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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: July 16, 1995
(Date of earliest event reported)
SCOTT PAPER COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 1-2300 23-1065080
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
Scott Center
2650 North Military Trail
Suite 300
Boca Raton, Florida 33431
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(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(407) 989-2300
Scott Plaza
Philadelphia, Pennsylvania 19113
--------------------------------
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On July 16, 1995, Kimberly-Clark Corporation, a Delaware
corporation ("Kimberly-Clark"), entered into an Agreement and Plan of Merger
dated as of July 16, 1995 (the "Merger Agreement") with Rifle Merger Co., a
Pennsylvania corporation and a wholly-owned subsidiary of Kimberly-Clark
("Sub"), and Scott Paper Company, a Pennsylvania corporation ("Scott"). The
Merger Agreement provides for the merger (the "Merger") of Sub with and into
Scott, with Scott surviving as a wholly-owned subsidiary of Kimberly-Clark.
Pursuant to the Merger Agreement, each common share, without
par value, of Scott ("Scott Common Shares") outstanding immediately prior to
the Effective Time (as defined in the Merger Agreement) of the Merger (other
than shares owned directly or indirectly by Kimberly-Clark or Scott, which
shares will be cancelled) will be converted into 0.765 (0.780 if the record
date for Kimberly-Clark's previously announced spinoff of its tobacco papers
business precedes the Merger) of a share of common stock, $1.25 par value, of
Kimberly-Clark ("Kimberly-Clark Common Stock"), including the corresponding
percentage of a right to purchase shares of Series A Junior Participating
Preferred Stock of Kimberly-Clark. Each holder of a certificate representing
prior to the Effective Time Scott Common Shares will cease to have any rights
with respect thereto after the Merger, except the right to receive (i)
certificate(s) representing the shares of Kimberly-Clark Common Stock into
which such Scott Common shares have been converted, (ii) certain dividends and
other distributions previously withheld in accordance with section 1.7 of the
Merger Agreement pending the exchange of stock certificate(s) and (iii) any
cash, without interest, to be paid in lieu of any fractional share of Kimberly-
Clark Common Stock in accordance with Section 1.8 of the Merger Agreement.
Prior to its execution, the Merger Agreement was approved by
the respective Boards of Directors of Kimberly-Clark and Scott. Fairness
opinions were delivered by Dillon, Read & Co. Inc. and Salomon Brothers Inc to
the Board of Directors of Kimberly-Clark and Scott, respectively. The
consummation of the Merger is subject, among other things, to the approval of
the issuance of Kimberly-Clark Common Stock by the stockholders of
Kimberly-Clark, to the approval of the Merger by the shareholders of Scott and
to certain regulatory approvals. In connection with the execution of the
Merger Agreement, Kimberly-Clark and Scott entered into a number of
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agreements with the six senior executive officers of Scott. Prior to the
mailing of the Joint Proxy Statement/Prospectus relating to the Merger, all of
the outstanding Cumulative Senior Preferred Shares of Scott will be redeemed.
Copies of the Merger Agreement, the Press Release issued by
Kimberly-Clark and Scott and the Press Release issued by Scott, each on July
17, 1995, with respect to the Merger are attached hereto as Exhibits 99.1, 99.2
and 99.3, respectively, and each is incorporated herein by reference.
In connection with the Merger Agreement, Scott entered into an
Amendment No. 3 ("Amendment No. 3") to its Rights Agreement, dated as of July
15, 1986 (as amended, the "Rights Agreement"), between Scott and First Chicago
Trust Company of New York (successor to Morgan Guaranty Trust Company of New
York), as Rights Agent, to provide that (i) neither Kimberly-Clark nor Sub
would be deemed to be a "Beneficial Owner" of or to "beneficially own" any
Scott Common Shares as a result of the execution, delivery and performance
under, or consummation of the transactions contemplated by, the Merger
Agreement, (ii) a Distribution Date (as defined in the Rights Agreement) will
not occur as a result of the execution of the Merger Agreement or the
conversion of the Scott Common Shares into Kimberly-Clark Common Stock pursuant
to the Merger and (iii) the Rights (as defined in the Rights Agreement) will
expire immediately prior to the Effective Time.
A copy of Amendment No. 3 is attached hereto as Exhibit 99.4
and is incorporated herein by reference.
As a result of the Merger Agreement, Scott has suspended its
efforts to sell its global pulp operations and timberlands. In addition,
Scott's previously announced program to repurchase $300 million of Scott Common
Shares has been discontinued. Through the end of the second quarter,
approximately 3 million Scott Common Shares had been repurchased at a cost of
$127 million.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired:
Not applicable.
(b) Pro forma financial information:
Not applicable.
(c) Exhibits:
99.1 Agreement and Plan of Merger dated as of July 16,
1995, among Kimberly-Clark, Sub and Scott.
99.2 Press release issued by Kimberly-Clark and Scott on
July 17, 1995.
99.3 Press release issued by Scott on July 17, 1995.
99.4 Amendment No. 3 to Rights Agreement, dated as of July
16, 1995, between Scott and First Chicago Trust
Company of New York (successor to Morgan Guaranty
Trust Company of New York), as Rights Agent.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SCOTT PAPER COMPANY
By: /s/ John P. Murtagh
John P. Murtagh
Senior Vice President, General
Counsel and Secretary
Date: July 18, 1995
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EXHIBIT INDEX
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Exhibit Page
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<S> <C> <C>
99.1 Agreement and Plan of Merger dated 7
as of July 16, 1995, among Kimberly-
Clark, Sub and Scott
99.2 Press release issued by Kimberly-Clark
and Scott on July 17, 1995
99.3 Press release issued by Scott on July
17, 1995
99.4 Amendment No. 3 to Rights Agreement,
dated as of July 16, 1995, between
Scott and First Chicago Trust Company
of New York (successor to Morgan
Guaranty Trust Company of New York),
as Rights Agent
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AMONG
KIMBERLY-CLARK CORPORATION
RIFLE MERGER CO.
AND
SCOTT PAPER COMPANY
DATED AS OF JULY 16, 1995
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1 The Merger................................................................ 1
Section 1.2 Effective Time............................................................ 2
Section 1.3 Effects of the Merger..................................................... 2
Section 1.4 Articles of Incorporation and By-laws; Officers and Directors............. 2
Section 1.5 Conversion of Securities.................................................. 2
Section 1.6 Parent to Make Stock Certificates Available............................... 3
Section 1.7 Dividends; Transfer Taxes; Withholding.................................... 3
Section 1.8 No Fractional Shares...................................................... 4
Section 1.9 Return of Exchange Fund................................................... 4
Section 1.10 Adjustment of Conversion Number........................................... 4
Section 1.11 No Further Ownership Rights in Company Common Shares...................... 4
Section 1.12 Closing of Company Transfer Books......................................... 4
Section 1.13 Further Assurances........................................................ 5
Section 1.14 Closing................................................................... 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 2.1 Organization, Standing and Power.......................................... 5
Section 2.2 Capital Structure......................................................... 5
Section 2.3 Authority................................................................. 6
Section 2.4 Consents and Approvals; No Violation...................................... 6
Section 2.5 SEC Documents and Other Reports........................................... 7
Section 2.6 Registration Statement and Joint Proxy Statement.......................... 7
Section 2.7 Absence of Certain Changes or Events...................................... 8
Section 2.8 No Existing Violation, Default, Etc....................................... 8
Section 2.9 Licenses and Permits...................................................... 9
Section 2.10 Environmental Matters..................................................... 9
Section 2.11 Tax Matters............................................................... 9
Section 2.12 Actions and Proceedings................................................... 10
Section 2.13 Labor Matters............................................................. 10
Section 2.14 Contracts................................................................. 10
Section 2.15 ERISA..................................................................... 10
Section 2.16 Liabilities............................................................... 11
Section 2.17 Intellectual Properties................................................... 11
Section 2.18 Opinion of Financial Advisor.............................................. 11
Section 2.19 Charter Takeover Provisions............................................... 12
Section 2.20 Pooling of Interests; Reorganization...................................... 12
Section 2.21 Operations of Sub......................................................... 12
Section 2.22 Brokers................................................................... 12
Section 2.23 Ownership of Company Capital Stock........................................ 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Standing and Power.......................................... 12
Section 3.2 Capital Structure......................................................... 12
Section 3.3 Authority................................................................. 13
Section 3.4 Consents and Approvals; No Violation...................................... 13
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Section 3.5 SEC Documents and Other Reports........................................... 14
Section 3.6 Registration Statement and Joint Proxy Statement.......................... 14
Section 3.7 Absence of Certain Changes or Events...................................... 15
Section 3.8 No Existing Violation, Default, Etc....................................... 15
Section 3.9 Licenses and Permits...................................................... 16
Section 3.10 Environmental Matters..................................................... 16
Section 3.11 Tax Matters............................................................... 16
Section 3.12 Actions and Proceedings................................................... 16
Section 3.13 Labor Matters............................................................. 17
Section 3.14 Contracts................................................................. 17
Section 3.15 ERISA..................................................................... 17
Section 3.16 Liabilities............................................................... 18
Section 3.17 Intellectual Properties................................................... 18
Section 3.18 Opinion of Financial Advisor.............................................. 18
Section 3.19 State Takeover Statutes; Company Rights Agreement......................... 18
Section 3.20 Pooling of Interests; Reorganization...................................... 19
Section 3.21 Brokers................................................................... 19
Section 3.22 Ownership of Parent Capital Stock......................................... 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.................................... 19
Section 4.2 No Solicitation........................................................... 22
Section 4.3 Third Party Standstill Agreements......................................... 23
Section 4.4 Pooling of Interests; Reorganization...................................... 23
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings...................................................... 23
Section 5.2 Preparation of the Registration Statement and the Joint Proxy Statement... 23
Section 5.3 Comfort Letters........................................................... 23
Section 5.4 Access to Information..................................................... 24
Section 5.5 Compliance with the Securities Act........................................ 24
Section 5.6 Stock Exchange Listings................................................... 25
Section 5.7 Fees and Expenses......................................................... 25
Section 5.8 Company Stock Options and Restricted Stock................................ 26
Section 5.9 Reasonable Best Efforts; Pooling of Interests............................. 27
Section 5.10 Public Announcements...................................................... 28
Section 5.11 Real Estate Transfer and Gains Tax........................................ 28
Section 5.12 State Takeover Laws....................................................... 28
Section 5.13 Indemnification; Directors and Officers Insurance......................... 28
Section 5.14 Notification of Certain Matters........................................... 29
Section 5.15 Redemption of Company Senior Preferred Shares............................. 29
Section 5.16 Board of Directors........................................................ 29
Section 5.17 Employee Matters.......................................................... 29
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger................ 31
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.............. 31
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger.......... 34
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ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 Termination............................................................... 37
Section 7.2 Effect of Termination..................................................... 38
Section 7.3 Amendment................................................................. 39
Section 7.4 Waiver.................................................................... 39
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties............................ 39
Section 8.2 Notices................................................................... 39
Section 8.3 Interpretation............................................................ 40
Section 8.4 Counterparts.............................................................. 40
Section 8.5 Entire Agreement; No Third-Party Beneficiaries............................ 40
Section 8.6 Governing Law............................................................. 40
Section 8.7 Assignment................................................................ 40
Section 8.8 Severability.............................................................. 40
Section 8.9 Enforcement of this Agreement............................................. 40
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 16, 1995 (this "Agreement")
among KIMBERLY-CLARK CORPORATION, a Delaware corporation ("Parent"), RIFLE
MERGER CO., a Pennsylvania corporation and a wholly-owned subsidiary of Parent
("Sub"), and SCOTT PAPER COMPANY, a Pennsylvania corporation (the "Company")
(Sub and the Company being hereinafter collectively referred to as the
"Constituent Corporations").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions herein set forth,
whereby each issued and outstanding Common Share, without par value, of the
Company ("Company Common Shares"), not owned directly or indirectly by Parent or
the Company, will be converted into shares of Common Stock, $1.25 par value, of
Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders, and Parent has approved this
Agreement and the Merger as the sole stockholder of Sub;
WHEREAS, in accordance with the understanding of Parent and the Company,
concurrently herewith: (i) Albert J. Dunlap, the Company and Parent are entering
into a Consulting Agreement, a Noncompetition Agreement, a Stock Option Exchange
Agreement and a Mutual Release Agreement each dated as of the date hereof, (ii)
the Company and Parent are entering into a Noncompetition Agreement, a Severance
Agreement and Release, a Stock Option Exchange Agreement and a General Release,
each dated as of the date hereof, with each of Basil L. Anderson, Russell A.
Kersh, John P. Murtagh, Richard R. Nicolosi and P. Newton White (the
"Executives"), (iii) the Company and Parent are entering into a Restricted Stock
Exchange Agreement with each of Mr. Anderson and Mr. White, and (iv) the Company
is entering into a Rescission Agreement, dated as of the date hereof, with
Albert J. Dunlap and with each of the Executives, each of the foregoing
agreements to become operative at the Effective Time (as hereinafter defined);
and the Company and Parent will be entering into Stock Option Exchange
Agreements and Restricted Stock Exchange Agreements with certain other employees
and directors of the Company;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
herein set forth, and in accordance with the Business Corporation Law of the
Commonwealth of Pennsylvania (the "PBCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the PBCL. Notwithstanding
any provision of this Agreement to the contrary, at the election of Parent, any
direct wholly-owned corporate Subsidiary (as hereinafter defined) of Parent may
be substituted for Sub as a constituent corporation in the Merger, in which case
Parent shall cause such Subsidiary to be bound by the
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terms and conditions of and to make the representations and warranties contained
in this Agreement. In such event, the parties hereto agree to execute an
appropriate amendment to this Agreement, in form and substance reasonably
satisfactory to Parent and the Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when
Articles of Merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the PBCL, are filed with the Department of State of the
Commonwealth of Pennsylvania; provided, however, that, upon the mutual consent
of the Constituent Corporations, the Articles of Merger may provide for a later
date of effectiveness of the Merger, but not to exceed 30 days after the date
that the Articles of Merger are filed. When used in this Agreement, the term
"Effective Time" means the later of the date and time at which the Articles of
Merger are filed or such later date and time as is established by the Articles
of Merger. The filing of the Articles of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger
herein set forth.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1929 of the PBCL.
Section 1.4 Articles of Incorporation and By-laws; Officers and
Directors. (a) At the Effective Time, the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be amended
so that Article FIFTH thereof shall read in its entirety as follows: "The
authorized capital stock of the Corporation shall be 100 Common Shares, without
par value"; Articles SIXTH and SEVENTH thereof shall be deleted in their
entirety; and Articles EIGHTH through ELEVENTH thereof shall be redesignated as
Articles SIXTH through NINTH, respectively. As so amended, such Articles of
Incorporation shall be the Articles of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-Laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or in the Articles of
Incorporation of the Surviving Corporation or as provided by applicable law.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of any shareholder of either of
the Constituent Corporations:
(a) Each issued and outstanding common share, $.01 par value, of Sub
shall be converted into one Common Share of the Surviving Corporation.
(b) All Company Common Shares that are held in the treasury of the
Company or by any wholly-owned Subsidiary of the Company and any Company
Common Shares owned by Parent or by any wholly-owned Subsidiary of Parent
shall be cancelled and no capital stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10, each Company
Common Share issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 1.5(b)) shall
be converted into 0.780 (if the record date for the Specialty Products
Business Spinoff (as defined in Section 1.10) shall be a date prior to the
Effective Time) or 0.765 (if there shall have been no such record date
prior to the Effective Time) (such applicable number being hereinafter
referred to as the "Conversion Number") of a validly issued, fully paid and
nonassessable share of Parent Common Stock, including the corresponding
percentage of a right (such rights being hereinafter referred to
collectively as the "Parent Rights") to purchase shares of Series A Junior
Participating Preferred Stock of Parent (the "Parent Series A Preferred
Stock") pursuant to the Rights Agreement dated as of June 21, 1988, as
amended and restated as of June 8, 1995 (as so amended and restated, the
"Parent Rights Agreement") between Parent and The First National Bank of
Boston, as Rights Agent. All references in this Agreement to Parent Common
Stock to be received in accordance with the Merger shall be deemed, from
and after the Effective Time, to include the associated Parent Rights. All
such Company Common Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired; and each
holder of a certificate representing prior to the Effective Time any such
Company Common Shares shall cease to have any rights with respect thereto,
except the right to receive (i) certificates representing the shares of
Parent Common Stock into which such Company Common
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Shares have been converted, (ii) any dividends and other distributions in
accordance with Section 1.7 and (iii) any cash, without interest, to be
paid in lieu of any fractional share of Parent Common Stock in accordance
with Section 1.8.
Section 1.6 Parent to Make Stock Certificates Available. (a) Exchange of
Certificates. Parent shall authorize a commercial bank having capital of not
less than $5 billion (or such other person or persons as shall be acceptable to
Parent and the Company) to act as exchange agent hereunder (the "Exchange
Agent"). As soon as practicable after the Effective Time, Parent shall deposit
with the Exchange Agent, in trust for the holders of certificates (the "Company
Certificates") which immediately prior to the Effective Time represented Company
Common Shares converted in the Merger, certificates (the "Parent Certificates")
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto in
accordance with Section 1.7, being hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 1.5(c) in exchange for the outstanding
Company Common Shares. The Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. Promptly after the Effective Time, the Exchange
Agent shall mail to each record holder of a Company Certificate a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Certificates shall pass, only upon actual delivery
thereof to the Exchange Agent and shall contain instructions for use in
effecting the surrender of the Company Certificates in exchange for the property
described in the next sentence). Upon surrender for cancellation to the Exchange
Agent of Company Certificate(s) held by any record holder of a Company
Certificate, together with such letter of transmittal duly executed, such holder
shall be entitled to receive in exchange therefor a Parent Certificate
representing the number of whole shares of Parent Common Stock into which the
Company Common Shares represented by the surrendered Company Certificate(s)
shall have been converted at the Effective Time pursuant to this Article I, cash
in lieu of any fractional share of Parent Common Stock in accordance with
Section 1.8 and certain dividends and other distributions in accordance with
Section 1.7; and the Company Certificate(s) so surrendered shall forthwith be
cancelled.
(c) Status of Company Certificates. Subject to the provisions of Sections
1.7 and 1.8, each Company Certificate which immediately prior to the Effective
Time represented Company Common Shares to be converted in the Merger shall, from
and after the Effective Time until surrendered in exchange for Parent
Certificate(s) in accordance with this Section 1.6, be deemed for all purposes
to represent the number of shares of Parent Common Stock into which such Company
Common Shares shall have been so converted.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof who became such on or
after the Effective Time, shall be paid to any person entitled by reason of the
Merger to receive Parent Certificates representing Parent Common Stock, and no
cash payment in lieu of any fractional share of Parent Common Stock shall be
paid to any such person pursuant to Section 1.8, until such person shall have
surrendered its Company Certificate(s) as provided in Section 1.6. Subject to
applicable law, there shall be paid to each person receiving a Parent
Certificate representing such shares of Parent Common Stock: (i) at the time of
such surrender or as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with respect to the shares of
Parent Common Stock represented by such Parent Certificate and having a record
date on or after the Effective Time and a payment date prior to such surrender;
and (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender. In no event shall the person entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or Parent Certificate representing
shares of Parent Common Stock is to be paid to or issued in a name other than
that in which the Company Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Company
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the issuance of
such Parent Certificate and the distribution of such cash payment in a name
other than that of the registered holder of the Company Certificate so
surrendered, or shall
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establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Parent or the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Company Common Shares such amounts as Parent or the Exchange
Agent are required to deduct and withhold under the Code, or any provision of
state, local or foreign tax law, with respect to the making of such payment. To
the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Company Common Shares in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
Section 1.8 No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Company Certificates pursuant to this Article I; no dividend or
other distribution by Parent and no stock split, combination or reclassification
shall relate to any such fractional share; and no such fractional share shall
entitle the record or beneficial owner thereof to vote or to any other rights of
a stockholder of Parent. In lieu of any such fractional share, each holder of
Company Common Shares who would otherwise have been entitled thereto upon the
surrender of Company Certificate(s) for exchange pursuant to this Article I will
be paid an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the per share closing price on the New York Stock
Exchange, Inc. (the "NYSE") of Parent Common Stock (as reported in the NYSE
Composite Transactions) on the date on which the Effective Time shall occur (or,
if the Parent Common Stock shall not trade on the NYSE on such date, the first
day of trading in Parent Common Stock on the NYSE thereafter) by (ii) the
fractional share to which such holder would otherwise be entitled. Parent shall
make available to the Exchange Agent the cash necessary for this purpose.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former holders of Company Common Shares for
one year after the Effective Time shall be delivered to Parent, upon its
request, and any such former holders who have not theretofore surrendered to the
Exchange Agent their Company Certificate(s) in compliance with this Article I
shall thereafter look only to Parent for payment of their claim for shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to such shares of Parent
Common Stock. Neither Parent nor the Company shall be liable to any former
holder of Company Common Shares for any such shares of Parent Common Stock held
in the Exchange Fund (and any cash, dividends and distributions payable in
respect thereof) which is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 1.10 Adjustment of Conversion Number. In the event of any stock
split, combination, reclassification or stock dividend with respect to Parent
Common Stock, any change or conversion of Parent Common Stock into other
securities or any other dividend or distribution with respect to Parent Common
Stock (other than quarterly cash dividends permitted by Section 4.1(a)(i)(A) and
any distribution by Parent, on terms substantially the same as previously
announced, of shares of capital stock of any Subsidiary (as hereinafter defined)
then conducting, directly or indirectly, Parent's specialty products business
(the "Specialty Products Business Spinoff")), or if a record date with respect
to any of the foregoing should occur, prior to the Effective Time, appropriate
and proportionate adjustments shall be made to the Conversion Number, and
thereafter all references in this Agreement to the Conversion Number shall be
deemed to be to the Conversion Number as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Shares. All
certificates representing shares of Parent Common Stock delivered upon the
surrender for exchange of any Company Certificate in accordance with the terms
hereof (including any cash paid pursuant to Section 1.7 or 1.8) shall be deemed
to have been delivered (and paid) in full satisfaction of all rights pertaining
to the Company Common Shares previously represented by such Company Certificate.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed, and no transfer of Company
Common Shares shall thereafter be made. Subject to the last sentence of Section
1.9, if, after the Effective Time, Company Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged as provided in this
Article I.
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Section 1.13 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title and interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (ii) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either Constituent Corporation, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title and interest in, to and under any of the rights, privileges,
powers, franchises, properties or assets of such Constituent Corporation and
otherwise to carry out the purposes of this Agreement.
Section 1.14 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Sidley & Austin,
One First National Plaza, Chicago, Illinois at 10:00 A.M., local time, on the
day on which the last of the conditions set forth in Article VI shall have been
fulfilled or waived, or at such other time and place as Parent and the Company
may agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant, jointly and severally, to the Company
as follows:
Section 2.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; Sub is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania, and all of its
outstanding shares of capital stock are owned directly by Parent; and each of
Parent and Sub has the requisite corporate power and authority to carry on its
business as now being conducted. Each Subsidiary of Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Parent and each
of its Subsidiaries are duly qualified to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent. For
purposes of this Agreement: (i) "Material Adverse Change" or "Material Adverse
Effect" means, when used with respect to Parent or the Company, as the case may
be, any change or effect that is or would reasonably be expected (so far as can
be foreseen at the time) to be materially adverse to the business, properties,
assets, liabilities, condition (financial or otherwise), results of operations
or prospects of Parent and its Subsidiaries taken as a whole, or the Company and
its Subsidiaries taken as a whole, as the case may be; and (ii) "Subsidiary"
means any corporation, partnership, joint venture or other legal entity which is
consolidated with Parent's or the Company's financial statements, as the case
may be, and of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
50% or more of the capital stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of directors or
other governing body of such corporation, partnership, joint venture or other
legal entity.
Section 2.2 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of: 300,000,000 shares of Parent Common Stock;
and 20,000,000 shares of Preferred Stock, without par value (the "Parent
Preferred Stock"), of which 2,000,000 shares have been designated as "Series A
Junior Participating Preferred Stock" (the "Parent Series A Preferred Stock").
At the close of business on July 11, 1995, 160,354,340 shares of Parent Common
Stock were issued and outstanding, all of which were validly issued, are fully
paid and nonassessable and are free of preemptive rights. No shares of Parent
Preferred Stock have been issued. All of the shares of Parent Common Stock
issuable in exchange for Company Common Shares at the Effective Time in
accordance with this Agreement will be, when so issued, duly authorized,
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validly issued, fully paid and nonassessable and free of preemptive rights. As
of the date of this Agreement, except for this Agreement, except as provided in
Parent's Restated Certificate of Incorporation, except for the Parent Rights and
except for stock options covering not in excess of 4,843,765 shares of Parent
Common Stock (collectively, the "Parent Stock Options"), there are no options,
warrants, calls, rights or agreements to which Parent or any of its Subsidiaries
is a party or by which any of them is bound obligating Parent or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Parent or any such Subsidiary or
obligating Parent or any such Subsidiary to grant, extend or enter into any such
option, warrant, call, right or agreement. Each outstanding share of capital
stock of each Subsidiary of Parent is duly authorized, validly issued, fully
paid and nonassessable and, except as disclosed in the Parent SEC Documents or
the Parent Letter (as such terms are hereinafter defined), each such share is
beneficially owned by Parent or another Subsidiary of Parent, free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. As of the date of its filing, Exhibit 21
to Parent's Annual Report on Form 10-K for the year ended December 31, 1994, as
filed with the Securities and Exchange Commission (the "SEC") (the "Parent
Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC.
Section 2.3 Authority. The Board of Directors of Parent has declared as
advisable and fair to and in the best interests of the stockholders of Parent
the Merger, an amendment to the Restated Certificate of Incorporation of Parent
to increase the number of authorized shares of Parent Common Stock to
600,000,000 (the "Charter Amendment") and the issuance (the "Parent Share
Issuance") of shares of Parent Common Stock in accordance with the Merger and as
contemplated by certain of the agreements referenced in the third recital clause
hereof and has approved this Agreement. The Board of Directors of Sub has
declared the Merger advisable and approved this Agreement. Parent has all
requisite power and authority to enter into this Agreement and (subject to
approval of the Parent Share Issuance by a majority of the votes cast at the
Parent Stockholder Meeting (as hereinafter defined) by the holders of the shares
of Parent Common Stock, provided that the total number of votes cast on the
Parent Share Issuance represents more than 50% of the shares of Parent Common
Stock entitled to vote thereon at the Parent Stockholder Meeting) to consummate
the transactions contemplated hereby. Sub has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and Sub,
subject to approval of the Parent Share Issuance by a majority of the votes cast
at the Parent Stockholder Meeting by the holders of the shares of Parent Common
Stock, provided that the total number of votes cast on the Parent Share Issuance
represents more than 50% of the shares of Parent Common Stock entitled to vote
thereon at the Parent Stockholder Meeting. This Agreement has been duly executed
and delivered by Parent and Sub and (assuming the valid authorization, execution
and delivery hereof by the Company and the validity and binding effect hereof on
the Company) constitutes the valid and binding obligation of Parent and Sub
enforceable against Parent and Sub in accordance with its terms. The Parent
Share Issuance and the preparation of a registration statement on Form S-4 to be
filed with the SEC by Parent under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), for the purpose of registering the shares of Parent Common Stock to be
issued in connection with the Merger (together with any amendments or
supplements thereto, whether prior to or after the effective date thereof, the
"Registration Statement"), including the Joint Proxy Statement (as hereinafter
defined), have been duly authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Except as set forth in
the letter dated and delivered to the Company on the date hereof (the "Parent
Letter"), which relates to this Agreement and is designated therein as being the
Parent Letter, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under: (i) any provision of the Restated Certificate
of Incorporation or By-
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laws of Parent or the comparable charter or organization documents or by-laws of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent and would not materially impair the ability of
Parent or Sub to perform their respective obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign (including provincial) or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent and Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except: (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) for the filing of Articles of
Merger with the Department of State of the Commonwealth of Pennsylvania and
appropriate documents with the relevant authorities of other states in which the
Company or any of its Subsidiaries is qualified to do business, (iii) for such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement, (iv) for such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (v) for such
filings as may be required in connection with the taxes described in Section
5.11, (vi) for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which Parent or the Company or any of their respective Subsidiaries
conducts any business or owns any property or assets and (vii) for such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to obtain or make would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent and would not
materially impair the ability of Parent or Sub to perform their respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.5 SEC Documents and Other Reports. Parent has filed all
documents required to be filed by it with the SEC since January 1, 1990 (the
"Parent SEC Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state any
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. The consolidated financial statements of Parent included in the
Parent SEC Documents complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). Since December 31, 1994, Parent has not made any change in
the accounting practices or policies applied in the preparation of its financial
statements.
Section 2.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the joint proxy statement/prospectus
included therein relating to the Stockholder Meetings (as defined in Section
5.1) (together with any amendments or supplements thereto, the "Joint Proxy
Statement") will (i) in the case of the Registration Statement, at the time it
becomes effective, 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
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therein not misleading or (ii) in the case of the Joint Proxy Statement, at the
time of the mailing thereof, at the time of each of the Stockholder Meetings and
at the Effective Time, 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. If at any time prior to the Effective Time any event
with respect to Parent, its directors and officers or any of its Subsidiaries
shall occur which is required to be described in the Joint Proxy Statement or
the Registration Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of Parent. The Registration
Statement will comply (with respect to information relating to Parent and Sub)
as to form in all material respects with the provisions of the Securities Act,
and the Joint Proxy Statement will comply (with respect to information relating
to Parent and Sub) as to form in all material respects with the provisions of
the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as set forth in
the Parent SEC Documents or the Parent Letter, since December 31, 1994: (i)
Parent and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be expected to result in a Material Adverse
Effect on Parent; (ii) Parent and its Subsidiaries have not sustained any loss
or interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had or
that would reasonably be expected to have a Material Adverse Effect on Parent;
(iii) there has been no material change in the indebtedness of Parent and its
Subsidiaries, no change in the outstanding shares of capital stock of Parent
except for the issuance of shares of Parent Common Stock pursuant to the Parent
Stock Options and no dividend or distribution of any kind declared, paid or made
by Parent on any class of its capital stock except for regular quarterly
dividends of not more than $.45 per share on Parent Common Stock and (iv) there
has been no event causing a Material Adverse Effect on Parent, nor any
development that would, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect on Parent; and except as set forth in the
Parent Letter, during the period from December 31, 1994 through the date of this
Agreement, neither Parent nor any of its Subsidiaries has taken any action that,
if taken during the period from the date of this Agreement through the Effective
Time, would constitute a breach of Section 4.1(a).
Section 2.8 No Existing Violation, Default, Etc. Neither Parent nor any of
its Subsidiaries is in violation of (i) its charter or other organization
documents or by-laws, (ii) any applicable law, ordinance or administrative or
governmental rule or regulation or (iii) any order, decree or judgment of any
Governmental Entity having jurisdiction over Parent or any of its Subsidiaries,
except for any violations that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent. The
properties, assets and operations of Parent and its Subsidiaries are in
compliance in all material respects with all applicable federal, state, local
and foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and the protection and clean-up of the environment and activities
or conditions related thereto, including, without limitation, those relating to
the generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past or current events, conditions,
circumstances, activities, practices, incidents, actions or plans of Parent or
any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, reasonably be expected to have a Material Adverse Effect on Parent.
The term "hazardous materials" shall mean those substances that are regulated by
or form the basis for liability under any applicable Environmental Laws.
Except as may be set forth in the Parent SEC Documents or the Parent
Letter: (i) there is no existing event of default or event that, but for the
giving of notice or lapse of time, or both, would constitute an event of
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default under any loan or credit agreement, note, bond, mortgage, indenture or
guarantee of indebtedness for borrowed money; and (ii) there is no existing
event of default or event that, but for the giving of notice or lapse of time,
or both, would constitute an event of default under any lease, other agreement
or instrument to which Parent or any of its Subsidiaries is a party or by which
Parent or any such Subsidiary or any of their respective properties, assets or
business is bound which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.
Section 2.9 Licenses and Permits. Parent and its Subsidiaries have
received such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate Governmental Entities
(the "Parent Licenses") as are necessary to own or lease and operate their
respective properties and to conduct their respective businesses substantially
in the manner described in the Parent SEC Documents and as currently owned or
leased and conducted, and all such Parent Licenses are valid and in full force
and effect, except for any such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances which the failure to
have or to be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Parent
and its Subsidiaries are in compliance in all material respects with their
respective obligations under the Parent Licenses, with only such exceptions as,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent, and no event has occurred that allows, or
after notice or lapse of time, or both, would allow, revocation or termination
of any material Parent License.
Section 2.10 Environmental Matters. Except as set forth in the Parent SEC
Documents or the Parent Letter, neither Parent nor any of its Subsidiaries is
the subject of any federal, state, local, foreign or provincial investigation,
and neither Parent nor any of its Subsidiaries has received any notice or claim
(or is aware of any facts that would form a reasonable basis for any claim), or
entered into any negotiations or agreements with any other person, relating to
any material liability or remedial action or potential material liability or
remedial action under any Environmental Laws; and there are no pending,
reasonably anticipated or, to the knowledge of Parent, threatened actions, suits
or proceedings against Parent, any of its Subsidiaries or any of their
respective properties, assets or operations asserting any such material
liability or seeking any material remedial action in connection with any
Environmental Laws.
Section 2.11 Tax Matters. Except as otherwise set forth in the Parent
Letter: (i) Parent and each of its Subsidiaries have filed all federal, and all
material state, local, foreign and provincial, Tax Returns (as hereinafter
defined) required to have been filed on or prior to the date hereof, or
appropriate extensions therefor have been properly obtained, and such Tax
Returns are correct and complete, except to the extent that any failure to be
correct and complete would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent; (ii) all Taxes (as
hereinafter defined) shown to be due on such Tax Returns have been timely paid
or extensions for payment have been duly obtained, or such Taxes are being
timely and properly contested, and Parent and each of its Subsidiaries have
complied with all rules and regulations relating to the withholding of Taxes,
except to the extent that any failure to comply with such rules and regulations
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent; (iii) neither Parent nor any of its
Subsidiaries has waived any statute of limitations in respect of its Taxes; (iv)
any such Tax Returns relating to federal and state income Taxes have been
examined by the Internal Revenue Service or the appropriate state taxing
authority or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired; (v) no issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of such Tax Returns are currently pending; and (vi) all deficiencies
asserted or assessments made as a result of any examination of such Tax Returns
by any taxing authority have been paid in full or are being timely and properly
contested. The charges, accruals and reserves on the books of Parent and its
Subsidiaries in respect of Taxes have been established and maintained in
accordance with generally accepted accounting principles. To the knowledge of
Parent, the representations set forth in the Parent Tax Certificate attached to
the Parent Letter, if made on the date hereof (assuming the Merger were
consummated on the date hereof and based on reasonable estimates in the case of
certain information not available on the date hereof), would be true and correct
in all material respects. For purposes of this Agreement: (i) "Taxes" means any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or added
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minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Entity; and
(ii) "Tax Return" means any return, report or similar statement (including any
attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 2.12 Actions and Proceedings. Except as set forth in the Parent
SEC Documents or the Parent Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against Parent or any
of its Subsidiaries, any of its or their properties, assets or business, any
Parent Plan (as defined in Section 2.15) or, to the knowledge of Parent, any of
its or their current or former directors or officers, as such, that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Except as set forth in the Parent SEC Documents or the
Parent Letter, there are no actions, suits or claims or legal, administrative or
arbitration proceedings or investigations pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries, any of its or
their properties, assets or business, any Parent Plan or, to the knowledge of
Parent, any of its or their current or former directors or officers, as such,
that would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent. Except as set forth in the Parent SEC
Documents or the Parent Letter, as of the date hereof, there are no actions,
suits or claims or legal, administrative or arbitration proceedings or
investigations or labor disputes pending or, to the knowledge of Parent,
threatened against Parent or any of its Subsidiaries, any of its or their
properties, assets or business, any Parent Plan or, to the knowledge of Parent,
any of its or their current or former directors or officers, as such, relating
to the transactions contemplated by this Agreement.
Section 2.13 Labor Matters. Except as disclosed in the Parent SEC
Documents or the Parent Letter, neither Parent nor any of its Subsidiaries has
any labor contracts, collective bargaining agreements or material employment or
consulting agreements with any persons employed by or otherwise performing
services primarily for Parent or any of its Subsidiaries (the "Parent Business
Personnel") or any representative of any Parent Business Personnel. Except as
set forth in the Parent SEC Documents or the Parent Letter, neither Parent nor
any of its Subsidiaries has engaged in any unfair labor practice with respect to
Parent Business Personnel, and there is no unfair labor practice complaint
pending against Parent or any of its Subsidiaries with respect to Parent
Business Personnel which, in either such case, would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Except as set forth in the Parent SEC Documents or the Parent Letter, there is
no material labor strike, dispute, slowdown or stoppage pending or, to the
knowledge of Parent, threatened against Parent or any of its Subsidiaries, and
neither Parent nor any of its Subsidiaries has experienced any material primary
work stoppage or other material labor difficulty involving its employees during
the last three years.
Section 2.14 Contracts. All of the material contracts of Parent and its
Subsidiaries that are required to be described in the Parent SEC Documents or to
be filed as exhibits thereto have been described or filed as required. Neither
Parent or any of its Subsidiaries nor, to the knowledge of Parent, any other
party is in breach of or default under any such contracts which are currently in
effect, except for such breaches and defaults which are described in the Parent
Letter or which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Except as set forth in the
Parent SEC Documents or the Parent Letter, neither Parent nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, Parent or any such Subsidiary
is entitled to conduct all or any material portion of the business of Parent and
its Subsidiaries taken as whole.
Section 2.15 ERISA. Each Parent Plan complies in all material respects
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the Code and all other applicable laws and administrative or governmental rules
and regulations. No "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Parent Plan for which the 30-day notice
requirement has not been waived (other than with respect to the transactions
contemplated by this Agreement), and no condition exists which would subject
Parent or any ERISA Affiliate (as hereinafter defined) to any fine under Section
4071 of ERISA; except as disclosed in the Parent Letter, neither Parent nor
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any of its ERISA Affiliates has withdrawn from any Parent Plan or Parent
Multiemployer Plan (as hereinafter defined) or has taken, or is currently
considering taking, any action to do so; and no action has been taken, or is
currently being considered, to terminate any Parent Plan subject to Title IV of
ERISA. No Parent Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. To the knowledge of Parent, there are no actions, suits or claims
pending or threatened (other than routine claims for benefits) with respect to
any Parent Plan which would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of
its ERISA Affiliates has incurred or would reasonably be expected to incur any
material liability under or pursuant to Title IV of ERISA. No prohibited
transactions described in Section 406 of ERISA or Section 4975 of the Code have
occurred which would reasonably be expected to result in material liability to
Parent or its Subsidiaries. Except as set forth in the Parent Letter, all Parent
Plans that are intended to be qualified under Section 401(a) of the Code have
received a favorable determination letter as to such qualification from the
Internal Revenue Service, and no event has occurred, either by reason of any
action or failure to act, which would cause the loss of any such qualification.
Parent is not aware of any reason why any Parent Plan is not so qualified in
operation. Neither Parent nor any of its ERISA Affiliates has been notified by
any Parent Multiemployer Plan that such Parent Multiemployer Plan is currently
in reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Parent Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA. As used herein: (i) "Parent Plan"
means a "pension plan" (as defined in Section 3(2) of ERISA, other than a Parent
Multiemployer Plan) or a "welfare plan" (as defined in Section 3(1) of ERISA)
established or maintained by Parent or any of its ERISA Affiliates or to which
Parent or any of its ERISA Affiliates has contributed or otherwise may have any
liability; (ii) "Parent Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Parent or any of its ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability; and (iii) with respect to any person, "ERISA Affiliate" means any
trade or business (whether or not incorporated) which is under common control or
would be considered a single employer with such person pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations promulgated thereunder
or pursuant to Section 4001(b) of ERISA and the regulations promulgated
thereunder.
Section 2.16 Liabilities. Except as fully reflected or reserved against in
the consolidated financial statements included in the Parent Annual Report, or
disclosed in the footnotes thereto, or set forth in the Parent SEC Documents or
the Parent Letter, Parent and its Subsidiaries had no liabilities (including,
without limitation, Tax liabilities) at the date of such consolidated financial
statements, absolute or contingent, of a nature required by generally accepted
accounting principles to be reflected in such consolidated financial statements
or disclosed in the footnotes thereto, or required to be disclosed in the Parent
SEC Documents by Item 103 of Regulation S-K under the Securities Act, that were
material, either individually or in the aggregate, to Parent and its
Subsidiaries taken as a whole. Except as so reflected, reserved or disclosed,
Parent and its Subsidiaries have no commitments which are reasonably expected to
be materially adverse, either individually or in the aggregate, to Parent and
its Subsidiaries taken as a whole.
Section 2.17 Intellectual Properties. Except as set forth in the Parent
Letter, Parent and its Subsidiaries own or have a valid license to use all
inventions, patents, trademarks, service marks, trade names, copyrights, trade
secrets, software, mailing lists and other intellectual property rights
(collectively, the "Parent Intellectual Property") necessary to carry on their
respective businesses as currently conducted; and neither Parent nor any such
Subsidiary has received any notice of infringement of or conflict with, and, to
Parent's knowledge, there are no infringements of or conflicts with, the rights
of others with respect to the use of any of the Parent Intellectual Property
that, in either such case, has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or result
in material adverse publicity for Parent.
Section 2.18 Opinion of Financial Advisor. Parent has received the opinion
of Dillon, Read & Co. Inc., dated the date hereof, to the effect that, as of the
date hereof, the Merger is fair to Parent from a financial point of view, a copy
of which opinion has been delivered to the Company.
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Section 2.19 Charter Takeover Provisions. The transactions contemplated by
this Agreement have been approved by the affirmative vote of a majority of the
Continuing Directors pursuant to Article X of the Restated Certificate of
Incorporation of Parent. No State Takeover Laws are applicable to Parent or Sub
as a result of the Merger, this Agreement or the transactions contemplated
hereby. As a result of the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, a Distribution Date
(as defined in the Parent Rights Agreement) shall not be deemed to occur, the
Parent Rights shall not separate from the shares of Parent Common Stock and the
Company shall not become an Acquiring Person (as defined in the Parent Rights
Agreement). The current holders of the Parent Rights will have no additional
rights under the Parent Rights Agreement as a result of the Merger or any other
transaction contemplated by this Agreement.
Section 2.20 Pooling of Interests; Reorganization. To the knowledge of
Parent after due investigation, neither Parent nor any of its Subsidiaries has
(i) taken any action or failed to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
Section 2.21 Operations of Sub. Sub has been formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
Section 2.22 Brokers. No broker, investment banker or other person, other
than Dillon, Read & Co. Inc., the fees and expenses of which will be paid by
Parent (as reflected in an agreement between Dillon, Read & Co. Inc. and Parent,
a copy of which has been furnished to the Company), is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
Section 2.23 Ownership of Company Capital Stock. None of Parent, Sub or
any of Parent's other Subsidiaries owns any shares of the capital stock of the
Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the requisite corporate power and authority
to carry on its business as now being conducted. Each Subsidiary of the Company
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
The Company and each of its Subsidiaries are duly qualified to do business, and
are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 3.2 Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of: 200,000,000 Company Common Shares;
70,640 Cumulative Senior Preferred Shares, without par value ("Company Senior
Preferred Shares"), of which 46,205 shares have been designated as "$3.40
Cumulative Senior Preferred Shares" ("Company $3.40 Preferred Shares") and
24,435 shares have been designated as "$4.00 Cumulative Senior Preferred Shares"
("Company $4.00 Preferred Shares"); and 10,000,000 Series Preferred Shares,
without par value, of which 800,000 shares have been designated as "Series B
Junior Participating Preferred Shares" ("Company Series B Junior Preferred
Shares"). At the close of business on July 12, 1995: (i) 151,576,194 Company
Common Shares were issued and outstanding, all of which were validly issued, are
fully paid and nonassessable and are free of preemptive rights; (ii) 46,205
Company
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$3.40 Preferred Shares were issued and outstanding, all of which were validly
issued, are fully paid and nonassessable and are free of preemptive rights; and
(iii) 24,435 Company $4.00 Preferred Shares were issued and outstanding, all of
which were validly issued, are fully paid and nonassessable and are free of
preemptive rights. No Company Series B Junior Preferred Shares have been issued.
As of the date of this Agreement, except as provided in the Company's Articles
of Incorporation, except for the rights (the "Company Rights") to purchase
Company Series B Junior Preferred Shares issued pursuant to the Rights Agreement
dated as of July 15, 1986, as amended as of May 17, 1988 and October 18, 1988
(as so amended, the "Company Rights Agreement"), between the Company and Morgan
Guaranty Trust Company of New York, as Rights Agent, and except for stock
options covering not in excess of 10,558,718 Company Common Shares
(collectively, the "Company Stock Options"), there are no options, warrants,
calls, rights or agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any such Subsidiary
or obligating the Company or any such Subsidiary to grant, extend or enter into
any such option, warrant, call, right or agreement. The Compensation Committee
of the Board of Directors of the Company has taken action pursuant to the
Company Stock Plans (as hereinafter defined) to provide for the creation of the
Substitute Options (as hereinafter defined) in the manner contemplated by
Section 5.8. Schedule A to the Company Letter (as hereinafter defined) sets
forth: (a) with respect to each of Albert J. Dunlap and the Executives, (i) the
name of such holder, (ii) the number of Company Common Shares subject to such
Company Stock Option, (iii) the date of grant of such Company Stock Option, (iv)
the date of all amendments effective within the past two years to such Company
Stock Option, (v) the vesting schedule for each such Company Stock Option,
including whether it is to become vested upon a change in control of the Company
and (vi) the exercise price of such Company Stock Option; and (b) with respect
to each executive specified in clause (a) above holding outstanding restricted
Company Common Shares, (i) the name of such holder, (ii) the number of
restricted Company Common Shares held by such holder, (iii) the date of grant of
such restricted Company Common Shares, (iv) the date of all amendments to such
grants and (v) the vesting schedule of each such grant, including whether such
restricted Company Common Shares are to become vested upon a change in control
of the Company. Each outstanding share of capital stock of each Subsidiary of
the Company is duly authorized, validly issued, fully paid and nonassessable
and, except as disclosed in the Company SEC Documents or the Company Letter (as
such terms are hereinafter defined), each such share is beneficially owned by
the Company or another Subsidiary of the Company, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever. As of the date of its filing, Exhibit 21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, as filed with the SEC
(the "Company Annual Report"), is a true, accurate and correct statement in all
material respects of all of the information required to be set forth therein by
the regulations of the SEC.
Section 3.3 Authority. The Board of Directors of the Company has declared
as advisable and fair to and in the best interests of the shareholders of the
Company the Merger and approved this Agreement, and the Company has all
requisite power and authority to enter into this Agreement and (subject to
approval of the Merger by a majority of the votes cast by the shareholders of
the Company entitled to vote thereon) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to approval of the Merger by a majority of the votes cast by
the shareholders of the Company entitled to vote thereon. As a consequence of
the actions required to be taken under Section 5.15, the holders of the Company
Senior Preferred Shares will not be entitled to vote on the Merger. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery hereof by Parent and Sub and the
validity and binding effect hereof on Parent and Sub) constitutes the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. The preparation of the Joint Proxy Statement to be filed with
the SEC has been duly authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Except as set forth in
the letter dated and delivered to Parent on the date hereof (the "Company
Letter"), which relates to this Agreement and is designated
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therein as being the Company Letter, the execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under: (i) any provision of the
Articles of Incorporation or By-Laws of the Company or the comparable charter or
organization documents or by-laws of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, agreement, instrument,
permit, concession, franchise or license applicable to the Company or any of its
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such violations, defaults, rights, liens, security interests,
charges or encumbrances that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company and
would not materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. No filing or registration with, or authorization, consent
or approval of, any Governmental Entity is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of this Agreement by the Company or is necessary for the consummation of the
Merger and the other transactions contemplated by this Agreement, except: (i) in
connection, or in compliance, with the provisions of the HSR Act, the Securities
Act and the Exchange Act, (ii) for the filing of Articles of Merger with the
Department of State of the Commonwealth of Pennsylvania and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) for such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement, (iv)
for such filings, authorizations, orders and approvals as may be required to
obtain the State Takeover Approvals, (v) for such filings as may be required in
connection with the taxes described in Section 5.11, (vi) for such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the laws of any foreign country in which Parent or the
Company or any of their respective Subsidiaries conducts any business or owns
any property or assets and (vii) for such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company and would not
materially impair the ability of the Company to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 3.5 SEC Documents and Other Reports. The Company has filed all
documents required to be filed by it with the SEC since January 1, 1990 (the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state any 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. The consolidated financial statements of the Company included in
the Company SEC Documents complied as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). Since December 31, 1994, the Company has not made any change
in the accounting practices or policies applied in the preparation of its
financial statements.
Section 3.6 Registration Statement and Joint Proxy Statement. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Joint Proxy
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Statement will (i) in the case of the Registration Statement, at the time it
becomes effective, 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 not misleading or (ii) in the case of the Joint
Proxy Statement, at the time of the mailing thereof, at the time of each of the
Stockholder Meetings and at the Effective Time, 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. If at any time prior to
the Effective Time any event with respect to the Company, its directors and
officers or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such event
shall be so described, and an appropriate amendment or supplement shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of the Company. The Joint Proxy Statement will comply (with
respect to information relating to the Company) as to form in all material
respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as set forth in
the Company SEC Documents or the Company Letter, since December 31, 1994: (i)
the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be expected to result in a Material Adverse
Effect on the Company; (ii) the Company and its Subsidiaries have not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance) that
has had or that would reasonably be expected to have a Material Adverse Effect
on the Company; (iii) there has been no material change in the indebtedness of
the Company and its Subsidiaries, no change in the outstanding shares of capital
stock of the Company except for the issuance of Company Common Shares pursuant
to the Company Stock Options and no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock except
for regular quarterly dividends of not more than $.85 per Company $3.40
Preferred Share, of not more than $1.00 per Company $4.00 Preferred Share and of
not more than $.10 per Company Common Share; and (iv) there has been no event
causing a Material Adverse Effect on the Company, nor any development that
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on the Company; and except as set forth in the Company
Letter, during the period from December 31, 1994 through the date of this
Agreement, neither the Company nor any of its Subsidiaries has taken any action
that, if taken during the period from the date of this Agreement through the
Effective Time, would constitute a breach of Section 4.1(b).
Section 3.8 No Existing Violation, Default, Etc. Neither the Company nor
any of its Subsidiaries is in violation of (i) its charter or other organization
documents or by-laws, (ii) any applicable law, ordinance or administrative or
governmental rule or regulation or (iii) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except for any violations that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company. The properties, assets and operations of the Company and its
Subsidiaries are in compliance in all material respects with all applicable
Worker Safety Laws and Environmental Laws, except for any violations that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company. With respect to such properties, assets
and operations, including any previously owned, leased or operated properties,
assets or operations, there are no past or current events, conditions,
circumstances, activities, practices, incidents, actions or plans of the Company
or any of its Subsidiaries that may interfere with or prevent compliance or
continued compliance in all material respects with applicable Worker Safety Laws
and Environmental Laws, other than any such interference or prevention as would
not, individually or in the aggregate with any such other interference or
prevention, reasonably be expected to have a Material Adverse Effect on the
Company.
Except as may be set forth in the Company SEC Documents or the Company
Letter: (i) there is no existing event of default or event that, but for the
giving of notice or lapse of time, or both, would constitute an event of default
under any loan or credit agreement, note, bond, mortgage, indenture or guarantee
of indebtedness for borrowed money; and (ii) there is no existing event of
default or event that, but for the giving of notice or lapse of time, or both,
would constitute an event of default under any material lease, agreement or
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instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any such Subsidiary or any of their respective properties,
assets or business is bound which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
Section 3.9 Licenses and Permits. The Company and its Subsidiaries have
received such certificates, permits, licenses, franchises, consents, approvals,
orders, authorizations and clearances from appropriate Governmental Entities
(the "Company Licenses") as are necessary to own or lease and operate their
respective properties and to conduct their respective businesses substantially
in the manner described in the Company SEC Documents and as currently owned or
leased and conducted, and all such Company Licenses are valid and in full force
and effect, except for any such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances which the failure to
have or to be in full force and effect would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company and its Subsidiaries are in compliance in all material respects with
their respective obligations under the Company Licenses, with only such
exceptions as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company, and no event has
occurred that allows, or after notice or lapse of time, or both, would allow,
revocation or termination of any material Company License.
Section 3.10 Environmental Matters. Except as set forth in the Company SEC
Documents or the Company Letter, neither the Company nor any of its Subsidiaries
is the subject of any federal, state, local, foreign or provincial
investigation, and neither the Company nor any of its Subsidiaries has received
any notice or claim (or is aware of any facts that would form a reasonable basis
for any claim), or entered into any negotiations or agreements with any other
person, relating to any material liability or remedial action or potential
material liability or remedial action under any Environmental Laws; and there
are no pending, reasonably anticipated or, to the knowledge of the Company,
threatened actions, suits or proceedings against the Company, any of its
Subsidiaries or any of their respective properties, assets or operations
asserting any such material liability or seeking any material remedial action in
connection with any Environmental Laws.
Section 3.11 Tax Matters. Except as otherwise set forth in the Company
Letter: (i) the Company and each of its Subsidiaries have filed all federal, and
all material state, local, foreign and provincial, Tax Returns required to have
been filed on or prior to the date hereof, or appropriate extensions therefor
have been properly obtained, and such Tax Returns are correct and complete,
except to the extent that any failure to be correct and complete would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company; (ii) all Taxes shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, or such Taxes are being timely and properly contested, and the Company
and each of its Subsidiaries have complied in all material respects with all
rules and regulations relating to the withholding of Taxes, except to the extent
any failure to comply with such rules and regulations would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company; (iii) neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of its Taxes; (iv) any such Tax Returns
relating to federal and state income Taxes have been examined by the Internal
Revenue Service or the appropriate state taxing authority or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired; (v) no issues that have been raised in writing by the
relevant taxing authority in connection with the examination of such Tax Returns
are currently pending; and (vi) all deficiencies asserted or assessments made as
a result of any examination of such Tax Returns by any taxing authority have
been paid in full or are being timely and properly contested. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Taxes have been established and maintained in accordance with
generally accepted accounting principles. To the knowledge of the Company, the
representations set forth in the Company Tax Certificate attached to the Company
Letter, if made on the date hereof (assuming the Merger were consummated on the
date hereof and based on reasonable estimates in the case of certain information
not available on the date hereof), would be true and correct in all material
respects.
Section 3.12 Actions and Proceedings. Except as set forth in the Company
SEC Documents or the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against the Company or
any of its Subsidiaries, any of its or their properties, assets or
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business, any Company Plan (as defined in Section 3.15) or, to the knowledge of
the Company, any of its or their current or former directors or officers, as
such, that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Except as set forth in the
Company SEC Documents or the Company Letter, there are no actions, suits or
claims or legal, administrative or arbitration proceedings or investigations
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, any of its or their properties, assets or business, any
Company Plan or, to the knowledge of the Company, any of its or their current or
former directors or officers, as such, that would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as set forth in the Company SEC Documents or the Company Letter,
as of the date hereof, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations or labor disputes
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, any of its or their properties, assets or business, any
Company Plan or, to the knowledge of the Company, any of its or their current or
former directors or officers, as such, relating to the transactions contemplated
by this Agreement.
Section 3.13 Labor Matters. Except as disclosed in the Company SEC
Documents or the Company Letter, neither the Company nor any of its Subsidiaries
has any labor contracts, collective bargaining agreements or material employment
or consulting agreements with any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries (the "Company
Business Personnel") or any representative of any Company Business Personnel.
Except as set forth in the Company SEC Documents or the Company Letter, neither
the Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to Company Business Personnel, and there is no unfair labor
practice complaint pending against the Company or any or its Subsidiaries with
respect to Company Business Personnel which, in either such case, would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth in the Company SEC Documents
or the Company Letter, there is no material labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has experienced any material primary work stoppage or other
material labor difficulty involving its employees during the last three years.
Section 3.14 Contracts. All of the material contracts of the Company and
its Subsidiaries that are required to be described in the Company SEC Documents
or to be filed as exhibits thereto have been described or filed as required.
Neither the Company or any of its Subsidiaries nor, to the knowledge of the
Company, any other party is in breach of or default under any such contracts
which are currently in effect, except for such breaches and defaults which are
described in the Company Letter or which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. Except as set forth in the Company SEC Documents or the Company Letter,
neither the Company nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
the Company or any such Subsidiary is entitled to conduct all or any material
portion of the business of the Company and its Subsidiaries taken as a whole.
Section 3.15 ERISA. Schedule B to the Company Letter sets forth the name
of each Company Plan and of each employment, severance, termination, consulting
or retirement plan or agreement which contains any special provision becoming
effective upon the occurrence of a change in control of the Company, true copies
of which have heretofore been delivered to Parent. Each Company Plan complies in
all material respects with ERISA, the Code and all other applicable laws and
administrative or governmental rules and regulations. Except as set forth in the
Company Letter, no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Company Plan for which the 30-day notice
requirement has not been waived (other than with respect to the transactions
contemplated by this Agreement), and no condition exists which would subject the
Company or any ERISA Affiliate to any fine under Section 4071 of ERISA; except
as disclosed in the Company Letter, neither the Company nor any of its ERISA
Affiliates has withdrawn from any Company Plan or Company Multiemployer Plan (as
hereinafter defined) or has taken, or is currently considering taking, any
action to do so; and no action has been taken, or
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is currently being considered, to terminate any Company Plan subject to Title IV
of ERISA. No Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived. To the knowledge of the Company, there are no actions, suits or
claims pending or threatened (other than routine claims for benefits) with
respect to any Company Plan which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Neither the Company nor any of its ERISA Affiliates has incurred or would
reasonably be expected to incur any material liability under or pursuant to
Title IV of ERISA. No prohibited transactions described in Section 406 of ERISA
or Section 4975 of the Code have occurred which would reasonably be expected to
result in material liability to the Company or its Subsidiaries. Except as set
forth in the Company Letter, all Company Plans that are intended to be qualified
under Section 401(a) of the Code have received a favorable determination letter
as to such qualification from the Internal Revenue Service, and no event has
occurred, either by reason of any action or failure to act, which would cause
the loss of any such qualification. The Company is not aware of any reason why
any Company Plan is not so qualified in operation. Neither the Company nor any
of its ERISA Affiliates has been notified by any Company Multiemployer Plan that
such Company Multiemployer Plan is currently in reorganization or insolvency
under and within the meaning of Section 4241 or 4245 of ERISA or that such
Company Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA. As used herein: (i) "Company Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA, other than a Company Multiemployer
Plan) or a "welfare plan" (as defined in Section 3(1) of ERISA) established or
maintained by the Company or any of its ERISA Affiliates or to which the Company
or any of its ERISA Affiliates has contributed or otherwise may have any
liability; and (ii) "Company Multiemployer Plan" means a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA) to which the Company or any of its
ERISA Affiliates is or has been obligated to contribute or otherwise may have
any liability.
Section 3.16 Liabilities. Except as fully reflected or reserved against in
the consolidated financial statements included in the Company Annual Report, or
disclosed in the footnotes thereto, or set forth in the Company SEC Documents or
the Company Letter, the Company and its Subsidiaries had no liabilities
(including, without limitation, Tax liabilities) at the date of such
consolidated financial statements, absolute or contingent, of a nature required
by generally accepted accounting principles to be reflected in such consolidated
financial statements or disclosed in the footnotes thereto or required to be
disclosed in the Company SEC Documents by Item 103 of Regulation S-K under the
Securities Act, that were material, either individually or in the aggregate, to
the Company and its Subsidiaries taken as a whole. Except as so reflected,
reserved or disclosed, the Company and its Subsidiaries have no commitments
which are reasonably expected to be materially adverse, either individually or
in the aggregate, to the Company and its Subsidiaries taken as a whole.
Section 3.17 Intellectual Properties. Except as set forth in the Company
Letter, the Company and its Subsidiaries own or have a valid license to use all
inventions, patents, trademarks, service marks, trade names, copyrights, trade
secrets, software, mailing lists and other intellectual property rights
(collectively, the "Company Intellectual Property") necessary to carry on their
respective businesses as currently conducted; and neither the Company nor any
such Subsidiary has received any notice of infringement of or conflict with,
and, to the Company's knowledge, there are no infringements of or conflicts
with, the rights of others with respect to the use of any of the Company
Intellectual Property that, in either such case, has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company or result in material adverse publicity for the Company.
Section 3.18 Opinion of Financial Advisor. The Company has received the
opinion of Salomon Brothers Inc, dated the date hereof, to the effect that, as
of the date hereof, the consideration to be received in the Merger by the
Company's shareholders is fair to the Company's shareholders from a financial
point of view, a copy of which opinion has been delivered to Parent.
Section 3.19 State Takeover Statutes; Company Rights Agreement. Valid and
irrevocable exemptions from Subchapters G, H, I and J of Chapter 25 of the PBCL
exist and are applicable to all of the transactions contemplated by this
Agreement. No other State Takeover laws are applicable to the Merger, this
Agreement or the transactions contemplated hereby. The Board of Directors of the
Company has amended the Company
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Rights Agreement to provide that: (i) the Distribution Date (as defined in the
Company Rights Agreement) shall not be deemed to occur, the Company Rights shall
not separate from the Company Common Shares and neither Parent nor Sub shall
become an Acquiring Person (as defined in the Company Rights Agreement) as a
result of the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated thereby; and (ii) pursuant to the
express terms of Section 7(a) of the Company Rights Agreement, the Company
Rights shall cease to be exercisable immediately prior to the Effective Time. No
other action is required to prevent the holders of the Company Rights from
having any right under the Company Rights Agreement as a result of the Merger or
any other transaction contemplated by this Agreement.
Section 3.20 Pooling of Interests; Reorganization. To the knowledge of the
Company after due investigation, neither the Company nor any of its Subsidiaries
has (i) taken any action or failed to take any action which action or failure
would jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (ii) taken any action or failed to take any action which
action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 3.21 Brokers. No broker, investment banker or other person, other
than Salomon Brothers Inc, the fees and expenses of which will be paid by the
Company (as reflected in an agreement between Salomon Brothers Inc and the
Company, a copy of which has been furnished to Parent), is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 3.22 Ownership of Parent Capital Stock. Neither the Company nor
any of its Subsidiaries owns any shares of the capital stock of Parent.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger.
(a) Actions by Parent. During the period from the date of this Agreement
through the Effective Time, except as otherwise expressly required by this
Agreement or as set forth in the Parent Letter, Parent shall, and shall cause
each of its Subsidiaries to, in all material respects carry on its business in,
and not enter into any material transaction other than in accordance with, the
ordinary course of its business as currently conducted and, to the extent
consistent therewith, use its reasonable best efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it, all to the end that its goodwill
and ongoing business shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, and except as otherwise expressly contemplated
by this Agreement or as set forth in the Parent Letter, Parent shall not, and
shall not permit any of its Subsidiaries to, without the prior written consent
of the Company:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than regular quarterly dividends of not more than
$.45 per share on Parent Common Stock, the Specialty Products Business
Spinoff and dividends paid by Subsidiaries of Parent in the ordinary course
of business and consistent with past practice); (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock; or (C) purchase, redeem or otherwise acquire
any shares of its capital stock or those of any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent
or convertible securities (other
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than the issuance of shares of Parent Common Stock and Parent Rights upon
the exercise of Parent Stock Options and the issuance of stock options to
employees of Parent or any of its Subsidiaries in the ordinary course of
business and consistent with past practice);
(iii) amend its charter or organization documents or by-laws;
(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing a substantial portion of the assets of or equity in or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than (A) transactions that are in the
ordinary course of business and consistent with past practice and not
material to Parent and its Subsidiaries taken as a whole and (B)
acquisitions for an aggregate consideration paid or payable by Parent and
its Subsidiaries (valuing any non-cash consideration at its fair market
value and any contingent payments at the maximum amount payable and
treating any liabilities assumed as consideration paid) in an amount not to
exceed $15,000,000;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business and consistent with past practice
and not material to Parent and its Subsidiaries taken as a whole and (B)
dispositions for an aggregate consideration paid or payable to Parent and
its Subsidiaries (valuing any non-cash consideration, contingent payments
and liabilities assumed as provided in clause (iv) above) in an amount not
to exceed $15,000,000;
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) borrowings or
guarantees incurred in the ordinary course of business and consistent with
past practice and (B) any loans, advances or capital contributions to, or
other investments in, Parent or any majority-owned Subsidiary of Parent;
(vii) enter into or adopt any Parent Plan, or amend any existing
Parent Plan, other than as required by law;
(viii) violate or fail to perform any material obligation or duty
imposed upon Parent or any Subsidiary by any applicable federal, state,
local, foreign or provincial law, rule, regulation, guideline or ordinance;
(ix) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures;
(x) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(xi) acquire any shares of capital stock of the Company.
Parent shall promptly advise the Company orally and in writing of any
change or event having, or which would reasonably be expected to have, a
Material Adverse Effect on Parent.
(b) Actions by the Company. During the period from the date of this
Agreement through the Effective Time, except as otherwise expressly required by
this Agreement or as set forth in the Company Letter, the Company shall, and
shall cause each of its Subsidiaries to, in all material respects carry on its
business in, and not enter into any material transaction other than in
accordance with, the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use its reasonable best efforts to preserve
intact its current business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it, all to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement or as set forth in the
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Company Letter, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such (other than regular quarterly dividends of not more than
$.85 per Company $3.40 Preferred Share, of not more than $1.00 per Company
$4.00 Preferred Share and of not more than $.10 per Company Common Share
(it being the express understanding of Parent and the Company that the
shareholders of the Company shall be entitled to either a dividend on
Company Common Shares or shares of Parent Common Stock, but not both, for
the calendar quarter in which the Closing shall occur, and the Board of
Directors of the Company shall not declare any dividend or fix any record
date therefor which would have such effect) and dividends paid by
Subsidiaries of the Company in the ordinary course of business and
consistent with past practice); (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock;
or (C) purchase, redeem or otherwise acquire any shares of its capital
stock or those of any Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent
or convertible securities (other than the issuance of Company Common Shares
and Company Rights upon the exercise of Company Stock Options outstanding
on the date of this Agreement in accordance with their current terms);
(iii) amend its charter or organization documents or by-laws;
(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing a substantial portion of the assets of or equity in or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than (A) transactions that are in the
ordinary course of business and consistent with past practice and not
material to the Company and its Subsidiaries taken as a whole and (B)
acquisitions for an aggregate consideration paid or payable by the Company
and its Subsidiaries (valuing any non-cash consideration at its fair market
value and any contingent payments at the maximum amount payable and
treating any liabilities assumed as consideration paid) in an amount not to
exceed $15,000,000;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than (A) transactions that
are in the ordinary course of business and consistent with past practice
and not material to the Company and its Subsidiaries taken as a whole and
(B) dispositions for an aggregate consideration paid or payable to the
Company and its Subsidiaries (valuing any non-cash consideration,
contingent payments and liabilities assumed as provided in clause (iv)
above) in an amount not to exceed $15,000,000; provided, however, that
there shall be no sale, lease or other disposition of pulp production
assets, forest products assets or timberlands other than in the ordinary
course of business;
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness, or make any loans, advances or capital contributions to, or
other investments in, any other person, or retire any outstanding
indebtedness for borrowed money, other than (A) borrowings or guarantees
incurred in the ordinary course of business and consistent with past
practice and (B) any loans, advances or capital contributions to, or other
investments in, the Company or any majority-owned Subsidiary of the
Company;
(vii) enter into or adopt any Company Plan, or amend any existing
Company Plan, other than as required by law;
(viii) increase the compensation payable or to become payable to its
officers or employees, except for increases in the ordinary course of
business and consistent with past practice, or grant any severance or
termination pay to, or enter into, or amend or modify, any employment,
severance or consulting
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agreement with, any director or officer of the Company or any of its
Subsidiaries, or establish, adopt, enter into or, except as may be required
to comply with applicable law, amend in any material respect or take action
to enhance in any material respect or accelerate any rights or benefits
under, 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 director, officer
or employee;
(ix) violate or fail to perform any material obligation or duty
imposed upon the Company or any Subsidiary by any applicable federal,
state, local, foreign or provincial law, rule, regulation, guideline or
ordinance;
(x) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures;
(xi) amend the Company Rights Agreement or redeem the Company Rights
other than as contemplated herein;
(xii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(xiii) acquire any shares of capital stock of Parent.
The Company shall promptly advise Parent orally and in writing of any
change or event having, or which would reasonably be expected to have, a
Material Adverse Effect on the Company.
Section 4.2 No Solicitation. From and after the date hereof, the Company
shall not, directly or indirectly, solicit, initiate or encourage (including by
way of furnishing information) any Takeover Proposal (as hereinafter defined)
from any person, or engage in or continue discussions or negotiations relating
to any Takeover Proposal and shall use its reasonable best efforts to prevent
any of its directors, officers, attorneys, financial advisors and other
authorized representatives from, directly or indirectly, taking any such action;
provided, however, that the Company may engage in discussions or negotiations
with, or furnish information concerning the Company and its properties, assets
and business to, any person which makes, or indicates in writing an intention to
make, a Superior Proposal (as hereinafter defined) if the Board of Directors of
the Company shall conclude in good faith on the basis of the advice of its
outside counsel that the failure to take such action would violate the fiduciary
obligations of such Board of Directors under applicable law. The Company shall
promptly notify Parent of any Takeover Proposal, including the material terms
and conditions thereof and the identity of the person (or group) making such
Takeover Proposal, and the name of all persons to whom the Company has furnished
any information and the nature of such information. As used in this Agreement:
(i) "Takeover Proposal" means, with respect to the Company, any proposal or
offer for, or any expression of interest (by public announcement or otherwise)
by any person (other than a proposal or offer by Parent or any of its
Subsidiaries) in, any tender or exchange offer for 20% or more of the equity of
the Company, any merger, consolidation or other business combination involving
the Company or any of its Significant Subsidiaries, any acquisition in any
manner of 20% or more of the equity of, or 20% or more of the assets of, the
Company or any of its Significant Subsidiaries or any inquiry by any person with
respect to the Company's willingness to receive or discuss any of the foregoing;
(ii) "Superior Proposal" means a bona fide, written and unsolicited proposal or
offer made by any person (or group) (other than Parent or any of its
Subsidiaries) to acquire the Company pursuant to any Takeover Proposal on terms
which a majority of the members of the Board of Directors of the Company
determines in good faith, and in the exercise of reasonable judgment (based on
the advice of independent financial advisors), to be more favorable to the
Company and its shareholders than the transactions contemplated hereby and for
which any required financing is committed or which, in the good faith and
reasonable judgment of a majority of such members (based on the advice of
independent financial advisors), is reasonably capable of being financed by such
person; and (iii) "Significant Subsidiary" shall have the meaning specified in
Rule 1-02 of Regulation S-X of the SEC. A Takeover Proposal, with respect to
Parent, shall have the meaning specified in the prior sentence, except that each
reference to "Parent" shall be changed to "the Company" and each reference to
the "the Company" shall be changed to "Parent."
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Section 4.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, neither the Company nor
Parent shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its Subsidiaries
is a party (other than any involving Parent or its Subsidiaries or the Company
or its Subsidiaries, as the case may be). During such period, the Company or
Parent shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including, but not limited to, by obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
of America or of any state having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the period from
the date of this Agreement through the Effective Time, unless the other parties
hereto shall otherwise agree in writing, none of Parent, the Company or any of
their respective Subsidiaries shall (i) knowingly take or fail to take any
action which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (ii) knowingly take or fail to
take any action which action or failure would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code or
would cause any of the representations and warranties set forth in the Company
Tax Certificate attached to the Company Letter or the Parent Tax Certificate
attached to the Parent Letter to be untrue or incorrect in any material respect.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings. The Company and Parent shall each call a
meeting of its stockholders (respectively, the "Company Stockholder Meeting" and
the "Parent Stockholder Meeting" and, collectively, the "Stockholder Meetings")
to be held as promptly as practicable for the purpose of voting upon the Merger
(in the case of the Company) and the Parent Share Issuance and the Charter
Amendment (in the case of Parent). The Company and Parent shall, through their
respective Boards of Directors, recommend to their respective stockholders
approval of such matters and shall not withdraw such recommendation; provided,
however, that neither such Board of Directors shall be required to make, and
shall be entitled to withdraw, such recommendation if such Board of Directors
concludes in good faith on the basis of the advice of its outside counsel that
the making of, or the failure to withdraw, such recommendation would violate the
fiduciary obligations of such Board of Directors under applicable law. The
respective Boards of Directors of the Company, Parent and Sub shall not rescind
their respective declarations that the Merger is advisable unless, in any such
case, any such Board of Directors concludes in good faith on the basis of the
advice of its outside counsel that the failure to rescind such determination
would violate the fiduciary obligations of such Board of Directors under
applicable law. The Company and Parent shall coordinate and cooperate with
respect to the timing of such meetings and shall use their reasonable best
efforts to hold such meetings on the same day.
Section 5.2 Preparation of the Registration Statement and the Joint Proxy
Statement. The Company and Parent shall promptly prepare and file with the SEC
the Joint Proxy Statement and Parent shall prepare and file with the SEC the
Registration Statement, in which the Joint Proxy Statement will be included as a
prospectus. Each of the Company and Parent shall use its reasonable best efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is now not
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in connection with the
Merger and upon any exercise of the Substitute Options (as defined in Section
5.8). The Company shall furnish all information concerning the Company and the
holders of Company Common Shares as may be reasonably requested by Parent in
connection with any such action.
Section 5.3 Comfort Letters. (a) The Company shall use its reasonable best
efforts to cause to be delivered to Parent "comfort" letters of Coopers &
Lybrand L.L.P., the Company's independent public accountants, dated the date on
which the Registration Statement shall become effective and as of the date of
the Parent Stockholder Meeting, and addressed to Parent and the Company, in form
and substance reasonably satisfactory to Parent and as is reasonably customary
in scope and substance for letters delivered by
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independent public accountants in connection with transactions such as those
contemplated by this Agreement.
(b) Parent shall use its reasonable best efforts to cause to be delivered
to the Company "comfort" letters of Deloitte & Touche LLP, Parent's independent
public accountants, dated the date on which the Registration Statement shall
become effective and as of the date of the Company Stockholder Meeting, and
addressed to the Company and Parent, in form and substance reasonably
satisfactory to the Company and as is reasonably customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions such as those contemplated by this Agreement.
Section 5.4 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Parent (which Parent represents
and warrants do not require it to withhold information which is material and
adverse to Parent and its Subsidiaries taken as a whole) or to the Company
(which the Company represents and warrants do not require it to withhold
information which is material and adverse to the Company and its Subsidiaries
taken as a whole), Parent and the Company shall, and shall cause each of its
respective Subsidiaries to, afford, during normal business hours during the
period from the date of this Agreement through the Effective Time, to the
accountants, counsel, financial advisors, officers and other representatives of
the other reasonable access to, and permit them to make such inspections as may
reasonably be requested of, its properties, books, contracts, commitments and
records (including, without limitation, the work papers of independent public
accountants), and also permit such interviews with its officers and employees as
may be reasonably requested; and, during such period, Parent and the Company
shall, and shall cause each of its respective Subsidiaries to, furnish promptly
to the other (i) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
federal or state securities laws and (ii) all other information concerning its
properties, assets, business and personnel as the other may reasonably request.
As soon as practicable after the date hereof, the Company shall provide to
Parent the information specified on Schedule A to the Company Letter in respect
of each holder of a Company Stock Option or restricted Company Common Shares
other than the six holders referenced in Section 3.2. From the date of this
Agreement through the Effective Time, Parent and the Company shall consult with
each other regarding any inquiries made by antitrust regulatory authorities,
including as to any issues raised by such authorities and the possible
resolutions thereof. No investigation pursuant to this Section 5.4 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information obtained by
Parent or the Company pursuant to this Section 5.4 shall be kept confidential in
accordance with the Confidentiality Agreements dated January 24, 1995 and May
11, 1995, respectively, as the same have been amended to date, between Parent
and the Company.
Section 5.5 Compliance with the Securities Act. (a) Prior to the Effective
Time, the Company shall cause to be prepared and delivered to Parent a list
(reasonably satisfactory to counsel for Parent) identifying each person who, at
the time of the Company Stockholder Meeting, may be deemed to be an "affiliate"
of the Company, as such term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the "Company Rule 145 Affiliates"). The Company shall use
its reasonable best efforts to cause each person who is identified as a Company
Rule 145 Affiliate in such list to deliver to Parent on or prior to the
Effective Time a written agreement, in the form previously approved by the
parties hereto, that such Company Rule 145 Affiliate will not (i) sell, pledge,
transfer or otherwise dispose of, or in any other way reduce such Company Rule
145 Affiliate's risk relative to, any Company Common Shares or any shares of
Parent Common Stock issued to such Company Rule 145 Affiliate in connection with
the Merger, except pursuant to an effective registration statement or in
compliance with such Rule 145 or another exemption from the registration
requirements of the Securities Act or (ii) sell or in any other way reduce such
Company Rule 145 Affiliate's risk relative to any Company Common Shares or any
shares of Parent Common Stock received in the Merger (within the meaning of
Section 201.01 of the SEC's Financial Reporting Release No. 1) during the period
commencing 30 days prior to the Effective Time and ending at such time as the
financial results (including combined sales and net income) covering at least 30
days of post-Merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC.
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(b) Prior to the Effective Time, Parent shall cause to be prepared and
delivered to the Company a list (reasonably satisfactory to counsel for the
Company) identifying each person who, at the time of the Parent Stockholder
Meeting, may be deemed to be an "affiliate" of Parent, as such term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Parent Rule
145 Affiliates"). Parent shall use its reasonable best efforts to cause each
person who is identified as a Parent Rule 145 Affiliate in such list to deliver
to the Company on or prior to the Effective Time a written agreement, in the
form previously approved by the parties hereto, that such Parent Rule 145
Affiliate will not sell, pledge, transfer or otherwise dispose of, or in any
other way reduce such Parent Rule 145 Affiliate's risk relative to, any shares
of Parent Common Stock or any Company Common Shares during the period commencing
30 days prior to the Effective Time and ending at such time as the financial
results (including combined sales and net income) covering at least 30 days of
post-Merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC. As soon as reasonably practicable,
but in no event later than 30 days after the end of the first full fiscal
quarter of Parent which includes results covering at least 30 days of
post-Merger combined operations of Parent and the Company, Parent shall publish
its results of operations for such fiscal quarter.
Section 5.6 Stock Exchange Listings. Parent shall use its reasonable best
efforts to list on the NYSE and on the Chicago and Pacific Stock Exchanges, upon
official notice of issuance, the shares of Parent Common Stock to be issued in
connection with the Merger, upon any exercise of the Substitute Options and as
contemplated by certain of the agreements referenced in the third recital clause
hereof.
Section 5.7 Fees and Expenses. (a) Except as otherwise provided in this
Section 5.7 and in Section 5.11, whether or not the Merger shall be consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, the fees and
disbursements of counsel, financial advisors, accountants, actuaries and
consultants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and filing fees shall be divided equally
between Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by the Company pursuant to Section 7.1(f),
the Company shall immediately pay to Parent an amount in cash equal to $100
million.
(c) Notwithstanding any provision in this Agreement to the contrary, if
there shall be a Takeover Proposal with respect to the Company and if this
Agreement shall be terminated by Parent pursuant to Section 7.1(g), the Company
shall immediately pay to Parent an amount in cash equal to $100 million.
(d) Notwithstanding any provision in this Agreement to the contrary, if (i)
prior to the Company Stockholder Meeting (x) there shall be a Takeover Proposal
with respect to the Company or the Company shall receive an indication of a
possible Takeover Proposal with respect to the Company by any person other than
Parent and its Subsidiaries, (y) any person other than Parent shall file a
Statement on Schedule 13D under the Exchange Act with respect to Company Common
Shares or (z) the Company shall engage in discussions or negotiations or furnish
information to any person pursuant to the proviso of the first sentence of
Section 4.2; and (ii) the shareholders of the Company shall not approve the
Merger at the Company Stockholder Meeting or any adjournment thereof; and (iii)
within seven months after the Company Stockholder Meeting or the last
adjournment thereof the Company shall enter into any agreement in respect of a
Takeover Proposal with respect to the Company with any person contemplated by
subclauses (x),(y) or (z) of clause (i) above or such person shall commence any
tender or exchange offer for more than 20% of the Company Common Shares; and
(iv) at any time thereafter such person shall consummate a Takeover Proposal
contemplated by such agreement or shall consummate such tender or exchange
offer; the Company shall immediately pay to Parent an amount in cash equal to
$100 million.
(e) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement shall be terminated by Parent pursuant to Section 7.1(i), the
Company shall immediately pay to Parent an amount in cash equal to $50 million.
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(f) Notwithstanding any provision in this Agreement to the contrary, if
there shall be a Takeover Proposal with respect to Parent and if this Agreement
shall be terminated by the Company pursuant to Section 7.1(h), Parent shall
immediately pay to the Company an amount in cash equal to $100 million.
(g) Notwithstanding any provision in this Agreement to the contrary, if (i)
prior to the Parent Stockholder Meeting (x) there shall be a Takeover Proposal
with respect to Parent or Parent shall receive an indication of a possible
Takeover Proposal with respect to Parent by any person other than the Company
and its Subsidiaries, (y) any person shall file a Statement on Schedule 13D
under the Exchange Act with respect to shares of Parent Common Stock or (z)
Parent shall engage in discussions or negotiations or furnish information to any
person with respect to an acquisition of all or substantially all of the equity
or assets of Parent by merger, tender offer or otherwise; and (ii) the
stockholders of Parent shall not approve the Parent Share Issuance at the Parent
Stockholder Meeting or any adjournment thereof; and (iii) within seven months
after the Parent Stockholder Meeting or the last adjournment thereof Parent
shall enter into any agreement in respect of a Takeover Proposal with respect to
Parent with any person contemplated by subclauses (x), (y) or (z) of clause (i)
above or such person shall commence any tender or exchange offer for more than
20% of the shares of Parent Common Stock; and (iv) at any time thereafter such
person shall consummate a Takeover Proposal contemplated by such agreement or
shall consummate such tender or exchange offer; Parent shall immediately pay to
the Company an amount in cash equal to $100 million.
(h) Nothing contained in this Section 5.7 shall relieve any party hereto
from any liability for any breach of this Agreement.
Section 5.8 Company Stock Options and Restricted Stock.
(a) Exercisable Stock Options. Not later than the Effective Time, each
Company Stock Option which is outstanding immediately prior to the Effective
Time pursuant to any stock option plan (other than any "stock purchase plan"
within the meaning of Section 423 of the Code) or long-term incentive plan of
the Company in effect on the date hereof (the "Company Stock Plans") and which
shall be fully exercisable at the Effective Time shall become and represent a
fully exercisable option to purchase the number of shares of Parent Common Stock
(a "Substitute Option"), decreased to the nearest whole share, determined by
multiplying (i) the number of Company Common Shares subject to such Company
Stock Option immediately prior to the Effective Time by (ii) the Conversion
Number, at an exercise price per share of Parent Common Stock (increased to the
nearest whole cent) equal to the exercise price per Company Common Share
immediately prior to the Effective Time divided by the Conversion Number. Parent
shall pay cash to the holders of Substitute Options in lieu of issuing
fractional shares of Parent Common Stock upon the exercise thereof unless, in
the reasonable judgment of Parent based upon the advice of its independent
public accountants, such payment would adversely affect the ability to account
for the Merger as a pooling of interests in accordance with generally accepted
accounting principles. After the Effective Time, except as provided above in
this Section 5.8(a), each Substitute Option shall be exercisable upon the same
terms and conditions as were applicable to the related Company Stock Option
immediately prior to the Effective Time. The Company shall not grant any stock
appreciation rights or limited stock appreciation rights and shall not permit
cash payments to holders of Company Stock Options in lieu of the substitution
therefor of Substitute Options as provided in this Section 5.8(a). Parent shall
register under the Securities Act on Form S-8 or another appropriate form (and
use its reasonable best efforts to maintain the effectiveness thereof) all
Substitute Options and all shares of Parent Common Stock issuable pursuant to
all Substitute Options.
(b) Unexercisable Stock Options. The Company shall use its reasonable best
efforts to cause each holder of a Company Stock Option outstanding immediately
prior to the Effective Time pursuant to any Company Stock Plan which shall not
be exercisable at the Effective Time (an "Unexercisable Option") to enter into a
stock option exchange agreement ("Stock Option Exchange Agreement"), pursuant to
which such Unexercisable Option shall be cancelled in exchange for the number of
shares of Parent Common Stock, decreased to the nearest whole share, having an
aggregate market value at the Effective Time equal to the value of such
Unexercisable Option, as determined pursuant to the terms of such Stock Option
Exchange Agreement. Parent shall pay cash to the holders of Unexercisable
Options in lieu of issuing fractional shares of Parent Common Stock unless, in
the reasonable judgment of Parent based upon the advice of its independent
public
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accountants, such payment would adversely affect the ability to account for the
Merger as a pooling of interests in accordance with generally accepted
accounting principles. Parent shall register under the Securities Act on an
appropriate form all shares of Parent Common Stock issuable pursuant to the
Stock Option Exchange Agreements.
(c) Unvested Restricted Stock. The Company shall use its reasonable best
efforts to cause each holder of shares of restricted Company Common Shares
("Restricted Stock") which are outstanding immediately prior to the Effective
Time pursuant to any Company Stock Plan which shall not be or shall not become
vested at the Effective Time ("Unvested Restricted Stock") to enter into a
restricted stock exchange agreement ("Restricted Stock Exchange Agreement"),
pursuant to which such Unvested Restricted Stock shall be cancelled in exchange
for the number of shares of Parent Common Stock, decreased to the nearest whole
share, having an aggregate market value at the Effective Time equal to the value
of such Unvested Restricted Stock, as determined pursuant to the terms of such
Restricted Stock Exchange Agreement. Parent shall pay cash to the holders of
Unvested Restricted Stock in lieu of issuing fractional shares of Parent Common
Stock unless, in the reasonable judgment of Parent based upon the advice of its
independent public accountants, such payment would adversely affect the ability
to account for the Merger as a pooling of interests in accordance with generally
accepted accounting principles. Parent shall register under the Securities Act
on an appropriate form all shares of Parent Common Stock issuable pursuant to
the Restricted Stock Exchange Agreements.
Section 5.9 Reasonable Best Efforts; Pooling of Interests. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable, to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including, but
not limited to: (i) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from all Governmental Entities and the making of
all necessary registrations and filings with, and the taking of all other
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity (including those in
connection with the HSR Act and the State Takeover Approvals); (ii) the
obtaining of all necessary consents, approvals or waivers from persons other
than Governmental Entities; (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by this Agreement.
(b) Each of Parent and the Company shall cooperate and work together, with
its respective accountants, with the objective that the Merger will qualify as a
pooling of interests under generally accepted accounting principles.
(c) Each party hereto shall use its reasonable best efforts not to take any
action, or to enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or to
result in a breach of any of its covenants in this Agreement.
(d) Notwithstanding any provision in this Agreement to the contrary: (i)
neither Parent nor the Company shall be obligated to use its reasonable best
efforts or to take any action (or omit to take any action) pursuant to this
Agreement if the Board of Directors of Parent or the Company, as the case may
be, shall conclude in good faith on the basis of the advice of its outside
counsel that such action would violate the fiduciary obligations of such Board
of Directors under applicable law; and (ii) in connection with any filing or
submission or other action required to be made or taken by either Parent or the
Company to effect the Merger and to consummate the other transactions
contemplated hereby, the Company shall not, without Parent's prior written
consent, commit to any divestiture transaction, and, except as may be set forth
in the Parent Letter, neither Parent nor any of its Affiliates shall be required
to divest or hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, the
Company or any
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material portions thereof or any of the business, product lines, properties or
assets of Parent or any of its Affiliates.
Section 5.10 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation and without the written approval (which shall not
unreasonably be withheld) of the other, except as may be required by applicable
law or by existing obligations pursuant to any listing agreement with any
national securities exchange.
Section 5.11 Real Estate Transfer and Gains Tax. Either the Company or the
Surviving Corporation shall pay all state or local taxes, if any (collectively,
the "Gains Taxes"), attributable to the transfer of the beneficial ownership of
the Company's and its Subsidiaries' real properties, and any penalties or
interest with respect thereto, payable in connection with the consummation of
the Merger. The Company shall cooperate with Parent in the filing of any returns
with respect to the Gains Taxes, including supplying in a timely manner a
complete list of all real property interests held by the Company and its
Subsidiaries and any information with respect to such properties that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real properties of the Company and its Subsidiaries shall be
determined by Parent in its reasonable discretion. The shareholders of the
Company shall be deemed to have agreed to be bound by the allocation established
pursuant to this Section 5.11 in the preparation of any return with respect to
the Gains Taxes.
Section 5.12 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, Parent and the Company and
their respective Boards of Directors shall use their reasonable best efforts to
grant such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise act to eliminate the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 5.13 Indemnification; Directors and Officers Insurance. (a) For
six years after the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless any person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer, employee or agent (an "Indemnified Person")
of the Company or any of its Subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including attorneys' fees and expenses),
judgments, fines, losses and amounts paid in settlement in connection with any
actual or threatened action, suit, claim, proceeding or investigation (each a
"Claim") to the extent that any such Claim is based on, or arises out of: (i)
the fact that such Indemnified Person is or was a director, officer, employee or
agent of the Company or any of its Subsidiaries or is or was serving at the
request of the Company or any of its Subsidiaries as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise; or (ii) this Agreement or any of the transactions contemplated
hereby, in each case to the extent that any such Claim pertains to any matter or
fact arising, existing or occurring prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under the PBCL, the Company's
Articles of Incorporation or By-laws or any indemnification agreement in effect
at the date hereof, including provisions relating to advancement of expenses
incurred in the defense of any such Claim; provided, however, that neither
Parent nor the Surviving Corporation shall be required to indemnify any
Indemnified Person in connection with any proceeding (or portion thereof)
involving any Claim initiated by such Indemnified Person unless the initiation
of such proceeding (or portion thereof) was authorized by the Board of Directors
of Parent or unless such proceeding is brought by an Indemnified Person to
enforce rights under this Section 5.13. Without limiting the generality of the
preceding sentence, in the event any Indemnified Person becomes involved in any
Claim, after the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, periodically advance to such Indemnified Person its legal and
other expenses (including the cost of any investigation and preparation incurred
in connection therewith), subject to the providing by such Indemnified Person of
an undertaking to reimburse all amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
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(b) Parent and the Company agree that all rights to indemnification or
liabilities, and all limitations with respect thereto, existing in favor of any
Indemnified Person, as provided in the Company's Articles of Incorporation or
By-laws and any indemnification agreement in effect at the date hereof, shall
survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of six years from the Effective Time to the
extent such rights, liabilities and limitations are consistent with the PBCL;
provided, however, that in the event any Claim is asserted or made within such
six-year period, all such rights, liabilities and limitations in respect of any
such Claim shall continue until disposition thereof; provided further that any
determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the PBCL, the
Company's Articles of Incorporation or By-laws or any such agreement, as the
case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably acceptable to Parent; and provided further
that nothing in this Section 5.13 shall impair any rights or obligations of any
current or former director or officer of the Company.
(c) Parent or the Surviving Corporation shall maintain the Company's
existing directors' and officers' liability insurance policy ("D&O Insurance")
for a period of not less than six years after the Effective Date; provided,
however, that Parent may substitute therefor policies of substantially similar
coverage and amounts containing terms no less advantageous to such former
directors or officers; provided further that if the existing D&O Insurance
expires or is cancelled during such period, Parent or the Surviving Corporation
shall use their best efforts to obtain substantially similar D&O Insurance; and
provided further that neither Parent nor the Surviving Corporation shall be
required to pay an annual premium for D&O Insurance in excess of 150% of the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
(d) The provisions of this Section 5.13 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives.
Section 5.14 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (B) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied; and (ii) any failure of Parent or the
Company, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.14 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.15 Redemption of Company Senior Preferred Shares. Prior to the
mailing of the Joint Proxy Statement, the Company shall redeem all outstanding
Company Senior Preferred Shares at the then applicable redemption prices
thereof.
Section 5.16 Board of Directors. Parent shall select from among the
current members of the Board of Directors of the Company three individuals for
nomination as directors of Parent. If an individual so selected consents to
serve as a director, such individual shall be elected as a director of Parent,
effective as of the Effective Time, for a term expiring at Parent's 1996 annual
meeting of stockholders, subject to being renominated as a director at the
discretion of the nominating committee of Parent's Board of Directors.
Section 5.17 Employee Matters. (a) Parent agrees that the Company shall
honor in accordance with their respective terms (including, subject to Sections
4.1(b)(vii) and (viii), any right to terminate or amend in accordance with the
express terms thereof) and, on and after the Effective Time, Parent shall cause
the Surviving Corporation to honor, without offset, deduction, counterclaim,
interruption or deferment, all Company Plans and all other written employment,
severance, termination, consulting and retirement agreements to which the
Company is a party as of the Effective Time, including all compensation plans
for non-employee directors of the Company, except to the extent that any such
Company Plan or any such employment, severance, termination, consulting or
retirement agreement or compensation plan was established, entered into or
amended in contravention of Section 4.1(b). Parent acknowledges that, for the
purposes of certain of such Company Plans and certain of such other employment,
severance, termination, consulting
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and retirement agreements to which the Company is currently a party, the
consummation of the Merger will constitute a "change in control" of the Company
(as such term is defined in such plans and agreements); provided, however, that
the Company shall amend (or cause to be amended), effective immediately prior to
the Effective Time, each Company Plan that is a defined benefit pension plan
qualified under Section 401(a) of the Code to delete therefrom any special
provisions otherwise effective upon the occurrence of a change in control.
Parent agrees to cause the Surviving Corporation, after consummation of the
Merger, to pay all amounts provided under such Company Plans and agreements as a
result of a change in control of the Company in accordance with their respective
terms and to honor, and to cause the Surviving Corporation to honor, all rights,
privileges and modifications to or with respect to any such Company Plans or
agreements which become effective as a result of such change in control. The
Company shall, prior to the Effective Time, amend its Termination Pay Plan for
Salaried Employees to reduce the number of years that such Plan will be required
to remain in effect following a change in control from six years to two years.
(b) Parent agrees that, for one year after the Effective Time, it shall, or
shall cause the Surviving Corporation to, provide employee pension and welfare
plans for the benefit of employees and former employees of the Company, which,
in the aggregate, are not materially less favorable than the Company Plans in
effect immediately prior to the Effective Time. To the extent any Parent Plan
(or any plan of the Surviving Corporation) shall be made applicable to any
employee or former employee of the Company, Parent shall, or shall cause the
Surviving Corporation to, grant to employees and former employees of the Company
credit for service with the Company prior to the Effective Time for the purposes
of determining eligibility to participate and the employee's nonforfeitable
interest in benefits thereunder but not for the purpose of calculating benefits
(including benefits the amount or level of which is determined by reference to
an employees' vesting service) thereunder. Nothing in this Agreement shall be
interpreted as limiting the power of the Surviving Corporation to amend or
terminate any Company Plan or any other employee benefit plan, program,
agreement or policy or as requiring the Surviving Corporation or Parent to offer
to continue (other than as required by its terms) any written employment
contract.
(c) Parent agrees that the following principles shall apply for purposes of
determining bonuses for 1995 under the Company's Performance Plan: (1) all
employees of the Company and its Subsidiaries at the Effective Time who, at such
time, are covered by such Plan (other than employees whose employment is
terminated for any reason prior to the Effective Time or for cause on or prior
to December 31, 1995) shall be eligible to receive a pro rata portion of such
bonuses; (2) whether any bonuses are payable under such Plan and, if so, the
amounts thereof shall be determined as if the Merger had not occurred and the
Company had remained an independent, publicly-owned company through 1995, taking
into account, to the extent reasonably applicable, action that could have been
taken but for the limitations imposed by Section 4.1(b); and (3) any bonuses
payable pursuant to clause (2) above shall be paid as soon as practicable after
December 31, 1995. The pro rata portion of an employee's bonus shall be the
amount determined pursuant to the preceding sentence multiplied by a fraction,
the numerator of which shall be the number of days during 1995 for which such
employee was employed by the Company or its Subsidiaries or Parent or its
Subsidiaries and the denominator of which shall be 365. Prior to the Effective
Time, the Compensation Committee of the Company's Board of Directors may, with
Parent's approval, amend such Plan and take other actions thereunder to
effectuate the foregoing principles. After the Effective Time, all
determinations with respect to such Plan shall be made by a special committee of
Parent's Board of Directors consisting of Parent's Chief Executive Officer and
the three former directors of the Company elected to Parent's Board of
Directors. This paragraph (c) shall not apply to any annual bonus payable
pursuant to a written employment or termination agreement in effect on the date
hereof.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party hereto to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. The Merger shall have been duly approved by a
majority of the votes cast by the shareholders of the Company entitled to vote
thereon in accordance with applicable law and the Articles of Incorporation and
By-laws of the Company, and the Parent Share Issuance shall have been duly
approved by a majority of the votes cast at the Parent Stockholder Meeting by
the holders of the shares of Parent Common Stock, provided that the total number
of votes cast on the Parent Share Issuance represents more than 50% of the
shares of Parent Common Stock entitled to vote thereon at the Parent Stockholder
Meeting.
(b) Stock Exchange Listings. The shares of Parent Common Stock issuable in
accordance with the Merger, upon exercise of the Substitute Options and as
contemplated by certain of the agreements referenced in the third recital clause
hereof shall have been authorized for listing on the NYSE, subject to official
notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals of, or
filings with, or terminations or expirations of waiting periods imposed by, any
Governmental Entity, which the failure to obtain, make or occur would have the
effect of making the Merger or any of the transactions contemplated hereby
illegal or would have a Material Adverse Effect on Parent or the Company (as the
Surviving Corporation), assuming the Merger had taken place, shall have been
obtained, shall have been made or shall have occurred.
(d) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated
or, to the knowledge of Parent or the Company, threatened by the SEC. All
necessary state securities authorizations (including State Takeover Approvals)
shall have been received.
(e) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger or any of the transactions contemplated hereby illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Parent
shall have performed in all respects its covenant in Section 5.16 and Parent and
Sub shall have performed in all material respects each of its other agreements
contained in this Agreement required to be performed at or prior to the
Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct at and as of the Effective Time as if made at and as of the Effective
Time and each of such representations and warranties that is not so qualified
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of the Effective Time, in each case except as
contemplated or permitted by this Agreement; and the Company shall have received
a certificate signed on behalf of Parent by its Chief Executive Officer and its
Chief Financial Officer to such effect.
(b) Tax Opinion. The Company shall have received an opinion of Skadden,
Arps, Slate, Meagher & Flom, in form and substance reasonably satisfactory to
the Company, dated the Effective Time, substantially
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to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing as
of the Effective Time, for federal income tax purposes:
(i) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be
a party to such reorganization within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) No gain or loss will be recognized by the shareholders of the
Company upon the exchange of their Company Common Shares solely for shares
of Parent Common Stock pursuant to the Merger, except with respect to cash,
if any, received in lieu of fractional shares of Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent Common Stock
received solely in exchange for Company Common Shares pursuant to the
Merger (including fractional shares of Parent Common Stock for which cash
is received) will be the same as the aggregate tax basis of the Company
Common Shares exchanged therefor;
(v) The holding period for shares of Parent Common Stock received in
exchange for Company Common Shares pursuant to the Merger will include the
holding period of the Company Common Shares exchanged therefor, provided
such Company Common Shares were held as capital assets by the shareholder
at the Effective Time; and
(vi) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's tax basis in such
fractional share (as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom may receive and
rely upon representations contained in a certificate of the Company
substantially in the form of the Company Tax Certificate attached to the Company
Letter, a certificate of Parent substantially in the form of the Parent Tax
Certificate attached to the Parent Letter and other appropriate certificates of
the Company, Parent and others.
(c) Opinion of O. George Everbach. The Company shall have received an
opinion from O. George Everbach, Senior Vice President -- Law and Government
Affairs of Parent, dated the Effective Time, substantially to the effect that:
(i) The incorporation, existence and good standing in their respective
jurisdictions of incorporation of Parent and Sub are as stated in the first
sentence of Section 2.1; the authorized shares of capital stock of Parent
are as stated in the first sentence of Section 2.2; and all outstanding
shares of Parent Common Stock have been duly and validly authorized and
issued, are fully paid and nonassessable and have not been issued in
violation of any preemptive right of stockholders;
(ii) To the knowledge of such counsel, the execution and performance
by Parent and Sub of this Agreement will not violate, result in a breach of
or constitute a default under any material indenture, mortgage, evidence of
indebtedness, lease, agreement, instrument, law, rule, regulation,
judgment, order or decree to which Parent or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or
assets are bound;
(iii) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or other Governmental Entity which has
not been obtained is required on behalf of Parent or any of its
Subsidiaries for the consummation of the transactions contemplated by this
Agreement; and
(iv) The shares of Parent Common Stock being issued at the Effective
Time pursuant to this Agreement have been duly authorized and validly
issued and are fully paid and nonassessable.
In rendering such opinion, Mr. Everbach may rely as to matters of fact upon
the representations contained herein and in certificates of officers of Parent
and its Subsidiaries delivered to him and certificates of public officials. Such
opinion may state that it is limited to the General Corporation Law of the State
of Delaware and the federal laws of the United States of America.
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(d) Opinion of Sidley & Austin. The Company shall have received an opinion
of Sidley & Austin, dated the Effective Time, substantially to the effect that:
(i) Each of Parent and Sub has full corporate power and authority to
execute, deliver and perform this Agreement, and this Agreement has been
duly authorized, executed and delivered by Parent and Sub and (assuming its
due and valid authorization, execution and delivery by the Company and its
validity and binding effect upon the Company) constitutes the valid and
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws now or hereafter in effect relating to the
enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding
in equity or at law);
(ii) The execution and performance by Parent and Sub of this Agreement
will not violate the Restated Certificate of Incorporation or By-laws of
Parent or the Articles of Incorporation or By-laws of Sub;
(iii) The Registration Statement, as of its effective date, appeared
on its face to be appropriately responsive in all material respects to the
requirements of the Securities Act, except that such counsel (i) need
express no opinion as to the financial statements, schedules and other
financial and statistical data included or incorporated by reference
therein or the Exhibits to the Registration Statement and (ii) need not
assume any responsibility (except as otherwise expressly set forth in such
opinion) for the accuracy of the statements contained in the Registration
Statement; and
(iv) In the course of the preparation of the Registration Statement
and the Joint Proxy Statement, such counsel has considered the information
set forth therein in light of the matters required to be set forth therein,
and has participated in conferences with officers and representatives of
the Company and Parent, including their respective counsel and independent
public accountants, during the course of which the contents of the
Registration Statement and the Joint Proxy Statement and related matters
were discussed; such counsel has not independently checked the accuracy or
completeness of, or otherwise verified, and accordingly is not passing
upon, and does not assume responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Joint Proxy Statement; such counsel has relied as to materiality, to a
large extent, upon the judgment of officers and representatives of the
Company and Parent; however, as a result of such consideration and
participation, no facts have come to such counsel's attention that have led
such counsel to believe that the Registration Statement (other than the
financial statements, schedules and other financial and statistical data
included or incorporated by reference therein, the Exhibits thereto and
information relating to or supplied by the Company, as to which such
counsel need express no belief), at the time it became effective, contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Joint Proxy Statement (other than the
financial statements, schedules and other financial and statistical data
included or incorporated by reference therein, and information relating to
or supplied by the Company, as to which such counsel need express no
belief), at the time the Registration Statement became effective and at the
time of the Stockholder Meetings, included any untrue statement of a
material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
In rendering such opinion, Sidley & Austin may rely as to matters of fact
upon the representations contained herein and in certificates of officers of
Parent and its Subsidiaries delivered to such counsel and certificates of public
officials. Such opinion may state that it is limited to the General Corporation
Law of the State of Delaware, the laws of the State of New York and the federal
laws of the United States of America and that, insofar as the laws of the
Commonwealth of Pennsylvania are applicable, such counsel has relied upon the
opinion of Dechert Price & Rhoads delivered to the Company pursuant to Section
6.2(e).
(e) Opinion of Dechert Price & Rhoads. The Company shall have received an
opinion from Dechert Price & Rhoads, dated the Effective Time, substantially to
the effect that: (i) Sub has full corporate power
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<PAGE> 38
and authority to execute, deliver and perform this Agreement; (ii) this
Agreement has been duly authorized, executed and delivered by Parent and Sub and
(assuming its due and valid authorization, execution and delivery by the Company
and its validity and binding effect upon the Company) constitutes the valid and
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law);
and (iii) the Merger has been duly consummated and become effective in
accordance with the PBCL. In rendering such opinion, Dechert Price & Rhoads may
rely as to matters of fact upon the representations contained herein and in
certificates of officers of Parent and its Subsidiaries delivered to such
counsel and certificates of public officials. Such opinion may state that it is
limited to the laws of the Commonwealth of Pennsylvania.
(f) Consents Under Agreements. Parent shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, lease or other agreement or instrument, except where the failure
to obtain the same would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Parent or upon the consummation
of the transactions contemplated hereby.
(g) Parent Affiliate Agreements. The Company shall have received the
written agreements from the Parent Rule 145 Affiliates described in Section
5.5(b).
(h) Accounting. The Company shall have received an opinion of Coopers &
Lybrand L.L.P., in form and substance reasonably satisfactory to the Company,
that, based on such procedures as were deemed relevant, the Merger will qualify
as a pooling of interests under generally accepted accounting principles.
(i) Litigation. There shall not have been instituted or be pending, or
threatened, any suit, action or proceeding by any Governmental Entity as a
result of this Agreement or any of the transactions contemplated hereby which,
if such Governmental Entity were to prevail, would reasonably be expected to
have a Material Adverse Effect on Parent or the Company (as the Surviving
Corporation).
(j) Material Adverse Change. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to Parent; and the Company
shall have received a certificate signed on behalf of Parent by its Chief
Executive Officer and its Chief Financial Officer to such effect.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligation of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The Company
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed at or prior to the Effective Time,
each of the representations and warranties of the Company contained in this
Agreement that is qualified by materiality shall be true and correct at and as
of the Effective Time as if made at and as of the Effective Time and each of
such representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made at
and as of the Effective Time, in each case except as contemplated or permitted
by this Agreement; and Parent shall have received a certificate signed on behalf
of the Company by its Chief Executive Officer and its Chief Financial Officer to
such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley & Austin,
in form and substance reasonably satisfactory to Parent, dated the Effective
Time, substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time, for federal income tax purposes:
(i) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will each be
a party to such reorganization within the meaning of Section 368(b) of the
Code;
34
<PAGE> 39
(ii) No gain or loss will be recognized by Parent or the Company as a
result of the Merger;
(iii) No gain or loss will be recognized by the shareholders of the
Company upon the exchange of their Company Common Shares solely for shares
of Parent Common Stock pursuant to the Merger, except with respect to cash,
if any, received in lieu of fractional shares of Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent Common Stock
received solely in exchange for Company Common Shares pursuant to the
Merger (including fractional shares of Parent Common Stock for which cash
is received) will be the same as the aggregate tax basis of the Company
Common Shares exchanged therefor;
(v) The holding period for shares of Parent Common Stock received in
exchange for Company Common Shares pursuant to the Merger will include the
holding period of the Company Common Shares exchanged therefor, provided
such Company Common Shares were held as capital assets by the shareholder
at the Effective Time; and
(vi) A shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's tax basis in such
fractional share (as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations contained in a certificate of Parent substantially in the form
of the Parent Tax Certificate attached to the Parent Letter, a certificate of
the Company substantially in the form of the Company Tax Certificate attached to
the Company Letter and other appropriate certificates of the Company, Parent and
others.
(c) Opinion of John P. Murtagh. Parent shall have received an opinion from
John P. Murtagh, Senior Vice President and General Counsel of the Company, dated
the Effective Time, substantially to the effect that:
(i) all outstanding Company Common Shares have been duly and validly
authorized and issued, are fully paid and nonassessable and have not been
issued in violation of any preemptive right of shareholders;
(ii) The Company has full corporate power and authority to execute,
deliver and perform this Agreement;
(iii) The execution and performance by the Company of this Agreement
will not violate the charter or organization documents or by-laws of any of
its Subsidiaries;
(iv) To the knowledge of such counsel, the execution and performance
by the Company of this Agreement will not violate, result in a breach of or
constitute a default under any material indenture, mortgage, evidence of
indebtedness, lease, agreement, instrument, law, rule, regulation,
judgment, order or decree to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their respective properties or
assets are bound; and
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or other Governmental Entity which has
not been obtained is required on behalf of the Company or any of its
Subsidiaries for consummation of the transactions contemplated by this
Agreement.
In rendering such opinion, Mr. Murtagh may rely as to matters of fact upon
the representations contained herein and in certificates of officers of the
Company and its Subsidiaries delivered to him and certificates of public
officials. Such opinion may state that is limited to the laws of the
Commonwealth of Pennsylvania and the federal laws of the United States of
America and that, insofar as the laws of the Commonwealth of Pennsylvania are
applicable, Mr. Murtagh has relied upon the opinion of Morgan, Lewis & Bockius
delivered to Parent pursuant to Section 6.3(e).
(d) Opinion of Skadden, Arps, Slate, Meagher & Flom. Parent shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom, dated the Effective
Time, substantially to the effect that:
(i) This Agreement has been duly authorized, executed and delivered by
the Company and (assuming its due and valid authorization, execution and
delivery by each of Parent and Sub and its
35
<PAGE> 40
validity and binding effect upon each of Parent and Sub) constitutes the
valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights generally and by the
effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law);
(ii) The Registration Statement, as of its effective date, appeared on
its face to be appropriately responsive in all material respects to the
requirements of the Securities Act, except that such counsel (i) need
express no opinion as to the financial statements, schedules and other
financial and statistical data included or incorporated by reference
therein or the Exhibits to the Registration Statement and (ii) need not
assume any responsibility (except as otherwise expressly set forth in such
opinion) for the accuracy of the statements contained in the Registration
Statement; and
(iii) In the course of the preparation of the Registration Statement
and the Joint Proxy Statement, such counsel has participated in conferences
with officers and representatives of the Company and Parent, including
their respective counsel and independent public accountants, during the
course of which the contents of the Registration Statement and the Joint
Proxy Statement and related matters were discussed; such counsel has not
independently checked the accuracy or completeness of, or otherwise
verified, and accordingly is not passing upon, and does not assume
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Joint Proxy
Statement; such counsel has relied as to materiality, to a large extent,
upon the judgment of officers and representatives of the Company and
Parent; however, as a result of such consideration and participation, on
the basis of the foregoing, no facts have come to such counsel's attention
that have led such counsel to believe that the Registration Statement
(other than the financial statements, schedules and other financial and
statistical data included therein, the Exhibits thereto and information
relating to or supplied by Parent, as to which such counsel need express no
belief), at the time it became effective, contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Joint Proxy Statement (other than the financial statements, schedules
and other financial and statistical data included or incorporated by
reference therein, and information relating to or supplied by Parent, as to
which such counsel need express no belief), at the time the Registration
Statement became effective and at the time of the Stockholder Meetings,
included any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom may rely as
to matters of fact upon the representations contained herein and in certificates
of officers of the Company and its Subsidiaries delivered to such counsel and
certificates of public officials. Such opinion may state that it is limited to
the General Corporation Law of the State of Delaware, the laws of the State of
New York and the federal laws of the United States of America and that, insofar
as the laws of the Commonwealth of Pennsylvania are applicable, such counsel has
relied upon the opinion of Morgan, Lewis & Bockius delivered to Parent pursuant
to Section 6.3(e).
(e) Opinion of Morgan, Lewis & Bockius. Parent shall have received an
opinion from Morgan, Lewis & Bockius, dated the Effective Time, substantially to
the effect that: (i) the incorporation, existence and good standing in its
jurisdiction of incorporation of the Company are as stated in the first sentence
of Section 3.1; and the authorized shares of capital stock of the Company are as
stated in the first sentence of Section 3.2; (ii) the Company has full corporate
power and authority to execute, deliver and perform this Agreement; (iii) the
execution and performance by the Company of this Agreement will not violate the
Articles of Incorporation or By-laws of the Company; (iv) this Agreement has
been duly authorized, executed and delivered by the Company and (assuming its
due and valid authorization, execution and delivery by each of Parent and Sub
and its validity and binding effect upon each of Parent and Sub) constitutes the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
36
<PAGE> 41
transfer or other similar laws now or hereafter in effect relating to the
enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and (v) the Merger has been duly consummated and become
effective in accordance with the PBCL. In rendering such opinion, Morgan, Lewis
& Bockius may rely as to matters of fact upon the representations contained
herein and in certificates of officers of the Company and its Subsidiaries
delivered to such counsel and certificates of public officials. Such opinion may
state that it is limited to the laws of the Commonwealth of Pennsylvania.
(f) Consents Under Agreements. The Company shall have obtained the consent
or approval of each person (other than the Governmental Entities referred to in
Section 6.1(c)) whose consent or approval shall be required in connection with
the transactions contemplated hereby under any indenture, mortgage, evidence of
indebtedness, lease or other agreement or instrument, except where the failure
to obtain the same would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company or Parent or upon
the consummation of the transactions contemplated hereby.
(g) Company Affiliate Agreements. Parent shall have received the written
agreements from the Company Rule 145 Affiliates described in Section 5.5(a).
(h) Redemption. The Company shall have redeemed the Company Senior
Preferred Shares.
(i) Litigation. There shall not have been instituted or be pending, or
threatened, any suit, action or proceeding by any Governmental Entity as a
result of this Agreement or any of the transactions contemplated hereby which,
if such Governmental Entity were to prevail, would reasonably be expected to
have a Material Adverse Effect on Parent or the Company (as the Surviving
Corporation).
(i) Certain Agreements. Parent shall have been satisfied, in its sole and
absolute discretion, that the agreements identified in Section 3.14 of the
Company Letter will not impair its ability to conduct its businesses following
the Effective Time.
(j) Accounting. Parent shall have received an opinion of Deloitte & Touche
LLP, in form and substance reasonably satisfactory to Parent, that, based on
such procedures as were deemed relevant, the Merger will qualify as a pooling of
interests under generally accepted accounting principles.
(k) Material Adverse Change. Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to the Company; and Parent
shall have received a certificate signed on behalf of the Company by its Chief
Executive Officer and its Chief Financial Officer to such effect.
ARTICLE VII
TERMINATION; AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval by the
stockholders of Parent or the Company of the matters presented in connection
with the Merger:
(a) by mutual written consent of Parent and the Company;
(b) by Parent if (i) the Company shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within five
business days after receipt by the Company of notice of such failure to
comply, (ii) the shareholders of the Company shall not approve the Merger
at the Company Stockholder Meeting or any adjournment thereof or (iii) the
stockholders of Parent shall not approve the Parent Share Issuance at the
Parent Stockholder Meeting or any adjournment thereof;
(c) by the Company if (i) Parent or Sub shall have failed to comply in
any material respect with any of its respective covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within five
business days
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<PAGE> 42
after receipt by Parent of notice of such failure to comply, (ii) the
shareholders of the Company shall not approve the Merger at the Company
Stockholder Meeting or any adjournment thereof or (iii) the stockholders of
Parent shall not approve the Parent Share Issuance at the Parent
Stockholder Meeting or any adjournment thereof;
(d) by either Parent or the Company if there has been (i) a material
breach by the other (or Sub if the Company is the terminating party) of any
representation or warranty that is not qualified as to materiality or (ii)
a breach by the other (or Sub if the Company is the terminating party) of
any representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five business days after
receipt by the breaching party of notice of the breach;
(e) by either Parent or the Company if: (i) the Merger has not been
effected on or prior to the close of business on March 31, 1996; provided,
however, that the right to terminate this Agreement pursuant to this clause
(e) shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, the
failure of the Merger to have occurred on or prior to such date; or (ii)
any court or other Governmental Entity having jurisdiction over a party
hereto shall have issued an order, decree or ruling or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable;
(f) by either Parent or the Company if the Board of Directors of the
Company shall reasonably determine that a Takeover Proposal constitutes a
Superior Proposal; provided, however, that the Company may not terminate
this Agreement pursuant to this clause (f) unless (i) 10 business days
shall have elapsed after delivery to Parent of a written notice of such
determination by such Board of Directors and during such 10 business-day
period the Company shall have fully cooperated with Parent, including,
without limitation, informing Parent of the terms and conditions of such
Takeover Proposal and the identity of the person or group making such
Takeover Proposal, with the intent of enabling Parent to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, and (ii) at the end of
such 10 business-day period such Board of Directors shall continue
reasonably to believe that such Takeover Proposal constitutes a Superior
Proposal and promptly thereafter the Company shall enter into a definitive
acquisition, merger or similar agreement to effect such Superior Proposal;
(g) by Parent if the Board of Directors of the Company shall not have
recommended the Merger to the Company's shareholders, or shall have
resolved not to make such recommendation, or shall have modified or
rescinded its recommendation of the Merger to the Company's shareholders as
being advisable and fair to and in the best interests of the Company and
its shareholders, or shall have modified or rescinded its approval of this
Agreement, or shall have resolved to do any of the foregoing;
(h) by the Company if the Board of Directors of Parent shall not have
recommended the Parent Share Issuance to Parent's stockholders, or shall
have resolved not to make such recommendation, or shall have modified or
rescinded its recommendation of the Parent Share Issuance to Parent's
stockholders as being advisable and fair to and in the best interests of
Parent and its stockholders, or shall have modified or rescinded its
approval of this Agreement, or shall have resolved to do any of the
foregoing; or
(i) by Parent if the Company shall breach any of its covenants or
agreements in Section 4.2.
The right of Parent or the Company to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of such party, whether prior to or
after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement by either Parent or the Company as provided in Section 7.1, this
Agreement shall forthwith become void without any liability hereunder on the
part of the Company, Parent, Sub or their respective directors or officers,
except for the last sentence of Section 5.4 and the entirety of Section 5.7,
which shall survive any such termination; provided,
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<PAGE> 43
however, that nothing contained in this Section 7.2 shall relieve any party
hereto from any liability for any breach of this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval by the stockholders of Parent and the
Company of the matters presented to them in connection with the Merger;
provided, however, that after any such approval, no amendment shall be made if
applicable law would require further approval by such stockholders, unless such
further approval shall be obtained. This Agreement shall not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any instrument delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of any party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall survive the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the other parties hereto at the following
addresses (or at such other address for any party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Kimberly-Clark Corporation
351 Phelps Drive
Irving, Texas 75038
Attention: O. George Everbach,
Senior Vice President --
Law and Government Affairs
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole and
Joseph S. Ehrman
39
<PAGE> 44
(b) if to the Company, to
Scott Paper Company
Scott Center
2650 North Military Trail
Suite 300
Boca Raton, Florida 33431
Attention: John P. Murtagh,
Senior Vice President and
General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-3987
Attention: Blaine V. Fogg
Section 8.3 Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each of the parties hereto and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, except as provided in the last sentence of Section 5.4, constitute
the entire agreement of the parties hereto and supersede all prior agreements
and understandings, both written and oral, among such parties with respect to
the subject matter hereof. This Agreement, except for the provisions of Section
5.13, is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.6 Governing Law. Except to the extent that the laws of the
Commonwealth of Pennsylvania are mandatorily applicable to the Merger, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws of such state.
Section 8.7 Assignment. Except as provided in the last sentence of Section
1.1, 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.
Section 8.8 Severability. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party hereto. Upon any determination that any term or
other provision hereof is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of such parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the terms or provisions
of this Agreement were not performed in accordance with their specific wording
or were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States of America or any state having
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<PAGE> 45
jurisdiction, such remedy being in addition to any other remedy to which any
party may be entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed and attested by their respective officers thereunto duly
authorized, all as of the date first written above.
KIMBERLY-CLARK CORPORATION
By: /s/ WAYNE R. SANDERS
----------------------------
Name: Wayne R. Sanders
Title: Chairman of the Board
and Chief Executive Officer
(Corporate Seal)
Attest: /s/ DONALD M. CROOK
------------------------
Name: Donald M. Crook
Title: Secretary
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RIFLE MERGER CO.
By: /s/ JOHN W. DONEHOWER
-------------------------
Name: John W. Donehower
Title: Vice President
(Corporate Seal)
Attest: /s/ O. GEORGE EVERBACH
--------------------------
Name: O. George Everbach
Title: Secretary
SCOTT PAPER COMPANY
By: /s/ ALBERT J. DUNLAP
--------------------------
Name: Albert J. Dunlap
Title: Chairman and Chief
Executive Officer
(Corporate Seal)
Attest: /s/ JOHN P. MURTAGH
------------------------------------
Name: John P. Murtagh
Title: Senior Vice President and
General Counsel
42
<PAGE> 1
<TABLE>
<S> <C>
KIMBERLY-CLARK CORPORATION SCOTT PAPER COMPANY
DALLAS, TEXAS BOCA RATON, FLORIDA
CONTACT: Tina Barry CONTACT: Peter Judice
Kimberly-Clark Burson-Marsteller
(214) 281-1484 (212) 614-4506
</TABLE>
FOR IMMEDIATE RELEASE:
KIMBERLY-CLARK AND SCOTT PAPER TO MERGE IN TAX-FREE SWAP PRESENTLY VALUED AT
$6.8 BILLION
CREATING SECOND LARGEST U.S. HOUSEHOLD AND PERSONAL CARE PRODUCTS COMPANY AND
WORLD'S LEADING TISSUE MANUFACTURER
DALLAS and BOCA RATON, July 17, 1995 -- Kimberly-Clark Corporation (KMB)
and Scott Paper Company (SPP) today announced they have signed a definitive
merger agreement that will create a global consumer products company with $11
billion in revenues. The combined company, which will operate under the
Kimberly-Clark name, will be the second largest household and personal care
products company in the U.S. and the world's leading tissue manufacturer.
Under the agreement, Scott shareholders will receive .765 shares of
Kimberly-Clark common stock for each share of Scott's common stock, for a total
value of $6.8 billion at the closing price on July 14. As a result, the combined
company would have a total stock market value of $16.2 billion, with Scott
shareholders owning 42 percent and Kimberly-Clark shareholders owning 58
percent.
The negotiated exchange ratio is based on the relative value of the
companies' shares in recent weeks. The companies said the ratio is subject to an
upward adjustment of .015 shares, to .780 Kimberly-Clark shares, if the record
date for Kimberly-Clark's previously announced spin-off of its tobacco papers
business precedes the merger.
The merger agreement has been unanimously approved by the boards of
directors of both companies. Wayne R. Sanders, chairman and chief executive
officer of Kimberly-Clark, will hold the same positions in the combined company.
Albert J. Dunlap, chairman and chief executive officer of Scott, will serve as
an advisor to Kimberly-Clark's board, which will be expanded to 15 members by
the addition of three Scott directors.
The transaction is intended to qualify as a tax-free reorganization and to
be accounted for as a pooling of interests. The merger is expected to be
completed in late 1995 and is subject to certain conditions, including
regulatory clearances and approval by the shareholders of both companies.
The combined company will offer a diversified product line with such
well-known brands as Kleenex, Scott, Cottonelle, Viva, Huggies, Kotex and
Depend. The merger will bring together Kimberly-Clark's competitive strengths in
facial tissue and industrial wipes with Scott's prowess in consumer bathroom
tissue, household towels and away-from-home tissue-based products and systems.
Worldwide, the two companies' operations are also highly complementary.
"Together, the companies will be positioned to achieve strong sales and
earnings growth, realize major cost efficiencies and compete even more
effectively on a global basis," Mr. Sanders said. "The combination also will
significantly strengthen Kimberly-Clark's global distribution channels for
personal care products, especially in Europe, and will improve market access for
Scott's consumer brands in the U.S. and elsewhere."
Mr. Dunlap said, "This is an important day for Scott shareholders. The
dramatic changes made at Scott in just over a year have improved shareholder
value by almost $4.5 billion. This consolidation will further increase
shareholder value when we realize the synergies and cost savings we expect. It's
a merger of equals that will combine the complementary strengths of two
exceptional companies to create an even stronger company that will be a leader
in its industry."
<PAGE> 2
In addition to creating growth opportunities, the merger is expected to
generate immediate cost savings estimated to grow to nearly $400 million
annually by the end of 1998. The combined company expects to reduce expenses and
increase efficiency by eliminating redundant overhead costs, consolidating
workforces and streamlining manufacturing facilities.
To cover the costs of implementing these plans, the combined company will
take a one-time charge in an amount yet to be determined in the quarter the
merger is completed. Excluding the charge, Kimberly-Clark expects to meet its
stated objective of earnings per share growth of at least 10 percent this year,
and Scott expects to post continued strong earnings improvement over 1994.
To complete the merger, Kimberly-Clark, which currently has 160.4 million
shares outstanding, would issue 116.0 million new shares in exchange for Scott's
151.6 million shares currently outstanding. The combined company would then have
a total of 276.4 million shares outstanding.
Scott currently pays a quarterly cash dividend of 10 cents per share.
Kimberly-Clark currently pays a quarterly cash dividend of 45 cents per share,
which will be the continuing dividend of the combined company.
Kimberly-Clark, with 1994 consolidated sales of $7.4 billion, is a
manufacturer of household, personal care and health care products, as well as
newsprint and premium business, correspondence and specialty papers. The company
has manufacturing operations in 27 countries and sells its products in more than
150 countries. Its well-known consumer products include Huggies diapers, Huggies
Pull-Ups training pants, Pull-Ups GoodNites underpants, Huggies baby wipes,
Kleenex facial tissue, Kleenex premium bathroom tissue, Kotex and New Freedom
feminine care products, Hi-Dri household towels and Depend and Poise
incontinence care products.
Scott Paper Company, with 1994 revenues from consolidated operations of
$3.6 billion, is the world's largest producer of sanitary tissue products. It
has operations in 22 countries and sells its consumer and commercial products in
80 countries. Familiar brand names include Scott and Cottonelle bathroom tissue,
Scott and Viva towels, Scotties facial tissue, Scott and Viva napkins, plus Baby
Fresh and Wash-a-bye Baby baby wipes.
<PAGE> 1
Exhibit 99.3
FOR RELEASE: IMMEDIATE
CONTACT: Pete Judice -- (212) 614-4506
SCOTT PAPER COMPANY AND KIMBERLY-CLARK MERGER
AGREEMENT HAILED BY SCOTT CHAIRMAN & CEO DUNLAP
BOCA RATON, FL, July 17, 1995 -- Scott Paper Company Chairman and CEO Albert J.
Dunlap, in public remarks, hailed the prospective combination between Scott and
Kimberly-Clark as "the natural evolution for increasing shareholder value into
the future following Scott's transformation from a paper company to a consumer
products company." Dunlap's comments were made in conjunction with today's
announcement of the merger agreement by the two companies which will create a
global consumer products company with $11 billion in revenues and a leader in
tissue markets in North America, Europe, and Asia.
Under the agreement, which is intended to qualify as a tax-free reorganization,
Scott shareholders will receive .765 shares of Kimberly-Clark common stock for
each share of Scott common stock. The transaction is valued at $6.8 billion at
today's prices. It is expected to be completed in the fourth quarter of 1995
and is subject to certain conditions, including regulatory clearances and
approval by the shareholders of both companies.
In April, 1994, Dunlap became the first outsider to head Scott in the Company's
115-year history. Under his leadership, dramatic changes were made,
transforming Scott from a paper company to a fast-moving consumer products
company. "My entire focus from the first day I joined Scott has been to
significantly increase shareholder value," said Dunlap. "What we have
accomplished at Scott in just fifteen month's time will likely be viewed as one
of the most remarkable turnarounds in the annals of corporate America."
<PAGE> 2
Through a comprehensive four-part program, Dunlap refocused Scott on its core
tissue business, installed a new management team and implemented a massive
global restructuring program including the sale of nonstrategic assets. The
proceeds from asset sales have totaled over $2.2 billion to date and have
provided Scott with resources to further invest in its core business and
strengthen its balance sheet, reducing debt by approximately $1.5 billion. The
restructuring program, which was completed by the end of 1994, is yielding
annual savings of nearly $350 million.
According to Dunlap, the key element of the program was to develop the
strategies to build the Company's global tissue business. "We have revitalized
Scott's business with over 100 new product initiatives in 1995 alone in our
Consumer and Away-From-Home markets around the world," he said. "We have
expanded globally in new markets with excellent growth potential, including
China, Indonesia and India, where Scott is the first international tissue
company to have a presence. Further, we are building our business in Mexico
and the U.S. with new, low-cost, state-of-the-art tissue machines and recycled
fiber facilities."
Scott's earnings have risen steadily over the last year. First quarter 1995
earnings of $0.64 per share set a second consecutive quarterly record.
Currently, Scott stock is selling at more than 2 1/2 times higher than when
Dunlap took over. During that time, the value of the Company has increased by
almost $4.5 billion.
Dunlap said, "We have evaluated long and hard the best way to continue to
significantly increase shareholder value. I truly believe that the Scott and
Kimberly-Clark combination will prove to be a quantum leap and represents the
best route for realizing Scott's full potential. This next step is for Scott
to join with another leading company with the objective of creating the finest
consumer products company in the world. There is a superb fit of the
companies' businesses, which we expect will magnify the best parts of both
companies, create many synergies and significant cost savings, and improve
access to our markets around the world."
Dunlap added, "I am proud of the improvements at Scott and the tremendous value
which has been created for
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<PAGE> 3
Scott's shareholders under my leadership. These accomplishments have set the
stage for the future. I am even more excited about what that future holds for
Scott and Kimberly-Clark together, which is why I intend to retain an ownership
position in this great new company."
The merger agreement has been approved by the boards of directors of both
companies. It provides for Dunlap to serve as an advisor to the combined
entity's board, which will be expanded to 15 members by the addition of three
Scott directors.
Salomon Brothers Inc represented Scott on this transaction.
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<PAGE> 1
Exhibit 99.4
AMENDMENT NO. 3 TO RIGHTS AGREEMENT
This Amendment (the "Amendment"), dated as of July 16, 1995,
is entered into by and between Scott Paper Company, a Pennsylvania corporation
(the "Company"), and First Chicago Trust Company of New York, a New York
corporation, as successor to Morgan Guaranty Trust Company of New York, as
Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent have entered into a
Rights Agreement, dated as of July 15, 1986 (the "Agreement");
WHEREAS, the Company wishes to amend the Agreement; and
WHEREAS, Section 26 of the Agreement provides, among other
things, that prior to the Distribution Date (as such term is defined in the
Agreement) the Company may and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of the Agreement without the
approval of any holders of certificates representing the Company's Common
Shares.
NOW, THEREFORE, the Company and the Rights Agent hereby amend
the Agreement as follows:
1. Amendment of Section 1(c). Section 1(c) of the Agreement
is amended to add the following sentence to the end thereof:
Notwithstanding anything in this Agreement to the contrary,
neither Kimberly-Clark Corporation ("K-C") nor any subsidiary of K-C
(any such subsidiary being referred to herein as "Merger Co.")
established to effect the Merger (as defined herein) shall, as a
result of the execution, delivery and performance under, or
consummation of the transaction contemplated by, that certain
Agreement and Plan of Merger, of even date herewith, as the same may
be amended from time to time, by and among the Company, Merger Co. and
K-C (the "Merger Agreement"), pursuant to which Merger Co. will be
merged
<PAGE> 2
(the "Merger") with and into the Company, be the "Beneficial Owner"
of, or "beneficially own," any securities which either K-C or Merger
Co. or any of their respective Affiliates may acquire or have the
right to acquire pursuant to the Merger Agreement.
2. Amendment of Section 3(a). Section 3(a) of the Agreement
is amended to add the following sentence to the end thereof:
Notwithstanding anything in this Agreement to the contrary, a
Distribution Date will not occur as a re- sult of the execution of the
Merger Agreement or the conversion of the Common Shares of the Company
into common shares of K-C pursuant to the terms of the Merger
Agreement unless and until the Board of Directors of the Com- pany
adopts a resolution affirmatively stating that the Distribution Date
shall occur on a date set forth in such resolution, and the
Distribution Date shall thereafter be deemed to have occurred as of
such date.
3. Amendment to Section 7(a). Section 7(a) of the Agreement
is hereby amended in its entirety to read as follows:
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except
as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section
11(a)(iii) and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the
principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with
respect to the total number of one one-hundredths of a share (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest
of (i) the close of business on July 25, 1996 (the "Final Expiration
Date"), (ii) the consummation of a transaction contemplated by Section
13(d) hereof, (iii) the time
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<PAGE> 3
at which the Rights are redeemed as provided in Section 23 hereof or
(iv) immediately prior to the Effective Time (as such term is defined
in the Merger Agreement) (the earlier of (i), (ii), (iii) and (iv)
being herein referred to as the "Expiration Date"), provided, however,
that if the Merger contemplated by the Merger Agreement does not occur
and the Merger Agreement is terminated, the Rights will remain
exercisable until the earlier of (i), (ii) or (iii) above, and no
Expiration Date shall be deemed to have occurred as a result of clause
(iv) of this Section 7(a).
4. Effect of Amendment. Except as set forth above, the
Rights Agreement shall continue in full force and effect.
5. Counterparts. This Amendment may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested as of the day and year first above
written.
SCOTT PAPER COMPANY
By: /s/ John P. Murtagh
Name: John P. Murtagh
Title: Senior Vice President,
General Counsel and Secretary
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By: /s/ Joanne Gorostiola
Name: Joanne Gorostiola
Title: Assistant Vice President
4
