<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
NIMBUS CD INTERNATIONAL, INC.
(Name of Subject Company)
CARLTON COMMUNICATIONS PLC
NEPTUNE ACQUISITION CORP.
(Bidder)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
65439010
(CUSIP Number of Class of Securities)
------------------------
DAVID ABDOO
COMPANY SECRETARY
25 KNIGHTSBRIDGE
LONDON SW1X 7RZ ENGLAND
011 44171 663 6363
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
DAVID M. KIES
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
CALCULATION OF FILING FEE:
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$271,789,056.50 $54,358
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes
23,633,831 shares (equal to the sum of (i) 21,469,754 shares issued and
outstanding as of June 15, 1998, according to Nimbus CD International, Inc.
(the "Company") and (ii) 2,164,077 shares subject to issuance pursuant to
outstanding options under the Company's stock option plans.
** 1/50 of 1% of Transaction Valuation
/ / 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.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
<TABLE>
<C> <S> <C>
CUSIP NO. 65439010
</TABLE>
<TABLE>
<C> <S>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlton Communications Plc
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC; OO
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION
England
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
9,373,322
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES / /
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
43.7%
10. TYPE OF REPORTING PERSON
CO
</TABLE>
<PAGE>
SCHEDULE 14D-1
<TABLE>
<C> <S> <C>
CUSIP NO. 65439010
</TABLE>
<TABLE>
<C> <S>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Neptune Acquisition Corp.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS
AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
9,373,322
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES / /
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
43.7%
10. TYPE OF REPORTING PERSON
CO
</TABLE>
<PAGE>
Item 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Nimbus CD International, Inc., a
Delaware corporation (the "Company"), and the address of its principal executive
offices is 623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968.
(b) The class of the securities to which this statement relates is the
Common Stock, par value $.01 per share (the "Shares"), of the Company. The
information set forth in the introductory section and Section 1 of the Offer to
Purchase ("Offer to Purchase") annexed hereto as Exhibit (a)(1) is incorporated
herein by reference.
(c) The information set forth in the introductory section and in Section 6
of the Offer to Purchase is incorporated herein by reference.
Item 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 of the Offer of Purchase
is incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions, offices
or employment for the past five years and citizenship of each director and
executive officer of Carlton Communications Plc, an English public limited
company ("Parent"), and Neptune Acquisition Corp., a Delaware corporation
("Purchaser"), a wholly owned subsidiary of Parent, are set forth in Schedule A
to the Offer to Purchase and are incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser nor Parent, nor, to
the best of Parent's knowledge, any of the directors and executive officers of
Purchaser or Parent has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such law.
Item 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 9, 10 and 11 of the Offer to
Purchase is incorporated herein by reference.
Item 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
Item 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the introductory section and in
Sections 7, 10 and 11 of the Offer to Purchase is incorporated herein by
reference.
Item 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 9 and 10 of the Offer to
Purchase is incorporated herein by reference.
Item 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the introductory section and Sections 9, 10 and
11 of the Offer to Purchase is incorporated herein by reference.
<PAGE>
Item 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
Item 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 to the Offer to Purchase is
incorporated herein by reference.
Item 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 10 of the Offer of Purchase is
incorporated herein by reference.
(b)-(d) The information set forth in Section 15 of the Offer of Purchase is
incorporated herein by reference.
(e)-(f) Not applicable.
Item 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated June 23
(a)(2) Form of Letter of Transmittal with respect to the Shares
(a)(3) Form of letter, dated June 23, 1998, to brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(4) Form of letter to be used by brokers, dealers, commercial banks,
trust companies, and nominees to their clients.
(a)(5) Press Release, dated June 17, 1998.
(a)(6) Form of newspaper advertisement, dated June 23, 1998.
(a)(7) Notice of Guaranteed Delivery.
(a)(8) Guidelines for Substitute Form W-9.
(c)(1) Agreement and Plan of Merger, dated as of June 16, 1998, by and
among the Company, Parent and Purchaser.
(c)(2) Agreement, dated as of June 16, 1998, among Parent, Purchaser and
the other parties signatory thereto.
g(1) Employment Agreement, dated as of June 16, 1998 by and between
Purchaser and Lyndon J. Faulkner.
g(2) Employment Agreement, dated as of June 16, 1998 by and between
Purchaser and L. Steven Minkel.
<PAGE>
SIGNATURES
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.
<TABLE>
<S> <C> <C> <C>
Dated: June 23, 1998 CARLTON COMMUNICATIONS PLC
By: /s/ DAVID ABDOO
--------------------------------------
Name: David Abdoo
Title: Company Secretary
NEPTUNE ACQUISITION CORP.
By: /s/ THOMAS M. COLLINS, JR.
--------------------------------------
Name: Thomas M. Collins, Jr.
Title: Vice President and Secretary
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase, dated June 23, 1998.
(a)(2) Form of Letter of Transmittal with respect to the Shares.
(a)(3) Form of letter, dated June 23, 1998, to brokers, dealers, commercial banks, trust companies and
nominees.
(a)(4) Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees to their
clients.
(a)(5) Press Release, dated June 17, 1998.
(a)(6) Form of newspaper advertisement, dated June 23, 1998.
(a)(7) Notice of Guaranteed Delivery.
(a)(8) Guidelines for Substitute Form W-9.
(c)(1) Agreement and Plan of Merger, dated as of June 16, 1998, among the Company, Parent and Purchaser.
(c)(2) Agreement, dated as of June 16, 1998, among Parent, Purchaser and the other parties signatory thereto.
g(1) Employment Agreement, dated as of June 16, 1998 by and between Purchaser and Lyndon J. Faulkner.
g(2) Employment Agreement, dated as of June 16, 1998 by and between Purchaser and L. Steven Minkel.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
AT
$11.50 NET PER SHARE
BY
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "SHARES"), OF NIMBUS CD
INTERNATIONAL, INC. (THE "COMPANY") WHICH REPRESENTS A MAJORITY OF THE TOTAL
VOTING POWER OF ALL SHARES OF CAPITAL STOCK OF THE COMPANY OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) ANY WAITING PERIOD UNDER
THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES
PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER
CONDITIONS TO THE CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED BY UNANIMOUS VOTE (WITH
ONE DIRECTOR ABSENT) THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, THE HOLDERS OF SHARES, HAS APPROVED THE OFFER, THE MERGER
AND THE MERGER AGREEMENT, AND HAS RECOMMENDED BY UNANIMOUS VOTE (WITH ONE
DIRECTOR ABSENT) THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS") HAVE
ENTERED INTO AN AGREEMENT WITH NEPTUNE ACQUISITION CORP. ("PURCHASER") AND
CARLTON COMMUNICATIONS PLC ("PARENT"), UPON THE TERMS AND SUBJECT TO THE
CONDITIONS OF WHICH, THE SELLING STOCKHOLDERS HAVE AGREED TO TENDER (AND NOT
WITHDRAW) PURSUANT TO THE OFFER 9,373,322 SHARES (OR APPROXIMATELY 44% OF THE
OUTSTANDING SHARES) AND ANY SHARES THEREAFTER ACQUIRED BY THEM.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and mail or deliver the Letter of
Transmittal or such facsimile with such stockholder's certificate(s) for the
tendered Shares and any other required documents to the Depositary, (2) follow
the procedure for book-entry tender of Shares set forth in Section 3 or (3)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such stockholder. Stockholders
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or to brokers, dealers, commercial banks or
trust companies.
------------------------
THE DEALER MANAGER FOR THE OFFER IS:
LAZARD FRERES & CO. LLC
---------------
June 23, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
INTRODUCTION.................................................................................................... 1
1. Terms of the Offer................................................................................... 2
2. Acceptance for Payment and Payment for Shares........................................................ 3
3. Procedure for Tendering Shares....................................................................... 4
4. Rights of Withdrawal................................................................................. 7
5. Certain Federal Income Tax Consequences of the Offer................................................. 8
6. Price Range of Shares; Dividends..................................................................... 9
7. Effect of the Offer on the Market for the Shares; Stock Quotation, Margin Regulations, and Exchange
Act Registration..................................................................................... 9
8. Certain Information Concerning the Company........................................................... 11
9. Certain Information Concerning Purchaser and Parent.................................................. 13
10. Background of the Offer; Contacts with the Company; the Stockholders Agreement;
Other Agreements..................................................................................... 17
11. Purpose of the Offer; Plans for the Company; the Merger.............................................. 21
12. Source and Amount of Funds........................................................................... 27
13. Certain Conditions of the Offer...................................................................... 28
14. Dividends and Distributions.......................................................................... 29
15. Certain Legal Matters................................................................................ 30
16. Fees and Expenses.................................................................................... 32
17. Miscellaneous........................................................................................ 33
Schedule A--Directors and Executive Officers of Neptune Acquisition Corp. and Carlton Communications Plc........
A-1
</TABLE>
i
<PAGE>
To the Holders of Shares of
Nimbus CD International, Inc.:
INTRODUCTION
Neptune Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Carlton Communications Plc, an English public limited
company ("Parent" or "Carlton"), hereby offers to purchase all of the
outstanding shares of Common Stock, par value $.01 per share (the "Shares") of
Nimbus CD International, Inc., a Delaware corporation (the "Company"), at $11.50
per Share, net to the seller in cash (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer"). Tendering stockholders will
not be obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of
Shares by Purchaser pursuant to the Offer. Purchaser or Parent will pay all
charges and expenses of ChaseMellon Shareholder Services, L.L.C., as Depositary
(the "Depositary"), and as Information Agent (the "Information Agent"), in
connection with the Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE, A NUMBER OF SHARES OF
THE COMPANY WHICH REPRESENTS A MAJORITY OF THE TOTAL VOTING POWER OF ALL SHARES
OF CAPITAL STOCK OF THE COMPANY OUTSTANDING ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION") AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULAIONS THEREUNDER
(THE "HSR ACT") APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER
HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER CONDITIONS TO THE CONSUMMATION
OF THE OFFER ARE DESCRIBED IN SECTION 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED BY UNANIMOUS VOTE (WITH
ONE DIRECTOR ABSENT) THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, THE HOLDERS OF SHARES, HAS APPROVED THE OFFER, THE MERGER
AND THE MERGER AGREEMENT AND HAS RECOMMENDED BY UNANIMOUS VOTE (WITH ONE
DIRECTOR ABSENT) THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
CERTAIN STOCKHOLDERS OF THE COMPANY (THE "SELLING STOCKHOLDERS") HAVE
ENTERED INTO AN AGREEMENT WITH PURCHASER AND PARENT, UPON THE TERMS AND SUBJECT
TO THE CONDITIONS OF WHICH, THE SELLING STOCKHOLDERS HAVE AGREED TO TENDER (AND
NOT WITHDRAW) PURSUANT TO THE OFFER 9,373,322 SHARES (OR APPROXIMATELY 44% OF
THE OUTSTANDING SHARES) AND ANY SHARES THEREAFTER ACQUIRED BY THEM.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 16, 1998, by and among the Company, Parent
and Purchaser, pursuant to which, after completion of the Offer, Purchaser will
be merged with and into the Company (the "Merger") and each issued and
outstanding Share (other than (i) any Shares which are held by any subsidiary of
the Company or in the treasury of the Company, or which are held, directly or
indirectly, by Parent or any direct or indirect subsidiary of Parent (including
Purchaser), all of which shall be canceled and none of which shall receive any
payment with respect thereto and (ii) Shares held by holders of Shares who
comply with all the provisions of Delaware law concerning the right of holders
of Shares to dissent from the Merger and require appraisal of their Shares (the
"Dissenting Stockholders")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive an amount in cash, without interest, equal to the price paid
for each Share pursuant to the Offer (the "Merger Consideration"). As a result
of the Merger, the Company (sometimes referred to herein as the "Surviving
Corporation") will become a wholly owned subsidiary of Parent.
<PAGE>
Simultaneously with entering into the Merger Agreement, Behrman Capital
L.P., Behrman Capital "B" L.P., Strategic Entrepreneur Fund, L.P., McCown De
Leeuw & Co. III, L.P., McCown De Leeuw & Co. (Europe) III, L.P., McCown De Leeuw
& Co. (Asia) III, L.P., Gamma Fund LLC, Lyndon J. Faulkner, President and Chief
Executive Officer of the Company and L. Steven Minkel, Executive Vice President
and Chief Financial Officer of the Company (the "Selling Stockholders"), entered
into a stockholders agreement, dated as of June 16, 1998 (the "Stockholders
Agreement") with Parent and Purchaser, pursuant to which the Selling
Stockholders have agreed, among other things, (i) to validly tender and sell
into the Offer all Shares which are owned of record or beneficially by such
Selling Stockholders prior to the Expiration Date (as hereinafter defined) and
vote such Shares in favor of the Merger, and (ii) that, upon certain sales or
other transfers or dispositions by a Selling Stockholder of its Shares, such
Selling Stockholder will pay to Purchaser an amount in cash equal to the product
of the number of Shares transferred and the positive difference between the
consideration per Share paid in such sale or other transfer or disposition and
$11.50, in each case upon the terms and subject to conditions set forth in the
Stockholders Agreement.
According to the Company, as of June 15, 1998, there were 21,469,754 Shares
outstanding and there were 2,164,077 Shares reserved for issuance upon exercise
of outstanding stock options.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 13 (the "Offer
Conditions") and if the Offer is extended or amended, the terms and conditions
of such extension or amendment), Purchaser will accept for payment, and pay for,
any and all Shares validly tendered on or prior to the Expiration Date and not
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
Midnight, New York City time, on July 21, 1998, unless and until Purchaser
shall, in its sole discretion, have extended the period for which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date on which the Offer, as so extended by Purchaser, shall expire.
Subject to the terms of the Merger Agreement and applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"), Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. See Section 4. Subject to the applicable regulations of
the SEC and the terms of the Merger Agreement, Purchaser also expressly reserves
the right, in its sole discretion, at any time or from time to time, (i) to
delay acceptance for payment of, or (regardless of whether such Shares were
theretofore accepted for payment) payment for, any tendered Shares, or to
terminate or amend the Offer as to any Shares not then paid for, on the
occurrence of any of the conditions specified in Section 13, and (ii) to waive
any condition (other than the Minimum Condition) and to set forth or change any
other term and condition of the Offer, by giving oral or written notice of such
delay, termination or amendment to the Depositary and by making a public
announcement thereof, PROVIDED, HOWEVER, without the consent of the Company,
Purchaser shall not (i) reduce the number of Shares to be purchased in the
Offer, (ii) reduce the Offer Price, (iii) add to the Offer Conditions or
otherwise modify the Offer Conditions in a manner that is adverse to the holders
of Shares or (iv) change the form of consideration payable in the Offer. If
Purchaser accepts any Shares for payment pursuant to the terms of the Offer, it
will accept for payment all Shares validly tendered prior to the Expiration Date
and not withdrawn, and subject to the terms and conditions of the Merger
Agreement, unless the Company otherwise consents in writing, Purchaser will
accept for payment and pay for the Shares in accordance with
2
<PAGE>
Rule 14e-1(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); PROVIDED, HOWEVER, that unless (i) any Person has made an Acquisition
Proposal (as defined in the Merger Agreement), or (ii) any of the Offer
Conditions shall not have been satisfied, the Expiration Date may not be
extended beyond the 10th business day after the initial Expiration Date of the
Offer without the Company's prior written consent, such consent not to be
unreasonably withheld (it being expressly understood and agreed that, if all of
the Offer Conditions shall have been satisfied and no Person has made an
Acquisition Proposal, Purchaser shall have the right, in its sole discretion, to
extend the Expiration Date (through one or more extensions) through the 10th
business day after the initial Expiration Date). Purchaser confirms that its
reservation of the right to delay payment for Shares which it has accepted for
payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that
a tender offeror pay the consideration offered or return the tendered securities
promptly after the termination or withdrawal of a tender offer.
Any extension, delay, termination or amendment of the Offer will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be issued no later than 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which Purchaser
may choose to make any public announcement, Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release or other announcement.
Purchaser confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, Purchaser will extend the Offer to the extent required
by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act.
If, prior to the Expiration Date, Purchaser, written with the consent of the
Company, shall decrease the percentage of Shares being sought or the
consideration offered to holders of Shares, such decrease shall be applicable to
all holders whose Shares are accepted for payment pursuant to the Offer and, if
at the time notice of any increase or decrease is first published, sent or given
to holders of Shares, the Offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended until the expiration of
such ten business day period. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 A.M. through 12:00 Midnight, New York City time.
The Company has provided Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of the Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by Purchaser to record holders of Shares
and will be furnished by Purchaser to brokers, dealers, banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will accept for
payment, and pay for, all Shares validly tendered and not withdrawn as promptly
as practicable after the later of (i) the satisfaction or waiver of the
conditions set forth in Section 13, including the expiration or termination of
the waiting period under the HSR Act applicable to the purchase of Shares
pursuant to the Offer and (ii) the Expiration Date, if at the time of the later
of the occurrence of
3
<PAGE>
(i) and (ii) above, the Minimum Condition has been satisfied or waived;
PROVIDED, HOWEVER, that neither Parent nor Purchaser shall waive the Minimum
Condition without the prior written consent of the Company. Purchaser filed a
Notification and Report Form under the HSR Act on June 19, 1998 and,
accordingly, unless earlier terminated or extended by a request for additional
information, the waiting period under the HSR Act is scheduled to expire at
11:59 p.m., New York City time, on July 4, 1998. See Section 15. In addition,
subject to applicable rules of the SEC, Purchaser expressly reserves the right
to delay acceptance for payment of or payment for Shares in order to comply, in
whole or in part, with any applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a confirmation of a book-entry transfer of such
Shares (a "Book-Entry Confirmation") into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each, a
"Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer
Facilities")), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Purchaser
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from Purchaser and transmitting such payments
to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE
PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depositary's
account at a Depositary Institution pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained with such
Depositary Institution), as soon as practicable following expiration or
termination of the Offer.
Purchaser reserves the right to transfer or assign in whole or in part from
time to time to one or more direct or indirect subsidiaries of Parent the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES
VALID TENDER. To tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions of the Letter of Transmittal, with any required
signature guarantees, certificates for Shares to be tendered, and any other
documents required by the Letter of Transmittal, must be received by the
Depositary prior to the Expiration Date at one of its addresses set forth on the
back cover of this Offer to Purchase, (b) such Shares must be delivered pursuant
to the procedures for book-entry transfer described below (and a confirmation of
such delivery received by the Depositary, including an Agent's Message if the
tendering stockholder has not delivered a Letter of Transmittal), prior to the
Expiration Date, or (c) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below. The term "Agent's Message" means
a message, transmitted by a Book-Entry Transfer Facility (as defined herein) to,
and received by, the Depositary and forming a part of a book-entry confirmation,
which states that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry
4
<PAGE>
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
BOOK-ENTRY DELIVERY. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in any of the Book-Entry Transfer Facilities'
systems may make a book-entry transfer of Shares by causing a Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account in
accordance with such Book-Entry Transfer Facility's procedures for such
transfer. Although delivery of Shares may be effected through book-entry
transfer, either the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees, or
any Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be transmitted to and received by the Depositary
by the Expiration Date at one of its addresses set forth on the back cover of
this Offer to Purchase, or the tendering stockholder must comply with the
guaranteed delivery procedures described below. The confirmation of a book-entry
transfer of Shares into the Depositary's account at a Book-Entry Transfer
Facility as described above is referred to herein as a "Book-Entry
Confirmation." Delivery of documents to a Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Except as provided below, all signatures on a Letter
of Transmittal must be guaranteed by a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"). Signatures on a
Letter of Transmittal need not be guaranteed (a) if the Letter of Transmittal is
signed by the registered holders (which term, for purposes of this paragraph,
includes any participant in any of the Book-Entry Transfer Facilities' systems
whose name appears on a security position listing as the owner of the Shares) of
Shares and such registered holder has not completed the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal, or (b) if such Shares are tendered for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If
the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not tendered or not accepted for payment are to be
returned to a person other than the registered holder of the certificates
surrendered, then the tendered certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holders or owners appear on the certificates, with the signatures
on the certificates or stock powers guaranteed as described above. See
instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. A stockholder who desires to tender Shares pursuant to
the Offer and whose certificates for Shares are not immediately available or who
cannot comply with the procedure for book-entry transfer on a timely basis, or
who cannot deliver all required documents to the Depositary prior to the
Expiration Date, may tender such Shares by following all of the procedures set
forth below:
(i) such tender is made by or through an Eligible Institution;
5
<PAGE>
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser, is received by the Depositary
(as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for transfer
(or a Book-Entry Confirmation with respect to all such Shares), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal)
and any other required documents, are received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery.
A "trading day" is any day on which the New York Stock Exchange (the "NYSE") is
open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
OTHER REQUIREMENTS. Notwithstanding any other provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message in Lieu of the Letter of Transmittal), and (c) any other
documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmation with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF
THE SHARES BE PAID BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
DELAY IN MAKING SUCH PAYMENT.
TENDER CONSTITUTES AN AGREEMENT. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering stockholder and Purchaser on the terms and subject to the
conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal as set forth above, the
tendering stockholder irrevocably appoints designees of Purchaser as such
stockholder's proxies, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by Purchaser and with respect to any and
all other Shares or other securities issued or issuable in respect of such
Shares on or after June 17, 1998. All such proxies will be considered coupled
with an interest in the tendered Shares. Such appointment is effective when, and
only to the extent that, Purchaser deposits payment for such Shares with the
Depositary. Upon the effectiveness of such appointment, all prior powers of
attorney, proxies and consents given by such stockholder will be revoked, and no
subsequent powers of attorney, proxies and consents may be given (and, if given,
will not be deemed effective). Purchaser's designees will, with respect to the
Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they, in their sole discretion,
may deem proper at any annual, special or adjourned meeting of the stockholders
of the Company, by written consent in lieu of any such meeting or otherwise.
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's payment for such Shares,
Purchaser must be able to exercise full voting rights with respect to such
Shares.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by Purchaser in its sole discretion, which determination will
be final and binding. Purchaser reserves the absolute right to reject any and
all tenders determined by it not to be in proper form or acceptance for payment
of or payment for which may, in the opinion of Purchaser's counsel, be unlawful.
Purchaser also reserves the absolute right to waive any defect or irregularity
in the tender of any Shares of any particular stockholder whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares will be deemed to have
6
<PAGE>
been validly made until defects and irregularities relating thereto have been
cured or waived. None of Purchaser, the Depositary, the Information Agent, the
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification. Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and instructions
thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide the stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service may impose a
penalty on such stockholder and payment of cash to such stockholder pursuant to
the Offer may be subject to backup withholding of 31%. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
4. RIGHTS OF WITHDRAWAL
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after August 22, 1998.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificate(s) evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of any
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares. If certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, the
name of the registered holder and the serial numbers of the particular
certificates evidencing the Shares to be withdrawn must also be furnished to the
Depositary as aforesaid prior to the physical release of such certificates. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by Purchaser, in its sole discretion, which
determination shall be final and binding. None of Purchaser, Parent, the Dealer
Manager, the Depositary, the Information Agent, or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification. Withdrawals of tender for Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the Expiration
Date.
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares, or is unable to accept for payment Shares pursuant to the Offer, for any
reason, then, without prejudice to Purchaser's
7
<PAGE>
rights under this Offer, the Depositary may, nevertheless, on behalf of
Purchaser, retain tendered Shares, and such Shares may not be withdrawn except
to the extent that tendering stockholders are entitled to withdrawal rights as
set forth in this Section 4.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
Sales of Shares pursuant to the Offer and the exchange of Shares for cash
pursuant to the Merger will be taxable transactions for federal income tax
purposes and may also be taxable under applicable state, local and other tax
laws. For federal income tax purposes, a stockholder whose Shares are purchased
pursuant to the Offer or who receives cash as a result of the Merger will
realize gain or loss equal to the difference between the adjusted basis of the
Shares sold or exchanged and the amount of cash received therefor. Such gain or
loss will be capital gain or loss if the Shares are held as capital assets by
the stockholder. Long-term capital gain of a non-corporate stockholder is
generally subject to a maximum tax rate of 28% in respect of property with a
holding period for federal income tax purposes of more than one year and to a
maximum rate of 20% in respect of property with a holding period for federal
income tax purposes of more than 18 months.
To the extent that the Company or any of its subsidiaries owns or leases
real property in New York State or New York City, certain transfer taxes may
apply to the sale or exchange of Shares by a stockholder pursuant to the Offer
and the Merger. Although Purchaser will pay any such taxes on behalf of the
stockholders, such payment may be treated as additional consideration paid for
the Shares. In such case, the amount of such additional consideration would be
offset by treatment of the tax as an additional selling expense incurred by the
stockholder. Accordingly, the payment of such taxes by Purchaser should have no
effect on the amount of gain or loss recognized by a stockholder.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL
SITUATIONS, INCLUDING STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE
OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE
NOT UNITED STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM, IN THEIR PARTICULAR
CIRCUMSTANCES, OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
8
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on the Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol "NMBS". The following table sets
forth, for the calendar quarters indicated, the high and low bid quotations for
the Shares on the Nasdaq National Market, based upon public sources:
<TABLE>
<CAPTION>
SHARES
--------------------
<S> <C> <C>
LOW HIGH
--------- ---------
YEAR ENDED DECEMBER 31, 1996
First Quarter................................................................................ $ 6.50 $ 9.13
Second Quarter............................................................................... 7.75 20.38
Third Quarter................................................................................ 8.63 14.75
Fourth Quarter............................................................................... 7.88 11.13
YEAR ENDED DECEMBER 31, 1997
First Quarter................................................................................ 8.50 12.63
Second Quarter............................................................................... 8.38 11.50
Third Quarter................................................................................ 9.88 14.00
Fourth Quarter............................................................................... 8.25 11.63
YEAR ENDED DECEMBER 31, 1998
First Quarter................................................................................ 9.88 12.50
Second Quarter (through June 22, 1998)....................................................... 9.63 12.25
</TABLE>
On June 9, 1998, the last full trading day prior to the public announcement
by the Company that it was in discussions for the sale of the Company in a
transaction that would offer $11.50 per Share in cash, the reported closing bid
price per Share as reported on the Nasdaq National Market was $11.38.
On June 16, 1998, the last full trading day prior to the public announcement
of the execution of the Merger Agreement, the reported closing bid price per
Share as reported on the Nasdaq National Market was $10.75. On June 22, 1998,
the last full trading day prior to commencement of the Offer, the reported
closing bid price per Share as reported on the Nasdaq National Market was
$11.19. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES.
DIVIDENDS.
Purchaser has been advised by the Company that the Company did not pay
dividends on its Shares during the years ended March 31, 1998 or 1997. Further,
the Amended and Restated Credit Agreement among the Company, certain of its
subsidiaries and NationsBank, N.A. restricts the payment of dividends to holders
of Shares. The Merger Agreement prohibits the Company from declaring or paying
any dividends until the effectiveness of the Merger.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION, MARGIN
REGULATIONS, AND EXCHANGE ACT REGISTRATION
MARKET FOR SHARES. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
may reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
STOCK QUOTATION. The Shares are listed on the Nasdaq National Market.
According to published guidelines of the Nasdaq National Market, the Shares
might no longer be eligible for quotation on the Nasdaq National Market if,
among other things, either (i) the number of Shares publicly held was less than
750,000, there were fewer than 400 holders of round lots, the aggregate market
value of publicly held Shares was less than $5,000,000, net tangible assets were
less than $4,000,000 and there were fewer than two registered and active market
makers for the Shares, or (ii) the number of Shares publicly held was less
9
<PAGE>
than 1,100,000, there were fewer than 400 holders of round lots, the aggregate
market value of publicly held Shares was less than $15,000,000, and either (x)
the Company's market capitalization was less than $50,000,000 or (y) the total
assets and total revenue of the Company for the most recently completed fiscal
year or two of the last three most recently completed fiscal years did not
exceed $50,000,000 and there were fewer than four registered and active market
makers. Shares held directly or indirectly by directors, officers or beneficial
owners of more than 10% of the Shares are not considered as being publicly held
for this purpose. According to the Company, as of June 15, 1998, there were
21,469,754 Shares outstanding held of record by 288 holders (not including
beneficial holders of shares in street name).
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges or through the National Association of Securities Dealers Automated
Quotation System, Inc. ("Nasdaq"). The extent of the public market for the
Shares and the availability of such quotations would, however, depend upon the
number of stockholders and/or the aggregate market value of the Shares remaining
at such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, the
Shares might no longer constitute "margin securities" for the purposes of the
margin regulations of the Federal Reserve Board's margin regulations in which
event the Shares would be ineligible as collateral for margin loans made by
brokers.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated by the Company upon
application to the SEC if the outstanding Shares are not listed on a national
securities exchange and if there are fewer than 300 holders of record of Shares.
Termination of registration of the Shares under the Exchange Act would reduce
the information required to be furnished by the Company to its stockholders and
to the SEC and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) and the requirement to
furnish a proxy statement in connection with stockholders' meetings pursuant to
Section 14(a) and the related requirement to furnish an annual report to
stockholders, no longer applicable with respect to the Shares. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
under the Securities Act of 1933, as amended, may be impaired or eliminated. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be eligible for Nasdaq reporting or for continued inclusion on
the Federal Reserve Board's list of "margin securities." Purchaser intends to
seek to cause the Company to apply for termination of registration of the Shares
as soon as possible after consummation of the Offer if the requirements for
termination of registration are met.
10
<PAGE>
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968. The
Company has described its business in publicly available information in the
manner set forth below.
The Company is a leading independent manufacturer of compact discs ("CD")
and digital versatile discs (commonly referred to as "DVD") for distribution in
North America, the United Kingdom and continental Europe. The Company focuses
its marketing efforts primarily on independent record labels, multimedia and
game software developers, personal computer hardware and peripheral
manufacturers and the entertainment industry. The Company meets customer
expectations by providing high quality products at a competitive price within a
short turnaround time.
Set forth below is certain summary consolidated financial information for
each of the Company's last two fiscal years for the period ended March 31, 1997
as contained in the Company's 1997 Annual Report on Form 10-K (the "Form 10-K")
and for the nine months ended December 31, 1996 and 1997, as contained in the
Company's Quarterly Report on Form 10-Q for the quarters ended December 31, 1996
and 1997. More comprehensive financial information is included in such reports
(including management's discussion and analysis of financial condition and
results of operations) and other documents filed by the Company with the SEC,
and the following summary is qualified in its entirety by reference to such
reports and other documents and all of the financial information and notes
contained therein. Copies of such reports and other documents may be examined at
or obtained from the SEC in the manner set forth below.
NIMBUS CD INTERNATIONAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
---------- ---------- ---------- ----------
OPERATING DATA:
Net sales...................................................... $ 118,245 $ 129,470 $ 100,942 $ 102,243
Gross profit................................................... 34,436 37,509 30,238 30,361
Restructuring charge(1)........................................ 6,014
Operating income............................................... 21,447 16,032 18,857 17,470
Net income(2).................................................. 7,507 9,175 11,066 11,257
Earnings per Share (diluted)................................... $ 0.53 $ 0.40 $ 0.48 $ 0.49
Weighted average Shares outstanding (diluted).................. 22,799 23,007 23,011 22,957
FINANCIAL POSITION:
Total assets................................................... $ 90,753 $ 108,272 $ 113,265 $ 131,865
Total debt..................................................... 26,131 25,999 29,924 28,614
Stockholders' equity........................................... 43,066 52,422 54,565 63,468
Working capital................................................ 16,187 10,170 14,467 9,360
</TABLE>
- ------------------------
(1) The results of operations for fiscal 1997 include a charge of $6.0 million
for costs associated with the closure of the Company's Sunnyvale, California
facility, as part of a program to reduce overhead costs and improve
operating efficiencies. The restructuring charge included severance and
related benefit payments of $453, commitments to third parties of $929,
write-off of intangible and other assets of $3,027, the write-down of excess
production and other fixed assets of $1,350, and other unusual expenses of
$75. During fiscal 1998, the Company reversed $664 of its restructuring
reserve as a result of the completion of the restructuring plan at less than
the originally estimated cost.
(2) In fiscal 1996, the Company refinanced its outstanding debt and incurred on
extraordinary charge of $4,183 ($2,952 net of tax) on the debt
extinguishment.
11
<PAGE>
On May 21, 1998, the Company publicly reported the following unaudited
selected financial results for the fiscal year ended March 31, 1998: Sales of
$132,340,000; Gross profit of $38,303,000; Restructuring charge of $(664,000);
Operating income of $21,333,000; Net income of $13,812,000; and Earnings per
Share (on a diluted basis based on a weighted average of Shares outstanding of
22,964,000) of $0.60. In addition, as at March 31, 1998, the Company reported:
Current assets of $45,986,000; Total assets of $131,302,000; Current liabilities
of $30,713,000; Total debt of $25,893,000; and Stockholders' equity of
$66,294,000.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources
and is qualified in its entirety by reference thereto. Although Parent,
Purchaser, the Information Agent and the Dealer Manager have no knowledge that
would indicate that any statements contained herein based on such documents and
records are untrue, Parent, Purchaser, the Information Agent and the Dealer
Manager cannot take responsibility for the accuracy or completeness of the
information contained in such documents and records, or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent, Purchaser, the Information Agent or the Dealer Manager.
In the course of the discussions between Company management, Purchaser and
Parent, Purchaser and Parent were provided with certain financial information
and projections prepared by Company management showing Sales increasing to
$223,560,000 and Net Income increasing to $23,224,000 in the year ending March
31, 2001.
The Company has advised Purchaser and Parent that (i) it does not, as a
matter of course, make public forecasts as to future revenues or profits and
(ii) the foregoing projections were based on estimates and assumptions that are
inherently subject to significant economic and competitive uncertainties, all of
which are difficult to predict and many of which are beyond the Company's
control. Accordingly, there can be no assurance that the projected results can
be realized or that actual results will not be materially higher or lower than
those projected. The projections were not prepared with a view to public
disclosure or compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections or forecasts. None of the Company, Parent or Purchaser or
their respective advisors assumes any responsibility for the accuracy of the
projections. The inclusion of the foregoing projections should not be regarded
as an indication that the Company, Parent, Purchaser or any other person who
received such information considers it an accurate prediction of future events.
Neither the Company nor Purchaser intends to update, revise or correct such
projections if they become inaccurate (even in the short term).
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION. For purposes of
the Private Securities Litigation Reform Act of 1995, Parent and Purchaser have
identified the following important factors which could cause the Company's
actual results to differ materially from the foregoing projections: (i) the
effect of changing optical media technology and the possibility that, over time,
optical media technology could be replaced by another form of information
storage and retrieval technology, (ii) the dependence of the Company's growth
prospects on the development of new technologies that achieve market acceptance
and create new demand for optical media and related services and (iii) the
highly competitive nature of the optical media manufacturing industry which may
adversely affect prices for optical media and other aspects of the Company's
business.
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
obligated to file reports and other information with the SEC relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning the Company's directors and officers, their remuneration,
stock options granted to them, the principal holders of the Company's
securities, any material interests of such persons in transactions with the
Company and other matters is required to be disclosed in proxy statements
distributed to the
12
<PAGE>
Company's stockholders and filed with the SEC. Such reports, proxy statements
and other information should be available for inspection at the public reference
room at the SEC's offices at 450 Fifth Street, N.W., Washington, D.C., 20549 and
also should be available for inspection and copying at the regional offices of
the SEC located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611. Copies may be obtained, by mail, upon payment of the SEC's
customary charges, by writing to its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and can be obtained electronically on
the SEC's Website at http://www.sec.gov.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser is a Delaware corporation and, except as described in this Offer
to Purchase, to date has engaged in no activities other than those incident to
its formation and the commencement of the Offer. Purchaser is an indirect wholly
owned subsidiary of Parent. The principal offices of Purchaser are located at
Brandywine Corporate Center, 650 Naamans Road, Suite 117, Claymont, Delaware
19703.
Parent is an English public limited company. Parent's principal executive
offices are located at 25 Knightsbridge, London SW1X 7RZ. Parent is principally
involved in television broadcasting and program production and in production and
manufacturing activities for the video, feature film and television industries.
The business is carried out primarily by Parent's wholly owned subsidiaries in
the United Kingdom ("UK"), the United States ("U.S.") and continental Europe.
These subsidiaries form a grouping of complementary activities within the
television and screen-based entertainment industry, particularly in the world's
major markets of the U.S. and Europe.
AVAILABLE INFORMATION. Additional information concerning Parent is set
forth in Parent's Annual Report on Form 20-F (Parent's "Form 20-F") for the year
ended September 30, 1997, a copy of which may be obtained from the SEC in the
manner set forth with respect to information concerning the Company in Section
8.
Set forth below is certain summary consolidated financial information of
Parent. More comprehensive financial information is included in Parent's Form
20-F (including management's discussion and analysis of financial condition and
results of operations) and other documents filed by Parent with the SEC, and the
following summary is qualified in its entirety by reference to Parent's Form
20-F and other documents and all of the financial information and notes
contained therein. Copies of such reports and other documents may be examined at
or obtained from the SEC in the manner set forth above.
13
<PAGE>
CARLTON COMMUNICATIONS PLC
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED SEPTEMBER 30,
--------------------------------------------------------------
1995 1996 1997 1997(1)
--------------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
(POUNDS/PENCE) (POUNDS/PENCE) (POUNDS/PENCE) (DOLLARS)
INCOME STATEMENT DATA:
UK GAAP
Net sales.............................................. L1,579.6 L1,677.5 L1,749.7 $ 2,820.0
Operating income....................................... 248.5 291.0 317.9 512.4
Income before taxes and minority interests............. 246.7 295.1 316.3 509.8
Net income............................................. 165.2 197.6 212.2 342.0
Per Ordinary Share Data:
Net income(3)...................................... 26.1p 31.6p 33.2p 0.54
Fully diluted net income........................... 24.0p 28.4p 30.1p 0.49
Dividend(2)........................................ 11.8p 13.9p 15.5p 0.25
U.S. GAAP
Net income............................................. L83.7 L85.4 L126.3 $ 203.6
Per Ordinary Share Data:
Net income (3)..................................... 14.5p 14.7p 21.1p 0.34
Per ADS data:
Net income......................................... 72.6p 73.5p 105.3p 1.70
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------------
1995 1996 1997 1997(1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(POUNDS) (POUNDS) (POUNDS) (DOLLARS)
BALANCE SHEET DATA:
UK GAAP
Working capital........................................................ L442.0 L484.7 L533.8 $ 860.3
Total assets........................................................... 1,298.3 1,355.6 1,632.9 2,631.7
Long-term debt......................................................... 222.6 224.4 327.7 528.2
Shareholders' equity................................................... 467.3 529.3 550.4 887.1
U.S. GAAP
Total assets........................................................... 2,600.1 2,631.4 2,999.6 4,834.5
Ordinary shareholders' equity.......................................... 1,396.9 1,445.5 1,569.5 2,529.6
Preference shareholders' equity........................................ 407.3 399.9 392.3 632.3
----------- ----------- ----------- -----------
Total shareholders' equity............................................. L1,804.2 L1,845.4 L1,961.8 $ 3,161.9
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) See the description of certain differences between UK GAAP and U.S. GAAP set
forth below. Pounds Sterling (L) are translated into U.S. Dollars at L1 =
$1.6117, the Noon Buying Rate of the Federal Reserve Bank of New York on
September 30, 1997. The presentation of the U.S. Dollar amounts should not
be construed as a representation that the Pounds Sterling amounts could be
so converted into U.S. Dollars at the rate indicated or at any other rate.
(2) Dividend per share data include the tax credit equivalent to United Kingdom
Advance Corporation Tax.
(3) Amounts per Ordinary Share were restated to give effect to a capitalization
issue effective as of February 26, 1996. There has been no effect on the
amounts per ADS, each ADS now representing five Ordinary Shares. Prior to
February 26, 1996, each ADS represented two Ordinary Shares.
14
<PAGE>
On May 20, 1998, Parent publicly reported the following unaudited selected
financial results for the six-month period ended March 31, 1998 as compared to
the following previously reported financial results for six-month period ended
March 31, 1997: Pretax profit of L165.7 million (approximately $277.8 million)
as compared to L158.6 million (approximately $260.9 million) in 1997; Sales of
L920.6 million (approximately $1,543.4 million) as compared to L896.0 million
(approximately $1,473.7 million) in 1997; and Earnings per Ordinary Share of
17.6p (approximately $0.30) as compared to 16.6p (approximately $0.27) in 1997.
For purposes of the foregoing, Pounds Sterling (L) amounts for and as of the six
months ended March 31, 1998 and March 31, 1997 are translated into U.S. Dollars
at L1 = $1.6765 and L1 = $1.6448, the respective Noon Buying Rates of the
Federal Reserve Bank of New York as of such dates. The presentation of the U.S.
Dollar amounts should not be construed as a representation that the Pounds
Sterling amounts could be so converted into U.S. Dollars at the rate indicated
or at any other rate.
Parent's financial statements are prepared in accordance with generally
accepted accounting principles in the UK ("UK GAAP"), which differ in certain
significant respects from generally accepted accounting principles in the US
("U.S. GAAP"). Parent, however, believes that the differences between UK GAAP
and U.S. GAAP are not material to a decision by a holder of Shares whether to
sell, tender or hold the Shares. The material differences relate principally to
the following items.
GOODWILL AND U.S. PURCHASE ACCOUNTING. Under UK GAAP, Parent has charged
goodwill arising on business combinations treated as purchases directly to
reserves. If an acquired business is subsequently sold, the full amount of the
original purchased goodwill is charged to income in determining the gain or loss
on disposal. Under U.S. GAAP, intangibles, including goodwill, in respect of
business combinations treated as purchases would be charged against income over
their estimated lives. Any unamortized intangible or goodwill relating to a
business sold in the year is written off in determining the profit or loss on
disposal.
ORDINARY SHARE DIVIDENDS. Under UK GAAP, final Ordinary Share dividends are
provided for in the fiscal year in respect of which they are recommended by the
Board of Directors for approval by the shareholders. Under U.S. GAAP, such
dividends are not provided for until the fiscal year in which they are approved
by the shareholders.
INTANGIBLE ASSETS. In its UK GAAP accounts, Parent has deferred its
pre-transmission revenue expenditure (excluding programming) in respect of its
Television division, and will charge such amounts to the profit and loss account
over the initial 10 year license period ending December 31, 2002. In presenting
amounts under U.S. GAAP, expenditures have been charged to the profit and loss
account as incurred. Under UK GAAP, Parent's Rank Film Library is being
amortized to an estimated net residual value over 20 years, whereas under U.S.
GAAP, the Rank Film Library is being amortized to Lnil over the same period.
DEFERRED TAXES. Under UK GAAP, deferred taxes are only accounted for to the
extent that liabilities or benefits are expected to crystallize within the
foreseeable future. Under U.S. GAAP, in accordance with SFAS 109, deferred taxes
are accounted for on all temporary differences and a valuation adjustment is
established in respect of those deferred tax assets where it is more likely than
not that some portion will not be realized.
PENSION COSTS. Differences between the UK and U.S. GAAP figures arise from
the requirement to use different actuarial methods and the method of amortizing
surpluses or deficits.
PROGRAM PRODUCTION AND DEVELOPMENT. Under UK GAAP, program production costs
and acquired program costs are written off fully when the material is first
transmitted. Under U.S. GAAP costs would be written off over the expected useful
life of the material, using the income forecast method.
INVESTMENTS. Under UK GAAP, Parent accounts for fixed asset investments
other than associated companies at cost less any amounts written off to reflect
a permanent diminution in value. Under U.S.
15
<PAGE>
GAAP, SFAS 115 "Accounting for Certain Investments in Debt and Equity
Securities" requires such investments to be held at fair value, but with gains
and losses excluded from earnings and treated as a separate component of
shareholders' equity.
AMORTIZATION OF PREFERENCE SHARE PREMIUM OVER REDEMPTION. Parent's 5.5p
Preference Shares were issued at L1.225 per share at a premium over the
redemption price of L1.00, resulting in a total premium of L47 million. Under UK
GAAP, the amortization of this premium is credited against the annual cash cost
of the 5.5p Preference Share dividends over the period to the first redemption
date in the year 2000 when redemption is entirely at Parent's discretion. Under
U.S. GAAP, amortization of the premium to redemption would not be dealt with as
an adjustment to dividends on Preference Shares; rather it would be treated as a
movement in retained earnings.
STOCK COMPENSATION. Under UK GAAP, Parent accounts for stock options upon
exercise as an increase in Parent's share capital and share premium accounts for
the amount of proceeds received. Under U.S. GAAP, in accordance with Financial
Accounting Standards Board Statement No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), a fair value-based method of accounting for employee
stock-based awards is applied. Under SFAS 123, compensation cost is measured at
the rate awards are granted and is recognized through charges to expense over
the employees' service period. In applying SFAS 123, Parent has estimated the
fair value of options granted, using the Black-Scholes option pricing model with
the following assumptions: (i) Risk-free rate of return of 7.43%, (ii) Expected
life of options of 7 years, (iii) Weighted average fair value of options granted
in the year ended September 30, 1997 of L2.1 million, (iv) Expected dividend
yield of 2% and (v) Expected stock volatility of 35%.
Statements Purchaser and Parent may publish, including those in this Offer
to Purchase, that are not strictly historical are "forward-looking" statements.
Although Purchaser and Parent believe the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be realized. Forward-looking statements
involve known and unknown risks which may cause Parent's actual results and
corporate developments to differ materially from those expected. Factors that
could cause results and developments to differ materially from Purchaser's and
Parent's expectations include, without limitation, changes in manufacturing and
shipment schedules, delays in completing plant construction and acquisitions,
currency exchange rates, new product and technology developments, competition
within each business segment, cyclicality of the markets for the products of a
major segment, litigation, significant cost variances, the effects of
acquisitions and divestitures and other risks described from time to time in
Parent's SEC reports including annual reports on Form 20-F.
The name, citizenship, business address, present principal occupation, and
material positions held during the past five years of each of the directors and
executive officers of Parent and Purchaser are set forth in Schedule A to this
Offer to Purchase.
Except as set forth in Sections 10 and 11, neither Purchaser nor Parent,
nor, to the best of their knowledge, any of the persons listed in Schedule A
hereto nor any associate or majority-owned subsidiary of any of the foregoing,
beneficially owns or has a right to acquire any equity securities of the
Company. Neither Purchaser nor Parent, nor, to the best of their knowledge, any
of the persons or entities referred to above, nor any director, executive
officer or subsidiary of any of the foregoing, has effected any transaction in
such equity securities during the past 60 days.
Except as set forth in Sections 10 and 11, neither Purchaser nor Parent,
nor, to the best of their knowledge, any of the persons listed in Schedule A
hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
or the giving or withholding of proxies. Except as set forth in Sections 10 and
11, there have been no contacts, negotiations or transactions since April 1,
1995 between Purchaser or Parent, or, to the best of their knowledge, any of the
persons listed in Schedule A hereto, on the one hand, and the
16
<PAGE>
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, a tender offer or other acquisition of securities, an election
of directors, or a sale or other transfer of a material amount of assets. Except
as described in Sections 10 and 11, neither Purchaser nor Parent, nor, to the
best of their knowledge, any of the persons listed in Schedule A hereto, has
since April 1, 1995 had any transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the SEC applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE STOCKHOLDERS
AGREEMENT; OTHER AGREEMENTS.
In late January 1997, representatives of Parent met with senior officers and
representatives of the Company and representatives of Berenson Minella & Company
("Berenson Minella"), the Company's financial advisers, at the Company's office
in Charlottesville, Virginia and discussed, among other things, certain
strategic alternatives available to their respective companies.
On December 10, 1997, senior officers of Technicolor Videocassette, Inc., a
Delaware corporation and an indirect wholly-owned subsidiary of Parent
("Technicolor"), met with representatives of Berenson Minella, to discuss
whether or not the Company would be receptive to an acquisition proposal. At
such time Technicolor entered into a confidentiality agreement with the Company.
The next day, the senior officers of Technicolor visited the Company's offices
in Charlottesville and met with Lyndon Faulkner and Steven Minkel, the President
and Chief Executive Officer and the Executive Vice President and Chief Financial
Officer, respectively, of the Company and were given presentations by various
officers of the Company regarding the Company and its businesses.
Later that month, Mr. Faulkner and Howard Nash, who is European Managing
Director of a subsidiary of the Company, visited Parent's offices in London and
met with senior officers of Parent. In early January 1998, Mr. Faulkner and Mr.
Minkel visited Parent's offices in London and met with several directors and
officers of Parent and Technicolor and made presentations regarding the Company
and its business. In mid-January representatives of Parent, Lazard Freres & Co.
LLC ("Lazard Freres"), financial adviser to Parent and Purchaser, and
Technicolor met with representatives of the Company and Company's financial
advisor in Charlottesville to conduct due diligence. Thereafter, various
officers and directors of Parent and Technicolor visited certain of the
Company's facilities and conducted additional due diligence on the Company and
its business.
On January 29, 1998, senior directors and executive officers of Parent met
with representatives of certain stockholders of the Company affiliated with
McCown De Leeuw & Co., Inc. and Behrman Capital and representatives of Berenson
Minella and Lazard Freres in New York, New York. At such meeting the
representatives of such stockholders advised the representatives of Parent that
they would only consider a sale of their Shares as part of a sale of the entire
Company. From January 29, 1998 to June 3, 1998, negotiations between
representatives of such stockholders and Parent continued, culminating in a
meeting on June 3, 1998 in New York, where such stockholders and, subject to
completion of its due diligence investigation, Parent, agreed to favorably
consider, subject to definitive documentation, a transaction pursuant to which
Parent would enter a merger agreement with the Company providing for a first
step tender offer for all outstanding Shares at $11.50 net per Share with a
second step merger in which any remaining Shares would be cashed out at the same
price and such stockholders would enter into a separate agreement pursuant to
which they would agree to tender (and not withdraw) their Shares pursuant to
such tender offer.
On June 5 and June 6, 1998 representatives of Parent and Technicolor visited
the Company's offices in Charlottesville to conduct additional due diligence on
the Company. From June 8 to June 16, 1998, representatives and counsel to
Parent, Purchaser, the Company and the Selling Stockholders negotiated the terms
and conditions of the Merger Agreement and the Stockholders Agreement.
17
<PAGE>
On June 10, 1998, the Company announced that it "is in discussions for the
sale of the Company in a transaction which would offer $11.50 per common share
in cash." The Company stated that "there could be no assurance that any
transaction would result from such discussions."
On June 16, 1998, the Board of Purchaser authorized representatives of
Purchaser and an authorized committee of Parent's Board authorized
representatives of Parent to enter into the Merger Agreement and the
Stockholders Agreement. On the same day, the Company's Board authorized
representatives of the Company to execute the Merger Agreement. At the request
of Parent and Purchaser, Mr. Faulkner and Mr. Minkel also agreed to become
parties to the Stockholders Agreement. The Merger Agreement and the Stockholders
Agreement were executed later that day and the transaction was publicly
announced the next morning.
To the extent any of the foregoing information describes events at which
neither Parent nor Purchaser or their representatives or advisors were present,
it is based on information provided by the Company.
THE STOCKHOLDERS AGREEMENT. As a condition and inducement to Parent's and
Purchaser's willingness to enter into the Merger Agreement and incur the
liabilities therein, concurrently with the execution and delivery of the Merger
Agreement, the Selling Stockholders entered into a Stockholders Agreement. In
the Stockholders Agreement, the Selling Stockholders have represented that they
own, in the aggregate, 9,373,322 Shares (or approximately 44% of the outstanding
Shares).
Each Selling Stockholder has agreed, as promptly as practicable (and in no
event later than the tenth day (or if such day is not a business day, the next
succeeding business day immediately thereafter) after commencement of the
Offer), to validly tender (and not to withdraw) pursuant to and in accordance
with the terms of the Offer (provided that the Offer is not amended in a manner
prohibited by the Merger Agreement), in a timely manner for acceptance by
Purchaser, the number of Shares set forth opposite such Stockholder's name on
the signature pages of the Stockholders Agreement (the "Existing Shares").
Each Selling Stockholder has also agreed that if (i) at any time prior to
the expiration or termination of the Offer, (A) any Person shall have become the
beneficial owner of 50% or more of the outstanding Shares or (B) any Person
makes or publicly announces an intention to make an Acquisition Proposal (as
defined herein) or (C) the Company enters into an agreement with any Person with
respect to an Acquisition Proposal and (ii) at any time (x) in the case of (A)
within one year thereafter, (y) in the case of (B), within the period ending on
the thirtieth day after the withdrawal of such Acquisition Proposal, unless such
Person or any of its affiliates shall have entered into an Agreement with the
Company or any one or more Selling Stockholders or their respective affiliates
regarding an Acquisition Proposal or have publicly announced a new or amended
Acquisition Proposal (in which event the termination of such period shall be
tolled) and (z) in the case of (C), within the period ending on the thirtieth
day after the termination of such agreement, unless such Person or any of its
affiliates shall have entered into a new or amended agreement with the Company
or any one or more Selling Stockholders or their respective affiliates regarding
an Acquisition Proposal or have made or publicly announced an intention to make
an Acquisition Proposal (in which event the termination of such period shall be
tolled), such Selling Stockholder sells or otherwise transfers or disposes of
any of such Selling Stockholder's Existing Shares or any other Shares of which
such Selling Stockholder becomes the owner prior to the date of such sale or
other transfer or disposition or any Shares that such Selling Stockholder
currently has the right to acquire then, such Selling Stockholder shall, as
promptly as practicable (but in any event within two business days after the
later of the date of such sale or other transfer or disposition, provided, that,
if the fair market value of any portion of the consideration is subject to the
alternative process for determination of its fair market value set forth in the
Stockholders Agreement, the payment relating to such portion of the
consideration shall be made no later than two business days after the date of
agreement or such determination) pay to Purchaser (or its designee) by wire
transfer of immediately available funds an amount in cash equal to the product
of (i) the number of such Shares so sold or otherwise transferred and (ii) the
positive difference between the value of the
18
<PAGE>
consideration per Share paid pursuant to such sale or other transfer or
disposition (as determined pursuant to the terms of the Stockholders Agreement)
and $11.50.
Each Selling Stockholder has agreed that prior to the termination of the
Stockholders Agreement such Selling Stockholder shall not (i) except as
contemplated by the Offer or the Stockholders Agreement, directly or indirectly,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
such Stockholder's Shares or any interest therein; (ii) grant any proxies or
powers of attorney, deposit any Shares into a voting trust or enter into a
voting agreement with respect to any Shares; or (iii) take any action that would
make any representation or warranty of such Stockholder contained in the
Stockholders Agreement untrue or incorrect or have the effect of preventing or
disabling such Stockholder from performing such Stockholder's obligations under
the Stockholders Agreement. Such Stockholder has further agreed that such
Stockholder shall not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made to Purchaser in
compliance with the Offer or the Stockholders Agreement.
Each Selling Stockholder has agreed that until the first to occur of (i) the
Effective Time (as hereinafter defined) and (ii) the termination of the
Stockholders Agreement pursuant to Section 8 thereof, at any meeting of the
holders of Shares, however called, or in connection with any written consent of
the holders of Shares, such Stockholder shall vote (or cause to be voted) the
Shares owned by such Stockholder (i) in favor of the Merger and each of the
other actions contemplated by the Merger Agreement and the Stockholders
Agreement and any actions required in furtherance thereof; (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or of such Stockholder under the Stockholders
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; or (C) (1) any change in a majority of the persons who
constitute the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or By-laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or its subsidiaries which is intended, or could reasonably be expected, to
prevent, impede, interfere with, delay, postpone, or materially adversely affect
the Offer, the Merger or the consummation of the transactions contemplated by
the Stockholders Agreement and the Merger Agreement. No Stockholder shall enter
into any agreement or understanding with any Person or entity the effect of
which would be to violate the provisions and agreements contained in Section 3
of the Stockholders Agreement.
EMPLOYMENT AGREEMENTS OF MESSRS. FAULKNER AND MINKEL. Concurrent with the
signing of the Merger Agreement, Messrs. Faulkner and Minkel (the "Executives")
entered into employment agreements (the "Employment Agreements") with Purchaser.
The period of employment, during which salary and benefits shall be provided
(the "Period of Employment"), will begin at the effective time of the Merger
(the "Effective Time") and will end on the third anniversary of the Effective
Time. The Period of Employment will be extended automatically each day by one
day beginning on the second anniversary of the Employment Agreement until a date
which is one year following the date on which the notice of termination is
delivered. Pursuant to his agreement, Mr. Faulkner will serve as President and
Chief Executive Officer of the Surviving Corporation at an annual salary of
$300,000 and will be eligible for a maximum annual bonus of up to 40% of base
salary. Mr. Minkel will serve as Executive Vice President, Chief Financial
Officer and Secretary of the Surviving Corporation at an annual salary of
$250,000 and will be eligible for a maximum annual bonus of up to 30% of base
salary.
19
<PAGE>
Each Executive will be eligible to participate in a Long Term Incentive Plan
(the "LTIP") which provides awards of one year's base salary conditioned upon
certain financial results which would be payable in three tranches in November
of 2001, 2002, and 2003, respectively. The LTIP also provides a super bonus of
three years' base salary payable in November 2004 if certain financial goals to
be determined by the Compensation Committee of the Board of Directors of
Technicolor are met. In the event that either Executive agrees to relocate to
Technicolor's offices, the Surviving Corporation shall reimburse the Executive's
reasonable moving expenses, including reasonable travel expenses, all household
moving expenses, all real estate expenses associated with selling the Employee's
home and purchasing a new home, up to six months of reasonable temporary living
costs, and a cost of living salary adjustment if a recognized national survey
shows the cost of living on the new location is on average more than 5% above
the cost of living in the former location. The Executives shall be eligible to
participate in the Surviving Corporation's employee benefit and executive
compensation plans, and shall be entitled to four weeks vacation and reasonable
sick leave. The Surviving Corporation will continue to make contributions for
the benefit of Mr. Faulkner to the United Kingdom retirement scheme that he
participated in prior to the Merger, on the condition that Mr. Faulkner shall
not simultaneously be permitted to participate in any qualified retirement plan
sponsored by the Surviving Corporation. The Surviving Corporation will also
reimburse Mr. Faulkner for all reasonable expenses related to applications for
U.S. citizenship for himself and his family.
Upon the signing of the Employment Agreements, Purchaser requested that
Parent grant, conditioned on the consummation of the Merger, each Executive a
stock option (the "Stock Option") to purchase ordinary shares of Parent
("Ordinary Shares") pursuant to Parent's 1987 Incentive and Nonqualified Stock
Option Plan for U.S. Employees and Directors. The Stock Option will permit the
Executive to acquire that number of Ordinary Shares equal in amount to the
result of dividing four times the Executive's base salary by the fair market
value of an Ordinary Share on the date of the Employment Agreement. The Stock
Option will become nonforfeitable and exercisable in three installments: (i) 60%
on the day immediately preceding the third anniversary of the Effective Time;
(ii) 20% on the day immediately preceding the fourth anniversary of the
Effective Time; and (iii) 20% on the day immediately preceding the fifth
anniversary of the Effective Time. At the same time, each Executive also
received options (the "Options") to purchase, at an exercise price equal to the
fair market value on the date of grant, that number of Ordinary Shares equal to
the profit (the "Spread") he would have received upon a specified percentage
(40% for Mr. Faulkner and 30% for Mr. Minkel) of each tranche of his outstanding
Company stock options with an exercise price equal to or lower than $11.50 per
share, divided by the fair market value of an Ordinary Share on the date of the
Employment Agreement. Each Executive agreed to cancel the same percentage of his
Company options for no consideration. The Options will be fully vested and
nonforfeitable and will become exercisable according to the following schedule:
(i) 40% on the first anniversary of the Effective Time; (ii) 30% on the second
anniversary of the Effective Time; and (iii) 30% on the third anniversary of the
Effective Time. The Options will become immediately exercisable upon the
Executive's death, disability or termination of employment. Purchaser also
granted each Executive a bonus (each a "Bonus") equal to their Spread, to be
paid in instalments in the same percentages and on the same schedule as the
Options become exercisable, each instalment of which shall be proportionately
reduced if the price of Ordinary Shares drops below its fair market value as of
the grant date of the Options. Each scheduled Bonus installment will continue to
be paid to the Employee following his termination of employment with the
Surviving Corporation, regardless of the reason for such termination.
If the Executive's employment is terminated by the Surviving Corporation
without Cause or if the Executive terminates for Good Reason (as those terms are
defined in the Employment Agreements) during the Period of Employment, the
Surviving Corporation will pay to the Executive a lump sum equal to the salary
for the remainder of the Period of Employment, or if the remaining Period of
Employment is less than one year, one year's salary.
20
<PAGE>
Copies of the Merger Agreement, the Stockholders Agreement and the
Employment Agreements have been filed as Exhibits to the Schedule 14D-1 filed by
Parent and Purchaser with the SEC and are available for inspection and copying
at the principal office of the SEC in the manner set forth in Sections 8 and 9.
The foregoing descriptions of these agreements are qualified in their entireties
by reference to such documents.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER.
PURPOSE.
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company. If Purchaser acquires a majority of the outstanding Shares pursuant to
the Offer, it will have the vote necessary under Delaware law to approve the
Merger. Under the DGCL, if Purchaser owns at least 90% of the outstanding
Shares, the Merger may be effected without the vote of the Company's
stockholders. Therefore, if at least 19,322,779 Shares (or such greater number
as may be necessary if options are exercised) are acquired pursuant to the Offer
or otherwise, Purchaser will be able to and intends to effect the Merger without
a meeting of holders of Shares.
THE MERGER AGREEMENT.
The Merger Agreement provides that as soon as practicable after the last of
certain conditions set forth in the Merger Agreement is fulfilled or waived
(subject to applicable law) but in no event later than the fifth business day
thereafter, or on such other date as Parent and the Company shall mutually
agree, Purchaser shall be merged into the Company. At the Effective Time, each
issued and outstanding Share (other than (i) any Shares which are held by any
subsidiary of the Company or in the treasury of the Company, or which are held,
directly or indirectly, by Parent or any direct or indirect subsidiary of Parent
(including Purchaser), all of which shall be canceled and none of which shall
receive any payment with respect thereto and (ii) Shares held by Dissenting
Stockholders) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and represent the right to receive the
Merger Consideration.
VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors of the Company and, if the "short form"
merger procedure described below is not available, adopted by the holders of a
majority of the Company's outstanding Shares. The Board of Directors of the
Company has approved the Offer, the Merger and the Merger Agreement;
consequently, the only additional action of the Company that may be necessary to
effect the Merger is adoption of the Merger Agreement by such stockholders if
the "short form" merger procedure described below is not available. Under the
DGCL, the affirmative vote of holders of a majority of the outstanding Shares
(including any Shares owned by Purchaser) is generally required to adopt the
Merger Agreement. If Purchaser acquires, through the Offer or otherwise, voting
power with respect to at least a majority of the outstanding Shares (which would
be the case if the Minimum Condition were satisfied and Purchaser were to accept
for payment Shares tendered pursuant to the Offer), it would have sufficient
voting power to effect the Merger without the vote of any other stockholder of
the Company. However, the DGCL also provides that if a parent company owns at
least 90% of each class of stock of a subsidiary, the parent company can effect
a short-form merger with that subsidiary without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, Purchaser acquires or controls the voting power of at least 90% of
the outstanding Shares, Purchaser could effect the Merger using the "short-form"
merger procedures without prior notice to, or any action by, any other
stockholder of the Company. In such a case, the Company has agreed under the
Merger Agreement, subject to certain conditions thereof, at the request of
Parent and Purchaser to take all necessary and appropriate action to cause the
Merger to become effective, without a meeting of the Company's stockholders, in
accordance with Section 253 of the DGCL.
21
<PAGE>
SECTION 203 OF THE DGCL. In general, Section 203 of the DGCL prevents an
"Interested Stockholder" (defined generally as a person with 15% or more of a
corporation's outstanding voting stock) of a Delaware corporation from engaging
in a "Business Combination" (defined as a variety of transactions, including
mergers, as set forth below) with such corporation for three years following the
date such person became an Interested Stockholder unless (i) before such person
became an Interested Stockholder, the Board of Directors of the corporation
approved the transaction in which the Interested Stockholder became an
Interested Stockholder or approved the Business Combination; (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock ownership plans that do not provide
employees with the rights to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer); or (iii)
following the transaction in which such person became an Interested Stockholder,
the Business Combination is approved by the Board of Directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the Interested Stockholder. However, Section 203 of the DGCL is
inapplicable to the Merger Agreement because the Company has elected in its
certificate of incorporation not to be governed by the provisions of Section
203.
CONDITIONS TO THE MERGER. The respective obligations of each party to
consummate the Merger are subject to the satisfaction or waiver (subject to
applicable law) at or prior to the Effective Time of certain conditions set
forth in the Merger Agreement, including: (a) to the extent required by
applicable law, the Merger Agreement and the Merger shall have been approved and
adopted by holders of a majority of the outstanding Shares in accordance with
applicable law (if required by applicable law) and the Company's Certificate of
Incorporation and By-Laws; (b) any waiting period (and any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated; (c) no preliminary or permanent injunction or other order shall have
been issued by any court or by any governmental or regulatory agency, body or
authority which prohibits the consummation of the Offer or the Merger and the
transactions contemplated by the Merger Agreement and which is in effect at the
Effective Time; PROVIDED, HOWEVER, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any decree, injunction or other order that may be entered;
(d) no statute, rule, regulation, executive order, decree or order of any kind
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority which prohibits the consummation of the Offer or the
Merger or has the effect of making the purchase of the Shares illegal; and (e)
Purchaser shall have accepted for payment and paid for a number of Shares
tendered pursuant to the Offer that satisfies the Minimum Condition; provided
that the foregoing clause (e) shall not be a condition to Parent's and
Purchaser's obligation to consummate the Merger if Purchaser's failure to
purchase any Shares violates the terms of the Offer.
TERMINATION OF THE MERGER AGREEMENT. According to its terms, the Merger
Agreement may be terminated and the transactions contemplated thereby may be
abandoned, at any time prior to the Effective Time, whether before or after
approval of the Merger by the Company's stockholders: (a) by mutual consent of
the Company, on the one hand, and of Parent and Purchaser, on the other hand;
(b) by either Parent and Purchaser, on the one hand, or the Company, on the
other hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such order, decree or ruling or other
action shall have become final and nonappealable; (c) by Parent and Purchaser,
on the one hand, or the Company, on the other hand, if the Effective Time shall
not have occurred on or prior to September 30, 1998 (the "Outside Date"), unless
the Effective Time shall not have occurred on or prior to the Outside Date
because of a material breach of any representation, warranty, obligation,
covenant, agreement or condition set forth in the Merger Agreement on the part
of the party seeking to terminate the Merger Agreement; (d) by Parent
22
<PAGE>
and Purchaser, if the Offer is terminated or expires in accordance with its
terms without Purchaser having purchased any Shares thereunder due to an event
or occurrence which would result in a failure to satisfy any of the conditions
set forth on Annex A to the Merger Agreement, unless any such failure shall have
been caused by or resulted from the failure of Parent or Purchaser to perform in
a material respect any covenant or agreement of either of them contained in the
Merger Agreement or the breach by Parent or Purchaser in a material respect of
any representation or warranty of either of them contained in the Merger
Agreement; (e) by Parent and Purchaser, in the event that (A)(i) any one or more
representations, warranties, covenants or agreements of the Company contained in
the Merger Agreement that is qualified as to materiality shall be untrue,
incorrect or breached in any respect except for such failures as would not be
reasonably likely to have a material adverse effect on the Condition of the
Company and its subsidiaries taken as a whole or (ii) any one or more of such
representations, warranties, covenants or agreements that is not so qualified
shall be untrue incorrect or breached in any material respect which,
individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the Condition of the Company and its subsidiaries taken as a
whole and, (B) in each case, cannot or has not been cured prior to the earlier
of (i) 15 days after the giving of written notice of such breach to the Company
and (ii) two business days prior to the date on which the Offer expires; (f) by
the Company, if the Board of Directors of the Company determines that an
Acquisition Proposal constitutes a Superior Proposal and the Board of Directors
determines after consulting with independent outside counsel that a failure to
terminate the Merger Agreement and enter into an agreement to effect the
Superior Proposal would constitute a breach of its fiduciary duties; PROVIDED,
HOWEVER, that the Company shall not be permitted to terminate the Merger
Agreement pursuant to clause (f) unless it has provided Parent and Purchaser
with two business days prior written notice of its intent to so terminate the
Merger Agreement together with a reasonably detailed summary of the terms and
conditions of such Superior Proposal; PROVIDED, FURTHER, that Parent shall
receive the fees set forth below under "Fees and Expenses" immediately prior to
any termination pursuant to clause (f) by wire transfer in same day funds; (g)
by Parent and Purchaser, if (i) the Company or any of its subsidiaries or their
Agents (as defined below) encourages, solicits or initiates the making of any
Acquisition Proposal from any Person other than Parent or Purchaser or the
Company or any of its subsidiaries or their Agents takes any other action to
knowingly facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(other than as permitted by and taken in compliance with the provisions of the
Merger Agreement described below under "No Solicitation of Other Offers"), (ii)
the Company enters into any agreement with respect to or the making of an
Acquisition Proposal or (iii) if the Company's Board of Directors shall have (A)
failed to recommend to the Company's stockholders that such stockholders tender
their Shares pursuant to the Offer and vote to approve and adopt the Merger
Agreement or (B) amended, withdrawn or modified such recommendation in a manner
adverse to Parent and Purchaser; (h) by the Company, in the event that (A)(x)
any one or more representations, warranties, covenants or agreements of Parent
or Purchaser contained in the Merger Agreement that is qualified as to
materiality shall be untrue, incorrect or breached in any respect except where
such failures are not reasonably likely to materially and adversely affect
Parent's or Purchaser's ability to complete the Offer or Merger or (y) any one
or more of such representations, warranties, covenants or agreements that is not
so qualified shall be untrue, incorrect or breached which, individually or in
the aggregate would be reasonably likely to materially and adversely effect
Parent's or Purchaser's ability to complete the Offer or the Merger and (B) in
each case cannot or has not been cured prior to the earlier of (x) 15 days after
the giving of written notice of such breach to the Parent and Purchaser and (y)
to the extent applicable, two business days prior to the date on which the Offer
expires; (i) by the Company, if Parent or Purchaser shall have (x) failed to
commence the Offer within 5 business days following the date of the Merger
Agreement, (y) terminated the Offer or (z) failed to pay for Shares pursuant to
the Offer on or prior to the earlier of (1) the fifth day after any Shares
tendered in the Offer have been accepted for payment and (2) the Outside Date,
unless in the case (x) or (y) such failure shall have been caused by or resulted
from the failure of the Company to satisfy the Tender Offer Conditions set forth
in Annex A or a material breach by the Company of any of its representations,
warranties, covenants or agreements set forth in the Merger Agreement.
23
<PAGE>
FEES AND EXPENSES. The Merger Agreement provides that subject to the
following, all costs and expenses incurred in connection with the Merger
Agreement and the consummation of the transactions contemplated thereby shall be
paid by the party incurring such costs and expenses. If (w) (i) the Offer shall
have remained open for a minimum of at least 20 business days, (ii) after the
date of the Merger Agreement and prior to December 31, 1998 any Person (other
than Parent or Purchaser) shall have become the beneficial owner of 50% or more
of the outstanding Shares and (iii) the Minimum Condition shall not have been
satisfied and the Offer is terminated without the purchase of any Shares
thereunder, or (x) Parent and Purchaser shall have terminated the Merger
Agreement pursuant to Section 6.01(g) thereof, or (y) the Company shall have
terminated the Merger Agreement pursuant to Section 6.01(f) thereof, then the
Company, if requested by Purchaser, shall promptly, but in no event later than
two days after the date of such request, pay Parent up to $2,000,000 to
reimburse Purchaser for the documented fees and expenses of Parent and Purchaser
related to the Merger Agreement, the transactions contemplated thereby and any
related financing and an additional fee of $8,000,000, which amounts shall be
immediately payable by wire transfer in same day funds; PROVIDED, HOWEVER, that
if the Company shall have terminated the Merger Agreement pursuant to clause (f)
as described above under "Termination of the Merger Agreement," such amounts
shall be paid in accordance with the provisions of such section. If the Company
fails to promptly pay the amounts due pursuant to these provisions of the Merger
Agreement or clause (f) as described above under "Termination of the Merger
Agreement," and, in order to obtain such payments, Parent or Purchaser commences
a suit which results in a judgment against the Company for the fees set forth
above, the Company shall pay to Parent and Purchaser its reasonably documented
costs and expenses (including reasonably documented attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at a rate equal to two percentage points over the prime rate of the
Morgan Guaranty Trust Company of New York on the date such payment was required
to be made.
AMENDMENT OF THE MERGER AGREEMENT. Subject to applicable law, the Merger
Agreement may be amended, modified and supplemented in writing by the parties
thereto in any and all respects before the Effective Time (notwithstanding any
stockholder approval), by action taken by the respective Boards of Directors of
Parent, Purchaser and the Company or by the respective officers authorized by
such Boards of Directors; PROVIDED, HOWEVER, that after any such stockholder
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval.
TREATMENT OF OPTIONS. The Merger Agreement provides that prior to the
Effective Time, the Board of Directors of the Company (or, if appropriate, any
Committee thereof) shall adopt appropriate resolutions and use its reasonable
best efforts to take all other actions necessary to (i) provide for the
cancellation, effective at the Effective Time of all the outstanding stock
options and other rights to purchase Shares ("Options") and (ii) terminate, as
of the Effective Time, the Company's stock option plans and any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any of its subsidiaries
(collectively, the "Stock Incentive Plans") and (iii) amend, as of the Effective
Time, the provisions in any U.S. or Foreign Employee Benefit Plan providing for
the issuance, transfer or grant of any capital stock of the Company or any of
its subsidiaries or any interest in respect of any capital stock of the Company
or its subsidiaries to provide that there shall be no continuing rights to
acquire, hold, transfer or grant any capital stock of the Company or its
subsidiaries or any interest in the capital stock of the Company or its
subsidiaries. Immediately prior to the Effective Time, the Company shall use its
reasonable best efforts to ensure that (i) each Option, whether or not then
vested or exercisable, shall no longer be exercisable for the purchase of Shares
but shall entitle each holder thereof, in cancellation and settlement therefor,
to payments by the Company in cash (subject to any applicable withholding taxes,
the "Cash Payment"), at the Effective Time, equal to the product of (x) the
total number of Shares subject to such Option whether or not then vested or
exercisable and (y) the excess of the Merger Consideration over the exercise
price per Share subject to such Option, each such Cash Payment to be paid to
each holder of an outstanding Option at the Effective Time and (ii) each Share
previously issued in the form of grants of restricted stock or grants of
contingent shares shall fully vest in
24
<PAGE>
accordance with their respective terms. In addition, any outstanding stock
appreciation rights or limited stock appreciation rights shall be canceled
immediately prior to the Effective Time without any payment or other
consideration therefor. The Merger Agreement further provides that the Company
shall use its reasonable best efforts to ensure that the Stock Incentive Plans
shall terminate as of the Effective Time. The Company will take all necessary
steps to ensure that neither the Company nor any of its subsidiaries is or will
be bound by any Options, other options, warrants, rights or agreements which
would entitle any Person, other than Parent or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof. The Company will use its reasonable best
efforts to obtain all necessary consents to ensure that after the Effective
Time, the only rights of the holders of Options to purchase Shares in respect of
such Options will be to receive the Cash Payment in cancellation and settlement
thereof. Notwithstanding any other provision of Section 2.07 of the Merger
Agreement to the contrary, payment of the Cash Payment may be withheld with
respect to any Option until the necessary consents are obtained.
DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION. The Merger Agreement
requires that from and after the Effective Time, the Surviving Corporation shall
(or, if necessary, Parent shall take all necessary actions to) ensure that the
Certificate of Incorporation and By-laws of the Surviving Corporation contain
the provisions with respect to indemnification and exculpation from liability
set forth in the Company's Certificate of Incorporation and By-Laws on the date
of the Merger Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company, unless such modification is required by law. For six years from the
Effective Time, the Surviving Corporation shall either (x) maintain in effect
the Company's directors' and officers' liability insurance covering those
persons who are covered on the date of the Merger Agreement by the Company's
directors' and officers' liability insurance policy (the "Indemnified Parties");
PROVIDED that the Surviving Corporation may substitute for such Company
policies, policies with at least the same coverage containing terms and
conditions which are no less advantageous and provided that said substitution
does not result in any gaps or lapses in coverage with respect to matters
occurring prior to the Effective Time or (y) cause Parent's directors' and
officers' liability insurance then in effect to cover those persons who are
covered on the date of the Merger Agreement by the Company's directors' and
officers' liability insurance policy with respect to those matters covered by
the Company's directors' and officers' liability policy; PROVIDED that the
coverage provided by Parent's insurance shall be no less favorable to the
Indemnified Parties and shall provide no fewer rights than the Company's
directors' and officers' liability insurance policy in place on the date of the
Merger Agreement. Notwithstanding anything to the contrary in the Merger
Agreement, in no event shall the Surviving Corporation be required to expend in
any one year an amount in excess of 200% of the annual premiums paid by the
Company as of the date of the Merger Agreement for such insurance and if the
annual premium for the insurance coverage that would otherwise be required would
exceed such amount, the Surviving Corporation shall only be obligated to obtain
a policy with the greatest coverage available for a cost not exceeding 200% of
the annual premiums paid by the Company on the date of the Merger Agreement.
EMPLOYEE BENEFIT PLANS. Pursuant to the Merger Agreement, from and after
the Effective Time until the first anniversary of the Effective Time, the
Surviving Corporation shall (or, if necessary, Parent shall cause the Surviving
Corporation to) ensure that all employees and officers of the Company at the
Effective Time receive benefits in the aggregate substantially comparable to the
benefits received by such individuals under U.S. Employee Benefit Plans and
Foreign Employee Benefit Plans immediately prior to the date of the Merger
Agreement. Notwithstanding the foregoing, following the Effective Time, the
Surviving Corporation may terminate the employment of any employee (subject to
the payment of severance benefits payable to the employee in connection with
such termination). From and after the Effective Time until the first anniversary
of the Effective Time, the Surviving Corporation shall (or, if necessary, Parent
shall cause the Surviving Corporation to) keep in effect all severance policies
that are applicable to employees and officers of the Company immediately prior
to the date of the Merger Agreement. Following the Effective
25
<PAGE>
Time, (i) the Surviving Corporation shall (or, if necessary, Parent shall cause
the Surviving Corporation to) ensure that no medical, dental, health or
disability plan adopted by the Surviving Corporation shall have any preexisting
condition limitations and (ii) the Surviving Corporation shall (or, if
necessary, Parent shall cause the Surviving Corporation to) honor all
deductibles and out-of-pocket expenses paid by the employees and officers of the
Company and its U.S. subsidiaries under any medical, dental, health or
disability plan of the Company and its subsidiaries during the portion of the
calendar year prior to the time such employees become eligible to participate in
any medical, dental, health or disability plan adopted by the Surviving
Corporation. Following the Effective Time, for purposes of eligibility and
vesting, the Surviving Corporation (and, if applicable, Parent) shall honor all
service credit accrued by the employees and officers of the Company under all
U.S. Employee Benefit Plans and Foreign Employee Benefit Plans up to (and
including) the Effective Time.
COMPOSITION OF THE BOARD OF DIRECTORS. The Merger Agreement provides that,
promptly upon the acceptance for payment of, and payment by Purchaser in
accordance with the Offer for, any Shares pursuant to the Offer, Purchaser shall
be entitled to designate such number of directors on the Board of Directors of
the Company, rounded up to the next whole number, as will give Purchaser,
subject to compliance with Section 14(f) of the Exchange Act, representation on
such Board of Directors equal to at least that number of directors which equals
the product of the total number of directors on the Board of Directors (giving
effect to the directors elected pursuant to this sentence) multiplied by a
fraction, the numerator of which shall be the number of Shares so accepted for
payment and paid for or otherwise acquired or owned by Purchaser or Parent and
the denominator of which shall be the number of Shares then issued and
outstanding, and the Company and its Board of Directors shall, at such time,
take any and all such action needed to cause Purchaser's designees to be
appointed to the Company's Board of Directors (including to cause directors to
resign). Subject to applicable law, the Company shall take all action requested
by Parent which is reasonably necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9, so long as Purchaser shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Purchaser's designees. In furtherance thereof, the
Company will increase the size of the Company's Board of Directors, or use its
reasonable efforts to secure the resignation of directors, or both, as is
necessary to permit Purchaser's designees to be elected to the Company's Board
of Directors.
NO SOLICITATION OF OTHER OFFERS. The Merger Agreement provides that, upon
execution of the Merger Agreement, the Company and its affiliates and each of
their respective officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants and other agents ("Agents") shall
immediately cease any existing discussions or negotiations with any other
parties that may be ongoing with respect to any Acquisition Proposal (as defined
below). Neither the Company nor any of its subsidiaries shall, directly or
indirectly, take (and the Company shall not authorize or permit its or its
subsidiaries' Agents to take) any action to (i) encourage, solicit or initiate
the making of any Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with or furnish or disclose any information to, any
Person (other than Parent or Purchaser) in connection with, or take any other
action to knowingly facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
except that the Company may participate in discussions or negotiations with and,
provided such Person enters into a confidentiality agreement with the Company on
terms no more favorable to such Person than the confidentiality agreement
between Technicolor and the Company, furnish or disclose information to, any
Person who has made, in the good faith judgment of the Board of Directors of the
Company after consultation with their financial advisors, a bona fide offer or
proposal (but not an inquiry) regarding a transaction that would constitute an
Acquisition Proposal and that, if agreed with the Company, would constitute a
Superior Proposal, provided such Acquisition Proposal was not initially
solicited, encouraged or knowingly facilitated by the Company, its subsidiaries
or their Agents, and, PROVIDED FURTHER, that nothing
26
<PAGE>
in the foregoing shall prevent the Company or Board of Directors from taking and
disclosing to the Company's stockholders a position contemplated by Rule 14d-9
and Rule 14e-2 promulgated under the Exchange Act with respect to any tender
offer or from making such disclosure to the Company's stockholders, upon the
advice of its independent outside legal counsel, as is required under applicable
Federal Securities law. Any actions permitted under the exception to clause
(iii), and taken in compliance with the foregoing, shall not be deemed a breach
of any other covenant or agreement of such party contained in the Merger
Agreement. "Acquisition Proposal" means any inquiry, proposal or offer from any
Person or group relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company or any of its subsidiaries or of all
or any portion of any class of equity securities of the Company or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning all or any portion of any class of
equity securities of the Company or any of its subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or any transaction having similar
economic effect involving the Company or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement. "Superior Proposal" means a
BONA FIDE proposal made by a third party to acquire all or a portion of the
outstanding shares of the Company pursuant to a tender offer, a merger or a sale
of all of the assets of the Company on terms which the Board of Directors of the
Company determines in its good faith reasonable judgment (after consultation
with its independent outside financial and legal advisors) to be more favorable
to the Company and its stockholders than the transactions contemplated hereby.
Except to the extent that, after consultation with independent outside counsel
to the Company, the Board of Directors determines in good faith that such
actions are required in order for the directors of the Company to satisfy their
fiduciary duties to the Company and its stockholders or to comply with Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act, the Board of Directors
shall not take any action to withdraw or modify in a manner adverse to Parent or
Purchaser, or take a public position inconsistent with, its approvals or
recommendation of the Offer, the Merger or the Merger Agreement or to recommend
another Acquisition Proposal and shall not resolve to do any of the foregoing.
In addition to the obligations of the Company set forth above, on the date of
receipt thereof, the Company shall advise Parent of any request for information
regarding, or that may be reasonably likely to result in, or any other inquiry
or proposal relating to, an Acquisition Proposal, the material terms and
conditions of such request, inquiry or proposal and of any subsequent material
amendments or changes thereto, and the identity of the Person making any such
request, inquiry or proposal.
COVENANTS; REPRESENTATIONS AND WARRANTIES. The Merger Agreement also
contains certain other restrictions as to the conduct of business by the Company
pending the Merger, as well as representations and warranties of each of the
parties customary in transactions of this kind.
12. SOURCE AND AMOUNT OF FUNDS.
Purchaser estimates that the total amount of funds required to purchase all
of the outstanding Shares pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $250,000,000. Purchaser will
obtain these funds from Parent, either directly or indirectly, via other wholly-
owned subsidiaries, through loans, advances or capital contributions. It is
currently anticipated that such funds will be generated internally by Parent and
its subsidiaries and/or obtained through borrowings or from a combination of
such sources. No final decisions have been made, however, concerning the method
Parent will employ to obtain such funds. Such decisions when made will be based
on Parent's review from time to time of the advisability of particular actions,
as well as on prevailing interest rates and financial and other economic
conditions.
27
<PAGE>
13. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer or the Merger Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act, pay for any Shares tendered pursuant to the Offer and may
terminate or amend the Offer and may postpone the acceptance of, and payment
for, Shares, if (i) there shall not have been validly tendered and not withdrawn
prior to the expiration of the Offer a number of Shares which satisfies the
Minimum Condition, (ii) any applicable waiting period under the HSR Act shall
not have expired or been terminated, or (iii) if, at any time on or after the
date of the Merger Agreement and at or before the time of payment for any such
Shares (whether or not any Shares have theretofore been accepted for payment or
paid for pursuant to the Offer) any of the following shall occur:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by
any other person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to or
which would be reasonably likely to make illegal, impede, delay or otherwise
directly or indirectly restrain or prohibit the Offer or the Merger or
seeking to obtain material damages, (ii) seeking to compel Parent or
Purchaser to dispose of, or hold separate (through the establishment of a
trust or otherwise) material assets or properties or categories of assets or
properties or businesses of Parent, the Company or any of their subsidiaries
or to withdraw from one or more lines of business material to the Condition
of Parent, the Company or any of their subsidiaries or to take any actions
that, in the aggregate would be reasonably likely to materially impair
Parent's ability to control, direct or manage on a day-to-day basis the
business or affairs of the Company, (iii) seeking to impose limitations on
the ability of Parent or Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by Purchaser or Parent on all matters properly
presented to the Company's stockholders, (iv) seeking to require divestiture
by Parent or Purchaser of any Shares or (v) materially adversely affecting
the Condition of the Company and its subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, Purchaser, the Company or any subsidiary of the Company or (ii) the
Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or to the Merger, which would directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(c) any change shall have occurred (or any condition, event or
development shall have occurred), that would have a material adverse effect
on the Condition of the Company and its subsidiaries taken as a whole;
(d) except as to any such representation or warranty which speaks as of
a specific date or for a specific period which must be true and correct in
the following respects only as of such specific date or period, as of the
date of the Merger Agreement and as of the scheduled expiration date of the
Offer (i) any one or more representations, warranties, covenants or
agreements of the Company contained in the Merger Agreement that is
qualified as to materiality shall be untrue, incorrect or breached in any
respect except for such failures as would not be reasonably likely to have a
material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole or (ii) any one or more of such representations,
warranties, covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in the
aggregate, would be reasonably likely to have a material adverse effect on
the Condition of the Company and its subsidiaries taken as a whole;
28
<PAGE>
(e) (i) the Company or any of its subsidiaries or their Agents
encourages, solicits or initiates the making of any Acquisition Proposal
from any Person other than Parent or Purchaser or the Company or any of its
subsidiaries or their Agents takes any other action to knowingly facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal other than as
permitted by and in compliance with Section 4.07 of the Merger Agreement,
(ii) the Company enters into any agreement with respect to or the making of
an Acquisition Proposal, (iii) if the Company's Board of Directors shall
have (A) failed to recommend to the Company's stockholders that such
stockholders tender their Shares pursuant to the Offer and vote to approve
and adopt the Merger Agreement or (B) amends, withdraws or modifies such
recommendation in a manner adverse to Parent and Purchaser or resolves to do
so;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it and its subsidiaries under the Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of Purchaser, in any such case and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or pay for any Shares tendered pursuant
to the Offer.
The foregoing conditions (including those set forth in clauses (i)-(iii)
above) are for the sole benefit of Parent and Purchaser and may be asserted by
Parent or Purchaser, or may be waived by Parent or Purchaser, in whole or in
part at any time and from time to time in its sole discretion. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
For purposes of the foregoing, "Condition" means the business, operations or
results of operations, and financial condition.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by Purchaser or Parent of any of its
rights under the Merger Agreement or a limitation of remedies available to
Purchaser or Parent for any breach of the Merger Agreement, including
termination thereof.
If, on or after the date of the Merger Agreement, the Company should (1)
split, combine or otherwise change the Shares or its capitalization, (2) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares or (3) issue or sell additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, to acquire any of the foregoing, other
than Shares issued pursuant to the exercise of stock options outstanding as of
the date of the Merger Agreement, then, subject to the provisions of Section 13
above, Purchaser, in its sole discretion, may make such adjustments as it deems
appropriate in the Merger Consideration and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any cash dividend on the Shares or other distribution on the Shares, or
issue with respect to the Shares any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire, any
of the foregoing, payable or distributable to stockholders of record on a date
prior to the transfer of the Shares purchased pursuant to the Offer to Purchaser
or its nominee or transferee on the Company's stock transfer records, then,
subject to the provisions of Section 13 above, (1) the offer price may, in the
sole discretion of
29
<PAGE>
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (2) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering stockholders will (a) be received and
held by the tendering stockholders for the account of Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of Purchaser, be exercised
for the benefit of Purchaser, in which case the proceeds of such exercise will
promptly be remitted to Purchaser. Pending such remittance and subject to
applicable law, Purchaser will be entitled to all rights and privileges as owner
of any such noncash dividend, distribution, issuance or proceeds and may
withhold the entire offer price or deduct from the offer price the amount or
value thereof, as determined by Purchaser in its sole discretion.
15. CERTAIN LEGAL MATTERS.
GENERAL. Except as otherwise disclosed herein, based upon an examination of
publicly available filings with respect to the Company, Parent and Purchaser are
not aware of any licenses or other regulatory permits which appear to be
material to the business of the Company and which might be adversely affected by
the acquisition of Shares by Purchaser pursuant to the Offer or of any approval
or other action by any governmental, administrative or regulatory agency or
authority which would be required for the acquisition or ownership of Shares by
Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is currently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, would be obtained or, if obtained, that it will be obtained without
substantial conditions or that adverse consequences might not result to the
Company's or Parent's business or that certain parts of the Company's or
Parent's business might not have to be disposed of in the event that such
approvals were not obtained or such other actions were not taken, any of which
could cause Purchaser to elect to terminate the Offer without the purchase of
the Shares thereunder. Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See Section 13.
ANTITRUST COMPLIANCE. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission ("FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by Purchaser is subject to these
requirements. See Section 2 of this Offer to Purchase as to the effect of the
HSR Act on the timing of Purchaser's obligation to accept Shares for payment.
Pursuant to the HSR Act, Parent filed a Notification and Report Form with
respect to the acquisition of Shares pursuant to the Offer and the Merger with
the Antitrust Division and the FTC on June 19, 1998. Under the provisions of the
HSR Act applicable to the purchase of Shares pursuant to the Offer, such
purchases may not be made until the expiration of a 15-calendar day waiting
period following the filing by Parent. Accordingly, the waiting period under the
HSR Act will expire at 11:59 p.m., New York City time, on July 4, 1998, unless
early termination of the waiting period is granted or Parent receives a request
for additional information or documentary material prior thereto. If either the
FTC or the Antitrust Division were to request additional information or
documentary material from Parent, the waiting period would expire at 11:59 p.m.,
New York City time, on the tenth calendar day after the date of substantial
compliance by Parent with such request unless the waiting period is sooner
terminated by the FTC or the Antitrust Division. Thereafter, the waiting period
could be extended only by agreement or by court order. See Section 2. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the rules promulgated under the HSR Act, except by
agreement or by court order. Any such extension of the waiting period will not
give rise to any withdrawal rights not otherwise provided for by applicable law.
See Section 4. Although the Company is required to file certain information and
documentary material with the Antitrust Division and the FTC in connection with
the Offer, neither the
30
<PAGE>
Company's failure to make such filings nor a request from the Antitrust Division
or the FTC for additional information or documentary material made to the
Company will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after Purchaser's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by Purchaser or the divestiture
of substantial assets of Parent, the Company or any of their respective
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if a challenge is made, what
the result will be. See Section 13 of this Offer to Purchase for certain
conditions to the Offer that could become applicable in the event of such a
challenge.
FOREIGN APPROVALS. The Company owns property or conducts business in
various foreign countries and jurisdictions. In connection with the acquisition
of the Shares pursuant to the Offer, the laws of certain of those foreign
countries and jurisdictions may require the filing of information with, or the
obtaining of the approval of, governmental authorities in such countries and
jurisdictions, including the Regulatory Approvals. The governments in such
countries and jurisdictions might attempt to impose additional conditions on the
Company's operations conducted in such countries and jurisdictions as a result
of the acquisition of the Shares pursuant to the Offer. There can be no
assurance that Parent will be able to cause the Company or its subsidiaries to
satisfy or comply with such laws or that compliance or non-compliance will not
have a material adverse effect on the financial condition, properties, business
or results of operations of the Company and its subsidiaries taken as a whole or
impair Parent, Purchaser or the Company or any of their respective affiliates,
following consummation of the Offer or Merger, to conduct any material business
or operations in any jurisdiction where they are now being conducted. See
Section 13.
FEDERAL RESERVE BOARD REGULATIONS. Regulations T, U and X (the "Margin
Regulations") promulgated by the Federal Board place restrictions on the amount
of credit that may be extended for the purpose of purchasing margin stock
(including the Shares) if such credit is secured directly or indirectly by
margin stock. Parent and Purchaser will attempt to ensure that the financing of
the acquisition of the Shares will be in compliance with the Margin Regulations.
STATE TAKEOVER LAWS. A number of states have adopted laws and regulations
applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, stockholders,
principal executive offices or principal places of business therein. In EDGAR V.
MITE CORPORATION, the Supreme Court of the United States held that the Illinois
Business Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS CORPORATION V. DYNAMICS CORPORATION OF AMERICA, the
Supreme Court held that as a matter of corporate law, and in particular, those
laws concerning corporate governance, a state may constitutionally disqualify an
acquirer of "Control Shares" (ones representing ownership in excess of certain
voting power thresholds e.g. 20%, 33% or 50%) of a corporation incorporated in
its state and meeting certain other jurisdictional requirements from exercising
voting power with respect to those shares without the approval of a majority of
the disinterested stockholders.
Based on information supplied by the Company, Purchaser does not believe
that any state takeover laws purport to apply to the Offer or the Merger.
Neither Purchaser nor Parent has currently complied with any state takeover
statute or regulation. Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the
31
<PAGE>
Merger, Purchaser might be required to file certain information with, or to
receive approvals from, the relevant state authorities, and Purchaser might be
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
or be delayed in consummating the Offer or the Merger. In such case, Purchaser
may not be obliged to accept for payment or pay for any Shares tendered pursuant
to the Offer.
If it is asserted that one or more state takeover laws applies to the Offer
and it is not determined by an appropriate court that such act or acts do not
apply or are invalid as applied to the Offer, Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, Purchaser might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in consummating
the Offer. In such case, Purchaser may not be obligated to accept for payment
any Shares tendered. See Section 13.
EXON-FLORIO. Under Section 721 of Title VII of the United States Defense
Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and
Competitiveness Act of 1988 ("Exon-Florio"), the President of the United States
is authorized to prohibit or suspend acquisitions, mergers or takeovers by
foreign persons of persons engaged in interstate commerce in the United States
if the President determines, after investigation, that such foreign persons in
exercising control of such acquired persons might take action that threatens to
impair the national security of the United States and that other provisions of
existing law do not provide adequate authority to protect national security.
Pursuant to Exon-Florio, notice of an acquisition by a foreign person is to be
made to the Committee on Foreign Investment in the United States ("CFIUS"),
which is comprised of representatives of the Departments of the Treasury, State,
Commerce, Defense and Justice, the Office of Management and Budget, the United
States Trade Representative's Office and the Council of Economic Advisors and
which has been selected by the President to administer Exon-Florio, either
voluntarily by the parties to such proposed acquisition, merger or takeover or
by any member of CFIUS.
A determination that an investigation is called for must be made within 30
days after notification of a proposed acquisition, merger or takeover is first
filed with CFIUS. Any such investigation must be completed within 45 days of
such determination. Any decision by the President to take action must be
announced within 15 days of the completion of the investigation. Although
Exon-Florio does not require the filing of a notification, nor does it prohibit
the consummation of an acquisition, merger or takeover if notification is not
made, such an acquisition, merger or takeover thereafter remains indefinitely
subject to divestment should the President subsequently determine that the
national security of the United States has been threatened or impaired.
Purchaser does not believe that the Offer or the Merger threatens to impair the
national security of the United States and does not intend to notify CFIUS of
the proposed transaction.
16. FEES AND EXPENSES.
Purchaser and Parent have retained Lazard Freres to act as the Dealer
Manager and to provide certain financial advisory services in connection with
the proposed acquisition of the Company. In connection with such services Parent
has agreed to pay Lazard Freres an aggregate fee of $900,000. Parent will also
reimburse Lazard Freres for certain reasonable out-of-pocket expenses, including
fees and expenses of its counsel. Purchaser and Parent will also indemnify
Lazard Freres against certain liabilities and expenses in connection with its
services, including certain liabilities and expenses under the federal
securities laws.
Purchaser and Parent have retained ChaseMellon Shareholder Services, L.L.C.
to act as the Information Agent and to serve as the Depositary in connection
with the Offer. The Information Agent and the Depositary each will receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person or entity (other than the Dealer Manager and as
described in the preceding paragraph) in connection with
32
<PAGE>
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Purchaser may, in its sole discretion, take such action
as it may deem necessary to make the Offer in any such jurisdiction and extend
the Offer to holders of Shares in such jurisdiction.
Neither Purchaser nor Parent is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
Purchaser and Parent have filed with the SEC a Statement on Schedule l4D-1
pursuant to Rule l4d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. Such Statement and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in Washington, D.C. in the manner set forth above.
No person has been authorized to give any information or make any
representation on behalf of Parent or Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
NEPTUNE ACQUISITION CORP.
33
<PAGE>
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF NEPTUNE ACQUISITION CORP.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
ORLANDO F. RAIMONDO.............. President; Chief President of various wholly owned United States
3233 East Mission Oaks Executive Officer; subsidiaries of Parent comprising
Boulevard Director the Technicolor Packaged Media
Camarillo, CA 93012 Group
GARY JOYCE....................... Vice President; Senior Vice President and Chief United Kingdom
3233 East Mission Oaks Treasurer; Assistant Financial Officer of Technicolor
Boulevard Secretary; Director Packaged Media Group since July
Camarillo, CA 93012 1996. Prior to that time,
Divisional Controller of Carlton.
THOMAS M. COLLINS, JR............ Vice President; Senior Vice President and General United States
3233 East Mission Oaks Secretary; Assistant Counsel of Technicolor Packaged
Boulevard Treasurer; Director Media Group; executive officer of
Camarillo, CA 93012 a wholly owned subsidiary of
Parent since 1993. Partner,
Thelen, Marrin, Johnson & Bridges
prior to July 1993.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF CARLTON COMMUNICATIONS PLC
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
MICHAEL P. GREEN................. Chairman Chairman of Carlton since United Kingdom
25 Knightsbridge February 1983. Chairman of
London SW1X 7RZ British Digital Broadcasting PLC
England and a non-executive Director of
ITN Limited and Reuters Holdings
Plc. Chairman of the Media Trust.
SIR DEREK BIRKIN................. Director Director of Carlton since June United Kingdom
25 Knightsbridge 1992. Non-executive Director of
London SW1X 7RZ Merck & Co., Inc., Watmoughs
England (Holdings) PLC and The Merchants
Trust PLC. Advisory Director of
Unilever PLC.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
BERNARD A. CRAGG................. Finance Director; Finance Director of Carlton since United Kingdom
25 Knightsbridge Chief Financial June 1987. Joined Carlton in 1985
London SW1X 7RZ Officer as Group Financial Controller.
England
ANTHONY D.A.W. FORBES............
25 Knightsbridge Director Non-executive Director of Carlton United Kingdom
London SW1X 7RZ since July 1994. Joint senior
England partner at Cazenove & Co. from
1980 until 1994. Non-executive
director of Royal & Sun Alliance
Insurance Group plc, Watmoughs
(Holdings) PLC and The Merchants
Trust PLC.
DAVID B. GREEN................... Director Non-executive Director of Carlton United Kingdom
25 Knightsbridge since November 1990. Chairman of
London SW1X 7RZ Colefax and Fowler Group PLC.
England
LESLIE F. HILL................... Director Non-executive Director of Carlton United Kingdom
25 Knightsbridge since January 1996. Chief
London SW1X 7RZ Executive and then Chairman of
England Central Independent Television
PLC from March 1991 to December
1995. Chairman of the ITV
Association.
SIR SYDNEY
LIPWORTH, QC................... Director Non-executive Director of Carlton United Kingdom
25 Knightsbridge since November 1993. Chairman of
London SW1X 7RZ Zeneca Group PLC, Deputy Chairman
England of National Westminister Bank Plc
and Chairman of the Financial
Reporting Council. Previously
Chairman of the Monopolies and
Mergers Commission.
JUNE F. DE MOLLER................ Managing Director Managing Director of Carlton United Kingdom
25 Knightsbridge since July 1993. Director since
London SW1X 7RZ February 1983. Non-executive
England Director of Anglian Water Plc.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
SIR BRIAN PITMAN................. Director Non-executive Director of Carlton United Kingdom
25 Knightsbridge since March 1, 1998. Chairman of
London SW1X 7RZ Lloyds TSB Group plc and Lloyds
England Bank plc. Director of the
National Bank of New Zealand
Limited and NBNZ Holdings
Limited. Non-executive Director
of Next plc and President of the
Chartered Institute of Bankers.
NIGEL N. WALMSLEY................ Director Joined the Board of Carlton in United Kingdom
25 Knightsbridge October 1991. Appointed Chairman
London SW1X 7RZ of Carlton Television Limited in
England May 1994. Director of British
Digital Broadcasting PLC.
Non-executive Director of GMTV
Limited and Energis PLC and Vice
President of the Advertising
Association.
THE HON. PIERS J.H. INSKIP....... )
25 Knightsbridge Associate Director(1 Joined Carlton in 1989 and United Kingdom
London SW1X 7RZ appointed an Associate Director
England in 1990.
MATTHEW J. KEARNEY............... Associate Director(1 ) Joined Carlton in 1993; appointed United Kingdom
25 Knightsbridge an Associate Director in 1996.
London SW1X 7RZ
England
DAVID ABDOO...................... Secretary Joined Carlton in 1988; appointed United Kingdom
25 Knightsbridge Company Secretary in 1991.
London SW1X 7RZ
England
</TABLE>
- ------------------------
(1) This title indicates a senior officer position immediately below that of
Executive Director.
A-3
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
<S> <C> <C>
Post Office Box 3301 85 Challenger Road, Mail Drop-Reorg 120 Broadway, 13th Floor
South Hackensack, N.J. 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
<TABLE>
<S> <C>
BY FACSIMILE TRANSMISSION: CONFIRM FACSIMILE BY TELEPHONE:
(For Eligible Institutions Only) (For Confirmation Only)
(201) 296-4293 (201) 296-4860
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its telephone numbers and locations
listed below. You may also contact your broker, dealer, commercial bank, or
trust company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
450 West 33rd Street--14th Floor
New York, NY 10001
or
Bankers and Brokers call: (212) 273-8080
All others call Toll Free: (888) 224-2745
THE DEALER MANAGER FOR THE OFFER IS:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (Call Collect)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF
COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
AT $11.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 23, 1998
BY
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS EXTENDED.
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
Post Office Box 3301 85 Challenger Road--Mail Drop--Reorg. 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Dept. Attn: Reorganization
Attn: Reorganization Department Dept.
</TABLE>
<TABLE>
<S> <C>
FACSIMILE TRANSMISSION: CONFIRM FACSIMILE BY TELEPHONE:
(For Eligible Institutions Only) (201) 296-4860
(201) 296-4293
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates are to be forwarded herewith or, unless an Agent's Message (as
defined in Section 3 of the Offer to Purchase (as defined below)) is utilized,
if delivery is to be made by book-entry transfer to the Depositary's account at
The Depository Trust Company ("DTC") or the Philadelphia Depository Trust
Company ("PDTC") (each, a "Book-Entry Transfer Facility" and collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase. Stockholders whose certificates evidencing
Shares ("Share Certificates") are not immediately available or who cannot
deliver their Share Certificates and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) or who cannot comply with the book-entry transfer procedures on a
timely basis must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL NUMBER OF
SHARE SHARES
CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATES* TENDERED**
TOTAL SHARES:
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Check Box of Book-Entry Transfer Facility (Check one):
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry
Transfer (check one):
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number (if delivered by Book-Entry Transfer): ______________________
Transaction Code Number: ___________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Neptune Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Carlton
Communications Plc, an English public limited company ("Parent"), the above-
described shares of Common Stock, par value $.01 per share (the "Shares"), of
Nimbus CD International, Inc., a Delaware corporation (the "Company"), at $11.50
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 23, 1998 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended or supplemented from time to time, together
constitute the "Offer"). The undersigned understands that Purchaser reserves the
right to transfer or assign, in whole or in part from time to time to Parent or
one or more direct or indirect wholly owned subsidiaries of Parent, the right to
purchase Shares tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the Offer
(including the Offer Conditions and together with, if the Offer is extended or
amended, the terms and conditions of such extension or amendment) the
undersigned hereby sells, assigns and transfers to, or upon the order of,
Purchaser all right, title and interest in and to all of the Shares that are
being tendered hereby and any and all other Shares or other securities issued or
issuable in respect of such Shares on or after June 17, 1998 (such other Shares
or other securities being referred to herein as the "Other Securities") and
irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all Other
Securities with full power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest), to the fullest extent of
such stockholder's right with respect to such Shares (and any Other Securities)
(a) to deliver such Share Certificates evidencing such Shares and all Other
Securities, or transfer ownership of such Shares and all Other Securities on the
account books maintained by a Book-Entry Transfer Facility together, in either
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of Purchaser, upon receipt by the Depositary, as the undersigned's
agent, of the purchase price (adjusted, if appropriate, as provided in the Offer
to Purchase), (b) present such Shares and all Other Securities for transfer on
the books of the Company, and (c) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Other Securities, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Purchaser, its officers and
designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to the full extent of the
undersigned's rights, including to exercise such voting and other rights as each
such attorney and proxy or his (or her) substitute shall, in his (or her) sole
discretion, deem proper, and otherwise act (including pursuant to written
consent), with respect to all of the Shares tendered hereby which have been
accepted for payment by Purchaser (and any and all Other Securities), which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned meeting), or written
consent in lieu of such meeting, or otherwise. This proxy and power of attorney
is coupled with an interest in the Shares tendered hereby and is irrevocable and
is granted in consideration of, and is effective upon, the acceptance for
payment of such Shares by Purchaser in accordance with the terms of the Offer.
Such acceptance for payment shall, without further action, revoke all prior
proxies and consents granted by the undersigned with respect to such Shares (and
all Shares and other securities issued in Other Securities in respect of such
Shares), and no subsequent proxy or power of attorney or written consent shall
be given (and if given or executed, shall be deemed not to be effective) with
respect thereto by the undersigned. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance for payment of such Shares, Purchaser is able to exercise
full voting and other rights with respect to such Shares (and any Other
Securities), including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Other Securities, and that when such Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and that none of such Shares and Other Securities will be subject
to any adverse claim. The undersigned, upon request, shall execute and delivery
any signature guarantees or additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all other Securities. In addition,
the undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser all Other Securities in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, Purchaser shall be entitled to all
rights and privileges as owner of such Other Securities and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall not be affected by, and shall survive the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
<PAGE>
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates evidencing Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Deliver
Instructions," please mail the check for the purchase price and/or return any
Share Certificates evidencing Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." If both the Special
Delivery Instructions and the Special Payment Instructions are completed, please
issue the check for the purchase price and/or return any Share Certificates
evidencing Shares not purchased (together with accompanying documents as
appropriate) in the name(s) of, and deliver said check and/or return such Share
Certificates to, the person or persons so indicated. Stockholders tendering
Shares by book-entry transfer may request that any Shares not accepted for
payment be returned by crediting such account maintained at DTC or PDTC as such
stockholder may designate by making an appropriate entry under "Special Payment
Instructions." The undersigned recognizes that Purchaser has no obligation
pursuant to the Special Payment Instructions to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7) (SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the To be completed ONLY if the check for the
purchase price of Shares purchased or Share purchase price of the Shares purchased or Shares
Certificates evidencing Shares not tendered or Certificates evidencing Shares not tendered or
not purchased are to be issued in the name of not purchased are to be mailed to someone other
someone other than the undersigned. than the undersigned, or to the undersigned at
an address other than that shown under
"Description of Shares Tendered."
Issue Mail
/ / Check and/or / / Certificate(s) / / Check and/or / / Certificate(s)
To: To:
- ------------------------------------------------ ------------------------------------------------
- ------------------------------------------------ Name (Please Print)
Name(s) (Please Print)
Address Address
- ------------------------------------------------ ------------------------------------------------
- ------------------------------------------------ ------------------------------------------------
- ------------------------------------------------ ------------------------------------------------
(Include Zip Code) (Include Zip Code)
- ------------------------------------------------
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
</TABLE>
<PAGE>
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated: ___________________ 1998
(Must be signed by registered holder(s) as name(s) appear(s) on share
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of a corporation or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
- --------------------------------------------------------------------------------
(NAME(S))
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
- --------------------------------------------------------------------------------
CAPACITY (FULL TITLE)
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
INCLUDE ZIP CODE
<TABLE>
<S> <C>
- ------------------------------------------------------------- -------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER (HOME) TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER (COMPLETE
SUBSTITUTE FORM W-9 BELOW)
- ------------------------------------------------------------- -------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER (BUSINESS)
</TABLE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
X
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
NAME (PLEASE PRINT OR TYPE)
<TABLE>
<S> <C>
- ------------------------------------------------------------- -------------------------------------------------------------
FULL TITLE NAME OF FIRM
</TABLE>
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
INCLUDE ZIP CODE
<TABLE>
<S> <C>
- -------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
</TABLE>
Date: ___________________, 1998
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as provided below, all signatures on this
Letter of Transmittal must be guaranteed by a financial institution (including
most commercial banks, savings and loan associations and brokerage houses) that
is a participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"). Signatures on a
Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal
is signed by the registered holders (which term, for purposes of this document,
includes any participant in any of the Book-Entry Transfer Facilities' systems
whose name appears on a security position listing as the owner of the Shares) of
Shares tendered herewith and such registered holder has not completed the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal, or (b) if such Shares are tendered
for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders either
if Share Certificates are to be forwarded herewith or if a tender of Shares is
to be made pursuant to the procedures for delivery by book-entry transfer set
forth in Section 3 of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any
book-entry transfer into the Depositary's account at a Book-Entry Transfer
Facility of Shares delivered by book-entry transfer as well as a properly
completed and duly executed letter of transmittal, must be received by the
Depositary, at one of the addresses set forth herein on or prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share
Certificates are forwarded to the Depositary in multiple deliveries, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery.
Stockholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot comply with the book-entry
transfer procedures on a timely basis may tender their Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure, (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Purchaser, must be
received by the Depositary prior to the Expiration Date and (iii) the Share
Certificates evidencing all physically tendered Shares (or Book-Entry
Confirmation with respect to such Shares), as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase.
If Share Certificates are forwarded separately to the Depositary, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares tendered should be listed on a separate signed schedule and attached
hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any Share Certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Number of Shares Tendered." In such cases, new
Share Certificate(s) evidencing the remainder of the Shares that were evidenced
by the old Share Certificate(s) will be sent to the registered holder, unless
otherwise provided in the appropriate box on this Letter of Transmittal, as soon
as practicable after the Expiration Date. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration, enlargement
or any change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
<PAGE>
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Share
Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by Share Certificates listed and transmitted hereby, no
endorsements of Share Certificates or separate stock powers are required unless
payment is to be made to or Share Certificates evidencing Shares not tendered or
purchased are to be issued in the name of a person other than the registered
holder(s), in which case the Share Certificate(s) evidencing the Shares tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder or holders appear on the Share Certificate(s). Signatures
on such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificates or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Purchaser will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of Shares to it or its
order pursuant to the Offer. If, however, payment of the purchase price is to be
made to, or if Share Certificates evidencing Shares not tendered or purchased
are to be registered in the name of, any person other than the registered
holder(s), or if Share Certificates evidencing tendered Shares are registered in
the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s) or such other person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent and/or any Share Certificates
are to be returned to someone other than the signer above, or to the signer
above but at an address other than that shown in the box entitled "Description
of Shares Tendered" above, the appropriate boxes on this Letter of Transmittal
should be completed. Stockholders tendering Shares by book-entry transfer may
request that Shares not purchased be credited to such account maintained at any
of the Book-Entry Transfer Facilities as such stockholder may designate under
"Special Delivery Instructions." If no such instructions are given, any such
Shares not purchased will be returned by crediting the account at the Book-Entry
Transfer Facilities designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained
from, the Information Agent or the Dealer Manager at the telephone numbers and
addresses set forth below. Stockholders may also contact their broker, dealer,
commercial bank or trust company.
<PAGE>
9. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the
"backup withholding" provisions of federal tax law, the Depositary may be
required to withhold 31% of the purchase price of Shares purchased pursuant to
the Offer. To prevent backup withholding, each tendering stockholder should
complete and sign the Substitute Form W-9 included in this Letter of Transmittal
and either: (a) provide the stockholder's correct taxpayer identification number
("TIN") and certify, under penalties of perjury, that the TIN provided is
correct (or that such stockholder is awaiting a TIN), and that (i) the
stockholder has not been notified by the Internal Revenue Service ("IRS") that
the stockholder is subject to backup withholding as a result of failure to
report all interest or dividends, or (ii) the IRS has notified the stockholder
that the stockholder is no longer subject to backup withholding; or (b) provide
an adequate basis for exemption. If "Applied for" is written in Part I of the
substitute Form W-9, the Depositary will retain 31% of any payment of the
purchase price for tendered Shares during the 60-day period following the date
of the Substitute Form W-9. If the stockholder furnishes the Depositary with his
or her TIN within 60 days of the date of the Substitute W-9, the Depositary will
remit such amount retained during the 60-day period to the stockholder and no
further amounts will be retained or withheld from any payment made to the
stockholder thereafter. If, however, the stockholder has not provided the
Depositary with his or her TIN within such 60-day period, the Depositary will
remit such previously-retained amounts to the IRS as backup withholding and
shall withhold 31% of any payment of the purchase price for the tendered Shares
made to the stockholder thereafter unless the stockholder furnishes a TIN to the
Depositary prior to such payment. In general, an individual's TIN is the
individual's Social Security number. If a certificate for tendered Shares is
registered in more than one name or is not in the name of the actual owner,
consult the Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report. If the
Depositary is not provided with the correct TIN or an adequate basis for
exemption, the stockholder may be subject to a $50 penalty imposed by the IRS
and backup withholding at a rate of 31%. Certain holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order to satisfy the
Depositary that a foreign individual qualifies as an exempt recipient, such
foreign individual must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. A form
for such statements can be obtained from the Depositary.
If payment for tendered Shares is to be made, pursuant to Special Payment
Instructions, to a person other than the tendering stockholder, backup
withholding will apply unless such other person, rather than the tendering
stockholder, complies with the procedures described above to avoid backup
withholding.
For further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how an individual who does not
have a TIN can obtain one and how to complete the Substitute Form W-9 if Shares
are held in more than one name), consult the Guidelines of the IRS for
Certification of Taxpayer Identification Number on Substitute Form W-9 attached
to this Letter of Transmittal.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments for such Shares. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided the appropriate information is furnished to the
IRS.
Additional copies of this Letter of Transmittal may be obtained from the
Depositary in its capacity as Information Agent in connection with the Offer
(the "Information Agent"). The address of the Information Agent is 450 West 33rd
Street - 14th Floor, New York, NY 10001, and its telephone number is (888)
224-2745.
Any questions or requests for assistance should be directed to the
Information Agent at the address and telephone number set forth above.
IMPORTANT: THIS LETTER OF TRANSMITTAL (TOGETHER WITH SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.
<PAGE>
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE
Name:
Address:
-----------------------------------------------------------------
FORM W-9
Department of the Treasury
Internal Revenue Service
Check appropriate box:
Request for Taxpayer Individual / / Corporation / /
Identification Number (TIN)
and Certification Partnership / / Other (specify) / /
- ---------------------------------------------------------------------------------------------------
PART I. Please provide your taxpayer identification number in the SSN: - -
space at right. If awaiting TIN, write "Applied For." or
EIN: -
- ---------------------------------------------------------------------------------------------------
PART II. For Payees exempt from backup withholding. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9."
- ---------------------------------------------------------------------------------------------------
PART III. CERTIFICATION
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for
a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I have not been notified by the IRS
that I am subject to backup withholding as a result of a failure to report all interests or
dividends, or (b) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS.--You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your
tax return. However, if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2).
Signature: ---------------------------------------------------------- Date: ------------------ ,
1998
- ---------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
</TABLE>
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
450 West 33rd Street--14th Floor
New York, New York 10001
or
Call Toll Free: (888) 224-2745
THE DEALER MANAGER FOR THE OFFER IS:
LAZARD FRERES & CO. LLC
30 Rockefeller Plaza
New York, New York 10020
(212) 632-6717 (Call Collect)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
AT
$11.50 NET PER SHARE
BY
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS EXTENDED.
June 23, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Neptune Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Carlton Communications Plc, an
English public limited company ("Parent"), to act as Dealer Manager in
connection with its offer to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of Nimbus CD International, Inc., a
Delaware corporation (the "Company"), at $11.50 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Purchaser's
Offer to Purchase dated June 23, 1998 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer"). Please
furnish copies of the enclosed materials to those of your clients for whom you
hold shares registered in your name or in the name of your nominee.
Enclosed herewith are the following documents:
1. Offer to Purchase, dated June 23, 1998;
2. Letter of Transmittal to be used by stockholders of the Company in
accepting the Offer;
3. Letter to Stockholders of the Company from the President and Chief
Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9; and
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with
regard to the Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Depositary.
<PAGE>
Payment for Shares accepted for payment pursuant to the Offer will be in all
cases made only after timely receipt by ChaseMellon Shareholder Services, L.L.C.
(the "Depositary"), of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter
of Transmittal, properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in Section 3 of the Offer to Purchase, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING PAYMENT PURSUANT TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 16, 1998 (the "Merger Agreement"), by and among the Company, Parent
and Purchaser. The Merger Agreement provides that, among other things, following
the consummation of the Offer and the satisfaction or waiver of the other
conditions set forth in the Merger Agreement, Purchaser will be merged with and
into the Company (the "Merger"). At the effective time of the Merger, each
outstanding Share (other than Shares held in the treasury of the Company, owned
by Parent, Purchaser or any other wholly owned subsidiary of Parent or held by
stockholders who perfect their dissenters' rights under Delaware law) will be
converted into the right to receive the per Share price paid in the Offer,
without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED BY UNANIMOUS VOTE (WITH
ONE DIRECTOR ABSENT) THAT EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN
THE BEST INTERESTS OF, THE HOLDERS OF SHARES, HAS APPROVED THE OFFER, THE
MERGER, AND THE MERGER AGREEMENT, AND HAS RECOMMENDED BY UNANIMOUS VOTE (WITH
ONE DIRECTOR ABSENT) THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will be deemed to have accepted for payment, and will pay
for, all Shares validly tendered and not properly withdrawn by the Expiration
Date (as defined in the Offer to Purchase) if, as and when the Purchaser gives
oral or written notice to the Depositary of the Purchaser's acceptance of the
tenders of such Shares for payment pursuant to the Offer. Payment for Shares
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates evidencing such Shares or timely confirmation of
a book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase), (ii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase), and (iii) any other documents required by the
Letter of Transmittal. The Offer is not being made to, nor will tenders be
accepted from, or on behalf of, holders of Shares in any jurisdiction in which
the making or acceptance of the Offer would not be in compliance with the laws
of such jurisdiction. In any jurisdiction where the securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed made on behalf of the Purchaser by Lazard Freres & Co. LLC, the Dealer
Manager for the Offer, or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction. An envelope in which to return
your instructions to us is enclosed. If you authorize tender of your Shares, all
such Shares will be tendered unless otherwise indicated in such instruction
form. Please forward your instructions to us as soon as possible to allow us
ample time to tender Shares on your behalf prior to the expiration of the Offer.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (in the case of any book-entry
transfer), and any other documents required by the Letter of Transmittal, should
be sent to the Depositary, and either certificates representing the tendered
Shares should be delivered or such Shares must be delivered to the Depositary
pursuant to the procedures for book-entry transfers, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
<PAGE>
Neither Parent nor Purchaser will pay any fees or commissions to any broker
or dealer or other person (other than the Dealer Manager, the Information Agent
and the Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed
upon request for customary mailing and handling expenses incurred by you in
forwarding the enclosed offering materials to your clients.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS
EXTENDED.
Any inquiries you may have with respect to the Offer may be addressed to the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover page of the Offer to Purchase. Requests for additional
copies of enclosed materials may be directed to the Information Agent or the
Dealer Manager.
Very truly yours,
LAZARD FRERES & CO. LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY
PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, ANY AFFILIATE OF THE
COMPANY, LAZARD FRERES & CO. LLC, THE DEALER MANAGER, THE INFORMATION AGENT OR
THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR
MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT
CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
AT
$11.50 NET PER SHARE
BY
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated June 23, 1998
(the "Offer to Purchase") and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to the Offer by Neptune Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Carlton Communications Plc, an
English public limited company ("Parent"), to purchase all of the outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of Nimbus CD
International, Inc., a Delaware corporation (the "Company"), at $11.50 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer. Also enclosed is the letter to stockholders of the
Company from the Chairman and Chief Executive Officer of the Company accompanied
by the Company's Solicitation/Recommendation Statement on Schedule 14D-9.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The Offer price is $11.50 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of the
Offer.
2. The Offer is being made for all outstanding Shares.
3. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED BY UNANIMOUS VOTE
(WITH ONE DIRECTOR ABSENT) THAT EACH OF THE OFFER AND THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES, HAS APPROVED THE
OFFER, THE MERGER AND THE MERGER AGREEMENT, AND HAS RECOMMENDED BY
UNANIMOUS VOTE (WITH ONE DIRECTOR ABSENT) THAT HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
<PAGE>
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which, together with any Shares beneficially owned by
Parent or Purchaser, represent at least a majority of the Shares
outstanding on a fully diluted basis on the date of purchase. The Offer
is also subject to other terms and conditions, including receipt of
certain regulatory approvals, set forth in the Offer to Purchase. Subject
to the terms of the Merger Agreement, any or all conditions to the Offer
may be waived by Purchaser.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Tuesday, July 21, 1998, unless the Offer is extended.
6. The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of June 16, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, among
other things, following the consummation of the Offer and the
satisfaction or waiver of the other conditions set forth in the Merger
Agreement, Purchaser will be merged with and into the Company (the
"Merger"). At the effective time of the Merger, each outstanding Share
(other than Shares held in the treasury of the Company, owned by Parent,
Purchaser or any other wholly owned subsidiary of Parent or held by
stockholders who perfect their dissenters' rights under Delaware law)
will be converted into the right to receive the per Share price paid in
the Offer, without interest.
7. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form set forth below. Please forward your instructions to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
Payment for Shares accepted for payment pursuant to the Offer will be in all
cases made only after timely receipt by ChaseMellon Shareholder Services, L.L.C.
(the "Depositary"), of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter
of Transmittal, properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in Section 3 of the Offer to Purchase, an Agent's
Message, and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING PAYMENT PURSUANT TO THE OFFER.
The Offer is not being made to, nor will tenders be accepted from, or on behalf
of, holders of Shares in any jurisdiction in which the making or acceptance of
the Offer would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities or blue sky laws require the Offer to be made
by a licensed broker or dealer, the Offer will be deemed made on behalf of
Purchaser by Lazard Freres & Co. LLC, the Dealer Manager for the Offer, or one
or more registered brokers or dealers that are licensed under the laws of such
jurisdiction. An envelope in which to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. Please forward
your instructions to us as soon as possible to allow us ample time to tender
Shares on your behalf prior to the expiration of the Offer.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated June 23, 1998 and the related Letter of Transmittal, in
connection with the offer by Neptune Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Carlton Communications Plc, an English public
limited company, to purchase for cash all outstanding Shares, par value $.01 per
share (the "Shares"), of Nimbus CD International, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer to Purchase and the related Letter of Transmittal.
Dated: , 1998
NUMBER OF SHARES TENDERED*
_______________ SHARES
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please Print Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please Print Address(es)
- --------------------------------------------------------------------------------
Area Code and Telephone Number(s)
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number(s)
- ------------------------
*Unless otherwise indicated, it will be assumed that all your Shares are to be
tendered.
3
<PAGE>
FOR IMMEDIATE RELEASE
WEDNESDAY, 17TH JUNE 1998
CARLTON TO ACQUIRE NIMBUS FOR $264M
Carlton Communications Plc, owner of Technicolor, announced today it has entered
into a merger agreement to acquire Nimbus CD International Inc., one of the
world's leading independent manufacturers of optical discs, including DVD,
DVD-ROM, CD-Audio and CD-ROM. Carlton plans to expand the business alongside
Technicolor, the world leader in manufacturing and distributing pre-recorded
videocassettes, which also has a growing business in manufacturing and
distributing optical discs.
Following the agreement, Carlton will make a cash tender offer of $11.50 per
share for all the outstanding shares, valuing Nimbus at approximately $264m
(L160m). Stockholders and management of Nimbus owning an aggregate of 9,373,322
shares, representing approximately 44 per cent of Nimbus' common stock, have
agreed to tender their shares into Carlton's tender offer. In the year ended
31st March 1998, Nimbus reported pre-tax profits of $21m, compared with $14m in
the previous year.
Michael Green, Chairman of Carlton, said:
"Technicolor is becoming the leading manufacturer and distributor of optical
discs. Just as the company added videocassettes to its film operations in the
'80s, now we are adding optical discs in the '90s. The penetration of VCRs, DVD
players and PC disc drives are all growing as part of the world wide expansion
of screen-based entertainment. Working together with Nimbus, we can serve a
larger part of the growing global market."
Page 1 of 3
<PAGE>
Lyndon Faulkner, Chairman and Chief Executive Officer of Nimbus, said:
"Nimbus and Technicolor are an excellent match and we look forward to working
with one of the most respected names in the packaged media industry. Together we
will be able to expand on the service that we provide to all our customers.
Technicolor has real distribution expertise. Nimbus has demonstrated the
strength of its CD-Audio and CD-ROM capabilities. As a leader in DVD production
we believe there is great potential for rapid growth as a supplier of DVD-Video,
Divx, and DVD-ROM products to the home entertainment and computer software
industries."
DVDs are capable of storing an entire film on one CD-sized disc. DVD players
were launched in the US in 1997 with first year sales of approximately 200,000
units. By comparison, sales of VCRs when introduced in 1975 took two years to
reach this level of market penetration. Over 1000 different DVD titles have been
published and the format is supported by all the major Hollywood studios.
DVD-ROMs are a CD-sized discs capable of storing up to 14 times more information
than CD-ROMs, allowing for significantly improved video and sound. DVD-ROM
drives are forecast to become standard in all PCs and independent forecasts
predict sales of over 2 billion DVD-ROMs in the US and Europe by 2003.
Based in Charlottesville, Virginia, Nimbus has the capacity to produce 260m CDs
and recently announced its intention to increase its DVD and Divx annual
capacity to 28m units. Nimbus serves over 2,000 customers and is one of a select
group of Microsoft Authorised Replicators. The company recently signed a five
year agreement with Digital Video Express, LP, to replicate the new Divx discs.
The acquisition will strengthen and expand Technicolor's leading position as a
global supplier of packaged media services. Technicolor is already the world's
largest producer and distributor of pre-recorded videocassettes for the
Hollywood studios and has a growing business in manufacturing optical discs.
Technicolor, with the capacity to produce 650m videocassettes and 40m CDs a
year, recently announced the trebling of its DVD capacity to 15m units a year.
Page 2 of 3
<PAGE>
Together with Nimbus, Technicolor will be able to provide a fully integrated
service of mastering, manufacturing and distribution in every major format in
all the key markets. Production and distribution operations will cover the US,
continental Europe and the United Kingdom. The two businesses will serve a wide
range of customers, including publishers of audio CDs, CD-ROMs, DVDs and
DVD-ROMs. Combined DVD capacity will be almost 50m units a year.
-ENDS -
FOR FURTHER INFORMATION, PLEASE CONTACT:
<TABLE>
<S> <C> <C>
David Cameron Carlton Communications Plc 0171 663 6363
Steve Minkel Nimbus CD International, Inc. 00 1 804 985 1100
(ext 371)
</TABLE>
NOTES TO EDITORS
Technicolor Video, based in Camarillo, California is the world's largest
producer of pre-recorded videocassettes. Technicolor Film, based in North
Hollywood, is the world's largest processor of motion picture film.
Technicolor also has US facilities in New York, Michigan and Tennessee, a
new business in Mexico and European plants in the United Kingdom, Holland,
Italy, Spain and Denmark. Technicolor's leading customers include the
Hollywood studios, Disney, Warner, Columbia Tristar, DreamWorks, Polygram
and New Line.
Nimbus is one of the world's leading independent manufacturers of optical discs,
distributed throughout North America, the United Kingdom and continental
Europe. Nimbus is at the forefront of optical disc manufacturing
technologies and provides complete DVD software and audio production
services. As at 31st March 1998, the company had net assets of $66m,
including net debt of $18m.
Page 3 of 3
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is
made solely by the Offer to Purchase, dated June 23, 1998, and the
related Letter of Transmittal and any amendments or supplements
thereto, and is being made to all holders of Shares. The Offer is
not being made to (nor will tenders be accepted from or on behalf
of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other
laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to
be made on behalf of Purchaser (as defined
below) by Lazard Freres & Co. LLC or one
or more registered brokers or dealers
that are licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
AT
$11.50 NET PER SHARE
BY
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
Neptune Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Carlton Communications Plc, an English public limited
company ("Parent"), hereby offers to purchase all outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of Nimbus CD International,
Inc., a Delaware corporation (the "Company"), at $11.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which together with
any amendments or supplements thereto, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant to
the Offer. The purpose of the Offer is to acquire for cash as many outstanding
Shares as possible as a first step in acquiring the entire equity interest in
the Company. Following the consummation of the Offer, Purchaser intends to
effect the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JULY 21, 1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE").
<PAGE>
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn prior to the Expiration Date a number of Shares
representing a majority of the total voting power of all shares of capital stock
of the Company outstanding on a fully diluted basis and (2) any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the regulations thereunder applicable to the purchase of Shares pursuant to the
Offer having expired or been terminated. Certain other conditions to the Offer
are described in Section 13 of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 16, 1998, by and among the Company, Parent
and Purchaser, pursuant to which, after completion of the Offer, Purchaser will
be merged with and into the Company (the "Merger") and each issued and
outstanding Share (other than (i) any Shares which are held by any subsidiary of
the Company or in the treasury of the Company, or which are held, directly or
indirectly, by Parent or any direct or indirect subsidiary of Parent (including
Purchaser), all of which shall be canceled and none of which shall receive any
payment with respect thereto and (ii) Shares held by Dissenting Stockholders (as
defined in the Offer to Purchase)) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and represent
the right to receive an amount in cash, without interest, equal to the price
paid for each Share pursuant to the Offer. As a result of the Merger, the
Company will become a wholly owned subsidiary of Parent.
The Board of Directors of the Company has determined by unanimous vote (with
one Director absent) that each of the Offer and the Merger is fair to, and in
the best interests of, the holders of Shares, has approved the Offer and the
Merger and adopted the Merger Agreement and has recommended by unanimous vote
(with one Director absent) that holders of Shares accept the Offer and tender
their Shares pursuant to the Offer.
Certain stockholders of the Company (the "Selling Stockholders") have
entered into an agreement with Purchaser and Parent, upon the terms and subject
to the conditions of which, the Selling Stockholders have agreed to tender (and
not withdraw) pursuant to the Offer 9,373,322 Shares (or approximately 44% of
the outstanding Shares) and any Shares thereafter acquired by them.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when Purchaser
gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary") of its acceptance for payment of such Shares pursuant to the
Offer. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for the tendering stockholders for the purpose of receiving
payments from Purchaser and transmitting such payments to the tendering
stockholders. Under no circumstances will interest on the purchase price for
Shares be paid, regardless of any delay in making such payment.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for such Shares or a confirmation of the book-entry transfer of such Shares into
the Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (b) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in Section 3 of the Offer to Purchase) in lieu of
the Letter of Transmittal), and (c) any other documents required by the Letter
of Transmittal.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Securities and Exchange Commission, Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be issued no later than 9:00 A.M., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
2
<PAGE>
During any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering stockholder to
withdraw such stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after August 22, 1998.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
such notice of withdrawal must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificate(s) evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase), unless such
Shares have been tendered for the account of any Eligible Institution. If Shares
have been tendered pursuant to the procedures for book-entry tender as set forth
in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, the name of the
registered holder and the serial numbers shown on such certificates must also be
furnished to the Depositary as aforesaid prior to the physical release of such
certificates. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by Purchaser, in its
sole discretion, which determination shall be final and binding. None of Parent,
Purchaser, the Dealer Manager (listed below), the Depositary, the Information
Agent (listed below), or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give such notification. Withdrawals of
tenders of Shares may not be rescinded, and any Shares properly withdrawn will
be deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be retendered by following one of the procedures described
in Section 3 of the Offer to Purchase at any time prior to the Expiration Date.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the Letter of Transmittal and, if required,
other relevant materials, will be mailed by Purchaser to record holders of
Shares and will be furnished to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Requests for additional copies of the Offer to Purchase
and the related Letter of Transmittal may be directed to the Information Agent
or to brokers, dealers, commercial banks or trust companies. Such additional
copies will be furnished at Purchaser's expense. Purchaser will not pay any fees
or commissions to any broker or dealer or any other person (other than the
Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
3
<PAGE>
The Information Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
450 West 33rd Street--14th Floor
New York, NY 10001
Banks and Brokers Call: (212) 273-8080
All Others Call Toll Free: (888) 224-2745
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6717 (CALL COLLECT)
June 23, 1998
4
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF
COMMON STOCK
OF
NIMBUS CD INTERNATIONAL, INC.
TO
NEPTUNE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CARLTON COMMUNICATIONS PLC
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form, or a form substantially equivalent to this form, must be used to accept
the Offer (as defined below) if the certificates representing shares of Common
Stock, par value $.01 per share (the "Shares"), of Nimbus CD International,
Inc., a Delaware Corporation (the "Company") are not immediately available or
time will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in the Offer to Purchase) or the procedures for
book-entry transfer cannot be completed on a timely basis. Such form may be
delivered by hand or transmitted by facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase). See Section 3 of the Offer to Purchase.
THE DEPOSITORY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
Post Office Box 3301 85 Challenger Road--Mail Drop--Reorg. 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Ridgefield Park, NJ 07660 New York, NY 10271
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
<TABLE>
<S> <C>
FACSIMILE TRANSMISSION: CONFIRM FACSIMILE BY TELEPHONE:
(For Eligible Institutions Only)
(201) 296-4293 (201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Neptune Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Carlton Communications Plc, an
English public limited company, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated June 23, 1998 (the "Offer to Purchase") and
the related Letter of Transmittal (which, as amended or supplemented from time
to time, together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares indicated below pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: Name(s) or Record Holder(s):
Share Certificate Numbers (if available): PLEASE TYPE OR PRINT
Address(es): ZIP CODE
If Shares will be delivered by book-entry Telephone Number:
transfer, check one box: AREA CODE
/ / The Depository Trust Company Signature(s):
/ / Philadelphia Depository Trust Company SIGNATURE(S)
Account Number:
Date: , 1998
</TABLE>
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program or any other eligible guarantor institution as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), hereby guarantees that either the certificates representing the
Shares tendered hereby in proper form for transfer, or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (pursuant
to procedures set forth in Section 3 of the Offer to Purchase), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase)) and any
other documents required by the Letter of Transmittal, will be received by the
Depositary at one of its addresses set forth above within three (3) New York
Stock Exchange trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal,
certificates for Shares and any other required documents to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
ZIP CODE
Area Code and
Telephone Number: ______________________________________________________________
AUTHORIZED SIGNATURE
Name: __________________________________________________________________________
PLEASE TYPE OR PRINT
Title: _________________________________________________________________________
Dated: __________________________________________________________________ , 1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF
TRANSMITTAL.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
provide on Substitute Form W-9.
<TABLE>
<CAPTION>
- -----------------------------------------------------
Give the Name and
For this type of account: Social Security
Number of--
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The
revocable savings grantor-trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law.
5. Sole proprietorship The owner(3)
- -----------------------------------------------------
<CAPTION>
Give the Name and
Employer
For this type of account: Identification
Number of--
<S> <C> <C>
- -----------------------------------------------------
6. A valid trust, The legal entity (Do
estate, or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
7. Corporate account The corporation
8. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization account
9. Partnership account The partnership
10. A broker or The broker or
registered nominee nominee
11. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
Obtaining a Taxpayer Identification Number
Persons without a taxpayer identification number should apply for one and
write "Applied for" in Part 1 of Substitute Form W-9. Individuals should file
Form SS-5, Application for a Social Security Card (or, in the case of resident
aliens that do not have and are not eligible for Social Security numbers, form
W-7, Application for Individual Taxpayer Identification Number), and
corporations, partnerships or other entities should file Form SS-4, Application
for Employer Identification Number. Form SS-5 may be obtained from Local Social
Security Administration offices. Forms W-7 and SS-4 may be obtained from the IRS
by calling 1-800-TAX-FORM (1-800-829-3676).
NOTE:Writing "Applied for" in Part 1 means that you have already applied for a
TIN or that you intend to apply for one soon.
<PAGE>
The following persons are exempt from backup withholding on payments from
the sale of Shares pursuant to the Offer:
- - A corporation.
- - An organization exempt from tax under Section 501(a) of the Internal Revenue
Code.
- - An individual retirement plan ("IRA").
- - A custodial account under Section 403(b)(7) of the Internal Revenue Code.
- - The United States or any of its agencies or instrumentalities.
- - A State, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
- - A foreign government or any of its political subdivisions, agencies or
instrumentalities.
- - A foreign central bank of issue.
- - A dealer in securities or commodities required to register in the United
States or a possession of the United States.
- - A futures commission merchant registered with the Commodities Futures Trading
Commission.
- - A real estate investment trust.
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A common trust fund operated by a bank under Section 584(a) of the Internal
Revenue Code.
- - A financial institution.
- -A person registered under the Investment Advisers Act of 1940 who regularly
acts as a broker.
Such persons should nevertheless complete Substitute Form W-9 to avoid
possible erroneous withholding. An exempt person should enter the correct TIN in
part I, write "Exempt" in Part II, and sign and date the form.
Privacy Act Notice
Section 6109 of the Internal Revenue Service requires you to give your
correct taxpayer identification number to persons who must file information
returns with the IRS to report interest, dividends and certain other income paid
to you, mortgage interest you paid, the acquisition or abandonment of secured
property, cancellation of debt, or contributions you made to an IRA. The IRS
uses the numbers for identification purposes and to help verify the accuracy of
your tax return. The IRS may also provide this information to the Department of
Justice for civil or criminal litigation and to states, cities and the District
of Columbia to help carry out their tax laws.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend and
certain other payment to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
<PAGE>
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CARLTON COMMUNICATIONS PLC
NEPTUNE ACQUISITION CORP.
AND
NIMBUS CD INTERNATIONAL, INC.
Dated as of June 16, 1998
- -------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE OFFER
1.01 The Offer.......................................................................................2
1.02 Company Actions.................................................................................3
1.03 Composition of the Board of Directors...........................................................4
ARTICLE II
THE MERGER AND RELATED MATTERS
2.01 The Merger......................................................................................5
2.02 Conversion of Stock.............................................................................6
2.03 Dissenting Stock................................................................................6
2.04 Surrender of Certificates.......................................................................7
2.05 Payment.........................................................................................8
2.06 No Further Rights of Transfers..................................................................8
2.07 Stock Option and Other Plans....................................................................9
2.08 Certificate of Incorporation of the Surviving Corporation......................................10
2.09 By-Laws of the Surviving Corporation...........................................................10
2.10 Directors and Officers of the Surviving Corporation............................................10
2.11 Closing........................................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company..................................................10
(a) Due Organization, Good Standing and Corporate Power...................................10
(b) Authorization and Validity of Agreement...............................................11
(c) Capitalization........................................................................11
(d) Consents and Approvals; No Violations.................................................13
(e) Company Reports and Financial Statements..............................................13
-i-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(f) Absence of Certain Changes............................................................14
(g) Title to Properties; Encumbrances.....................................................15
(h) Compliance with Laws..................................................................15
(i) Litigation............................................................................16
(j) Employee Benefit Plans................................................................16
(k) Taxes.................................................................................18
(l) Liabilities...........................................................................19
(m) Intellectual Properties...............................................................19
(n) Material Contracts....................................................................19
(o) Proxy Statement and Schedule l4D-9....................................................21
(p) Broker's or Finder's Fee..............................................................22
(q) Environmental Laws and Regulations....................................................22
(r) State Takeover Statutes; Charter Provisions...........................................24
(s) Opinion of Financial Advisor..........................................................24
(t) Rights Agreement......................................................................24
(u) Voting Requirements...................................................................24
3.02 Representations and Warranties of Parent and Sub...............................................25
(a) Due Organization; Good Standing and Corporate Power...................................25
(b) Authorization and Validity of Agreement...............................................25
(c) Consents and Approvals; No Violations.................................................25
(d) Offer Documents, Schedule l4D-9 and Proxy Statement...................................26
(e) Broker's or Finder's Fee..............................................................26
(f) Financing.............................................................................27
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records........................................27
4.02 Confidentiality................................................................................27
4.03 Conduct of the Business of the Company Pending the Closing Date................................27
4.04 Proxy Statement................................................................................30
4.05 Stockholder Approval...........................................................................30
4.06 Reasonable Efforts.............................................................................30
4.07 No Solicitation of Other Offers................................................................31
4.08 Notification of Certain Matters................................................................33
4.09 HSR Act........................................................................................33
4.10 Employee Benefits..............................................................................33
4.11 Directors' and Officers' Insurance; Indemnification............................................34
4.12 Guaranty of Performance........................................................................35
4.13 Financing......................................................................................35
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and the Company.............................35
(a) Approval of Company's Stockholders....................................................35
(b) HSR Act...............................................................................35
(c) Injunction............................................................................35
(d) Statutes..............................................................................36
(e) Payment for Common Stock..............................................................36
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination....................................................................................36
6.02 Effect of Termination..........................................................................38
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses..............................................................................39
7.02 Representations and Warranties.................................................................39
7.03 Extension; Waiver..............................................................................40
7.04 Public Announcements...........................................................................40
7.05 Notices........................................................................................40
7.06 Entire Agreement...............................................................................41
7.07 Binding Effect; Benefit; Assignment............................................................42
7.08 Amendment and Modification.....................................................................42
7.09 Further Actions................................................................................42
7.10 Headings.......................................................................................42
7.11 Counterparts...................................................................................42
7.12 Applicable Law; Jurisdiction...................................................................42
7.13 Severability...................................................................................43
7.14 Certain Definitions............................................................................43
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1998 (this
"Agreement"), by and among Carlton Communications Plc, a company organized under
the laws of England ("Parent"), Neptune Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), and Nimbus CD
International, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved and determined that it is in the best interests of
their respective companies and stockholders for Sub to acquire the Company;
WHEREAS, in contemplation thereof it is proposed that Sub will
make a tender offer (the "Offer") to purchase all the issued and outstanding
shares of common stock, $0.01 par value, of the Company ("Common Stock"), upon
the terms and subject to the conditions of this Agreement (including the
conditions set forth in Annex A hereto), at a price of 11.50 per share net to
the seller in cash (the "Offer Price");
WHEREAS, to complete such acquisition, the respective Boards
of Directors of Parent, Sub and the Company, have approved the merger of Sub
into the Company, with the Company being the surviving corporation (the
"Merger"), upon the terms and subject to the conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously
determined that each of the Offer and the Merger are fair to, and in the best
interests of, the holders of Common Stock, approved the Offer and the Merger and
recommended the acceptance of the Offer and approval and adoption of this
Agreement by the stockholders of the Company; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, as a condition and inducement to Parent's and Sub's willingness
to enter into this Agreement, certain stockholders of the Company (the "Selling
Stockholders") are entering into an agreement with Parent and Sub (the
"Stockholder Agreement"), pursuant to which, and upon the terms and subject to
the conditions of which, the Selling Stockholders have agreed to tender (and not
to withdraw) all of the shares of Common Stock currently owned and hereafter
acquired by them pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements herein contained,
the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE OFFER
1.01 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Article VI hereof and so long as none of
the events set forth in Annex A hereto (the "Tender Offer Conditions") shall
have occurred and are continuing, as promptly as practicable, but in no event
later than the fifth business day after the date of this Agreement, Sub shall
commence (within the meaning of Rule 14d-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) the Offer. The
obligations of Sub to accept for payment and to pay for any shares of Common
Stock validly tendered and not withdrawn prior to the expiration of the Offer
shall be subject only to the Tender Offer Conditions, any of which may be waived
by Parent or Sub; provided, however, that neither Parent or Sub shall waive the
Minimum Condition (as defined in Annex A) without the prior written consent of
the Company. The Tender Offer Conditions are for the sole benefit of Parent and
Sub and may be asserted by Parent and Sub regardless of the circumstances giving
rise to any such Tender Offer Conditions and, subject to the immediately
preceding sentence, may be waived by Parent and Sub in whole or in part. Parent
and Sub expressly reserve the right to modify the terms of the Offer, including
without limitation to extend the Offer beyond any scheduled expiration date;
provided, however, without the consent of the Company, Sub shall not (i) reduce
the number of shares of Common Stock to be purchased in the Offer, (ii) reduce
the Offer Price, (iii) add to the Tender Offer Conditions or otherwise modify
the Tender Offer Conditions in a manner that is adverse to the holders of Common
Stock or (iv) change the form of consideration payable in the Offer. Parent and
Sub covenant and agree that, subject to the terms and conditions of this
Agreement, including, but not limited to, the Tender Offer Conditions, unless
the Company otherwise consents in writing, Sub will accept for payment and pay
for the Common Stock in accordance with Rule 14e-1(c) of the Exchange Act;
provided, however, that unless (i) any Person has made an Acquisition Proposal
(as hereinafter defined), or (ii) any of the conditions of the Offer set forth
in Annex A hereto shall not have been satisfied, the expiration date may not be
extended beyond the 10th business day after the initial expiration date of the
Offer without the Company's prior written consent, such consent not to be
unreasonably withheld (it being expressly understood and agreed that, if all of
the conditions set forth in Annex A hereto shall have been satisfied and no
Person has made an Acquisition Proposal, Sub shall have the right, in its sole
discretion, to extend the expiration date (through one or more extensions)
through the 10th business day after the initial expiration date).
(b) As soon as reasonably practicable (and no more than five
business days) after the date hereof, Parent and Sub shall file, and Parent, if
necessary, shall cause Sub to file, with the Securities and Exchange Commission
(the "Commission") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with respect to the
Offer. The Schedule 14D-1 shall contain (included
-2-
<PAGE>
as an exhibit) or shall incorporate by reference an offer to purchase (the
"Offer to Purchase") and a form of the related letter of transmittal (the
"Letter of Transmittal"), as well as all other information and exhibits required
by law (which Schedule 14D-1, Offer to Purchase, Letter of Transmittal and such
other information and exhibits, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents"). The
Offer Documents will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the Commission
and the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Sub with respect
to any information supplied by the Company in writing for inclusion in the
Schedule 14D-1 or derived from the Company's Commission Filings. Each of Parent
and Sub agrees promptly to correct any information provided by it for use in the
Offer Documents that shall be, or have become, false or misleading in any
material respect, and Parent and Sub further agree to take all steps necessary
to cause the Schedule 14D-1 as so corrected to be filed with the Commission and
the other Offer Documents as so corrected to be disseminated to holders of
Common Stock, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and Sub agrees to provide the Company and its
counsel with copies (which shall be treated confidentially) of any written
comments Parent and Sub or their counsel may receive from the Commission or its
staff with respect to the Offer Documents promptly after the receipt of such
comments and shall, to extent practicable, provide the Company and its counsel
an opportunity to comment on the proposed response of Parent and Sub to such
comments.
1.02 Company Actions. The Company hereby approves of and
consents to the Offer and the Merger and represents that (a) its Board of
Directors (at a meeting duly called and held) has (i) determined by the
unanimous vote of the Directors that each of the Offer and the Merger is fair
to, and in the best interests of, the holders of Common Stock, (ii) approved the
Offer and the Merger and approved and adopted this Agreement in accordance with
the provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), (iii) recommended the acceptance of the Offer and the approval and
adoption of this Agreement by the stockholders of the Company, (iv) taken all
other applicable action necessary to render Section 203 of the DGCL and all
other applicable state takeover statutes, if any, inapplicable to the Offer, the
Merger and the acquisition of shares of Common Stock by Sub pursuant to the
Stockholders Agreement and the actions contemplated hereby and thereby;
provided, however, that such recommendation may be withdrawn, modified or
amended at any time or from time to time if the Board of Directors of the
Company determines in its good faith judgment after consulting with independent
outside counsel to the Company, that failing to take such action would
constitute a breach of the Board's fiduciary obligations under applicable law;
and (b) Berenson Minella & Company ("Berenson Minella") has delivered to the
Board of Directors of the Company its opinion that the consideration per share
of Common Stock to be received by the holders of Common
-3-
<PAGE>
Stock (other than Parent and Sub) pursuant to the Offer and the Merger is fair
to the holders of Common Stock from a financial point of view, subject to the
assumptions and qualifications contained in such opinion. The Company shall file
with the Securities and Exchange Commission (the "Commission"), as soon as
practicable after the date of the commencement of the Offer, a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule l4D-9")
containing the recommendations referred to in clause (a) of the preceding
sentence and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
under the Exchange Act; provided, however, that such recommendation or other
action may be withdrawn, modified or amended at any time or from time to time if
the Board of Directors of the Company determines in its good faith judgment,
after consulting with independent outside counsel to the Company, that failing
to take such action would constitute a breach of the Board's fiduciary
obligations under applicable law. Parent and Sub and their counsel shall be
given the opportunity to review and comment upon the Schedule l4D-9 prior to its
filing with the Commission. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the Commission and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or Sub in
writing for inclusion in the Schedule 14D-9. The Company agrees to provide
Parent and its counsel with any comments the Company or its counsel may receive
from the Commission or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments and shall, to the extent practicable, provide
Parent and its counsel an opportunity to comment on the proposed response of the
Company to such comments.
In connection with the Offer, the Company will promptly
furnish Sub with mailing labels, security position listings and any available
listing or computer list containing the names and addresses of the record
holders of the Common Stock as of the most recent practicable date and shall
furnish Sub with such additional information (including, but not limited to,
updated lists of holders of Common Stock and their addresses, mailing labels and
lists of security positions) and such other assistance as Sub or its agents may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Sub and their respective affiliates,
associates, agents, and advisors, shall keep confidential and use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information then in their possession.
1.03 Composition of the Board of Directors. Promptly upon the
acceptance for payment of, and payment by Sub in accordance with the Offer for,
any shares of Common Stock pursuant to the Offer, Sub shall be entitled to
designate such number of directors on
-4-
<PAGE>
the Board of Directors of the Company, rounded up to the next whole number, as
will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock so accepted for payment and paid for or otherwise acquired or
owned by Sub or Parent and the denominator of which shall be the number of
shares of Common Stock then issued and outstanding, and the Company and its
Board of Directors shall, at such time, take any and all such action needed to
cause Sub's designees to be appointed to the Company's Board of Directors
(including to cause directors to resign). Subject to applicable law, the Company
shall take all action requested by Parent which is reasonably necessary to
effect any such election, including mailing to its stockholders the Information
Statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such
mailing with the mailing of the Schedule 14D-9, so long as Sub shall have
provided to the Company on a timely basis all information required to be
included in the Information Statement with respect to Sub's designees. In
furtherance thereof, the Company will increase the size of the Company's Board
of Directors, or use its reasonable efforts to secure the resignation of
directors, or both, as is necessary to permit Sub's designees to be elected to
the Company's Board of Directors.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.01 The Merger. (a) Subject to the terms and conditions of
this Agreement, at the time of the Closing (as defined in Section 2.11 hereof),
a certificate of merger (the "Certificate of Merger") shall be duly prepared,
executed and acknowledged by Sub and the Company in accordance with the DGCL and
shall be filed on the Closing Date (as defined in Section 2.11 hereof). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the
provisions and requirements of the DGCL. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time."
(b) At the Effective Time, Sub shall be merged with and into
the Company and the separate corporate existence of Sub shall cease, and the
Company shall continue as the surviving corporation under the laws of the State
of Delaware (the "Surviving Corporation").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in Section 259 of the DGCL.
-5-
<PAGE>
2.02 Conversion of Stock. At the Effective Time:
(a) Each share of Common Stock then issued and outstanding
(other than (i) any shares of Common Stock which are held by any
subsidiary of the Company or in the treasury of the Company, or which
are held, directly or indirectly, by Parent or any direct or indirect
subsidiary of Parent (including Sub), all of which shall be cancelled
and none of which shall receive any payment with respect thereto and
(ii) shares of Common Stock held by Dissenting Stockholders (as defined
in Section 2.03 hereof)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and
represent the right to receive an amount in cash, without interest,
equal to the price paid for each share of Common Stock pursuant to the
Offer (the "Merger Consideration"); and
(b) Each share of common stock, par value $0.01 per share, of
Sub then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the holder thereof, become one fully
paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
2.03 Dissenting Stock. Notwithstanding anything in this
Agreement to the contrary but only to the extent required by the DGCL, shares of
Common Stock that are issued and outstanding immediately prior to the Effective
Time and are held by holders of Common Stock who comply with all the provisions
of Delaware law concerning the right of holders of Common Stock to dissent from
the Merger and require appraisal of their shares of Common Stock ("Dissenting
Stockholders") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due such Dissenting Stockholder pursuant to the law of the
State of Delaware; provided, however, that (i) if any Dissenting Stockholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Stockholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law or (iii) if within 120 days of
the Effective Time neither any Dissenting Stockholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of the
shares of Common Stock outstanding at the Effective Time and held by Dissenting
Stockholders, in accordance with applicable law, then such Dissenting
Stockholder or Stockholders, as the case may be, shall forfeit the right to
appraisal of such shares and such shares shall thereupon be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration, without interest. The Company shall give Parent and Sub (A)
prompt notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other related instruments received by the Company, and (B) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company will not voluntarily make any payment with respect to
any demands for appraisal and will not, except with the prior written consent of
Parent, settle or offer to settle any demand.
-6-
<PAGE>
2.04 Surrender of Certificates. (a) Concurrently with or prior
to the Effective Time, Parent shall designate a bank or trust company located in
the United States and reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") for purposes of making the cash payments contemplated
hereby. As soon as practicable after the Effective Time, Sub shall (and if
necessary Parent shall cause Sub to) cause the Paying Agent to mail and/or make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which are held by any subsidiary of the Company
or in the treasury of the Company or which are held directly or indirectly by
Parent or any direct or indirect subsidiary of Parent (including Sub)) a Letter
of Transmittal advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Paying Agent such certificate or certificates
which immediately prior to the Effective Time represented outstanding Common
Stock (the "Certificates") in exchange for the Merger Consideration deliverable
in respect thereof pursuant to this Article II. Upon the surrender for
cancellation to the Paying Agent of such Certificates, together with a Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereon, and any other items specified by the Letter of Transmittal, the Paying
Agent shall promptly pay to the Person (as defined in Section 7.14 hereof)
entitled thereto the Merger Consideration deliverable in respect thereof. Until
so surrendered, each Certificate shall be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the Merger Consideration
deliverable in respect thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect of such cash
payments.
(b) If the Merger Consideration (or any portion thereof) is to
be delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article II; provided that, the Person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
-7-
<PAGE>
2.05 Payment. Concurrently with or immediately prior to the
Effective Time, Sub or , if necessary, Parent shall deposit in trust with the
Paying Agent cash in United States dollars in an aggregate amount equal to the
product of (i) the number of shares of Common Stock outstanding immediately
prior to the Effective Time (other than shares of Common Stock which are held by
any subsidiary of the Company or in the treasury of the Company or which are
held directly or indirectly by Parent or any direct or indirect subsidiary of
Parent (including Sub) or a Person known at the time of such deposit to be a
Dissenting Stockholder) and (ii) the Merger Consideration (such amount being
hereinafter referred to as the "Payment Fund"). The Payment Fund shall be
invested by the Paying Agent as directed by Sub in direct obligations of the
United States, obligations for which the full faith and credit of the United
States is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Moody's Investors Services,
Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank
repurchase agreements or bankers' acceptances of a commercial bank having at
least $500,000,000 in assets (collectively "Permitted Investments") or in money
market funds which are invested in Permitted Investments, and any net earnings
with respect thereto shall be paid to Parent as and when requested by Parent.
The Paying Agent shall, pursuant to irrevocable instructions, make the payments
referred to in Section 2.02(a) hereof out of the Payment Fund. The Payment Fund
shall not be used for any other purpose except as otherwise agreed to by Parent.
Promptly following the date which is six months after the Effective Time, the
Paying Agent shall return to the Surviving Corporation all cash, certificates
and other instruments in its possession that constitute any portion of the
Payment Fund, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without interest,
but shall have no greater rights against the Surviving Corporation or Parent
than may be accorded to general creditors of the Surviving Corporation or Parent
under applicable law. Notwithstanding the foregoing, neither the Paying Agent
nor any party hereto shall be liable to a holder of shares of Common Stock for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
2.06 No Further Rights of Transfers. At and after the
Effective Time, each holder of a Certificate shall cease to have any rights as a
stockholder of the Company, except for, in the case of a holder of a Certificate
(other than shares to be cancelled pursuant to Section 2.02(a) hereof and other
than shares held by Dissenting Stockholders), the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration or, in the case
of a Dissenting Stockholder, to perfect his or her right to receive payment for
his or her shares pursuant to Delaware law if such holder has validly perfected
and not withdrawn his or her right to receive payment for his or her shares, and
no transfer of shares of Common Stock shall be made on the stock transfer books
of the Surviving Corporation. Certificates presented to the Surviving
Corporation after the Effective Time shall be cancelled and exchanged for cash
as provided in this Article II. At the close of business on the day of the
-8-
<PAGE>
Effective Time the stock ledger of the Company with respect to Common Stock
shall be closed.
2.07 Stock Option and Other Plans. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any Committee
thereof) shall adopt appropriate resolutions and use its reasonable best efforts
to take all other actions necessary to (i) provide for the cancellation,
effective at the Effective Time of all the outstanding stock options and other
rights to purchase shares of Common Stock ("Options") and (ii) terminate, as of
the Effective Time, the Stock Option Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any of its subsidiaries (collectively,
the "Stock Incentive Plans") and (iii) amend, as of the Effective Time, the
provisions in any U.S. or Foreign Employee Benefit Plan providing for the
issuance, transfer or grant of any capital stock of the Company or any of its
subsidiaries or any interest in respect of any capital stock of the Company or
its subsidiaries to provide that there shall be no continuing rights to acquire,
hold, transfer or grant any capital stock of the company or its subsidiaries or
any interest in the capital stock of the Company or its subsidiaries.
Immediately prior to the Effective Time, the Company shall use its reasonable
best efforts to ensure that (i) each Option, whether or not then vested or
exercisable, shall no longer be exercisable for the purchase of shares of Common
Stock but shall entitle each holder thereof, in cancellation and settlement
therefor, to payments by the Company in cash (subject to any applicable
withholding taxes, the "Cash Payment"), at the Effective Time, equal to the
product of (x) the total number of shares of Common Stock subject to such Option
whether or not then vested or exercisable and (y) the excess of the Merger
Consideration over the exercise price per share of Common Stock subject to such
Option, each such Cash Payment to be paid to each holder of an outstanding
Option at the Effective Time and (ii) each share of Common Stock previously
issued in the form of grants of restricted stock or grants of contingent shares
shall fully vest in accordance with their respective terms. In addition, any
outstanding stock appreciation rights or limited stock appreciation rights shall
be cancelled immediately prior to the Effective Time without any payment or
other consideration therefor. As provided herein, the Company shall use its
reasonable best efforts to ensure that the Stock Incentive Plans shall terminate
as of the Effective Time. The Company will take all necessary steps to ensure
that neither the Company nor any of its subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
Person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof. The Company will use its reasonable best efforts to obtain all
necessary consents to ensure that after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will be to receive the Cash Payment in cancellation and settlement
thereof. Notwithstanding any other provision of this Section 2.07 to the
contrary, payment of the Cash Payment may be withheld with respect to any Option
until the necessary consents are obtained.
-9-
<PAGE>
2.08 Certificate of Incorporation of the Surviving
Corporation. The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation.
2.09 By-Laws of the Surviving Corporation. The By-Laws of Sub,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation.
2.10 Directors and Officers of the Surviving Corporation. At
the Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Company immediately prior to the Effective Time shall,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of the Surviving Corporation, be the officers of the Surviving
Corporation until their respective successors shall be duly elected or appointed
and qualified.
2.11 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Sullivan and Cromwell, 125 Broad Street, New York,
New York, as soon as practicable after the last of the conditions set forth in
Article V hereof is fulfilled or waived (subject to applicable law) but in no
event later than the fifth business day thereafter, or at such other time and
place and on such other date as Parent and the Company shall mutually agree (the
"Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. The
Company hereby represents and warrants to Parent and Sub as follows:
(a) Due Organization, Good Standing and Corporate Power. Each
of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Except
as set forth in Section 3.01(a) of the Company's disclosure letter (the
"Company Disclosure Letter") delivered concurrently with the delivery
of this Agreement, each of the Company and its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated
-10-
<PAGE>
by it or the nature of the business conducted by it makes such
qualification necessary, except where such failure to be so qualified
or licensed and in good standing would not have a material adverse
effect on the business, operations or results of operations, financial
condition (the "Condition") of the Company and its subsidiaries taken
as a whole, or would not be reasonably likely to prevent or materially
delay consummation of the transactions contemplated by this Agreement.
The Company has made available to Parent and Sub complete and correct
copies of the Certificate of Incorporation and By-Laws of the Company
and the comparable governing documents of each of its subsidiaries, in
each case as amended to the date of this Agreement.
(b) Authorization and Validity of Agreement. The Company has
the corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company, and the consummation by
it of the transactions contemplated hereby, have been duly authorized
and unanimously approved by its Board of Directors and no other
corporate action on the part of the Company is necessary to authorize
the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
(other than the approval of this Agreement by the holders of a majority
of the outstanding shares of Common Stock entitled to vote) or the
consummation of the transactions contemplated by the Stockholders
Agreement. This Agreement has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
(c) Capitalization. (i) The authorized capital stock of the
Company consists of 60,000,000 shares of Common Stock and 2,000,000
shares of preferred stock, par value $0.01. As of June 15, 1998, (1)
39,012,786 shares of Common Stock are issued of which 21,469,754 are
outstanding, (2) 2,164,077 shares of Common Stock are reserved for
issuance pursuant to outstanding Options granted under the Stock Plans,
(3) 17,543,032 shares of Common Stock are held in the Company's
treasury and (4) no shares of preferred stock were issued and
outstanding. All issued and outstanding shares of Common Stock have
been duly authorized, validly issued and are fully paid and
nonassessable and are not subject to, nor were they issued in violation
of any preemptive rights. Except as set forth in this Section 3.01(c)
or in Section 3.01(c) of the Company Disclosure Letter, (i) there are
no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are not as of the date hereof, and at the
Effective Time there will not be, any outstanding or authorized
options, warrants, rights, subscriptions, claims of any character,
-11-
<PAGE>
agreements, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to
Common Stock or any other shares of capital stock of the Company,
pursuant to which the Company is or may become obligated to issue
shares of Common Stock, any other shares of its capital stock or any
securities convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of the capital stock of the Company. After
the Effective Time, the Surviving Corporation will have no obligation
to issue, transfer or sell any shares of or common stock of the
Surviving Corporation pursuant to any Employee Benefit Plan (as defined
in Section 3.01(j)). Neither the Company nor any of its subsidiaries
has authorized or issued any bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having
the right to vote) with the stockholders of the Company or any of its
subsidiaries on any matter.
(ii) Section 3.01(c)(ii) of the Company Disclosure
Letter lists all of the Company's subsidiaries. All of the
outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were
they issued in violation of, any preemptive rights, and are
owned, of record and beneficially, by the Company, free and
clear of all liens, security interests, rights of first
refusal, charges, security agreements, encumbrances, options,
claims or any other encumbrances of any kind whatsoever
("Encumbrance") except as set forth in Section 3.01(c)(ii) of
the Company Disclosure Letter. No shares of capital stock of
any of the Company's subsidiaries are reserved for issuance or
are held in the treasury of such subsidiary and there are no
outstanding or authorized options, warrants, rights, calls,
subscriptions, claims of any character, agreements,
obligations, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise,
relating to the capital stock of any subsidiary, pursuant to
which such subsidiary is or may become obligated to issue any
shares of capital stock of such subsidiary or any securities
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of such subsidiary. Other than as
set forth in Section 3.01(c)(ii) of the Company Disclosure
Letter, there are no restrictions of any kind which prevent
the payment of dividends by any of the Company's subsidiaries.
Except for the subsidiaries listed in Section 3.01(c)(ii) of
the Company Disclosure Letter, the Company does not own,
directly or indirectly, any capital stock or other equity
interest in any Person or have any direct or indirect equity
or ownership interest in any Person and neither the Company
nor any of its subsidiaries is subject to any obligation or
requirement to provide funds for or to make any investment (in
the form of a loan or capital contribution) to or in any
Person.
-12-
<PAGE>
(d) Consents and Approvals; No Violations. Assuming (i) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), are made and the waiting period
thereunder has been terminated or has expired, (ii) the requirements of
the Exchange Act relating to the Proxy Statement and the Offer are met,
(iii) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by DGCL are made and (iv)
approval of the Merger by holders a majority of the outstanding shares
of Common Stock entitled to vote, if required by the DGCL, is received,
the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
will not: (1) violate any provision of the Certificate of Incorporation
or By-Laws of the Company or the comparable governing documents of any
of its subsidiaries, in each case, as amended; (2) violate any statute,
code, ordinance, rule, regulation, order or decree (collectively
"Laws") of any court, arbitrator or of any governmental or regulatory
body, agency or authority (each a "Governmental Entity") applicable to
the Company or any of its subsidiaries or their respective properties
or assets; (3) require any filing with, or permit, consent or approval
of, or the giving of any notice to, any Governmental Entity by the
Company; or (4) except as set forth in Section 3.01(d) of the Company
Disclosure Letter, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation,
payment, acceleration or other material right or obligation or
limitation) under, or result in the creation of any Encumbrance upon
any of the properties or assets of the Company or any of its
subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease, franchise agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party, or by which it or
any of their respective properties or assets are bound or subject
except for in the case of clauses (3) and (4) above for any such
filings, permits, consents, approvals, violations, breaches or
Encumbrances which, individually or in the aggregate would not have a
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole, or would not be reasonably likely to
prevent or materially delay consummation of the transactions
contemplated by this Agreement (including the transactions contemplated
by the Stockholders Agreement).
(e) Company Reports and Financial Statements. (i) Since
January 1, 1996 the Company has filed all forms, reports and documents
with the Commission required to be filed by it pursuant to the federal
securities laws and the Commission rules and regulations thereunder,
and all forms, reports and documents filed with the Commission by the
Company have complied in all material respects with all applicable
requirements of the federal securities laws and the Commission rules
and regulations promulgated thereunder. The Company has made available
to Parent true and complete copies of all forms, reports, registration
statements and other filings filed by the Company with the Commission
from January 1, 1996 through the date
-13-
<PAGE>
of this Agreement (such forms, reports, registration statements and
other filings, together with any exhibits, any amendments thereto and
information incorporated by reference therein, are sometimes
collectively referred to as the "Commission Filings"). As of their
respective dates, the Commission Filings did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets, and the consolidated
statements of operations, consolidated statements of stockholders'
equity and consolidated statements of cash flows, included in the
Commission Filings, were prepared in accordance with generally accepted
accounting principles ("GAAP") (as in effect from time to time) applied
on a consistent basis, (except as may be indicated therein or in the
notes or schedules thereto) and fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the results of
their operations and changes in cash flows for the periods then ended.
(ii) The Company shall deliver to Sub and Parent as
soon as they become available true and complete copies of any
report or statement mailed by it to its stockholders generally
or filed by it with the Commission subsequent to the date
hereof and prior to the Effective Time. As of their respective
dates, such reports and statement 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 the federal
securities laws and the Commission rules and regulations
thereunder. The consolidated financial statements of the
Company included in such reports and statement will be
prepared in accordance with GAAP applied on a consistent basis
(except as may be indicated therein or in the notes or
schedules thereto) and will fairly present in all material
respects the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the
periods then ended (subject in the case of any unaudited
financial statements, to normal year-end adjustments).
(f) Absence of Certain Changes. Except as previously disclosed
in the Commission Filings or as set forth in Section 3.01(f) of the
Company Disclosure Letter, since March 31, 1997 or as specifically
contemplated by this Agreement (i) there has not been any material
adverse change in the Condition of the Company and its subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
subsidiaries have been conducted only in the ordinary course consistent
with past practice; (iii) neither the Company nor any of its
subsidiaries has incurred any material liabilities (direct, contingent
or otherwise) or engaged in any material
-14-
<PAGE>
transaction or entered into any material agreement outside of the
ordinary course of business consistent with past practice; (iv) the
Company and its subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their
employees, in each case other than in the ordinary course of business
consistent with past practice; (v) neither the Company nor any of its
subsidiaries has taken any action referred to in Section 4.03 hereof,
except as permitted thereby; (vi) there has been no declaration,
setting aside or payment of any dividend or other distribution with
respect to the capital stock of the Company; (vii) there has been no
change by the Company in accounting principles, practices or methods,
except as may have been required by GAAP or applicable Law and (viii)
neither the Company nor any of its subsidiaries has agreed (whether or
not in writing) to do any of the foregoing.
(g) Title to Properties; Encumbrances. The Company and each of
its subsidiaries has good, valid and marketable title to (i) all of its
material tangible properties and assets (real and personal), including,
without limitation, all the properties and assets reflected in the
consolidated balance sheet as of December 31, 1997 except as indicated
in the notes thereto and except for properties and assets reflected in
the consolidated balance sheet as of March 31, 1997 which have been
sold or otherwise disposed of in the ordinary course of business
consistent with past practice after such date, and (ii) all the
material tangible properties and assets purchased by the Company and
any of its subsidiaries since March 31, 1997 except for such properties
and assets which have been sold or otherwise disposed of in the
ordinary course of business consistent with past practice; in each case
subject to no Encumbrance, except for (1) Encumbrances set forth in the
consolidated balance sheet as of March 31, 1997 (including the notes
thereto) or as set forth in Section 3.01(g) of the Company Disclosure
Letter, (2) Encumbrances consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of
real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such
property by the Company or any of its subsidiaries in the operation of
its respective business, (3) statutory liens or liens of landlords,
carriers, warehousemen, mechanics, suppliers, materialmen or repairmen
arising in the ordinary course of business, (4) Encumbrances for
current taxes, assessments or governmental charges or levies on
property not yet due and delinquent and (5) such Encumbrances as,
individually or in the aggregate, would not be reasonably expected to
have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole. All of the material properties and
assets of the Company and its subsidiaries are in good working order,
normal wear and tear excepted and are suitable for their current uses
in their respective businesses.
(h) Compliance with Laws. Except as set forth in Section
3.01(h) of the Company Disclosure Schedule, the Company and its
subsidiaries are in compliance with applicable Laws except where the
failure to so comply would not have a
-15-
<PAGE>
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or would not prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(i) Litigation. Except as disclosed in the Commission Filings
or as set forth in Section 3.01(i) of the Company Disclosure Letter,
there is no action, suit, proceeding at law or in equity, or any
arbitration or any administrative or other proceeding by or before (or
to the knowledge of the Company any investigation by) any Governmental
Entity, pending, or to the best knowledge of the Company, threatened,
against or affecting the Company or any of its subsidiaries, or any of
their properties, assets or rights which would be reasonably likely to
have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or would prevent or materially delay
consummation of the transactions contemplated by this Agreement. Except
as disclosed in the Commission Filings, neither the Company nor any of
its subsidiaries is subject to any judgment, order or decree entered in
any lawsuit, arbitration or other proceeding which would have a
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or on the ability of the Company or any
subsidiary to conduct its business as presently conducted or would
prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(j) Employee Benefit Plans. (i) Each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by the Company
and/or any of its United States subsidiaries or to which the Company or
any such subsidiary contributes (or has any obligation to contribute)
(collectively, the "US Employee Benefit Plans") is listed in Section
3.01(j)(i) of the Company Disclosure Letter. Also listed on the
Disclosure Schedule are any bonus, deferred compensation, profit
sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination,
severance, change of control or incentive compensation plan or
agreement maintained by the Company or any of its subsidiaries. Except
as set forth in Section 3.01(j)(i) of the Company Disclosure Letter:
(1) each US Employee Benefit Plan is in material compliance with
applicable law and has been administered and operated in all respects
in accordance with its terms; (2) each US Employee Benefit Plan which
is intended to be "qualified" within the meaning of Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), has
received a favorable determination letter from the Internal Revenue
Service with respect to "TRA" (as defined in Section 1 of Rev. Proc.
93-39) and, to the knowledge of the Company, no event has occurred and
no condition exists which would result in the revocation of any such
determination; (3) no US Employee Benefit Plan is covered by Title IV
of ERISA or subject to Section 412 of the Code or Section 302 of ERISA;
(4) no liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company or any of its subsidiaries
with
-16-
<PAGE>
respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, covered by Title IV
of ERISA ("Single Employer Plan") currently or formerly maintained by
any of them, or the Single-Employer Plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate"); (5) no notice
of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has
been required to be filed for any U.S. Employee Benefit Plan covered by
Title IV of ERISA ("Pension Plan") within the 12-month period ending on
the date hereof or will be required to be filed in connection with the
transactions contemplated by this Agreement; (6) neither any Pension
Plan nor any Single-Employer Plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver; (7) neither the Company
nor any of its subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any Single-Employer Plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code; (8) under each
Pension Plan which is a Single-Employer Plan, as of the last day of the
most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Plan, and there has been no material change in the financial condition
of such Plan since the last day of the most recent plan year; (9) the
withdrawal liability of the Company and its subsidiaries under each
U.S. Employee Benefit Plan which is a multiemployer plan to which the
Company, any of its subsidiaries or an ERISA affiliate has contributed
during the preceding 12 months, determined as if a "complete
withdrawal", within the meaning of Section 4203 of ERISA, had occurred
as of the date hereof, does not exceed $100,000; (10) neither the
Company nor any of its subsidiaries, nor, to the Company's knowledge,
any other "disqualified person" or "party in interest" (as defined in
Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transactions in connection with any US
Employee Benefit Plan that would result in the imposition of a penalty
pursuant to Section 502 of ERISA, damages pursuant to Section 409 of
ERISA or a tax pursuant to Section 4975 of the Code; (11) no US
Employee Benefit Plan provides for post-employment or retiree health or
life insurance benefits, except to the extent required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code; (12) no
litigation or administrative proceeding has been commenced, or, to the
Company's knowledge, threatened with respect to any US Employee Benefit
Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied such claims); (13) all contributions
required to be made under the terms of any US Employee Benefit Plan
have been timely made or have been reflected in the Audited Financial
Statements or the Preliminary Financial Statements.
-17-
<PAGE>
(ii) Each employee benefit plan other than any US Employee
Benefit Plan maintained or contributed to by any non-United States
subsidiary of the Company is listed in Section 3.01(j)(ii) of the
Company Disclosure Letter (collectively, the "Foreign Employee Benefit
Plans"). Except as set forth in Section 3.01(j)(ii) of the Company
Disclosure Letter: (1) each Foreign Employee Benefit Plan is in
compliance with applicable law and has been administered and operated
in all respects in accordance with its terms; and (2) no litigation or
administrative proceeding has been commenced, or, to the Company's
knowledge, threatened, with respect to any Foreign Employee Benefit
Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied such claims); and (3) with respect to
each Foreign Employee Benefit Plan which is a pension plan, the Company
and its subsidiaries have no material unfunded liabilities with respect
to any such pension plan.
(k) Taxes. (i) The Company has filed or caused to be filed, or
will file or cause to be filed on or prior to the Closing Date, all
material federal, state, local and foreign tax returns and tax reports
which are required to be filed by, or with respect to, the Company on
or prior to the Closing Date (taking into account any extension of time
to file granted to or on behalf of the Company) (collectively, the
"Returns"). Except as set forth in Section 3.01(k) of the Company
Disclosure Letter, all material federal, state, local and foreign
income, gross receipts, windfall profits, severance, property, sales,
use, license, excise, franchise, employment, withholding or similar
taxes imposed on the income, properties or operations of the Company,
together with any interest, additions to tax or penalties with respect
thereto and any interest in respect of such additions to tax or
penalties ("Taxes") due and payable by the Company have been, or prior
to the Closing Date will be, paid or fully provided for on the books
and records of the Company in accordance with GAAP, and all material
Taxes not yet due and payable with respect to periods (or portions
thereof) ending on or prior to the Closing Date have been or will be
fully provided for on the books and records of the Company in
accordance with generally accepted accounting principles. Except as set
forth in Section 3.01(k) of the Company Disclosure Letter, (a) all
Returns with respect to periods ending on or before the Closing Date
have been examined by the Internal Revenue Service or the appropriate
state, local or foreign taxing authority or the period for assessment
of the Taxes in respect of which such Returns were required to be filed
has expired, (b) no issues have been raised by any relevant taxing
authority in connection with an audit or examination of any such
Returns which are currently pending, and (c) no waivers of statutes of
limitation are in effect with respect to any Taxes of the Company.
(ii) The Company is not, nor was it at any time
during the five-year period ending on the Closing Date, a
"United States real property holding corporation" within the
meaning of Section 897(c) of the Code.
-18-
<PAGE>
(iii) Except as set forth in Section 3.01(k) of the
Company Disclosure Letter, none of the Company, Parent or Sub
will be obligated as a result of the transactions contemplated
by this Agreement to make a payment that would be a "parachute
payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code without regard to whether
such payment is reasonable compensation for personal services
performed or to be performed in the future.
(l) Liabilities. Except as set forth in Section 3.01(l) of the
Company Disclosure Letter, neither the Company nor any of its
subsidiaries has any material claims, liabilities or indebtedness
outstanding except (i) as set forth in the consolidated balance sheet
of the Company as of March 31, 1997, (ii) for liabilities incurred
subsequent to March 31, 1997, in the ordinary course of business
consistent with past practice, (iii) as set forth in the Commission
Filings.
(m) Intellectual Properties. Except as would not have a
material adverse effect on the Condition of the Company and its
subsidiaries, taken as a whole, the Company and its subsidiaries own or
have valid, binding and enforceable rights to use all patents,
trademarks, trade names, service marks, service names, copyrights,
applications therefor and licenses or other rights in respect thereof
("Intellectual Property") used or held for use in connection with the
business of the Company or its subsidiaries, without any known conflict
with the rights of others. Except as set forth in Section 3.01(m) of
the Company Disclosure Letter, neither the Company nor any of its
subsidiaries has received any notice from any other Person pertaining
to or challenging the right of the Company or any of its subsidiaries
to use any Intellectual Property or any trade secrets, proprietary
information, inventions, know-how, processes and procedures owned or
used by or licensed to the Company or its subsidiaries, except with
respect to rights the loss of which, individually or in the aggregate,
would not be reasonably likely to have a material adverse effect on the
Condition of the Company and its subsidiaries, taken as a whole.
(n) Material Contracts. Except as set forth in Section
3.01(n) of the Company Disclosure Letter, neither the Company nor
any of its subsidiaries has or is bound by:
(i) any agreement, contract or commitment that
involves the performance of services by it of an amount or
value (as measured by the revenue derived therefrom during
1997) in excess of $500,000 annually, unless terminable by the
Company or its relevant subsidiary on not more than 90 days
notice,
-19-
<PAGE>
(ii) any agreement, indenture or other instrument
which contains restrictions with respect to payment of
dividends or any other distribution in respect of its capital
stock,
(iii) any agreement, contract or commitment to be
performed relating to capital expenditures in excess of
$100,000 in any calendar year, or in the aggregate require
expenditures in excess of $1,000,000 other than those capital
expenditures approved as part of the Company's fiscal 1999
budget a true and correct copy of which has heretofore been
provided to Parent,
(iv) any agreement, indenture or instrument relating
to indebtedness for borrowed money or the deferred purchase
price of property (excluding trade payables in the ordinary
course of business, intercompany indebtedness and leases for
telephones, copy machines, facsimile machines and other office
equipment),
(v) any loan or advance to (other than advances to
employees in the ordinary course of business in amounts of
$25,000 or less to any individual and $100,000 in the
aggregate), or investment in (other than investments in
subsidiaries), any Person, or any agreement, contract or
commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving
a sharing of profits (except for bonus arrangements with
employees entered into in the ordinary course of business
consistent with past practice),
(vi) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person (other
than in the ordinary course of business, consistent with past
practice or with respect to any indebtedness or obligation of
the Company or any subsidiary),
(vii) any management service, consulting or any other
similar type of contract, involving payments of more than
$250,000 annually, unless terminable by the Company on not
more than 90 days notice,
(viii) any agreement, contract or commitment limiting
the ability of the Company or any of its subsidiaries to
engage in any line of business or to compete with any Person,
(ix) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended
by the Company or any of its subsidiaries other than in the
ordinary course of business, or
-20-
<PAGE>
(x) any material amendment, modification or
supplement in respect of any of the foregoing.
Except as otherwise set forth in Section 3.01(n) of the
Company Disclosure Letter, each contract or agreement set forth in Section
3.01(n) of the Company Disclosure Letter is in full force and effect and (A)
there exists no default or event of default or event, occurrence, condition or
act (including the consummation of Offer or the Merger) on the part of the
Company or any subsidiary which, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or event
of default thereunder and (B) no approval or consent of, or notice to, any
person is needed in order that each such contract or agreement shall continue in
full force and effect in accordance with its terms without penalty, acceleration
or rights of early termination by reason of the consummation of the transactions
contemplated by this Agreement.
(o) Proxy Statement and Schedule l4D-9. The definitive proxy
statement and related materials, if required, to be furnished to the
holders of Common Stock in connection with the Merger pursuant to
Section 4.04 hereof (the "Proxy Statement") will comply in all material
respects with the Exchange Act and the rules and regulations thereunder
and any other applicable laws. If at any time prior to the Effective
Time any event occurs which should be described in an amendment or
supplement to the Proxy Statement, the Company will promptly file and
disseminate, as required, an amendment or supplement which complies in
all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. Prior to its
filing with the Commission, Parent and Sub and their Counsel shall have
a reasonable opportunity to review the amendment or supplement. None of
the information supplied by the Company for inclusion in the Proxy
Statement, will, at the date such information is supplied and at the
Effective Time, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
made, in light of the circumstance under which they are made, not
misleading. None of the information in the Schedule 14D-9, at the
respective times the Schedule 14D-9 is filed with the Commission, will
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made
with respect to any information with respect to Parent, Sub or their
officers, directors or affiliates provided to the Company by Parent or
Sub in writing for inclusion in the Schedule 14D-9. The Schedule l4D-9
will comply in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. If at
any time prior to the expiration or termination of the Offer any event
occurs which should be described in an amendment or supplement to the
Schedule l4D-9 or any amendment or supplement thereto, the Company will
promptly file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the
rules and regulations
-21-
<PAGE>
thereunder and any other applicable laws. Prior to its filing with the
Commission, Parent and Sub and their Counsel shall have a reasonable
opportunity to review the amendment or supplement. None of the
information supplied by the Company to Parent or Sub for inclusion or
incorporation by reference in the Offer Documents contained, at the
respective times the Offer Documents were filed with the SEC, any
untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(p) Broker's or Finder's Fee. Except for Berenson Minella
(whose fees and expenses will be paid by the Company in accordance with
the Company's agreement with such firm) no agent, broker, Person or
firm acting on behalf of the Company is, or will be, entitled to any
fee, commission or broker's or finder's fees from any of the parties
hereto, or from any Person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated hereby.
(q) Environmental Laws and Regulations. Except as set forth in
Section 3.01(q) of the Company Disclosure Letter, or as would not have
a material adverse effect on the Condition of the Company and its
subsidiaries, taken as a whole:
(i) Hazardous Materials have not been generated,
used, treated or stored on any Company Property, except for
quantities used or stored at such Property in compliance with
Environmental Laws, required in connection with the normal
operations and maintenance of such Property and as would not
reasonably be expected to result in liability under any
Environmental Law.
(ii) Hazardous Materials have not been released or
disposed of on any Company Property, except for quantities
released on such Property in compliance with Environmental
Laws and required in the normal operation and maintenance of
such Property.
(iii) The Company and its subsidiaries are in
compliance with Environmental Laws and the requirements of
permits issued under such Environmental Laws with respect to
any Company Property.
(iv) There are no pending or threatened Environmental
Claims against the Company, any of its subsidiaries or, to the
knowledge of the Company, any Company Property.
(v) neither the Company nor any subsidiary is subject
to any order, decree, injunction or other arrangement with any
Governmental Entity
-22-
<PAGE>
or any indemnity or other agreement with any third party
relating to liability under any Environmental Law.
(vi) none of the properties of the Company or any
subsidiary contain any underground storage tanks,
asbestos-containing material, lead products, or
polychlorinated biphenyls.
(vii) there are no other circumstances or conditions
involving the Company or any subsidiary that could reasonably
be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use,
or transfer of any property in connection with any
Environmental Law.
As used in this Section 3.01(q), the following terms shall
have the meanings set forth below:
(i) "Company Property" means any real property and
improvements currently or formerly owned, leased, used,
operated or occupied by the Company or any of its
subsidiaries.
(ii) "Hazardous Materials" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas;
and (b) any chemicals, materials or substances defined as or
included in the definition of "Hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law or otherwise regulated
under any Environmental Law.
(iii) "Environmental Law" means any applicable
federal, state, foreign or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law in
effect and in each case as amended as of the Closing Date, and
any judicial or administrative interpretation thereof as of
the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.;
the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Occupational Safety
and Health Act, 28 U.S.C. ss. 2412; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Oil
-23-
<PAGE>
Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; and their
state and local counterparts and equivalents.
(iv) "Environmental Claims" means administrative,
regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or
violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such
Law (hereafter "Claims"), including (a) Claims by governmental
or regulatory authorities for enforcement, investigations,
monitoring, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental
Law, and (b) Claims by any third party relating to any
Environmental Law seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
(v) "Release" means disposing, discharging,
injecting, spilling, leaking, leaching, dumping, emitting,
escaping, emptying, seeping, placing and the like, into or
upon any land or water or air, or otherwise entering into the
environment.
(r) State Takeover Statutes; Charter Provisions. Section 203
of the DGCL is inapplicable to the Offer, the Merger, this Agreement
and the Stockholders Agreement and the transactions contemplated hereby
and thereby. No other state takeover statute or similar statute or
regulation applies to the Offer, the Merger or the transactions
contemplated hereby or by the Stockholders Agreement.
(s) Opinion of Financial Advisor. The Company has received the
opinion of Berenson Minella, to the effect that, as of the date of this
Agreement, the consideration per share of Common Stock to be received
in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders from a financial point of view, and a
complete and correct signed copy of such opinion has been, or will be,
delivered to Sub and Parent.
(t) Rights Agreement. The Company has not adopted or otherwise
implemented a stockholder rights plan or other similar agreement or
instrument.
(u) Voting Requirements. Unless the Merger is consummated in
accordance with the provisions of Section 253 of the DGCL, the
affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated hereby.
-24-
<PAGE>
3.02 Representations and Warranties of Parent and Sub. Each of
Parent and Sub represents and warrants to the Company as follows:
(a) Due Organization; Good Standing and Corporate Power.
Parent is a corporation duly organized and validly existing and in good
standing under the laws of its jurisdiction of incorporation. Sub is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of Parent and Sub
has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted except such instances where the failure to have such power
and authority, individually or in the aggregate, would not prevent or
materially delay the consummation of the transactions contemplated by
this Agreement.
(b) Authorization and Validity of Agreement. Each of Parent
and Sub has the corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Parent and Sub, and the consummation
by each of them of the transactions contemplated hereby, have been duly
authorized by the Boards of Directors of each of Parent and Sub. No
other corporate action on the part of either of Parent or Sub is
necessary to authorize the execution, delivery and performance of this
Agreement by each of Parent and Sub and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Sub and is a valid and binding
obligation of each of Parent and Sub, enforceable against each of
Parent and Sub in accordance with its terms, except that such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, and general equitable principles.
(c) Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired, (ii) the requirements of
the Exchange Act relating to the Proxy Statement and the Offer are met,
and (iii) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by the laws of the State of
Delaware, the execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions
contemplated hereby will not: (1) violate any provision of the
Certificate of Incorporation or By-Laws of either Parent or Sub; (2)
violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or
authority applicable to Parent or Sub or by which either of their
respective properties or assets may be bound; (3) require any filing
with, or permit, consent or approval of, or the giving of any notice to
any governmental or regulatory body, agency or authority; or (4) result
in a violation or breach of, conflict with, constitute (with or without
due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation
-25-
<PAGE>
or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
the Parent, Sub or any of their subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or
obligation to which Parent or Sub or any of their subsidiaries is a
party, or by which they or their respective properties or assets may be
bound except for in the case of clauses (3) and (4) above for such
filing, permit, consent, approval or violation, which would not prevent
or materially delay consummation of the transactions contemplated by
this Agreement.
(d) Offer Documents, Schedule l4D-9 and Proxy Statement. The
Offer Documents will comply in all material respects with the Exchange
Act and the rules and regulations thereunder and any other applicable
laws. The Offer Documents will not, at the time such Offer Documents
are filed with the Commission or are first published, sent or given to
the Company's stockholders, as the case may be, contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the expiration or
termination of the Offer any event occurs which should be described in
an amendment or supplement to the Schedule l4D-1 or any amendment or
supplement thereto, Sub will file and disseminate, as required, an
amendment or supplement which complies in all material respects with
the Exchange Act and the rules and regulations thereunder and any other
applicable laws. Prior to its filing with the Commission, the amendment
or supplement shall be delivered to the Company and its counsel and the
Company shall be given the opportunity to comment thereon. The written
information supplied or to be supplied by Parent and Sub for inclusion
in the Proxy Statement and the Schedule l4D-9 of the Company will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made
with respect to any information with respect to the Company or its
officers, directors and affiliates provided to Parent or Sub by the
Company in writing for inclusion in the Offer Documents or amendments
or supplements thereto.
(e) Broker's or Finder's Fee. Except for Lazard Freres & Co.
LLC (whose fees and expenses as financial advisor to Parent and Sub
will be paid by Parent or Sub), no agent, broker, Person or firm acting
on behalf of Parent or Sub is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto,
or from any Person controlling, controlled by, or under common control
with any of the parties hereto, in connection with this Agreement or
any of the transactions contemplated hereby.
-26-
<PAGE>
(f) Financing. Parent has available to it sufficient funds to
consummate the transactions contemplated hereby. On or prior to the
purchase of shares of Common Stock pursuant to the Offer and Effective
Time Parent shall provide or cause to be provided to Sub the funds
necessary to consummate the transactions contemplated hereby.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending at the Effective
Time, the Company shall, and shall cause each of its subsidiaries to, upon
reasonable notice, afford Parent and Sub, and their respective counsel,
accountants, consultants and other authorized representatives, reasonable access
during normal business hours to the employees, properties, books and records of
the Company and its subsidiaries in order that they may have the opportunity to
make such investigations as they shall desire of the affairs of the Company and
its subsidiaries and all other information concerning the Company's or its
subsidiaries' business, properties and personnel as Parent and Sub may
reasonably request. The Company shall furnish promptly to Parent and Sub (a) a
copy of each report, schedule, registration statement and other document filed
by it or its subsidiaries during such period pursuant to the requirements of
Federal or state securities laws and (b) all other information concerning its or
its subsidiaries' business, properties and personnel as Parent and Sub may
reasonably request. The Company agrees to cause its officers and employees to
furnish such additional financial and operating data and other information and
respond to such inquiries as Parent and Sub shall from time to time reasonably
request.
4.02 Confidentiality. Information obtained by Parent and Sub
and their respective counsel accountants, consultants and other authorized
representatives pursuant to Section 4.01 hereof shall be subject to the
provisions of the Confidentiality Agreement between the Company and Technicolor
Video Cassettes, Inc. dated December 10, 1997.
4.03 Conduct of the Business of the Company Pending the
Closing Date. The Company agrees that, except as specifically permitted,
required or specifically contemplated by or otherwise described in this
Agreement or otherwise consented to or approved by Sub and Parent (which consent
or approval shall not be unreasonably withheld, conditioned or delayed), during
the period commencing on the date hereof and, except with respect to Section
4.03(b)(xiv) which shall survive any termination of this Agreement in accordance
with Section 6.02 hereof, ending at the Effective Time.
(a) The Company and each of its subsidiaries will conduct
their respective businesses and operations only according to their
ordinary course of business
-27-
<PAGE>
consistent with past practice and will use their reasonable best
efforts to preserve intact their respective business organization, keep
available the services of their officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors,
clients, landlords, joint venture partners, employees, agents and
others having business relationships with them;
(b) Neither the Company nor any of its subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or
By-Laws (or comparable governing documents); (ii) distribute, issue or
sell any shares of its capital stock (other than in connection with the
exercise of Options outstanding on the date hereof) or any of its other
securities, or issue any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of, any
shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) sell or pledge or agree
to sell or pledge any stock owned by it in any of its subsidiaries;
(iv) declare, pay, set aside or make any dividend or other distribution
or payment with respect to, or split or combine, redeem or reclassify,
or purchase or otherwise acquire any shares of its capital stock or its
other securities, other than dividends in the ordinary course,
consistent with past practice by a direct or indirect wholly owned
subsidiary to is parent, (v) (A) enter into any contract or commitment
with respect to capital expenditures in excess of $100,000,
individually or $1,000,000, in the aggregate, other than those capital
expenditures approved as part of the Company's fiscal 1999 budget; (B)
acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business or division thereof; or
(C) enter into, amend, modify, supplement or cancel any material
contract, (vi) except in the ordinary course of business, acquire a
material amount of assets or securities or release or relinquish any
material contract rights; (vii) except to the extent required under
existing employee and director benefit plans, agreements or
arrangements as in effect on the date of this Agreement, (a) increase
the compensation or fringe benefits of any of its directors, officers
or employees, except for increases in salary or wages of employees
(other than officers) of the Company and its subsidiaries in the
ordinary course of business, consistent with past practice, (b) grant
any severance or termination pay not currently required to be paid
under existing severance plans, (c) enter into any employment,
consulting or severance agreement or arrangement with any present or
former director, officer or other employee of the Company or any of its
subsidiaries, or (d) establish, adopt, enter into or amend or terminate
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
present or former directors, officers or employees; (viii) transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber
or subject to any lien, any material properties or assets or incur or
-28-
<PAGE>
modify any indebtedness or other material liability (other than
indebtedness incurred in the ordinary course under the Amended and
Restated Credit Agreement among the Company, certain of its
subsidiaries and NationsBank, N.A. (the "Existing Credit Facility") or
issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for the obligations of another
Person or, otherwise than in the ordinary course of business,
consistent with past practice make any loan or extend credit; (ix) make
any material tax election or settle or compromise any material tax
liability; (x) except as required by applicable law or generally
accepted accounting principles, make any material change in its method
of accounting; (xi) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger); (xii)
agree to the settlement of any material claim or litigation (including,
but not limited to any claim or litigation in respect of or related to
any Environmental Law), (xiii) permit any material insurance policy
naming it as beneficiary or a loss payable payee to be cancelled or
otherwise terminate without notice to Parent unless such insurance
policy is immediately replaced, with no gaps or lapses in coverage,
with an insurance policy issued by a financially sound and reputable
insurance company in at least such amounts and against at least such
risks as the cancelled policy for a premium not greater than 110% of
the premium for the cancelled or otherwise terminated policy, (xiv)
take any action, including, without limitation, the adoption of any
stockholder rights plan or similar agreement, arrangement or instrument
or amendments to its Certificate of Incorporation (or other
organizational or governing documents), which would, directly or
indirectly, restrict or impair the ability of Parent or Sub to vote, or
otherwise to exercise the rights and receive the benefits of a
stockholder with respect to, securities of the Company that may be
acquired or controlled by Parent or Sub or permit any stockholder to
acquire securities of the Company on a basis not available to Parent or
(xv) agree, in writing or otherwise, to take any of the foregoing
actions; and
(c) The Company shall not, and shall not permit any of its
subsidiaries to, (i) take any action (or knowingly omit to take any
action), engage in any transaction or enter into any agreement which
action, knowing omission, transaction or agreement would cause any of
the representations or warranties set forth in Section 3.01 hereof to
be untrue as of the Closing Date, or (ii) purchase or acquire, or offer
to purchase or acquire, any shares of capital stock of the Company; and
(d) The Company and each of its subsidiaries shall pay all
material Taxes and shall use reasonable best efforts to pay all other
Taxes as the same become due other than Taxes which are being contested
in good faith.
-29-
<PAGE>
4.04 Proxy Statement. If stockholder approval of the Merger is
required by law, as promptly as practicable, the Company will promptly prepare
and file a preliminary Proxy Statement with the Commission and will use its
reasonable efforts to respond to the comments of the Commission in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants). Parent, Sub and Company will cooperate with each other in
connection with the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, each of Parent and Sub will furnish to the Company
the information relating to it required by the Exchange Act to be set forth in
the Proxy Statement. Promptly after the expiration or termination of the Offer,
if required by the DGCL in order to consummate the Merger, the Company will
cause the definitive Proxy Statement to be mailed to the stockholders of the
Company and, if necessary, after the definitive Proxy Statement shall have been
so mailed, promptly circulate amended, supplemental or supplemented proxy
material and, if required in connection therewith, resolicit proxies. The
Company will not use any proxy material in connection with the meeting of its
stockholders without providing Parent and Sub with a reasonable opportunity to
review and comment on such proxy material.
4.05 Stockholder Approval. (a) Promptly after the expiration
or termination of the Offer, if required by DGCL in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law, duly call, convene and hold a meeting of the holders of
Common Stock for the purpose of voting upon this Agreement and the Merger and
the Company agrees that this Agreement and the Merger shall be submitted at such
special meeting. The Company shall use its reasonable best efforts to solicit
from its stockholders proxies, and, subject always to the fiduciary obligations
of the Company's directors under applicable law, shall take all other action
necessary and advisable to secure the vote of stockholders required by
applicable law to obtain the approval for this Agreement and the Merger. Subject
to Section 4.07 of this Agreement, the Company agrees that it will include in
the Proxy Statement the recommendation of its Board of Directors that holders of
Common Stock approve and adopt this Agreement and approve the Merger. Parent
will cause all shares of Common Stock owned by Parent and its subsidiaries to be
voted in favor of the Merger.
(b) Notwithstanding the foregoing, in the event that Sub shall
acquire at least 90% of the outstanding Company Common Stock, the Company
agrees, at the request of Parent and Sub, subject to Article V, to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with Section 253 of the DGCL.
4.06 Reasonable Efforts. Subject to the terms and conditions
provided herein, each of the Company, Parent and Sub shall, and the Company
shall cause each of its subsidiaries to, cooperate and use their respective
reasonable efforts to (a) take, or cause to
-30-
<PAGE>
be taken, all appropriate action, to do and cause to be done all things
reasonably necessary, proper and advisable and to make, or cause to be made, all
filings necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable efforts to obtain, as
promptly as practicable and prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities, regulatory organizations, and other instrumentalities and agencies
and other third parties to contracts with the Company and its subsidiaries as
are necessary in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the Offer and the Merger and (b) as
promptly as practicable, make, or cause to be made, all filings and other
submissions necessary, proper or advisable with respect to this Agreement the
transactions contemplated hereby under (x) the HSR Act and any related
governmental request thereunder and (y) any other applicable laws or
regulations; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its subsidiaries in
order to obtain any such consent, approval or authorization without the written
consent of Sub. The Company, Parent and Sub shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company, Parent and Sub shall use their respective
reasonable best efforts to furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable law in connection with the transactions contemplated by this
Agreement.
4.07 No Solicitation of Other Offers. (a) The Company and its
affiliates and each of their respective officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants and
other agents ("Agents") shall immediately cease any existing discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal (as defined below). Neither the Company nor any of its
subsidiaries shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its subsidiaries' Agents to take) any action to (i)
encourage, solicit or initiate the making of any Acquisition Proposal, (ii)
enter into any agreement with respect to any Acquisition Proposal or (iii)
participate in any way in discussions or negotiations with or furnish or
disclose any information to, any Person (other than Parent or Sub) in connection
with, or take any other action to knowingly facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal, except that, the Company may participate in
discussions or negotiations with and, provided such Person enters into a
confidentiality agreement with the Company on terms no more favorable to such
Person than the confidentiality agreement between Technicolor Videocassette
Inc., a wholly owned subsidiary of Parent, and the Company, furnish or
-31-
<PAGE>
disclose information to, any Person who has made, in the good faith judgment of
the Board of Directors of the Company after consultation with their financial
advisors, a bona fide offer or proposal (but not an inquiry) regarding a
transaction that would constitute an Acquisition Proposal and that, if agreed
with the Company, would constitute a Superior Proposal, provided such
Acquisition Proposal was not initially solicited, encouraged or knowingly
facilitated by the Company, its subsidiaries or their Agents in violation of
this Agreement after the date hereof, and, provided further, that nothing in
this Section 4.07 shall prevent the Company or Board of Directors from taking
and disclosing to the Company's stockholders a position contemplated by Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act with respect to any
tender offer or from making such disclosure to the Company's stockholders, upon
the advice of its independent outside legal counsel, as is required under
applicable Federal Securities law. Any actions permitted under, and taken in
compliance with, this Section 4.07 shall not be deemed a breach of any other
covenant or agreement of such party contained in this Agreement.
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any Person or group relating to any direct or indirect acquisition or
purchase of a substantial amount of assets of the Company or any of its
subsidiaries or of all or any portion of any class of equity securities of the
Company or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning all or any portion of
any class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or any transaction having
similar economic effect involving the Company or any of its subsidiaries, other
than the transactions contemplated by this Agreement. "Superior Proposal" shall
mean a bona fide proposal made by a third party to acquire all or a portion of
the outstanding shares of the Company pursuant to a tender offer, a merger or a
sale of all of the assets of the Company (x) on terms which the Board of
Directors of the Company determines in their good faith reasonable judgment
(after consultation with its independent outside financial and legal advisors)
to be more favorable to the Company and its stockholders than the transactions
contemplated hereby.
(b) Except to the extent that, after consultation with independent
outside counsel to the Company, the Board of Directors determines in good faith
that such actions are required in order for the directors of the Company to
satisfy their fiduciary duties to the Company and its stockholders or to comply
with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act, the Board of
Directors shall not take any action to withdraw or modify in a manner adverse to
Parent or Sub, or take a public position inconsistent with, its approvals or
recommendation of the Offer, the Merger or this Agreement or to recommend
another Acquisition Proposal and shall not resolve to do any of the foregoing.
(c) In addition to the obligations of the Company set forth in
paragraph (a) above, on the date of receipt thereof, the Company shall advise
Parent of any request for information regarding or that may be reasonably likely
to result in, or any other inquiry or proposal
-32-
<PAGE>
relating to an Acquisition Proposal, the material terms and conditions of such
request, inquiry or proposal and of any subsequent material amendments or
changes thereto, and the identity of the Person making any such request, inquiry
or proposal.
(d) Immediately following the execution of this Agreement, the Company
will request each Person which has heretofore executed a confidentiality
agreement in connection with its consideration of making an Acquisition Proposal
with respect to the Company to return and/or destroy all confidential
information heretofore furnished to such Person by or on behalf of the Company.
4.08 Notification of Certain Matters. The Company shall give
prompt notice to Sub and Parent, and Parent and Sub shall give prompt notice to
the Company, of (a) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or would be reasonably likely cause
(i) any representation or warranty contained in the Agreement to be untrue in
any material respect or (ii) any of the Tender Offer Conditions to be
unsatisfied, (b) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by the Company or any of its subsidiaries under any material contract
to which the Company or any of its subsidiaries is a party or under which any of
their respective assets or properties is bound, or (c) any event, change in
circumstances or other occurrence that has or would be reasonably likely to have
a material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole. Each of the Company on the one hand and Sub and Parent on the
other shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
4.09 HSR Act. The Company and Parent shall, as soon as
practicable and in any event within ten days from the date of this Agreement,
file 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 shall use their reasonable efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division for additional information or documentation.
4.10 Employee Benefits. (a) From and after the Effective Time
until the first anniversary of the Effective Time, the Surviving Corporation
shall (or, if necessary, Parent shall cause the Surviving Corporation to) ensure
that all employees and officers of the Company at the Effective Time receive
benefits in the aggregate substantially comparable to the benefits received by
such individuals under US Employee Benefit Plans and Foreign Employee Benefit
Plans immediately prior to the date hereof. Notwithstanding the foregoing,
following the Effective Time, the Surviving Corporation may terminate the
employment of any employee (subject to the payment of severance benefits payable
to the employee in connection with such termination).
-33-
<PAGE>
(b) From and after the Effective Time until the first
anniversary of the Effective Time, the Surviving Corporation shall (or, if
necessary, Parent shall cause the Surviving Corporation to) keep in effect all
severance policies that are applicable to employees and officers of the Company
immediately prior to the date hereof.
(c) Following the Effective Time, (i) the Surviving
Corporation shall (or, if necessary, Parent shall cause the Surviving
Corporation to) ensure that no medical, dental, health or disability plan
adopted by the Surviving Corporation shall have any preexisting condition
limitations and (ii) the Surviving Corporation shall (or, if necessary, Parent
shall cause the Surviving Corporation to) honor all deductibles and
out-of-pocket expenses paid by the employees and officers of the Company and its
U.S. subsidiaries under any medical, dental, health or disability plan of the
Company and its subsidiaries during the portion of the calendar year prior to
the time such employees become eligible to participate in any medical, dental,
health or disability plan adopted by the Surviving Corporation.
(d) Following the Effective Time, for purposes of eligibility
and vesting, the Surviving Corporation (and, if applicable, Parent) shall honor
all service credit accrued by the employees and officers of the Company under
all US Employee Benefit Plans and Foreign Employee Benefit Plans up to (and
including) the Effective Time.
4.11 Directors' and Officers' Insurance; Indemnification. (a)
From and after the Effective Time, the Surviving Corporation shall (or, if
necessary, Parent shall take all necessary action to) ensure that the
Certificate of Incorporation and the By-Laws of the Surviving Corporation shall
contain the provisions with respect to indemnification and exculpation from
liability set forth in the Company's Certificate of Incorporation and By-Laws on
the date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company, unless such modification is required by law.
(b) For six years from the Effective Time, the Surviving
Corporation shall either (x) maintain in effect the Company's current directors'
and officers' liability insurance covering those persons who are currently
covered on the date of this Agreement by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Parent) (the "Indemnified Parties"); provided that the Surviving Corporation may
substitute for such Company policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous and provided that
said substitution does not result in any gaps or lapses in coverage with respect
to matters occurring prior to the Effective Time or (y) cause the Parent's,
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy;
provided
-34-
<PAGE>
that the coverage provided by Parent's insurance shall be no less favorable to
the Indemnified Parties and shall provide no fewer rights than the Company's
directors' and officers' liability insurance policy currently in place.
Notwithstanding anything to the contrary in this Section 4.11, in no event shall
the Surviving Corporation be required to expend in any one year an amount in
excess of 200% of the annual premiums paid by the Company as of the date of this
Agreement for such insurance and if the annual premium for the insurance
coverage that would otherwise be required pursuant to this Section 4.11 would
exceed such amount, the Surviving Corporation shall only be obligated to obtain
a policy with the greatest coverage available for a cost not exceeding 200% of
the annual premiums currently paid by the Company.
4.12 Guaranty of Performance. If Sub fails to perform any of
its obligations under this Agreement, Parent shall, or shall cause another of
its affiliates to, perform such obligations.
4.13 Financing. Parent shall provide Sub with the funds
necessary to consummate the Offer, the Merger and the other transactions
contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and
the Company. The respective obligations of Parent and Sub, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction or waiver (subject to applicable law) at or prior to the Effective
Time of each of the following conditions:
(a) Approval of Company's Stockholders. To the extent required
by applicable law, this Agreement and the Merger shall have been
approved and adopted by holders of a majority of the outstanding shares
of the Common Stock of the Company entitled to vote in accordance with
applicable law (if required by applicable law) and the Company's
Certificate of Incorporation and By-Laws;
(b) HSR Act. Any waiting period (and any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated;
(c) Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental
or regulatory agency, body or authority which prohibits the
consummation of the Offer or the Merger and the transactions
contemplated by this Agreement and which is in effect at the Effective
Time, provided, however, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable best
efforts to prevent the entry
-35-
<PAGE>
of any such injunction or other order and to appeal as promptly as
possible any decree, injunction or other order that may be entered;
(d) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which
prohibits the consummation of the Offer or the Merger or has the effect
of making the purchase of the Common Stock illegal; and
(e) Payment for Common Stock. Sub shall have accepted for
payment and paid for a number of shares of Common Stock tendered
pursuant to the Offer that satisfies the Minimum Condition; provided
that the foregoing shall not be a condition to Parent's and Sub's
obligation to consummate the Merger if Sub's failure to purchase any
shares of Common Stock violates the terms of the Offer.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after approval of the Merger by the Company's
stockholders:
(a) by mutual consent of the Company, on the one hand,
and of Parent and Sub, on the other hand;
(b) by either Parent and Sub, on the one hand, or the Company,
on the other hand, if any governmental or regulatory agency shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, shares of Common Stock pursuant to the
Offer or the Merger and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by Parent and Sub, on the one hand, or the Company, on the
other hand, if the Effective Time shall not have occurred on or prior
to September 30, 1998 (the "Outside Date"), unless the Effective Time
shall not have occurred on or prior to the Outside Date because of a
material breach of any representation, warranty, obligation, covenant,
agreement or condition set forth in this Agreement on the part of the
party seeking to terminate this Agreement;
(d) by Parent and Sub, if the Offer is terminated or expires
in accordance with its terms without Sub having purchased any Common
Stock thereunder due to
-36-
<PAGE>
an event or occurrence which would result in a failure to satisfy any
of the conditions set forth on Exhibit A hereto, unless any such
failure shall have been caused by or resulted from the failure of
Parent or Sub to perform in a material respect any covenant or
agreement of either of them contained in this Agreement or the breach
by Parent or Sub in a material respect of any representation or
warranty of either of them contained in this Agreement;
(e) by Parent and Sub, in the event that (A) (i) any one or
more representations, warranties, covenants or agreements of the
Company contained in this Agreement that is qualified as to materiality
shall be untrue, incorrect or breached in any respect except for such
failures as would not be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole or (ii) any one or more of such representations, warranties,
covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in
the aggregate, would be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole and, (B) in each case, cannot or has not been cured prior to the
earlier of (i) 15 days after the giving of written notice of such
breach to the Company and (ii) two business days prior to the date on
which the Offer expires;
(f) by the Company, if the Board of Directors of the Company
determines that an Acquisition Proposal constitutes a Superior Proposal
and the Board of Directors determines after consulting with independent
outside counsel that a failure to terminate this Agreement and enter
into an agreement to effect the Superior Proposal would constitute a
breach of its fiduciary duties; provided, however, that the Company
shall not be permitted to terminate this Agreement pursuant to this
Section 6.01(f) unless it has provided Parent and Sub with two business
days prior written notice of its intent to so terminate this Agreement
together with a reasonably detailed summary of the terms and conditions
of such Superior Proposal; provided, further, that Parent shall receive
the fees set forth in Section 7.01(b) immediately prior to any
termination pursuant to this Section 6.01(f) by wire transfer in same
day funds;
(g) by Parent and Sub, if (i) the Company or any of its
subsidiaries or their Agents encourages, solicits or initiates the
making of any Acquisition Proposal from any Person other than Parent or
Sub or the Company or any of its subsidiaries or their Agents takes any
other action to knowingly facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to,
any Acquisition Proposal (other than as permitted by and taken in
compliance with Section 4.07), (ii) the Company enters into any
agreement with respect to or the making of an Acquisition Proposal or
(iii) if the Company's Board of Directors shall have (A) failed to
recommend to the Company's stockholders that such stockholders tender
their shares of Common Stock pursuant to the Offer and vote to approve
and
-37-
<PAGE>
adopt this Agreement or (B) amended, withdrawn or modified such
recommendation in a manner adverse to Parent and Sub.
(h) by the Company, in the event that (A) (i) any one or more
representations, warranties, covenants or agreements of Parent or Sub
contained in this Agreement that is qualified as to materiality shall
be untrue, incorrect or breached in any respect except where such
failures as are not reasonably likely to materially and adversely
affect Parent's or Sub's ability to complete the Offer or Merger or
(ii) any one or more of such representations, warranties, covenants or
agreements that is not so qualified shall be untrue, incorrect or
breached which, individually or in the aggregate would be reasonably
likely to materially and adversely effect Parent's or Sub's ability to
complete the Offer or the Merger and (B) in each case cannot or has not
been cured prior to the earlier of (i) 15 days after the giving of
written notice of such breach to the Parent and Sub and (ii), to the
extent applicable, two business days prior to the date on which the
Offer expires.
(i) by the Company, if Parent or Sub shall have (i) failed to
commence the Offer within 5 business days following the date of this
Agreement, (ii) terminated the Offer or (iii) failed to pay for shares
of Common Stock pursuant to the Offer on or prior to the earlier of (x)
the fifth day after any shares of Common Stock tendered in the Offer
have been accepted for payment and (y) the Outside Date, unless in the
case (i) or (ii) such failure shall have been caused by or resulted
from the failure of the Company to satisfy the Tender Offer Conditions
set forth in Annex A or a material breach by the Company of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
6.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.01 hereof by Parent or Sub, on the one
hand, or the Company, on the other hand, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall become void and have
no effect, and there shall be no liability hereunder on the part of Parent, Sub
or the Company, except that Sections 4.02, 7.01 and this Section 6.02 hereof
shall survive any termination of this Agreement and Section 4.03(b)(xiv) of this
Agreement shall survive termination of this Agreement until the thirtieth day
following the expiration, termination or withdrawal of (without recommencement
or amendment or the execution of any agreement with the Company or any one or
more Selling Stockholders relating to) any Acquisition Proposal made by any
Person prior to the expiration or termination of the Offer. Nothing in this
Section 6.02 shall relieve any party to this Agreement of liability for breach
of this Agreement.
-38-
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses. (a) Except as provided in paragraph
(b) below, 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 costs and expenses.
(b) If (w) (i) the Offer shall have remained open for a
minimum of at least 20 business days, (ii) after the date hereof and prior to
December 31, 1998 any Person (other than Parent or Sub) shall have become the
beneficial owner of 50% or more of the outstanding shares of Common Stock and
(iii) the Minimum Condition (as defined in Annex A) shall not have been
satisfied and the Offer is terminated without the purchase of any Shares
thereunder, or (x) Parent and Sub shall have terminated this Agreement pursuant
to Section 6.01(g), or (y) the Company shall have terminated this Agreement
pursuant to Section 6.01(f), then the Company, if requested by Purchaser, shall
promptly, but in no event later than two days after the date of such request,
pay Parent up to $2,000,000 to reimburse Purchaser for the documented fees and
expenses of Parent, Purchaser and Merger Sub related to this Agreement, the
transactions contemplated hereby and any related financing and an additional fee
of $8,000,000, which amounts shall be immediately payable by wire transfer in
same day funds; provided, however, that if the Company shall have terminated
this Agreement pursuant to Section 6.01(f), such amounts shall be paid in
accordance with the provisions of such section. The Company acknowledges that
the agreements contained in this Section 7.01(b) are an integral part of the
transactions contemplated in this Agreement, and that, without these agreements,
Parent and Sub would not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amounts due pursuant to this Section 7.01(b) or
Section 6.01(f), and, in order to obtain such payments, Parent or Sub commences
a suit which results in a judgment against the Company for the fees set forth in
this paragraph (b), the Company shall pay to Parent and Sub its reasonably
documented costs and expenses (including reasonably documented attorneys' fees
and expenses) in connection with such suit, together with interest on the amount
of the fee at a rate equal to two percentage points over the prime rate of the
Morgan Guaranty Trust Company of New York on the date such payment was required
to be made.
7.02 Representations and Warranties. The respective
representations and warranties of the Company, on the one hand, and Parent and
Sub, on the other hand, 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. Each and every such
representation and warranty shall expire with, and be terminated and
extinguished by, the Closing and thereafter none of the Company, Parent or Sub
shall be under any liability whatsoever with respect to any such representation
or warranty. This Section 7.02 shall have no effect upon any other obligation of
the parties hereto, whether to
-39-
<PAGE>
be performed before or after the Effective Time.
7.03 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent or Sub, 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 by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
7.04 Public Announcements. The Company, on the one hand, and
Parent and Sub, on the other hand, agree to consult promptly with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and, unless required by
applicable law or regulation or the rules and regulations of any stock exchange
on which any of their securities are traded, shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement.
7.05 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed, certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, as follows:
(a) if to the Company, to it at:
Nimbus CD International Inc.
623 Welsh Run Road, Guildford Farm
Ruckersville, Virginia 22968
Attention: L. Steven Minkel
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr.
-40-
<PAGE>
(b) if to Parent, to it at:
Carlton Communications Plc
25 Knightsbridge
London SW1X 7RZ England
Attention: David Abdoo
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
(c) if to Sub, to it at:
Neptune Acquisition Corp.
3233 East Mission Oaks Blvd.
Camarillo, California 93012
Attention: Thomas Collins
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
7.06 Entire Agreement. This Agreement and the annex, schedules
and other documents referred to herein or delivered pursuant hereto,
collectively contain the entire understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
-41-
<PAGE>
7.07 Binding Effect; Benefit; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and, with respect
to the provisions of Section 4.11 hereof, shall inure to the benefit of the
Persons benefiting from the provisions thereof who are specifically intended to
be third party beneficiaries thereof, and, in each such case, 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.
Notwithstanding anything in this Section 7.07 to the contrary, it is expressly
understood that Parent and Sub may assign their respective rights, interests and
obligations under this Agreement to any of their affiliates provided that such
assignment shall not relieve Parent or Sub, as the case may be, from their
obligations pursuant to this Agreement. Except as set forth above, nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
7.08 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Effective Time
(notwithstanding any stockholder approval), by action taken by the respective
Boards of Directors of Parent, Sub and the Company or by the respective officers
authorized by such Boards of Directors; provided, however, that after any such
stockholder approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval.
7.09 Further Actions. Each of the parties hereto agrees that,
subject to the terms of this Agreement and its obligations under applicable Law,
it will use its reasonable best efforts to fulfill all conditions precedent
specified herein, to the extent that such conditions are within its control, and
to do all things reasonably necessary to consummate the transactions
contemplated hereby.
7.10 Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
7.11 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
7.12 Applicable Law; Jurisdiction. This Agreement and the
legal relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws rules thereof. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
-42-
<PAGE>
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 7.12 and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of New York other than for such purposes. EACH PARTY
HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
7.13 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
7.14 Certain Definitions. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) "subsidiary" with respect to the Company, shall mean and
include (x) any partnership of which the Company or any subsidiary is a general
partner or (y) any corporation or other organization whether incorporated or
unincorporated of which at least a majority of the securities or interests
having by the terms thereof ordinary voting power to elect at least a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by such
party and one or more of its subsidiaries.
[SIGNATURE PAGE FOLLOWS]
-43-
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company has caused this
Agreement to be executed by its respective officers thereunto duly authorized,
all as of the date first above written.
CARLTON COMMUNICATIONS PLC
By___________________________
Name: B.A. Cragg
Title: Finance Director
NEPTUNE ACQUISITION CORP.
By___________________________
Name: O.F. Raimondo
Title: President
NIMBUS CD INTERNATIONAL, INC.
By___________________________
Name: L.J. Faulkner
Title: President and Chief Executive Officer
-44-
<PAGE>
ANNEX A
The capitalized terms used in this Annex A shall have the
meanings set forth in the Agreement to which it is annexed, except that the term
"Merger Agreement" shall be deemed to refer to the Agreement to which this Annex
A is appended and "Purchaser" shall be deemed to refer to Sub.
Notwithstanding any other provision of the Offer or the Merger
Agreement, Purchaser shall not be required to accept for payment or subject to
any applicable rules and regulations of the Commission, including Rule 14e-1c
under the Exchange Act, pay for any shares of Common Stock tendered pursuant to
the Offer and may terminate or amend the Offer and may postpone the acceptance
of, and payment for, shares of Common Stock, if (i) there shall not have been
validly tendered and not withdrawn prior to the expiration of the Offer a number
of shares of Common Stock which represent a majority of the total voting power
of all shares of capital stock of the Company outstanding on a fully diluted
basis (the "Minimum Condition"), (ii) any applicable waiting period under the
HSR Act shall not have expired or been terminated, or (iii) if, at any time on
or after the date of the Merger Agreement and at or before the time of payment
for any such shares of Common Stock (whether or not any shares of Common Stock
have theretofore been accepted for payment or paid for pursuant to the Offer)
any of the following shall occur:
(a) there shall be instituted or pending any action or
proceeding by any government or governmental authority or agency,
domestic or foreign, or by any other Person, domestic or foreign,
before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to or which would be reasonably
likely to make illegal, impede, delay or otherwise directly or
indirectly restrain or prohibit the Offer or the Merger or seeking to
obtain material damages, (ii) seeking to compel Parent or Purchaser to
dispose of, or hold separate (through the establishment of a trust or
otherwise) material assets or properties or categories of assets or
properties or businesses of Parent, the Company or any of their
subsidiaries or to withdraw from one or more lines of business material
to the Condition of Parent, the Company or any of their subsidiaries or
to take any actions that, in the aggregate would be reasonably likely
to materially impair Parent's ability to control, direct or manage on a
day-to-day basis the business or affairs of the Company, (iii) seeking
to impose limitations on the ability of Parent or Purchaser effectively
to exercise full rights of ownership of the shares of Common Stock,
including, without limitation, the right to vote any shares of Common
Stock acquired or owned by Sub or Parent on all matters properly
presented to the Company's stockholders, (iv) seeking to require
divestiture by Parent or Purchaser of any shares of Common Stock or (v)
materially adversely affecting the Condition of the Company and its
subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
proposed, enacted, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Purchaser, the
-1-
<PAGE>
Company or any subsidiary of the Company or (ii) the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
other than the routine application of the waiting period provisions of
the HSR Act to the Offer or to the Merger, which would directly or
indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change shall have occurred (or any condition, event or
development shall have occurred), that would have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole;
(d) except as to any such representation or warranty which
speaks as of a specific date or for a specific period which must be
true and correct in the following respects only as of such specific
date or period, as of the date of the Merger Agreement and as of the
scheduled expiration date the Offer (i) any one or more
representations, warranties, covenants or agreements of the Company
contained in the Merger Agreement that is qualified as to materiality
shall be untrue, incorrect or breached in any respect except for such
failures as would not be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole or (ii) any one or more of such representations, warranties,
covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in
the aggregate, would be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole;
(e) (i) the Company or any of its subsidiaries or their Agents
encourages, solicits or initiates the making of any Acquisition
Proposal from any Person other than Parent or Sub or the Company or any
of its subsidiaries or their Agents takes any other action to knowingly
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal other than as permitted by and in compliance with Section
4.07, (ii) the Company enters into any agreement with respect to or the
making of an Acquisition Proposal, or (iii) if the Company's Board of
Directors shall have (A) failed to recommend to the Company's
stockholders that such stockholders tender their shares of Common Stock
pursuant to the Offer and vote to approve and adopt this Agreement or
(B) amends, withdraws or modifies such recommendation in a manner
adverse to Parent and Sub or resolves to do so.
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it and its subsidiaries under the Merger
Agreement; or
-2-
<PAGE>
(g) the Merger Agreement shall have been terminated in
accordance with its terms;
which, in the reasonable judgment of Purchaser, in any such case and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions (including those set forth in clauses
(i)-(iii) above) are for the sole benefit of the Parent and the Purchaser and
may be asserted by the Parent or the Purchaser, or may be waived by the Parent
or the Purchaser, in whole or in part at any time and from time to time in its
sole discretion. The failure by the Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
-3-
<PAGE>
AGREEMENT
AGREEMENT dated as of June 16, 1998, among Carlton
Communications Plc, a company organized under the laws of England ("Parent"),
Neptune Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and the other parties signatory hereto (each a "Stockholder"
and collectively, the "Stockholders").
W I T N E S S E T H :
WHEREAS, contemporaneously herewith, Parent, Sub and Nimbus CD
International, Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to and subject to the conditions of which Sub will, as soon as
practicable (and not later than five business days) after the execution and
delivery of the Merger Agreement, commence an offer to purchase all of the
issued and outstanding shares of Company Common Stock (the "Offer") and Sub will
be merged with and into the Company (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Sub have required that the Stockholders agree, and
the Stockholders have each agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Company Common Stock" shall mean at any time the common
stock, $0.01 par value, of the Company.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
2. Tender of Shares.
(a) Each Stockholder hereby agrees to, as promptly as
practicable (and in no event later than the tenth day (or if such day is not a
business day, the next succeeding business day immediately thereafter) after
commencement of the Offer), validly tender (and not to withdraw) pursuant to and
in accordance with the terms of the Offer (provided that the Offer is not
amended in a manner prohibited by the Merger Agreement), in a timely manner for
acceptance by Sub in the Offer, the number of shares of Company Common Stock set
-1-
<PAGE>
forth opposite such Stockholder's name on Schedule I hereto (the "Existing
Shares" and, together with any shares of Company Common Stock acquired by such
Stockholder after the date hereof and prior to the termination of this Agreement
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise and acquired by such Stockholder solely in
its capacity as a stockholder, the "Shares"), owned by such Stockholder. Each
Stockholder hereby acknowledges and agrees that Sub's obligation to accept for
payment and pay for Company Common Stock in the Offer, including the Shares, is
subject to the terms and conditions of the Offer.
(b) Each Stockholder agrees that if (i) at any time prior to
the expiration or termination of the Offer, (A) any Person shall have become the
beneficial owner of 50% or more of the outstanding shares of Common Stock or (B)
any Person makes or publicly announces an intention to make an Acquisition
Proposal or (C) the Company enters into an agreement with any Person with
respect to an Acquisition Proposal and (ii) at any time (x) in the case of (A)
within one year thereafter, (y) in the case of (B), within the period ending on
the thirtieth day after the withdrawal of such Acquisition Proposal, unless such
Person or any of its affiliates shall have entered into an Agreement with the
Company or any one or more Stockholders or their respective affiliates regarding
an Acquisition Proposal or have publicly announced a new or amended Acquisition
Proposal (in which event the termination of such period shall be tolled) and (z)
in the case of (C), within the period ending on the thirtieth day after the
termination of such agreement, unless such Person or any of its affiliates shall
have entered into a new or amended agreement with the Company or any one or more
Stockholders or their respective affiliates regarding an Acquisition Proposal or
have made or publicly announce an intention to make an Acquisition Proposal (in
which event the termination of such period shall be tolled), such Stockholder
sells or otherwise transfers or disposes of any of such Stockholder's Existing
Shares or any other shares of Common Stock of which such Stockholder becomes the
owner prior to the date of such sale or other transfer or disposition or any
shares of Common Stock that such Stockholder currently has the right to acquire
then, such Stockholder shall, as promptly as practicable (but in any event
within two business days after the later of the date of such sale or other
transfer or disposition, provided, that, if the fair market value of any portion
of the consideration is subject to the process for determination of its fair
market value set forth below, the payment relating to such portion of the
consideration shall be made no later than two business days after the date of
agreement or such determination) pay to Sub (or its designee) by wire transfer
of immediately available funds an amount in cash equal to the product of (i) the
number of such shares of Common Stock so sold or otherwise transferred and (ii)
the positive difference between value of the consideration per share of Common
Stock paid pursuant to such sale or other transfer or disposition and $11.50.
For purposes of the foregoing, the parties agree that the value of the
consideration per share of Common Stock paid pursuant to such sale or other
transfer or disposition shall be deemed to include the value of any dividends or
other distributions of any kind whatsoever (including, by means of stock
dividend, cash dividend,
-2-
<PAGE>
stock split, recapitalization, combination, reorganization, exchange of shares
of Common Stock or otherwise) received or distributable in respect of such
shares of Common Stock held on or prior to the date of such sale or other
transfer or disposition and that no Stockholder shall sell, distribute or
otherwise transfer (including by means of liquidation) such shares of Common
Stock to any of its limited partners, general partners, family members or other
affiliates unless such transferee first agrees in writing for the benefit of Sub
and Parent (in form reasonably satisfactory to Sub and Parent) that such
transferee agrees to be bound by the provisions of this Agreement. For purposes
of determining the value of the consideration paid per share of Common Stock and
the value of any distributions with respect to shares of Common Stock, the
parties agree that (i) the value of any part of such consideration or
distribution paid in cash shall be such cash value and (ii) any part of such
consideration or distribution paid in securities or other property shall be
valued at the fair market value of such securities or other property as of the
date of such sale or other transfer or disposition. For purposes of the
preceding clause (ii), the parties agree that the fair market value of
securities or other property shall be determined as follows: (A) if such
securities or other property are publicly traded, the fair market value of such
securities or other property shall be the average of the high and low sales
prices of such securities or other property as publicly reported by or for the
principal exchange or other market on which such securities or other property
are traded on the date of such sale or other transfer or disposition and (B) if
such securities or other property are not publicly traded and the parties cannot
otherwise agree on their fair market value within two business days after the
sale or other transfer or disposition, by averaging the fair market values of
such securities or other property as determined within five business days after
such sale or other transfer or disposition by two internationally recognized
investment banking firms, one chosen by Sub and one chosen by the Stockholders
(acting together); provided, however, that if such investment banking firms
shall fail to make such determinations within such time period or the fair
market values of such securities or other property as of the date of such sale
or other transfer or disposition as determined by such investment banking firms
differ by more than 10% of the lower of the two values, such determination
(which shall be final and binding on all parties hereto) shall be made witin 10
business days after the sale or other transfer or disposition by a third
internationally recognized investment banking firm chosen by the other two
investment banking firms. The parties agree to use reasonable best efforts to
ensure the prompt payment, and if necessary, the prompt determination of the
fair market value of any securities or other property pursuant to this
paragraph, it being understood and agreed that, without limiting the generality
of the foregoing, it is the intent of the parties that Sub, and not the
Stockholders, should receive the value of the consideration in excess of
$11.50 from any sale or other transfer or disposition of the shares of Common
Stock subject to this Agreement as a result of any change in control or
agreement relating to or public announcement of the making of or an intention
to make an Acquisition Proposal prior to the date the Offer is terminated or
otherwise expires. For purposes of this Agreement, an Acquisition Proposal
shall be deemed to include an acquisition (or series of acquisitions) by the
Company pursuant to which the Company issues shares of Common Stock
constituting, in the aggregate, more than the
-3-
<PAGE>
number of issued and outstanding shares of Common Stock as of the date of this
Agreement and, in such circumstances, the value of the consideration received
for the shares of Common Stock subject to this paragraph shall be the fair
market value of such shares of Common Stock as of the date of any such
acquisitions by the Company.
(c) Each Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
Company Common Stock and the nature of its commitments, arrangements and
understandings under this Agreement.
3. Provisions Concerning Company Common Stock. Each
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of (i) the Effective Time and (ii) the
termination of this Agreement pursuant to Section 8 hereof at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, such Stockholder shall
vote (or cause to be voted) the Shares owned by such Stockholder whether issued,
heretofore owned or hereafter acquired, (i) in favor of the Merger and each of
the other actions contemplated by the Merger Agreement and this Agreement and
any actions required in furtherance thereof and hereof; (ii) against any action
or agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or of such Stockholder under this Agreement; and
(iii) except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; or (C) (1) any
change in a majority of the persons who constitute the board of directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of Company's Certificate of Incorporation or By-laws; (3) any other
material change in the Company's corporate structure or business; or (4) any
other action involving the Company or its subsidiaries which is intended, or
could reasonably be expected, to prevent, impede, interfere with, delay,
postpone, or materially adversely affect the Offer, the Merger or the
consummation of the transactions contemplated by this Agreement and the Merger
Agreement. No Stockholder shall enter into any agreement or understanding with
any Person or entity the effect of which would be to violate the provisions and
agreements contained in this Section 3.
4. Representations and Warranties of the Stockholders. Each
Stockholder, as to itself, hereby severally represents and warrants to Sub and
Parent as follows:
-4-
<PAGE>
(a) Legal Status. If such Stockholder is a corporation,
partnership or other similar business entity, such Stockholder is a duly
organized and validly existing corporation, partnership or other similar
business entity, as the case may be, in good standing under the laws of its
jurisdiction of organization.
(b) Ownership of Shares. Such Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Schedule I hereto. On the date hereof, the Existing Shares set forth
opposite such Stockholder's name on Schedule I hereto constitute all of the
Shares owned by such Stockholder. Except as set forth on Schedule I, such
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares set forth opposite such
Stockholder's name on Schedule I hereto, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the terms
of this Agreement. Other than this Agreement and the Merger Agreement, there is
no option, warrant, right, call, proxy, agreement, commitment or understanding
of any nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the sale, pledge or other transfer or disposition of any of the
Existing Shares, any interest therein or any rights with respect thereto, or
related to the voting, disposition or control of the Existing Shares, or (ii)
obligates such Shareholder to grant, offer or enter into any of the foregoing.
(c) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to execute, deliver and enter into this Agreement,
comply with all of terms and provisions of this Agreement, perform all of such
Stockholder's obligations under this Agreement and consummate all of the
transactions involving such Stockholder contemplated by this Agreement and has
taken all necessary corporate or other action necessary to authorize the
execution, delivery and performance by such Stockholder of this Agreement and
the consummation of the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by such Stockholder will not violate
any other agreement to which such Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly authorized (if such Stockholder is a
corporation, partnership or other similar business entity), executed and
delivered by such Stockholder and constitutes a valid and binding agreement of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting creditors' rights generally or by general
principles of equity. There is no other person whose consent is required for the
execution, delivery and performance of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby whose unconditional and
irrevocable consent has not heretofore been obtained.
-5-
<PAGE>
(d) No Conflicts. Except for the required filings and the
expiration or earlier termination of the required waiting period under the HSR
Act, (A) No filing with, and no permit, authorization, consent or approval of,
any state or federal public body or authority is necessary for the execution of
this Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (B) none of the execution and delivery
of this Agreement by such Stockholder, the consummation by such Stockholder of
the transactions contemplated hereby or compliance by such Stockholder with any
of the provisions hereof shall (1) if such Stockholder is a corporation,
partnership or other similar business entity, conflict with or violate the
certificate of incorporation, bylaws, partnership agreement or other
organizational documents or instruments of such Stockholder, as the case may be,
(2) conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Stockholder is a
party or by which such Stockholder or any of its properties or assets may be
bound, (3) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or to which any of
its properties or assets are subject or (4) result in the creation of any
claims, liens, restrictions, security interests, pledges, limitations and
encumbrances of any kind.
(e) No Encumbrances. Such Stockholder's Shares and the
certificates representing such 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 of any kind whatsoever, except for any such
encumbrances or proxies arising hereunder. The transfer by such Stockholder of
its Shares to Sub in the Offer or otherwise pursuant to this Agreement shall
pass to and unconditionally vest in Sub good and valid title to all Shares, free
and clear of all claims, liens, restrictions, security interests, pledges,
limitations and encumbrances of any kind whatsoever.
(f) Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of such Stockholder or any of its Affiliates (other than
the Company) is, or will be, entitled to any commission or broker's or finder's
fees from any Person other than such Stockholder or its Affiliates (other than
the Company) in connection with any of the sale of its Shares as contemplated by
this Agreement.
(g) Offer Documents and Schedule 14D-9. None of the
information supplied by such Stockholder for inclusion or incorporation by
reference in the Offer Documents, the Company's Schedule 14D-9, at the
respective times the Offer Documents or the Company's Schedule 14D-9 are filed
with the SEC and the date they are first
-6-
<PAGE>
published, sent or given to the holders of Common Stock, will contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they are made, not misleading. Such Stockholder agrees promptly to correct any
information provided by it for use in the Offer Documents, or the Company's
Schedule 14D-9 that shall be, or shall have become, false or misleading in any
material respect.
(h) Reliance by Parent. Such Stockholder understands and
acknowledges that Sub and Parent are each entering into the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
5. Covenants of the Stockholders. Each Stockholder covenants
and agrees as follows:
(a) Restriction on Transfer, Proxies and Non-Interference.
Beginning on the date hereof and ending on the date this Agreement shall
terminate pursuant to Section 8 hereof, such Stockholder shall not (i) except as
contemplated by the Offer or this Agreement, directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares or any interest therein; (ii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (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 such Stockholder from
performing such Stockholder's obligations under this Agreement.
(b) Waiver of Appraisal Rights. Such Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that such Stockholder may have.
(c) Stop Transfer; Changes in Shares. Such Stockholder agrees
with, and covenants to, Parent and Sub that such Stockholder shall not request
that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of such Stockholder's
Shares, unless such transfer is made to Sub in compliance with the Offer or this
Agreement. In the event of a stock dividend or distribution, or any change in
the capital stock of the Company by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged and the purchase price per Share shall be
appropriately adjusted. Such Stockholder shall be entitled to receive any cash
dividend paid by the
-7-
<PAGE>
Company during the term of this Agreement until its Shares are purchased in the
Offer or hereunder.
(d) Exclusive Dealing. (a) Such Stockholder and each of its
officers, directors, employees, representatives, consultants, investment banker,
attorneys, accountants, agents or advisors (collectively "Agents") shall
immediately cease any discussions or negotiations with any other parties that
may be ongoing with respect to any purchase of such Stockholder's Shares or any
Acquisition Proposal (as defined below). Such Stockholder shall not, directly or
indirectly, take (and no Stockholder shall authorize or permit its Agents to so
take) any action to (i) encourage, solicit or initiate the making of any offer
to purchase such Stockholder's Shares or any Acquisition Proposal, (ii) enter
into any agreement with respect to any offer to purchase such Stockholder's
Shares or any Acquisition Proposal, or (iii) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than Parent or Sub) in connection with, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any offer to purchase such Stockholder's
Shares or any Acquisition Proposal.
6. Fiduciary Duties. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not require any Stockholder, acting in his capacity as an officer or director of
the Company, to breach his fiduciary duties as a director of the Company to the
Company and its stockholders.
7. Miscellaneous.
(a) Further Assurances. From time to time, at the other
party's request and without further consideration, each of the parties hereto
shall execute and deliver such additional documents and take all such further
lawful action as may be necessary or desirable to consummate and make effective,
in the most expeditious manner practicable, the transactions contemplated by
this Agreement.
(b) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
-8-
<PAGE>
transferor shall remain liable for the performance of all obligations under this
Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party provided that Parent and Sub may assign, at their respective sole
discretion, their respective rights and obligations hereunder to any direct or
indirect wholly-owned subsidiary of Parent, although no such assignment shall
relieve Parent or Sub of their respective obligations hereunder if such assignee
does not perform such obligations and provided further that, in the event of a
Stockholder's death or incapacity, such Stockholder's rights hereunder shall
inure to his heirs, guardians, administrators or successors.
(e) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties (e.g., Parent, Sub and, any one or more Stockholders with
respect to the respective rights and obligations as among Parent, Sub and such
Stockholders under this Agreement).
(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to a Stockholder: At the address set forth on Schedule I hereto
copy to: White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr.
If to Parent:
Carlton Communications Plc
25 Knightsbridge
London SW1X 7RZ England
Attention: David Abdoo
-9-
<PAGE>
copy to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
If to Sub:
Neptune Acquisition Corp.
3233 East Mission Oaks Blvd.
Camarillo, California 93012
Attention: Thomas Collins
copy to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be
-10-
<PAGE>
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.
(j) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(l) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(m) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (m) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of New York other than for such purposes. EACH PARTY
HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
(n) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(o) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
8. Termination. This Agreement (other than Section 2(b) and
Sections 7 and 8 which shall survive termination of this Agreement until any
amounts due and payable by any Stockholder pursuant to Section 2(b) have been
paid) shall terminate upon the termination of the Merger Agreement pursuant to
Article VI thereof and thereafter no party
-11-
<PAGE>
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no effect except that nothing in this Section 8 shall
relieve any party of liability for a breach of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-12-
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholders
has caused this Agreement to be duly executed as of the day and year first above
written.
CARLTON COMMUNICATIONS PLC
By:
--------------------------------------
Name:
Title:
NEPTUNE ACQUISITION CORP.
By:
--------------------------------------
Name:
Title:
-13-
<PAGE>
STOCKHOLDERS
<TABLE>
<CAPTION>
Name of Stockholder Number of Existing Shares
- ------------------- -------------------------
<S> <C>
BEHRMAN CAPITAL L.P. 3,306,037
By: Behrman Brothers L.P., general partner
By:
-------------------------------
Darryl Behrman, general partner
BEHRMAN CAPITAL "B" L.P. 298,278
By: Behrman Brothers L.P., general partner
By:
-------------------------------
Darryl Behrman, general partner
STRATEGIC ENTREPRENEUR FUND, L.P. 65,751
By:
---------------------------------------
Darryl Behrman, general partner
----------
Subtotal 3,670,066
</TABLE>
The address of the foregoing Stockholders is 126 E.56th Street, New
York, New York 10022, Attention: Darryl Behrman.
(LIST OF STOCKHOLDERS CONTINUED ON NEXT PAGE)
-14-
<PAGE>
STOCKHOLDERS (cont.)
<TABLE>
<CAPTION>
Name of Stockholder Number of Existing Shares
- ------------------- -------------------------
<S> <C>
McCOWN DE LEEUW & CO. III, L.P. 4,478,412
By: MDC Management Company III, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
McCOWN DE LEEUW & CO. (Europe) III, L.P. 774,046
By: MDC Management Company IIIA, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
McCOWN DE LEEUW & CO. (Asia) III, L.P. 82,931
By: MDC Management Company IIIA, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
GAMMA FUND LLC 193,512
By:
----------------------------------
Charles Ayres, member
-----------
Subtotal 5,528,901
</TABLE>
The address of each of the foregoing Stockholders is 101 East 52nd
Street, New York, New York 10022. Attention Charles Ayres.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------- 0
Lyndon J. Faulkner
- -------------------------------------- 174,355
L. Steven Minkel
\
The address of each of the foregoing Stockholders is Nimbus CD International Inc.,
623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968
---------
TOTAL SHARES 9,373,322
---------
</TABLE>
-15-
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 16, 1998, by and between Neptune
Acquisition Corporation, a Delaware corporation (the "Company"), and Lyndon
J. Faulkner (the "Employee").
WHEREAS, the Employee's current employer, Nimbus CD
International, Inc. ("Nimbus"), has entered into an Agreement and Plan of
Merger, dated as of June 16, 1998 with the Company and with Carlton
Communications, Plc (the "Merger Agreement") pursuant to which the Company
will merge with and into Nimbus; and
WHEREAS, the Company desires to secure the continued employment
of Employee as President and Chief Executive Officer following the Effective
Time of the Merger (as such term is defined in the Merger Agreement); and
WHEREAS, the Employee and the Company desire to enter into an
agreement setting forth the terms and conditions of the employment of the
Employee with the Company on and after the Effective Time;
NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. Employment.
Subject to the consummation of the transactions contemplated by
the Merger Agreement, the Company hereby agrees to employ Employee, and
Employee agrees to serve as an employee of the Company, on the terms and
conditions set forth in this Agreement, effective as of the date of this
Agreement. The continuation of such employment shall be expressly conditioned
on and subject to the consummation of the transactions contemplated by the
Merger Agreement. This Agreement shall become null and void, and shall have
no force or effect, if the transactions contemplated under the Merger
Agreement are not consummated.
<PAGE>
2. Period of Employment.
The "Period of Employment" shall be the period commencing on the
Effective Time and ending on the third anniversary of the Effective Time,
during which the Company shall pay to the Employee a base salary and annual
bonus as provided in Section 4 and shall provide the Employee with the
benefits and compensation described in Section 5. Commencing on the second
anniversary of the Effective Time, if on or before that date the Company has
not delivered to the Employee and the Employee has not delivered to the
Company notice of termination of this Agreement (in accordance with Section
11 hereof), the Period of Employment will be automatically extended each day
by one day until a date which is one year following the date on which the
Company first delivers to the Employee, or the Employee first delivers to
Company, notice of termination of the Agreement.
3. Duties During the Period of Employment.
During the Period of Employment, Employee shall serve as President
and Chief Executive Officer of the Company and shall have such duties and
responsibilities as are assigned to him by the Chairman of the Company and
the Board of Directors of the Company commensurate with such position.
Employee shall report directly to the Chairman of the Company.
Employee shall devote Employee's full business time, attention and
efforts to the affairs of the Company during the Period of Employment,
provided, however, that Employee may engage in other activities, such as
activities involving professional, charitable, educational, religious and
similar types of organizations, speaking engagements, membership on the board
of directors of such other organizations as Company may from time to time
agree to, and activities of a similar nature to the extent that such other
activities do not inhibit the performance of Employee's duties under this
Agreement, or conflict in any material way with the business of Company and
its affiliates.
Employee's principal work location will be in Charlottesville,
Virginia. Employee agrees to travel to, and work at, the offices of the
Technicolor Packaged Media
2
<PAGE>
Group in Camarillo, California as is reasonably required for the performance
of his assigned duties.
4. Annual Cash Compensation.
(a) Base Salary.
As compensation for his services hereunder, Company will pay to
Employee during the Period of Employment a base salary at the annual rate of
$300,000, payable in accordance with the Company's standard payroll practices
for senior executives. Company shall review the Employee's base salary on
October 1, 1999 and on each October 1 thereafter during the Period of
Employment and in light of such review may, in the discretion of the Board of
Directors of Company (but shall not be obligated to), increase such base
salary taking into account any change in Employee's responsibilities,
increases in the cost of living, the Employee's job performance and other
pertinent factors. Effective as of the date of any such increase, the base
salary (as increased) shall be considered the Employee's new base salary for
all purposes of this Agreement and may not thereafter be reduced. Any
increase in base salary shall not limit or reduce any other obligation of
the Company to the Employee under this Agreement.
(b) Annual Bonus Plan.
For each fiscal year during the Period of Employment, other than
with respect to the Carlton Communications, Plc ("Carlton") or Technicolor
Packaged Media Group 1998 fiscal year, Employee will participate in the
Technicolor Packaged Media Group annual bonus plan and shall be eligible to
receive an annual target bonus in accordance with the terms of such plan.
Employee shall be entitled to receive a maximum bonus of 40% of base salary
if certain operating profit and cash flow objectives (as agreed to in the
annual budget) are met and certain personal management objectives mutually
agreed to by the Employee and the Company at the beginning of each fiscal
year are satisfied. In order to receive a bonus under the plan, the Employee
must be employed by the Company at the time required for the payment of
bonuses under the terms of the annual bonus plan.
3
<PAGE>
5. Other Employee Benefits and Compensation.
(a) Initial Carlton Stock Option.
The Company shall request as of the date of this Agreement that
Carlton grant to the Employee, effective as of the date of this Agreement, an
option (the "Stock Option") to purchase ordinary shares of Carlton pursuant
to the Carlton 1987 Incentive and Nonqualified Stock Option Plan for US
Employees, as amended. The Stock Option shall be expressly conditioned on and
subject to the consummation of the transactions contemplated by the Merger
Agreement. The Stock Option shall be null and void, and shall have no force
and effect, if the transactions contemplated under the Merger Agreement are
not consummated. The Stock Option shall permit the Employee to acquire
ordinary shares of Carlton equal in amount to the result of dividing four
times the Employee's base salary (as defined in Section 4(a)) by the fair
market value of one ordinary share of Carlton as of the date of this
Agreement. The exercise price per share of the Stock Option shall be equal to
the fair market value of one ordinary share of Carlton as of the date of this
Agreement. The Stock Option shall become nonforfeitable and exercisable in
three installments as follows: (i) 60% of the Stock Option on the day
immediately preceding the third anniversary of the Effective Time; (ii) 20%
of the Stock Option on the day immediately preceding the fourth anniversary
of the Effective Time; and (iii) 20% of the Stock Option on the day
immediately preceding the fifth anniversary of the Effective Time. The Stock
Option shall be granted on terms and conditions which are not less favorable
than those set forth in the stock option agreement attached as Exhibit A.
(b) Long Term Incentive Plan.
Employee shall be entitled to participate in the Technicolor
Packaged Media Group Long Term Incentive Plan and to receive awards
thereunder in accordance with the terms of such Plan, as summarized in the
attached Exhibit B.
4
<PAGE>
(c) Vacation and Sick Leave.
Employee shall be entitled to reasonable paid annual vacation
periods (but in no event less than four weeks in each year) and to reasonable
sick leave as determined by the Board of Directors of Company.
(d) Regular Reimbursed Business Expenses.
Company shall reimburse Employee for all expenses and
disbursements reasonably incurred by Employee in the performance of
Employee's duties during the Period of Employment, and provide such other
facilities or services as Company and Employee may, from time to time, agree
are appropriate, all in accordance with the Company's established policies.
(e) Employee Benefit Plans.
In addition to the cash compensation described in Section 4, the
Employee shall be entitled to participate in the Company's employee benefit
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement. During the Period of Employment, and
to the extent permitted under applicable law, the Company shall continue to
make contributions for the benefit of the Employee to the United Kingdom
retirement scheme in which the Employee participates as of the date of this
Agreement (the "Scheme"). Such contributions shall be made on the same
basis and under the same methods that have been used by Nimbus Manufacturing
(UK) Limited to make contributions to the Scheme for the Employee. The
Employee shall not be permitted to participate in any qualified retirement
plan (within the meaning of Section 401(a) of the Internal Revenue Code of
1986) that is sponsored by the Company while the Company is making
contributions to the Scheme.
(f) Executive Compensation Plans.
In addition to the cash compensation described in Section 4 and
the executive compensation and benefits described in this Agreement, the
Employee shall be entitled to participate in Company's executive compensation
plans, as presently in effect or
5
<PAGE>
as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(g) Relocation Expenditures.
In the event the Employee agrees to relocate to the offices of the
Technicolor Packaged Media Group in Camarillo, California, Company shall
reimburse Employee in amounts, which after provision for the net amount of
all income taxes payable by Employee with respect to the receipt of such
amounts (taking into account any moving expense or other deductions available
to Employee), shall be equal to all reasonable expenses of moving Employee and
Employee's family and their personal effects from Charlottesville, Virginia
(the "Existing Location") to Camarillo, California, including, without
limitation, (i) reasonable travel expenses, (ii) all household moving
expenses, (iii) all real estate expenses associated with selling the
Employee's Existing Location home and purchasing a new home, (iv) up to six
(6) months of reasonable temporary living costs, and (v) a cost of living
salary adjustment if a recognized national survey show the cost of living in
the new location is on average more than 5% above the cost of living for the
Existing Location.
(h) Options and Bonuses in Replacement of Nimbus Options.
The Employee shall receive additional options to purchase ordinary
shares of Carlton and a cash bonus, in accordance with the provisions of the
attached Exhibit C.
(i) U.S. Citizenship Expenses
The Company shall reimburse Employee for all reasonable expenses
related to the applications for U.S. citizenship for the Employee, his wife
and their two children.
6. Termination.
(a) Termination by Company Without Cause.
If the Company terminats the Employee's employment during the
Period of Employment without Cause (as defined below), in addition to all
other compensation and benefits payable to the Employee under this Agreement,
the Company shall pay to Employee in a lump sum an amount equal to the
greater of:
6
<PAGE>
(i) the product of (A) the number of years and
fractions thereof remaining until the third anniversary
of the Effective Time and (B) the base annual salary
payable to Employee pursuant to Section 4(a) as of the
date of termination of the Employee's employment; or
(ii) the base annual salary then payable to the
Employee pursuant to Section 4(a).
The lump sum payment shall be paid to the Employee within thirty (30) days
following the date of the Employee's termination of employement.
Until the thrid anniversary of the Effective Time, the Company
shall provide the Employee with the same level of medical and dental benefits
upon substantially the same terms and conditions (including contributions
required by Employee for such benefits), as existed immediately prior to
Employee's termination of employment.
For purposes of this Agreement, "Cause" shall mean (i) the willful
and continued failure by Employee to perform substantially his duties with
Company (other than any such failure resulting from incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to Employee by the Company which specifically identifies the manner
in which Company believes Employee has not substantially performed his
duties; (ii) the Employee's conviction of a felony; (iii) the Employee's
habitual abuse of narcotics or alcohol; or (iv) the Employee's fraud,
material dishonesty or gross misconduct in connection with the business of
the Company or its affiliates. Cause shall not exist unless and until the
Company has delivered to Employee a copy of a resolution duly adopted by
two-thirds (2/3) of the entire Board of Directors of the Company (excluding
Employee if Employee is a Board member) at a meeting of the Board held for
such purpose (after reasonable notice to Employee and an opportunity for
Employee, together with counsel, to be heard before the Board), which (i)
finds that in the good faith opinion of the Board an event constituting Cause
has occurred, and (ii) sets forth in detail the basis for the Board's
findings.
(b) Termination by Company for Cause.
7
<PAGE>
If Company terminates the Employee's employment during the Period
of Employment for Cause (as defined above), Employee will be entitled only to
(i) the base annual salary otherwise payable to Employee under Section 4(a)
through the end of the month in which the Period of Employment is terminated,
and (ii) the benefits described in Section 5(h).
(c) Termination by Employee for Good Reason.
If the Employee terminates employment during the Employee Period
after having given written notice to the Board of Directors of the Company
that an event constituting Good Reason has occurred, and the Company does not
reasonably remedy such event within the period described below, the
Employee's employment shall be deemed to have been terminated by the Company
without Cause and he shall receive the lump sum payment and all other
benefits described in Section 6(a) above.
For purposes of this Agreement, "Good Reason" shall mean; (i)
the failure of the Company or any of its affiliates to comply with any of the
material provisions of this Agreement or any agreement which relates to the
Agreement, (ii) any material adverse change in the Employee's
responsibilities and duties, or (iii) the failure by the Company to assign
this Agreement to a successor to the Company or the failure of a successor to
the Company to explicitly assume and agree to be bound by this Agreement.
Notwithstanding the foregoing, an isolated action taken in good faith and
which is remedied by the Company within ten (10) days after receipt of notice
given by Employee shall not constitute Good Reason.
7. Noncompetition.
(a) Employee covenants that at all times during the period of
his employment and for a period of one year immediately following the
termination thereof for any reason, he will not, without the prior written
consent of Company, which consent shall not be unreasonably withheld, for a
period of one year following his date of termination, either individually or
in partnership or jointly or in conjunction with any person as principal,
agent, employee, shareholder (other than by way of holding shares listed on a
8
<PAGE>
stock exchange in a number not exceeding five percent of the outstanding
class or series of shares so listed) or in any other manner whatsoever carry
on, be engaged in, be concerned with or be interested in, or advise, lend
money to, guarantee the debts or obligations of or permit his name or any
part thereof to be used or employed by, any person engaged in or concerned
with or interested in, any business in competition with the business carried
on by Company or any of its subsidiaries or affiliates.
(b) Employee hereby covenants and agrees that, at all times
during the period of his employment and for a period of one year immediately
following the termination thereof for any reason, Employee shall not employ
or seek to employ any person employed at that time by Company or any of its
subsidiaries or its affiliates who is engaged in or concerned with or
interested in, any business in competition with the business carried on by
Company or any of its subsidiaries or affiliates, or otherwise encourage or
entice such person to leave such employment.
(c) Employee hereby covenants and agrees that to the extent that
he receives compensation or benefits from other employment, the payments to
be made and the benefits to be provided by the Company shall, to the extent
permitted under applicable law, be correspondingly reduced, if such
compensation or benefits are earned through competing activity as defined in
this Section 7.
(d) It is the intention of the parties hereto that the
restrictions contained in this Section 7 be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions
is excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.
(e) Employee confirms that all restrictions in this Section 7
are reasonable and valid and all defenses to the strict enforcement thereof
by Company are hereby waived by Employee.
9
<PAGE>
8. Confidential Information.
Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to Company or any affiliate
of Company, including, without limitation, customer lists, client lists,
trade secrets, pricing policies and other business affairs of Company and any
affiliate of Company learned by him from Company or any such affiliate or
otherwise before or after the date of this Agreement, and not to disclose any
such confidential matter to anyone outside Company or any of its affiliates,
whether during or after his period of service with Company, except as may be
required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information.
Employee agrees to give Company advance written notice of any disclosure
pursuant to the preceding sentence and to cooperate with any reasonable and
legally permissible efforts by Company to limit the extent of such
disclosure. Upon request by Company, Employee agrees to deliver promptly to
Company upon termination of his services for Company, or at any time
thereafter as Company may request, all Company or affiliate memoranda, notes,
records, reports, manuals, drawings, designs, computer files in any media and
other documents (and all copies thereof) relating to Company's or any
affilliate's business and all property of Company or any affiliate associated
therewith, which he may then possess or have under his control, other than
personal notes, diaries, rolodexes and correspondence.
9. Remedy.
Should Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Section 7 or 8 hereof, it is agreed
that Company shall be entitled to full injunctive relief, to be issued by any
competent court of equity, enjoining and restraining Employee and each and
every other person, firm, organization, association, or corporation concerned
therein, from the continuance of such violative acts. The foregoing remedy
available to Company shall not be deemed to limit or prevent the exercise by
10
<PAGE>
Company of any or all further rights and remedies which may be available to
Company hereunder or at law or in equity.
10. Governing Law.
This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of Virginia without reference to
principles relating to conflicts of law. If under such law, any portion of
this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation or ordinance, such portion shall be deemed to be
modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement; the invalidity of any such portion shall not
affect the force, affect and validity of the remaining portion hereof.
11. Notices.
All notices under this Agreement shall be in writing and shall be
deemed effective when delivered in person, or five (5) days after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail, addressed to the respective party at the address set forth
below or to such other address as may hereafter be designated by like notice.
Unless otherwise notified as set forth above, notice shall be sent to each
party as follows:
(a) Employee, to:
Lyndon J. Faulkner
3173 Prestwick Place
Keswick, VA 22947
(b) Company, to:
Sarah Osborne
Brandywine Corporate Center
Naamans Road, Suite 117
Claymont, DE 19703
(805) 792-2666 (facsimile)
Attention: Secretary
11
<PAGE>
with a copy to:
Thomas M. Collins, Jr.
3223 East Mission Oaks Blvd.
Camarillo, CA 93012
(805) 445-1964 (facsimile)
Attention: Vice President
In lieu of personal notice or notice by deposit in the U.S. mail,
a party may give notice by confirmed telegram, telex or fax, which shall be
effective upon receipt.
12. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire understanding between
Company and Employee relating to employment of Employee by Company and
supersedes and cancels all prior written and oral agreements and
understanding with respect to the subject matter of this Agreement, including
but not limited to the term sheet to this Agreement dated May 13, 1998.
Notwithstanding the foregoing, nothing in this Agreement shall supersede or
cancel any other written agreements or understandings between the Employee
and any affiliate of the Company. This Agreement may be amended but only by a
subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, Employee's heirs, executors,
administrators and beneficiaries, and Company and its successors and assigns.
(b) Withholding Taxes.
All amounts payable to Employee under this Agreement shall be
subject to applicable income, wage and other tax withholding requirements.
(c) Reimbursement of Legal Fees and Expenses.
The Company shall pay all reasonable legal fees and expenses, if
any, that are incurred by the Employee to successfully enforce this Agreement
and which result from a breach of this Agreement by the Company, any
affiliate of the Company, or any successor thereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.
Neptune Acquisition Corporation
By:
----------------------------------
Chairman
-------------------------------------
Lyndon J. Faulkner
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 16, 1998, by and between Neptune
Acquisition Corporation, a Delaware corporation (the "Company"), and L.
Steven Minkel (the "Employee").
WHEREAS, the Employee's current employer, Nimbus CD International,
Inc. ("Nimbus"), has entered into an Agreement and Plan of Merger, dated as
of June 16, 1998 with the Company and with Carlton Communications, Plc (the
"Merger Agreement") pursuant to which the Company will merge with and into
Nimbus; and
WHEREAS, the Company desires to secure the continued employment of
Employee as Executive Vice President, Chief Financial Officer and Secretary
following the Effective Time of the Merger (as such term is defined in the
Merger Agreement); and
WHEREAS, the Employee and the Company desire to enter into an
agreement setting forth the terms and conditions of the employment of the
Employee with the Company on and after the Effective Time;
NOW, THEREFORE, IN CONSIDERATION OF the mustial covenants herein
contained, and other good and valuable consideration, the parties hereto
agree as follows:
1. Employment
Subject to the consummation of the transactions contemplated by
the Merger Agreement, the Company hereby agrees to employ Employee, and
Employee agrees to serve as an employee of the Company, on the terms and
conditions set forth in this Agreement, effective as of the date of this
Agreement. The continuation of such employment shall be expressly conditioned
on and subject to the consummation of the transactions contemplated by the
Merger Agreement. This Agreement shall become null and void, and shall have
no force or effect, if the transactions contemplated under the Merger
Agreement are not consummated.
<PAGE>
2. Period of Employment
The "Period of Employment" shall be the period commencing on
the Effective Time and ending on the third anniversary of the Effective Time,
during which the Company shall pay to the Employee a base salary and annual
bonus as provided in Section 4 and shall provide the Employee with the
benefits and compensation as described in Section 5. Commencing on the second
anniversary of the Effective Time, if on or before that date the Company has
not delivered to the Employee and the Employee has not delivered to the
Company notice of termination of this Agreement (in accordance with Section
11 hereof), the Period of Employment will be automatically extended each day
by one day until a date which is one year following the date on which the
Company first delivers to the Employee, or the Employee first delivers to
Company, notice of termination of the Agreement.
3. Duties During the Period of Employment.
During the Period of Employment, Employee shall serve as Executive
Vice President, Chief Financial Officer and Secretary of the Company and
shall have such duties and responsibilities as are assigned to him by the
Chief Executive Officer of the Company and the Board of Directors of the
Company commensurate with such position. Employee shall report directly to
the Chief Executive Officer of the Company.
Employee shall devote Employee's full business time, attention and
efforts to the affairs of the Company during the Period of Employment,
provided, however, that Employee may engage in other activities, such as
activities involving professional, charitable, educational, religious and
similar types of organizations, speaking engagements, membership on the board
of directors of such other organizations as Company may from time to time
agree to, and activities of a similar nature to the extent that such other
activities do not inhibit the performance of Employee's duties under this
Agreement, or conflict in any material way with the business of Company and
its affiliates.
Employee's principal work location will be in Charlottesville,
Virginia. Employee agrees to travel to, and work at, the offices of the
Technicolor Packaged Media
2
<PAGE>
Group in Camarillo, California as is reasonably required for the performance
of his assigned duties.
4. Annual Cash Compensation.
(a) Base Salary.
As compensation for his services hereunder, Company will pay to
Employee during the Period of Employment a base salary at the annual rate of
$250,000, payable in accordance with the Company's standard payroll practices
for senior executives. Company shall review the Employee's base salary on
October 1, 1999 and on each October 1 thereafter during the Period of
Employment and in light of such review may, in the discretion of the Board of
Directors of Company (but shall not be obligated to), increase such base
salary taking into account any change in Employee's responsibilities,
increases in the cost of living, the Employee's job performance and other
pertinent factors. Effective as of the date of any such increase, the base
salary (as increased) shall be considered the Employee's new base salary for
all purposes of this Agreement and may not thereafter be reduced. Any
increase in base salary shall not limit or reduce any other obligations of
the Company to the Employee under this Agreement.
(b) Annual Bonus Plan.
For each fiscal year during the Period of Employment, other than
with respect to the Carlton Communications, Plc ("Carlton") or Technicolor
Packaged Media Group 1998 fiscal year, Employee will participate in the
Technicolor Packaged Media Group annual bonus plan and shall be eligible to
receive an annual target bonus in accordance with the terms of such plan.
Employee shall be entitled to receive a maximum bonus of 30% of base salary
if certain operating profit and cash flow objectives (as agreed to in the
annual budget) are met and certain personal management objectives mutually
agreed to by the Employee and the Company at the beginning of each fiscal
year are satisfied. In order to receive a bonus under the plan, the Employee
must be employed by the Company at the time required for the payment of
bonuses under the terms of the annual bonus plan.
3
<PAGE>
5. Other Employee Benefits and Compensation.
(a) Initial Carlton Stock Option.
The Company shall request as of the date of this Agreement that
Carlton shall immediately grant to the Employee, effective as of the date of
this Agreement, an option (the "Stock Option") to purchase ordinary shares of
Carlton pursuant to the Carlton 1987 Incentive and Nonqualified Stock Option
Plan for US Employees and Directors, as amended. The Stock Option shall be
expressly conditioned on and subject to the consummation of the transactions
contemplated by the Merger Agreement. The Stock Option shall be null and
void, and shall have no force and effect, if the transactions contemplated
under the Merger Agreement are not consummated. The Stock Option shall permit
the Employee to acquire ordinary shares of Carlton equal in amount to the
result of dividing four times the Employee's base salary (as defined in
Section 4(a)) by the fair market value of one ordinary share of Carlton as of
the date of this Agreement. The exercise price per share of the Stock Option
shall be equal to the fair market value of one ordinary share of Carlton as
of the date of this Agreement. The Stock Option shall become nonforfeitable
and exercisable in three installments as follows: (i) 60% of the Stock Option
on the day immediately preceding the third anniversary of the Effective Time;
(ii) 20% of the Stock Option on the day immediately preceding the fourth
anniversary of the Effective Time; and (iii) 20% of the Stock Option on the
day immediately preceding the fifth anniversary of the Effective Time. The
Stock Option shall be granted on terms and conditions which are not less
favorable than those set forth in the stock option agreement attached as
Exhibit A.
(b) Long Term Incentive Plan.
Employee shall be entitled to participate in the Technicolor
Packaged Media Group Long Term Incentive Plan and to receive awards
thereunder in accordance with the terms of such Plan, as summarized in the
attached Exhibit B.
(c) Vacation and Sick Leave.
4
<PAGE>
Employee shall be entitled to reasonable paid annual vacation
periods (but in no event less than four weeks in each year) and to reasonable
sick leave as determined by the Board of Directors of Company.
(d) Regular Reimbursed Business Expenses.
Company shall reimburse Employee for all expenses and
disbursements reasonably incurred by Employee in the performance of
Employee's duties during the Period of Employment, and provide such other
facilities or services as Company and Employee may, from time to time, agree
are appropriate, all in accordance with the Company's established policies.
(e) Employee Benefit Plans.
In addition to the cash compensation described in Section 4, the
Employee shall be entitled to participate in the Company's employee benefit
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(f) Executive Compensation Plans.
In addition to the cash compensation described in Section 4 and
the executive compensation and benefits described in this Agreement, the
Employee shall be entitled to participate in Company's executive compensation
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(g) Relocation Expenditures.
In the event the Employee agrees to relocate to the offices of the
Technicolor Packaged Media Group in Camarillo, California, Company shall
reimburse Employee in amounts, which after provision for the net amount of
all income taxes payable by Employee with respect to the receipt of such
amounts (taking into account any moving expense or other deductions available
to Employee), shall be equal to all reasonable expenses of moving Employee
and Employee's family and their personal effects from Charlottesville,
Virginia (the "Existing Location") to Camarillo, California, including,
without limitation, (i) reasonable travel expenses, (ii) all household moving
expenses, (iii)
5
<PAGE>
all real estate expenses associated with selling the Employee's Existing
Location home and purchasing a new home, (iv) up to six (6) months of
reasonable temporary living costs, and (v) a cost of living salary adjustment
if a recognized national survey shows the cost of living in the new location
is on average more than 5% above the cost of living for the Existing Location.
(h) Options and Bonuses in Replacement of Nimbus Options.
The Employee shall receive additional options to purchase ordinary
shares of Carlton and a cash bonus, in accordance with the provisions of the
attached Exhibit C.
6. Termination.
(a) Termination by Company Without Cause.
If the Company terminates the Employee's employment during the
Period of Employment without Cause (as defined below), in addition to all
other compensation and benefits payable to the Employee under this Agreement,
the Company shall pay to Employee in a lump sum an amount equal to the
greater of:
(i) the product of (A) the number of years and
fractions thereof remaining until the third anniversary
of the Effective Time and (B) the base annual salary
payable to Employee pursuant to Section 4(a) as of the
date of termination of the Employee's employment; or
(ii) the base annual salary then payable to the
Employee pursuant to Section 4(a).
The lump sum payment shall be paid to the Employee within thirty (30) days
following the date of the Employee's termination of employment.
Until the third anniversary of the Effective Time, the Company
shall provide the Employee with the same level of medical and dental benefits
upon substantially the same terms and conditions (including contributions
required by Employee for such benefits), as existed immediately prior to
Employee's termination of employment.
6
<PAGE>
For purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by Employee to perform substantially his duties
with Company (other than any such failure resulting from incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to Employee by the Company which specifically identifies the manner
in which Company believes Employee has not substantially performed his
duties; (ii) the Employee's conviction of a felony; (iii) the Employee's
habitual abuse of narcotics or alcohol; or (iv) the Employee's fraud,
material dishonesty or gross misconduct in connection with the business of
the Company or its affiliates. Cause shall not exist unless and until the
Company has deliverd to Employee a copy of a resolution duly adopted by
two-thirds (2/3) of the entire Board of Directors of the Company (excluding
Employee if Employee is a Board member) at a meeting of the Board held for
such purpose (after reasonable notice to Employee and an opportunity for
Employee, together with counsel, to be heard before the Board), which (i)
finds that in the good faith opinion of the Board an event constituting Cause
has occurred, and (ii) sets forth in detail the basis for the Board's
findings.
(b) Termination by Company for Cause.
If Company terminates the Employee's employment during the Period
of Employment for Cause (as defined above), Employee will be entitled only to
(i) the base annual salary otherwise payable to Employee under Section 4(a)
through the end of the month in which the Period of Employment is terminated,
and (ii) the benefits described in Section 5(h).
(c) Termination by Employee for Good Reason.
If the Employee terminates employment during the Employee Period
after having given written notice to the Board of Directors of the Company
that an event constituting Good Reason has occurred, and the Company does not
reasonably remedy such event within the period described below, the
Employee's employment shall be deemed to have been terminated by the Company
without Cause and he shall receive the lump sum payment and all other
benefits described in Section 6(a) above.
7
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean: (i)
the failure of the Company or any of its affiliates to comply with any of the
material provisions of this Agreement or any agreement which relates to the
Agreement, (ii) any material adverse change in the Employee's
responsibilities and duties, or (iii) the failure by the Company to assign
this Agreement to a successor to the Company or the failure of a successor to
the Company to explicitly assume and agree to be bound by this Agreement.
Notwithstanding the foregoing, an isolated action taken in good faith and
which is remedied by the Company within ten (10) days after receipt of notice
given by Employee shall not constitute Good Reason.
7. Noncompetition.
(a) Employee covenants that at all times during the period of
his employment and for a period of one year immediately following the
termination thereof for any reason, he will not, without the prior written
consent of Company, which consent shall not be unreasonably withheld, for a
period of one year following his date of termination, either individually or
in partnership or jointly or in conjunction with any person as principal,
agent, employee, shareholder (other than by way of holding shares listed on a
stock exchange in a number not exceeding five percent of the outstanding
class or series of shares so listed) or in any other manner whatsoever carry
on, be engaged in, be concerned with or be interested in, or advise, lend
money to, guarantee the debts or obligations of or permit his name or any
part thereof to be used or employed by, any person engaged in or concerned
with or interested in, any business in competition with the business carried
on by Company or any of its subsidiaries or affiliates.
(b) Employee hereby covenants and agrees that, at all times
during the period of his employment and for a period of one year immediately
following the termination thereof for any reason, Employee shall not employ
or seek to employ any person employed at that time by Company or any of its
subsidiaries or its affiliates who is engaged in or concerned with or
interested in, any business in competition with the business carried on by
Company or any of its subsidiaries or affiliates, or otherwise encourage or
entice such person or entity to leave such employment.
8
<PAGE>
(c) Employee hereby covenants and agrees that to the extent that
he receives compensation or benefits from other employment, the payments to
be made and the benefits to be provided by the Company shall, to the extent
permitted under applicable law, be correspondingly reduced, if such
compensation or benefits are earned through competing activity as defined in
this Section 7.
(d) It is the intention of the parties hereto that the
restrictions contained in this Section 7 be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions
is excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.
(e) Employee confirms that all restrictions in this Section 7
are reasonable and valid and all defenses to the strict enforcement thereof
by Company are hereby waived by Employee.
8. Confidential Information.
Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to Company or any affiliate
of Company, including, without limitation, customer lists, client lists,
trade secrets, pricing policies and other business affairs of Company and
any affiliate of Company learned by him from Company or any such affiliate or
otherwise before or after the date of this Agreement, and not to disclose any
such confidential matter to anyone outside Company or any of its affiliates,
whether during or after his period of service with Company, except as may be
required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information.
Employee agrees to give Company advance written notice of any disclosure
pursuant to the preceding sentence and to cooperate with any reasonable and
legally permissible efforts by Company to limit the extent of such
disclosure. Upon request by Company, Employee agrees to deliver promptly to
Company upon termination of his services for Company, or at any time
thereafter as Company may request, all Company or
9
<PAGE>
affiliate memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof)
relating to Company's or any affilliate's business and all property of
Company or any affiliate associated therewith, which he may then possess or
have under his control, other than personal notes, diaries, rolodexes and
correspondence.
9. Remedy.
Should Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Section 7 or 8 hereof, it is agreed
that Company shall be entitled to full injunctive relief, to be issued by any
competent court of equity, enjoining and restraining Employee and each and
every other person, firm, organization, association, or corporation concerned
therein, from the continuance of such violative acts. The foregoing remedy
available to Company shall not be deemed to limit or prevent the exercise by
Company of any or all further rights and remedies which may be available to
Company hereunder or at law or in equity.
10. Governing Law.
This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of Virginia without reference to
principles relating to conflicts of law. If under such law, any portion of
this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation or ordinance, such portion shall be deemed to be
modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement; the invalidity of any such portion shall not
affect the force, affect and validity of the remaining portion hereof.
11. Notices.
All notices under this Agreement shall be in writing and shall be
deemed effective when delivered in person, or five (5) days after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail, addressed to the respective party at the address set forth
below or to such other addresses as may hereafter be designated
10
<PAGE>
by like notice. Unless otherwise notified as set forth above, notice shall be
sent to each party as follows:
(a) Employee, to:
L. Steven Minkel
1446 Bremerton Lane
Keswick, VA 22947
(b) Company, to:
Sarah Osborne
Brandywine Corporate Center
Naamans Road, Suite 117
Claymont, DE 19703
(805) 792-2666 (facsimile)
Attention: Chairman
with a copy to:
Thomas M. Collins, Jr.
3223 East Mission Oaks Blvd.
Camarillo, CA 93012
(805) 445-1964 (facsimile)
Attention: Vice President
In lieu of personal notice or notice by deposit in the U.S. mail,
a party may give notice by confirmed telegram, telex or fax, which shall be
effective upon receipt.
12. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire understanding between
Company and Employee relating to employment of Employee by Company and
supersedes and cancels all prior written and oral agreements and
understandings with respect to the subject matter of this Agreement, including
but not limited to the term sheet to this Agreement dated May 13, 1998.
Notwithstanding the foregoing, nothing in this Agreement shall supersede or
11
<PAGE>
cancel any other written agreements or understandings between the Employee
and any affiliate of the Company. This Agreement may be amended but only by a
subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, Employee's heirs, executors,
administrators and beneficiaries, and Company and its successors and assigns.
(b) Withholding Taxes.
All amounts payable to Employee under this Agreement shall be
subject to applicable income, wage and other tax withholding requirements.
(c) Reimbursement of Legal Fees and Expenses.
The Company shall pay all reasonable legal fees and expenses, if
any, that are incurred by the Employee to successfully enforce this Agreement
and which result from a breach of this Agreement by the Company, any
affiliate of the Company, or any successor thereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.
Neptune Acquisition Corporation
By:
----------------------------------
Chairman
/s/ L. Steven Minkel
-------------------------------------
L. Steven Minkel
