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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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NIMBUS CD INTERNATIONAL, INC.
(Name of Subject Company)
NIMBUS CD INTERNATIONAL, INC.
(Name of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
65439010
(CUSIP Number of Class of Securities)
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LYNDON J. FAULKNER
PRESIDENT
NIMBUS CD INTERNATIONAL, INC.
623 WELSH RUN ROAD
GUILDFORD FARM
RUCKERSVILLE, VIRGINIA 22968
(804) 985-1100
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement)
WITH A COPY TO:
WILLIAM F. WYNNE, JR., ESQ.
WHITE & CASE LLP
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 819-8200
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Nimbus CD International, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968.
The title of the class of equity securities to which this statement relates is
the Company's common stock, par value $.01 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") made by Neptune
Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly owned
subsidiary of Carlton Communications Plc ("Parent"), a public limited company
organized under the laws of England, disclosed in a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") dated June 23, 1998, to purchase all of
the outstanding Shares at a price of $11.50 per Share, net to the seller in cash
without interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 23, 1998 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer Documents").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 16, 1998, by and among the Company, Purchaser and Parent (the "Merger
Agreement"), which provides for the making of the Offer by Purchaser, subject to
the conditions and upon the terms of the Merger Agreement, and for the
subsequent merger of Purchaser with and into the Company (the "Merger").
Concurrently with the execution of the Merger Agreement, Purchaser and
Parent entered into an agreement (the "Stockholders Agreement") with certain
stockholders (the "Selling Stockholders") of the Company. As of the date hereof,
the Selling Stockholders own, in the aggregate, 9,373,322 Shares (the
"Stockholder Shares"), representing approximately 44% of the outstanding Shares.
Pursuant to the Stockholders Agreement, the Selling Stockholders have each
agreed to validly tender (and not to withdraw) all of the Shares currently owned
or hereafter acquired by each of them prior to the termination of the Merger
Agreement, at a price of $11.50 per Share pursuant to and in accordance with the
Offer. Pursuant to the Stockholders Agreement, the Selling Stockholders have
agreed to pay to Purchaser any consideration in excess of $11.50 per Share which
they receive in respect of the Stockholder Shares.
According to the Schedule 14D-1, the principal executive offices of Parent
are located at 25 Knightsbridge, London SW1X 7RZ, England, and the principal
offices of Purchaser are located at Brandywine Corporate Center, 650 Naamans
Road, Suite 117, Claymont, Delaware 19703.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b) or described in the Company's
Information Statement (the "Information Statement") pursuant to Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder, which is annexed hereto as Annex A and incorporated herein by
reference in its entirety, to the knowledge of the Company, as of the date
hereof, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company, its executive officers, directors
or affiliates or (ii) Parent or Purchaser or their respective executive
officers, directors or affiliates.
Certain contracts, agreements and understandings and any actual or potential
conflict of interest between the Company and its directors, executive officers
and affiliates or between the Company, Purchaser and Parent are set forth below:
(i) MERGER AGREEMENT. The following is a summary of the material terms
of the Merger Agreement. This summary is not a complete description of the terms
and conditions thereof and is qualified in its entirety by reference to the full
text thereof, which is incorporated herein by reference and a copy of which has
been filed with the Securities and Exchange Commission (the "SEC") as Exhibit 1
hereto.
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The Merger Agreement provides that as soon as practicable after the last of
the conditions set forth therein is fulfilled or waived (subject to applicable
law) but in no event later than the fifth business day thereafter, or on such
other date as Parent and the Company shall mutually agree, Purchaser shall be
merged with and into the Company. Upon consummation of the Merger (the
"Effective Time"), each issued and outstanding Share (other than (i) any Shares
which are held by any subsidiary of the Company or in the treasury of the
Company, or which are held, directly or indirectly, by Parent or any direct or
indirect subsidiary of Parent (including Purchaser), all of which shall be
canceled and none of which shall receive any payment with respect thereto and
(ii) Shares held by Dissenting Stockholders) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
represent the right to receive an amount, in cash, without interest, equal to
the price paid for each Share pursuant to the Offer (the "Merger
Consideration").
VOTE REQUIRED TO APPROVE MERGER. The Delaware General Corporation Law (the
"DGCL") requires, among other things, that the adoption of any plan of merger or
consolidation of the Company must be approved by the Board of Directors of the
Company and, if the "short form" merger procedure described below is not
available, adopted by the holders of a majority of the Company's outstanding
Shares. The Board of Directors of the Company has approved and adopted the
Merger Agreement and has approved the Offer and the Merger; consequently, the
only additional action of the Company that may be necessary to effect the Merger
is the approval and adoption of the Merger Agreement by such stockholders if the
"short form" merger procedure described below is not available. Under the DGCL,
the affirmative vote of holders of a majority of the outstanding Shares
(including any Shares owned by Purchaser) is generally required to adopt the
Merger Agreement. If Purchaser acquires, through the Offer or otherwise, voting
power with respect to at least a majority of the outstanding Shares (which would
be the case if the Minimum Condition were satisfied and Purchaser were to accept
for payment Shares tendered pursuant to the Offer), it would have sufficient
voting power to effect the Merger without the vote of any other stockholder of
the Company. However, the DGCL also provides that if a parent company owns at
least 90% of each class of stock of a subsidiary, the parent company can effect
a short-form merger with that subsidiary without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, Purchaser acquires or controls the voting power of at least 90% of
the outstanding Shares, Purchaser could effect the Merger using the "short-form"
merger procedures without prior notice to, or any action by, any other
stockholder of the Company. In such a case, the Company has agreed under the
Merger Agreement, subject to certain conditions thereof, at the request of
Parent and Purchaser to take all necessary and appropriate action to cause the
Merger to become effective, without a meeting of the Company's stockholders, in
accordance with Section 253 of the DGCL.
SECTION 203 OF THE DGCL. In general, Section 203 of the DGCL prevents an
"Interested Stockholder" (defined generally as a person with 15% or more of a
corporation's outstanding voting stock) of a Delaware corporation from engaging
in a "Business Combination" (defined as a variety of transactions, including
mergers, as set forth below) with such corporation for three years following the
date such person became an Interested Stockholder unless (i) before such person
became an Interested Stockholder, the Board of Directors of the corporation
approved the transaction in which the Interested Stockholder became an
Interested Stockholder or approved the Business Combination; (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock ownership plans that do not provide
employees with the rights to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer); or (iii)
following the transaction in which such person became an Interested Stockholder,
the Business Combination is approved by the Board of Directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the Interested Stockholder. However, Section 203 of the DGCL is
inapplicable to the Merger
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Agreement because the Company has elected in its certificate of incorporation
not to be governed by the provisions of Section 203.
CONDITIONS TO THE MERGER. The respective obligations of each party to
consummate the Merger are subject to the satisfaction or waiver (subject to
applicable law) at or prior to the Effective Time of the following conditions:
(a) to the extent required by applicable law, the Merger Agreement and the
Merger shall have been approved and adopted by holders of a majority of the
outstanding shares of the Common Stock of the Company entitled to vote in
accordance with applicable law (if required by applicable law) and the Company's
Certificate of Incorporation and By-Laws; (b) any waiting period (and any
extension thereof) under the HSR Act applicable to the Merger shall have expired
or been terminated; (c) no preliminary or permanent injunction or other order
shall have been issued by any court or by any governmental or regulatory agency,
body or authority which prohibits the consummation of the Offer or the Merger
and the transactions contemplated by the Merger Agreement and which is in effect
at the Effective Time; PROVIDED, HOWEVER, that, in the case of a decree,
injunction or other order, each of the parties shall have used reasonable best
efforts to prevent the entry of any such injunction or other order and to appeal
as promptly as possible any decree, injunction or other order that may be
entered; (d) no statute, rule, regulation, executive order, decree or order of
any kind shall have been enacted, entered, promulgated or enforced by any court
or governmental authority which prohibits the consummation of the Offer or the
Merger or has the effect of making the purchase of the Shares illegal; and (e)
there shall have been tendered (and not withdrawn) and Purchaser shall have
accepted for payment and paid for a number of Shares which represent a majority
of the total voting power of all shares of capital stock of the Company
outstanding on a fully diluted basis (the "Minimum Condition"); PROVIDED that
the foregoing clause (e) shall not be a condition to Parent's and Purchaser's
obligation to consummate the Merger if Purchaser's failure to purchase any
Shares violates the terms of the Offer.
TERMINATION OF THE MERGER AGREEMENT. According to its terms, the Merger
Agreement may be terminated and the transactions contemplated thereby may be
abandoned, at any time prior to the Effective Time, whether before or after
approval of the Merger by the Company's stockholders: (a) by mutual consent of
the Company, on the one hand, and of Parent and Purchaser, on the other hand;
(b) by either Parent and Purchaser, on the one hand, or the Company, on the
other hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, shares of
Common Stock pursuant to the Offer or the Merger and such order, decree or
ruling or other action shall have become final and nonappealable; (c) by Parent
and Purchaser, on the one hand, or the Company, on the other hand, if the
Effective Time shall not have occurred on or prior to September 30, 1998 (the
"Outside Date"), unless the Effective Time shall not have occurred on or prior
to the Outside Date because of a material breach of any representation,
warranty, obligation, covenant, agreement or condition set forth in the Merger
Agreement on the part of the party seeking to terminate the Merger Agreement;
(d) by Parent and Purchaser, if the Offer is terminated or expires in accordance
with its terms without Purchaser having purchased any Common Stock thereunder
due to an event or occurrence which would result in a failure to satisfy any of
the conditions set forth on Annex A to the Merger Agreement, unless any such
failure shall have been caused by or resulted from the failure of Parent or
Purchaser to perform in a material respect any covenant or agreement of either
of them contained in the Merger Agreement or the breach by Parent or Purchaser
in a material respect of any representation or warranty of either of them
contained in the Merger Agreement; (e) by Parent and Purchaser, in the event
that (A)(i) any one or more representations, warranties, covenants or agreements
of the Company contained in the Merger Agreement that is qualified as to
materiality shall be untrue, incorrect or breached in any respect except for
such failures as would not be reasonably likely to have a material adverse
effect on the Condition (as defined in the Merger Agreement) of the Company and
its subsidiaries taken as a whole or (ii) any one or more of such
representations, warranties, covenants or agreements that is not so qualified
shall be untrue incorrect or breached in any material respect which,
individually or in the aggregate, would be reasonably likely to have a material
adverse effect on the Condition of the Company and its subsidiaries taken as a
whole and,
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(B) in each case, cannot or has not been cured prior to the earlier of (i) 15
days after the giving of written notice of such breach to the Company and (ii)
two business days prior to the date on which the Offer expires; (f) by the
Company, if the Board of Directors of the Company determines that an Acquisition
Proposal constitutes a Superior Proposal and the Board of Directors determines
after consulting with independent outside counsel that a failure to terminate
the Merger Agreement and enter into an agreement to effect the Superior Proposal
would constitute a breach of its fiduciary duties; PROVIDED, HOWEVER, that the
Company shall not be permitted to terminate the Merger Agreement pursuant to
clause (f) unless it has provided Parent and Purchaser with two business days
prior written notice of its intent to so terminate the Merger Agreement together
with a reasonably detailed summary of the terms and conditions of such Superior
Proposal; PROVIDED, FURTHER, that Parent shall receive the fees set forth below
under "Fees and Expenses" immediately prior to any termination pursuant to
clause (f) by wire transfer in same day funds; (g) by Parent and Purchaser, if
(i) the Company or any of its subsidiaries or their Agents encourages, solicits
or initiates the making of any Acquisition Proposal from any Person other than
Parent or Purchaser or the Company or any of its subsidiaries or their Agents
takes any other action to knowingly facilitate any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (other than as permitted by and taken in compliance with
the provisions of the Merger Agreement described below under "No Solicitation of
Other Offers"), (ii) the Company enters into any agreement with respect to or
the making of an Acquisition Proposal or (iii) if the Company's Board of
Directors shall have (A) failed to recommend to the Company's stockholders that
such stockholders tender their Shares pursuant to the Offer and vote to approve
and adopt the Merger Agreement or (B) amended, withdrawn or modified such
recommendation in a manner adverse to Parent and Purchaser; (h) by the Company,
in the event that (A)(x) any one or more representations, warranties, covenants
or agreements of Parent or Purchaser contained in the Merger Agreement that is
qualified as to materiality shall be untrue, incorrect or breached in any
respect except where such failures are not reasonably likely to materially and
adversely affect Parent's or Purchaser's ability to complete the Offer or Merger
or (y) any one or more of such representations, warranties, covenants or
agreements that is not so qualified shall be untrue, incorrect or breached
which, individually or in the aggregate would be reasonably likely to materially
and adversely effect Parent's or Purchaser's ability to complete the Offer or
the Merger and (B) in each case cannot or has not been cured prior to the
earlier of (x) 15 days after the giving of written notice of such breach to the
Parent and Purchaser and (y) to the extent applicable, two business days prior
to the date on which the Offer expires; (i) by the Company, if Parent or
Purchaser shall have (x) failed to commence the Offer within 5 business days
following the date of the Merger Agreement, (y) terminated the Offer or (z)
failed to pay for Shares pursuant to the Offer on or prior to the earlier of (1)
the fifth day after any Shares tendered in the Offer have been accepted for
payment and (2) the Outside Date, unless in the case (x) or (y) such failure
shall have been caused by or resulted from the failure of the Company to satisfy
the Tender Offer Conditions set forth in Annex A or a material breach by the
Company of any of its representations, warranties, covenants or agreements set
forth in the Merger Agreement. As used in the Merger Agreements, "Acquisition
Proposal" means any inquiry, proposal or offer from any person or group relating
to any direct or indirect acquisition or purchase of a substantial amount of
assets of the Company or any of its subsidiaries or of all or any portion of any
class of equity securities of the Company or any of its subsidiaries, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning all or any portion of any class of equity securities of the
Company or any of its subsidiaries, any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or any transaction having similar economic effect
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement. "Superior Proposal" means a BONA FIDE
proposal made by a third party to acquire all or a portion of the outstanding
shares of the Company pursuant to a tender offer, a merger or a sale of all of
the assets of the Company on terms which the Board of Directors of the Company
determines in its good faith reasonable judgment (after consultation with its
independent outside financial and legal advisors) to be more favorable to the
Company and its stockholders than the transactions contemplated hereby.
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FEES AND EXPENSES. The Merger Agreement provides that subject to the
following, all costs and expenses incurred in connection with the Merger
Agreement and the consummation of the transactions contemplated thereby shall be
paid by the party incurring such costs and expenses. If (w) (i) the Offer shall
have remained open for a minimum of at least 20 business days, (ii) after the
date of the Merger Agreement and prior to December 31, 1998 any Person (other
than Parent or Purchaser) shall have become the beneficial owner of 50% or more
of the outstanding Shares and (iii) the Minimum Condition shall not have been
satisfied and the Offer is terminated without the purchase of any Shares
thereunder, or (x) Parent and Purchaser shall have terminated the Merger
Agreement pursuant to Section 6.01(g) thereof, or (y) the Company shall have
terminated the Merger Agreement pursuant to Section 6.01(f) thereof, then the
Company, if requested by Purchaser, shall promptly, but in no event later than
two days after the date of such request, pay Parent up to $2,000,000 to
reimburse Purchaser for the documented fees and expenses of Parent and Purchaser
related to the Merger Agreement, the transactions contemplated thereby and any
related financing and an additional fee of $8,000,000, which amounts shall be
immediately payable by wire transfer in same day funds; PROVIDED, HOWEVER, that
if the Company shall have terminated the Merger Agreement pursuant to clause (f)
as described above under "Termination of the Merger Agreement," such amounts
shall be paid in accordance with the provisions of such section. If the Company
fails to promptly pay the amounts due pursuant to these provisions of the Merger
Agreement or clause (f) as described above under "Termination of the Merger
Agreement," and, in order to obtain such payments, Parent or Purchaser commences
a suit which results in a judgment against the Company for the fees set forth
above, the Company shall pay to Parent and Purchaser its reasonably documented
costs and expenses (including reasonably documented attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at a rate equal to two percentage points over the prime rate of the
Morgan Guaranty Trust Company of New York on the date such payment was required
to be made.
AMENDMENT OF THE MERGER AGREEMENT. Subject to applicable law, the Merger
Agreement may be amended, modified and supplemented in writing by the parties
thereto in any and all respects before the Effective Time (notwithstanding any
stockholder approval), by action taken by the respective Boards of Directors of
Parent, Purchaser and the Company or by the respective officers authorized by
such Boards of Directors; PROVIDED, HOWEVER, that after any such stockholder
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval.
TREATMENT OF OPTIONS. The Merger Agreement provides that prior to the
Effective Time, the Board of Directors of the Company (or, if appropriate, any
Committee thereof) shall adopt appropriate resolutions and use its reasonable
best efforts to take all other actions necessary to (i) provide for the
cancellation, effective at the Effective Time of all the outstanding stock
options and other rights to purchase Shares ("Options") and (ii) terminate, as
of the Effective Time, the Company's stock option plans and any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any of its subsidiaries
(collectively, the "Stock Incentive Plans") and (iii) amend, as of the Effective
Time, the provisions in any U.S. or Foreign Employee Benefit Plan providing for
the issuance, transfer or grant of any capital stock of the Company or any of
its subsidiaries or any interest in respect of any capital stock of the Company
or its subsidiaries to provide that there shall be no continuing rights to
acquire, hold, transfer or grant any capital stock of the Company or its
subsidiaries or any interest in the capital stock of the Company or its
subsidiaries. Immediately prior to the Effective Time, the Company shall use its
reasonable best efforts to ensure that (i) each Option, whether or not then
vested or exercisable, shall no longer be exercisable for the purchase of Shares
but shall entitle each holder thereof, in cancellation and settlement therefor,
to payments by the Company in cash (subject to any applicable withholding taxes,
the "Cash Payment"), at the Effective Time, equal to the product of (x) the
total number of Shares subject to such Option whether or not then vested or
exercisable and (y) the excess of the Merger Consideration (as defined in the
Merger Agreement) over the exercise price per Share subject to such Option, each
such Cash Payment to be paid to each holder of an outstanding Option at the
Effective Time and (ii) each Share previously issued in the form of grants of
restricted stock or
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grants of contingent shares shall fully vest in accordance with their respective
terms. In addition, any outstanding stock appreciation rights or limited stock
appreciation rights shall be canceled immediately prior to the Effective Time
without any payment or other consideration therefor. The Merger Agreement
further provides that the Company shall use its reasonable best efforts to
ensure that the Stock Incentive Plans shall terminate as of the Effective Time.
The Company will take all necessary steps to ensure that neither the Company nor
any of its subsidiaries is or will be bound by any Options, other options,
warrants, rights or agreements which would entitle any Person, other than Parent
or its affiliates, to own any capital stock of the Surviving Corporation or any
of its subsidiaries or to receive any payment in respect thereof. The Company
will use its reasonable best efforts to obtain all necessary consents to ensure
that after the Effective Time, the only rights of the holders of Options to
purchase Shares in respect of such Options will be to receive the Cash Payment
in cancellation and settlement thereof. Notwithstanding any other provision of
Section 2.07 of the Merger Agreement to the contrary, payment of the Cash
Payment may be withheld with respect to any Option until the necessary consents
are obtained.
DIRECTORS' AND OFFICERS' INSURANCE; INDEMNIFICATION. The Merger Agreement
requires that from and after the Effective Time, the Surviving Corporation (as
defined in the Merger Agreement) shall (or, if necessary, Parent shall take all
necessary actions to) ensure that the Certificate of Incorporation and By-laws
of the Surviving Corporation contain the provisions with respect to
indemnification and exculpation from liability set forth in the Company's
Certificate of Incorporation and By-Laws on the date of the Merger Agreement,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who on or prior to the Effective
Time were directors, officers, employees or agents of the Company, unless such
modification is required by law. For six years from the Effective Time, the
Surviving Corporation shall either (x) maintain in effect the Company's current
directors' and officers' liability insurance covering those persons who are
covered on the date of the Merger Agreement by the Company's directors' and
officers' liability insurance policy (the "Indemnified Parties"); PROVIDED that
the Surviving Corporation may substitute for such Company policies, policies
with at least the same coverage containing terms and conditions which are no
less advantageous and provided that said substitution does not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time or (y) cause Parent's directors' and officers' liability
insurance then in effect to cover those persons who are covered on the date of
the Merger Agreement by the Company's directors' and officers' liability
insurance policy with respect to those matters covered by the Company's
directors' and officers' liability policy; PROVIDED that the coverage provided
by Parent's insurance shall be no less favorable to the Indemnified Parties and
shall provide no fewer rights than the Company's directors' and officers'
liability insurance policy in place on the date of the Merger Agreement.
Notwithstanding anything to the contrary in the Merger Agreement, in no event
shall the Surviving Corporation be required to expend in any one year an amount
in excess of 200% of the annual premiums paid by the Company as of the date of
the Merger Agreement for such insurance and if the annual premium for the
insurance coverage that would otherwise be required would exceed such amount,
the Surviving Corporation shall only be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding 200% of the annual premiums
paid by the Company on the date of the Merger Agreement.
EMPLOYEE BENEFIT PLANS. Pursuant to the Merger Agreement, from and after
the Effective Time until the first anniversary of the Effective Time, the
Surviving Corporation shall (or, if necessary, Parent shall cause the Surviving
Corporation to) ensure that all employees and officers of the Company at the
Effective Time receive benefits in the aggregate substantially comparable to the
benefits received by such individuals under U.S. Employee Benefit Plans and
Foreign Employee Benefit Plans immediately prior to the date of the Merger
Agreement. Notwithstanding the foregoing, following the Effective Time, the
Surviving Corporation may terminate the employment of any employee (subject to
the payment of severance benefits payable to the employee in connection with
such termination). From and after the Effective time until the first anniversary
of the Effective Time, the Surviving Corporation shall (or, if necessary, Parent
shall cause the Surviving Corporation to) keep in effect all severance policies
that are applicable to employees and
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officers of the Company immediately prior to the date of the Merger Agreement.
Following the Effective Time, (i) the Surviving Corporation shall (or, if
necessary, Parent shall cause the Surviving Corporation to) ensure that no
medical, dental, health or disability plan adopted by the Surviving Corporation
shall have any preexisting condition limitations and (ii) the Surviving
Corporation shall (or, if necessary, Parent shall cause the Surviving
Corporation to) honor all deductibles and out-of-pocket expenses paid by the
employees and officers of the Company and its U.S. subsidiaries under any
medical, dental, health or disability plan of the Company and its subsidiaries
during the portion of the calendar year prior to the time such employees become
eligible to participate in any medical, dental, health or disability plan
adopted by the Surviving Corporation. Following the Effective Time, for purposes
of eligibility and vesting, the Surviving Corporation (and, if applicable,
Parent) shall honor all service credit accrued by the employees and officers of
the Company under all U.S. Employee Benefit Plans and Foreign Employee Benefit
Plans up to (and including) the Effective Time.
COMPOSITION OF THE BOARD OF DIRECTORS. The Merger Agreement provides that,
promptly upon the acceptance for payment of, and payment by Purchaser in
accordance with the Offer for, any Shares pursuant to the Offer, Purchaser shall
be entitled to designate such number of directors on the Board of Directors of
the Company, rounded up to the next whole number, as will give Purchaser,
subject to compliance with Section 14(f) of the Exchange Act, representation on
such Board of Directors equal to at least that number of directors which equals
the product of the total number of directors on the Board of Directors (giving
effect to the directors elected pursuant to this sentence) multiplied by a
fraction, the numerator of which shall be the number of Shares so accepted for
payment and paid for or otherwise acquired or owned by Purchaser or Parent and
the denominator of which shall be the number of Shares then issued and
outstanding, and the Company and its Board of Directors shall, at such time,
take any and all such action needed to cause Purchaser's designees to be
appointed to the Company's Board of Directors (including to cause directors to
resign). Subject to applicable law, the Company shall take all action requested
by Parent which is reasonably necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9, so long as Purchaser shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Purchaser's designees. In furtherance thereof, the
Company will increase the size of the Company's Board of Directors, or use its
reasonable efforts to secure the resignation of directors, or both, as is
necessary to permit Purchaser's designees to be elected to the Company's Board
of Directors.
NO SOLICITATION OF OTHER OFFERS. The Merger Agreement provides that, upon
execution of the Merger Agreement, the Company and its affiliates and each of
their respective officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants and other agents ("Agents") shall
immediately cease any existing discussions or negotiations with any other
parties that may be ongoing with respect to any Acquisition Proposal (as defined
below). Neither the Company nor any of its subsidiaries shall, directly or
indirectly, take (and the Company shall not authorize or permit its or its
subsidiaries' Agents to take) any action to (i) encourage, solicit or initiate
the making of any Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal or (iii) participate in any way in
discussions or negotiations with or furnish or disclose any information to, any
Person (other than Parent or Purchaser) in connection with, or take any other
action to knowingly facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
except that the Company may participate in discussions or negotiations with and,
provided such Person enters into a confidentiality agreement with the Company on
terms no more favorable to such Person than the confidentiality agreement
between Technicolor Videocasette, Inc., a wholly owned subsidiary of Parent
("Technicolor") and the Company, furnish or disclose information to, any Person
who has made, in the good faith judgment of the Board of Directors of the
Company after consultation with their financial advisors, a bona fide offer or
proposal (but not an inquiry) regarding a transaction that would constitute an
Acquisition Proposal and that, if agreed with the Company, would constitute a
Superior Proposal, provided
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such Acquisition Proposal was not initially solicited, encouraged or knowingly
facilitated by the Company, its subsidiaries or their Agents in violation of the
Merger Agreement after the date of execution of the Merger Agreement, and,
PROVIDED FURTHER, that nothing in the foregoing shall prevent the Company or
Board of Directors from taking and disclosing to the Company's stockholders a
position contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with respect to any tender offer or from making such disclosure to
the Company's stockholders, upon the advice of its independent outside legal
counsel, as is required under applicable Federal Securities law. Any actions
permitted under the exception to clause (iii), and taken in compliance with the
foregoing, shall not be deemed a breach of any other covenant or agreement of
such party contained in the Merger Agreement. Except to the extent that, after
consultation with independent outside counsel to the Company, the Board of
Directors determines in good faith that such actions are required in order for
the directors of the Company to satisfy their fiduciary duties to the Company
and its stockholders or to comply with Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act, the Board of Directors shall not take any action to
withdraw or modify in a manner adverse to Parent or Purchaser, or take a public
position inconsistent with, its approvals or recommendation of the Offer, the
Merger or the Merger Agreement or to recommend another Acquisition Proposal and
shall not resolve to do any of the foregoing. In addition to the obligations of
the Company set forth above, on the date of receipt thereof, the Company shall
advise Parent of any request for information regarding, or that may be
reasonably likely to result in, or any other inquiry or proposal relating to, an
Acquisition Proposal, the material terms and conditions of such request, inquiry
or proposal and of any subsequent material amendments or changes thereto, and
the identity of the Person making any such request, inquiry or proposal.
COVENANTS; REPRESENTATIONS AND WARRANTIES. The Merger Agreement also
contains certain other restrictions as to the conduct of business by the Company
pending the Merger, as well as representations and warranties of each of the
parties customary in transactions of this kind.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the
Offer or the Merger Agreement, Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act, pay for any Shares tendered
pursuant to the Offer and may terminate or amend the Offer and may postpone the
acceptance of, and payment for, Shares, if (i) there shall not have been validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which satisfies the Minimum Condition, (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated, or (iii) if, at any
time on or after the date of the Merger Agreement and at or before the time of
payment for any such Shares (whether or not any Shares have theretofore been
accepted for payment or paid for pursuant to the Offer) any of the following
shall occur:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, or by
any other person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to or
which would be reasonably likely to make illegal, impede, delay or otherwise
directly or indirectly restrain or prohibit the Offer or the Merger or
seeking to obtain material damages, (ii) seeking to compel Parent or
Purchaser to dispose of, or hold separate (through the establishment of a
trust or otherwise) material assets or properties or categories of assets or
properties or businesses of Parent, the Company or any of their subsidiaries
or to withdraw from one or more lines of business material to the Condition
of Parent, the Company or any of their subsidiaries or to take any actions
that, in the aggregate would be reasonably likely to materially impair
Parent's ability to control, direct or manage on a day-to-day basis the
business or affairs of the Company, (iii) seeking to impose limitations on
the ability of Parent or Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by Purchaser or Parent on all matters properly
presented to the Company's stockholders, (iv) seeking to require divestiture
by
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Parent or Purchaser of any Shares or (v) materially adversely affecting the
Condition of the Company and its subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent, Purchaser, the Company or any subsidiary of the Company or (ii) the
Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or to the Merger, which would directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(c) any change shall have occurred (or any condition, event or
development shall have occurred), that would have a material adverse effect
on the Condition of the Company and its subsidiaries taken as a whole;
(d) except as to any such representation or warranty which speaks as of
a specific date or for a specific period which must be true and correct in
the following respects only as of such specific date or period, as of the
date of the Merger Agreement and as of the scheduled expiration date of the
Offer (i) any one or more representations, warranties, covenants or
agreements of the Company contained in the Merger Agreement that is
qualified as to materiality shall be untrue, incorrect or breached in any
respect except for such failures as would not be reasonably likely to have a
material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole or (ii) any one or more of such representations,
warranties, covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in the
aggregate, would be reasonably likely to have a material adverse effect on
the Condition of the Company and its subsidiaries taken as a whole;
(e) (i) the Company or any of its subsidiaries or their Agents
encourages, solicits or initiates the making of any Acquisition Proposal
from any Person other than Parent or Purchaser or the Company or any of its
subsidiaries or their Agents takes any other action to knowingly facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal other than as
permitted by and in compliance with Section 4.07 of the Merger Agreement,
(ii) the Company enters into any agreement with respect to or the making of
an Acquisition Proposal or (iii) if the Company's Board of Directors shall
have (A) failed to recommend to the Company's stockholders that such
stockholders tender their Shares pursuant to the Offer and vote to approve
and adopt the Merger Agreement or (B) amends, withdraws or modifies such
recommendation in a manner adverse to Parent and Purchaser or resolves to do
so;
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied
with by it and its subsidiaries under the Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of Purchaser, in any such case and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or pay for any Shares tendered pursuant
to the Offer.
The foregoing conditions (including those set forth in clauses (i)-(iii)
above) are for the sole benefit of Parent and Purchaser and may be asserted by
Parent or Purchaser, or may be waived by Parent or Purchaser, in whole or in
part at any time and from time to time in its sole discretion. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
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For purposes of the foregoing, "Condition" means the business, operations or
results of operations, and financial condition.
(ii) STOCKHOLDERS AGREEMENT. The following is a summary of the material
terms of the Stockholders Agreement. This summary is not a complete description
of the terms and conditions thereof and is qualified in its entirety by
reference to the full text thereof which is incorporated herein by reference and
a copy of which has been filed with the SEC as Exhibit 2 hereto.
As a condition and inducement to Parent's and Purchaser's willingness to
enter into the Merger Agreement and incur the liabilities therein, concurrently
with the execution and delivery of the Merger Agreement, the Selling
Stockholders entered into a Stockholders Agreement. In the Stockholders
Agreement, the Selling Stockholders have represented that they own, in the
aggregate, 9,373,322 Shares (or approximately 44% of the outstanding Shares).
Each Selling Stockholder has agreed to, as promptly as practicable (and in
no event later than the tenth day (or if such day is not a business day, the
next succeeding business day immediately thereafter) after commencement of the
Offer), validly tender (and not to withdraw) pursuant to and in accordance with
the terms of the Offer (provided that the Offer is not amended in a manner
prohibited by the Merger Agreement), in a timely manner for acceptance by
Purchaser, the number of Shares set forth opposite such Stockholder's name on
the signature pages of the Stockholders Agreement (the "Existing Shares").
Each Selling Stockholder has also agreed that if (i) at any time prior to
the expiration or termination of the Offer, (A) any Person shall have become the
beneficial owner of 50% or more of the outstanding Shares or (B) any Person
makes or publicly announces an intention to make an Acquisition Proposal or (C)
the Company enters into an agreement with any Person with respect to an
Acquisition Proposal and (ii) at any time (x) in the case of (A) within one year
thereafter, (y) in the case of (B), within the period ending on the thirtieth
day after the withdrawal of such Acquisition Proposal, unless such Person or any
of its affiliates shall have entered into an Agreement with the Company or any
one or more Selling Stockholders or their respective affiliates regarding an
Acquisition Proposal or have publicly announced a new or amended Acquisition
Proposal (in which event the termination of such period shall be tolled) and (z)
in the case of (C), within the period ending on the thirtieth day after the
termination of such agreement, unless such Person or any of its affiliates shall
have entered into a new or amended agreement with the Company or any one or more
Selling Stockholders or their respective affiliates regarding an Acquisition
Proposal or have made or publicly announced an intention to make an Acquisition
Proposal (in which event the termination of such period shall be tolled), such
Selling Stockholder sells or otherwise transfers or disposes of any of such
Selling Stockholder's Existing Shares or any other Shares of which such Selling
Stockholder becomes the owner prior to the date of such sale or other transfer
or disposition or any Shares that such Selling Stockholder currently has the
right to acquire then, such Selling Stockholder shall, as promptly as
practicable (but in any event within two business days after the later of the
date of such sale or other transfer or disposition, provided, that, if the fair
market value of any portion of the consideration is subject to the alternative
process for determination of its fair market value set forth in the Stockholders
Agreement, the payment relating to such portion of the consideration shall be
made no later than two business days after the date of agreement or such
determination) pay to Purchaser (or its designee) by wire transfer of
immediately available funds an amount in cash equal to the product of (i) the
number of such Shares so sold or otherwise transferred and (ii) the positive
difference between the value of the consideration per Share paid pursuant to
such sale or other transfer or disposition (as determined pursuant to the terms
of the Stockholders Agreement) and $11.50.
Each Selling Stockholder has agreed that prior to the termination of the
Stockholders Agreement such Selling Stockholder shall not (i) except as
contemplated by the Offer or the Stockholders Agreement, directly or indirectly,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
such
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Stockholder's Shares or any interest therein; (ii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of such Stockholder contained in the Stockholders
Agreement untrue or incorrect or have the effect of preventing or disabling such
Stockholder from performing such Stockholder's obligations under the
Stockholders Agreement. Such Stockholder has further agreed that such
Stockholder shall not request that the Company register the transfer (book-entry
or otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made to Purchaser in
compliance with the Offer or the Stockholders Agreement.
Each Selling Stockholder has agreed that until the first to occur of (i) the
Effective Time (as hereinafter defined) and (ii) the termination of the
Stockholders Agreement pursuant to Section 8 thereof, at any meeting of the
holders of Shares, however called, or in connection with any written consent of
the holders of Shares, such Stockholder shall vote (or cause to be voted) the
Shares owned by such Stockholder (i) in favor of the Merger and each of the
other actions contemplated by the Merger Agreement and the Stockholders
Agreement and any actions required in furtherance thereof; (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or of such Stockholder under the Stockholders
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or its subsidiaries; (B) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; or (C) (1) any change in a majority of the persons who
constitute the board of directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or By-laws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or its subsidiaries which is intended, or could reasonably be expected, to
prevent, impede, interfere with, delay, postpone, or materially adversely affect
the Offer, the Merger or the consummation of the transactions contemplated by
the Stockholders Agreement and the Merger Agreement. No Stockholder shall enter
into any agreement or understanding with any Person or entity the effect of
which would be to violate the provisions and agreements contained in Section 3
of the Stockholders Agreement.
(iii) FAULKNER EMPLOYMENT AGREEMENT. The following is a summary of the
material terms of the Employment Agreement, dated as of June 16, 1998 by and
between Purchaser and Lyndon J. Faulkner (the "Faulkner Employment Agreement").
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which has been filed with the SEC
as Exhibit 6 hereto.
Concurrent with the signing of the Merger Agreement, Mr. Faulkner entered
into the Faulkner Employment Agreement. The period of employment, during which
salary and benefits shall be provided (the "Period of Employment"), will begin
at the Effective Time (as such term is defined in the Merger Agreement) and will
end on the third anniversary of the Effective Time. The Period of Employment
will be extended automatically each day by one day beginning on the second
anniversary of the Effective Time until a date which is one year following the
date on which the notice of termination is delivered. Pursuant to his agreement,
Mr. Faulkner will serve as President and Chief Executive Officer of the
Surviving Corporation at an initial annual salary of $300,000 and will be
eligible for a maximum annual bonus of up to 40% of base salary.
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Mr. Faulkner shall be eligible to participate in a Long Term Incentive Plan
(the "LTIP") which provides awards of one year's base salary conditioned upon
certain financial results which would be payable in three tranches in November
of 2001, 2002, and 2003, respectively. The LTIP also provides a super bonus of
three years' base salary payable in November 2004 if certain financial goals to
be determined by the Compensation Committee of the Board of Directors of
Technicolor are met. In the event that Mr. Faulkner agrees to relocate to
Technicolor Packaged Media Group's offices, the Surviving Corporation shall
reimburse Mr. Faulkner's reasonable moving expenses, including reasonable travel
expenses, all household moving expenses, all real estate expenses associated
with selling Mr. Faulkner's home and purchasing a new home, up to six months of
reasonable temporary living costs, and a cost of living salary adjustment if a
recognized national survey shows the cost of living on the new location is on
average more than 5% above the cost of living in the former location. Mr.
Faulkner shall be eligible to participate in the Surviving Corporation's
employee benefit and executive compensation plans, and shall be entitled to four
weeks vacation and reasonable sick leave. The Surviving Corporation will
continue to make contributions for the benefit of Mr. Faulkner to the United
Kingdom retirement scheme that he participated in prior to the Merger, on the
condition that Mr. Faulkner shall not simultaneously be permitted to participate
in any qualified retirement plan sponsored by the Surviving Corporation. The
Surviving Corporation shall also reimburse Mr. Faulkner for all reasonable
expenses related to applications for U.S. citizenship for himself and his
family.
Upon the signing of the Faulkner Employment Agreement, Purchaser requested
that Parent grant, conditioned on the consummation of the Merger, Mr. Faulkner a
stock option (the "Faulkner Stock Option") to purchase ordinary shares of Parent
("Ordinary Shares") pursuant to Parent's 1987 Incentive and Nonqualified Stock
Option Plan for U.S. Employees, as amended. The Faulkner Stock Option shall
permit Mr. Faulkner to acquire that number of Ordinary Shares equal in amount to
the result of dividing four times Mr. Faulkner's base salary by the fair market
value of an Ordinary Share on the date of the execution of the Faulkner
Employment Agreement. The Faulkner Stock Option will become nonforfeitable and
exercisable in three installments: (i) 60% on the day immediately preceding the
third anniversary of the Effective Time; (ii) 20% on the day immediately
preceding the fourth anniversary of the Effective Time; and (iii) 20% on the day
immediately preceding the fifth anniversary of the Effective Time. At the same
time, Mr. Faulkner also received options (the "Faulkner Options") to purchase,
at an exercise price equal to the fair market value on the date of the execution
of the Faulkner Employment Agreement, that number of Ordinary Shares equal to
40% of the profit (the "Spread") he would have received of each tranche of his
outstanding Company stock options with an exercise price equal to or lower than
$11.50 per share, divided by the fair market value of an Ordinary Share on the
date of the execution of the Faulkner Employment Agreement. Mr. Faulkner has
agreed to cancel the same percentage of his Company options for no
consideration. The Faulkner Options shall be fully vested and nonforfeitable and
will become exercisable according to the following schedule: (i) 40% on the
first anniversary of the Effective Time; (ii) 30% on the second anniversary of
the Effective Time; and (iii) 30% on the third anniversary of the Effective
Time. The Faulkner Options will become immediately exercisable upon Mr.
Faulkner's death, disability or termination of employment. Purchaser also
granted Mr. Faulkner a bonus (the "Bonus") equal to his Spread, to be paid in
installments in the same percentages and on the same schedule as the Faulkner
Options become exercisable, each installment of which shall be proportionately
reduced if the price of Ordinary Shares drops below its fair market value as of
the grant date of the Faulkner Options. Each scheduled Bonus installment will
continue to be paid to Mr. Faulkner following his termination of employment with
the Surviving Corporation, regardless of the reason for such termination.
If Mr. Faulkner's employment is terminated by the Surviving Corporation
without Cause or if Mr. Faulkner terminates for Good Reason (as those terms are
defined in the Faulkner Employment Agreement) during the Period of Employment,
the Surviving Corporation shall pay to Mr. Faulkner a lump sum equal to the
salary for the remainder of the Period of Employment, or if the remaining Period
of Employment is less than one year, one year's salary.
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(iv) MINKEL EMPLOYMENT AGREEMENT. The following is a summary of the
material terms of the Employment Agreement, dated as of June 16, 1998 by and
between Purchaser and L. Steven Minkel (the "Minkel Employment Agreement"). This
summary is not a complete description of the terms and conditions thereof and is
qualified in its entirety by reference to the full text thereof which is
incorporated herein by reference and a copy of which has been filed with the SEC
as Exhibit 7 hereto.
Concurrent with the signing of the Merger Agreement, Mr. Minkel entered into
the Minkel Employment Agreement. The Period of Employment, during which salary
and benefits shall be provided, will begin at the Effective Time and will end on
the third anniversary of the Effective Time. The Period of Employment will be
extended automatically each day by one day beginning on the second anniversary
of the Effective Time until a date which is one year following the date on which
the notice of termination is delivered. Pursuant to his agreement, Mr. Minkel
will serve as Executive Vice President, Chief Financial Officer and Secretary of
the Surviving Corporation at an annual salary of $250,000 and will be eligible
for a maximum annual bonus of up to 30% of base salary.
Mr. Minkel shall be eligible to participate in the LTIP which provides
awards of one year's base salary conditioned upon certain financial results
which would be payable in three tranches in November of 2001, 2002, and 2003,
respectively. The LTIP also provides a super bonus of three years' base salary
payable in November 2004 if certain financial goals to be determined by the
Compensation Committee of the Board of Directors of Technicolor are met. In the
event that Mr. Minkel agrees to relocate to Technicolor Packaged Media Group's
offices, the Surviving Corporation shall reimburse Mr. Minkel's reasonable
moving expenses, including reasonable travel expenses, all household moving
expenses, all real estate expenses associated with selling Mr. Minkel's home and
purchasing a new home, up to six months of reasonable temporary living costs,
and a cost of living salary adjustment if a recognized national survey shows the
cost of living on the new location is on average more than 5% above the cost of
living in the former location. Mr. Minkel shall be eligible to participate in
the Surviving Corporation's employee benefit and executive compensation plans,
and shall be entitled to four weeks vacation and reasonable sick leave.
Upon the signing of the Minkel Employment Agreement, Purchaser requested
that Parent grant, conditioned on the consummation of the Merger a stock option
(the "Minkel Stock Option") to purchase Ordinary Shares pursuant to Parent's
1987 Incentive and Nonqualified Stock Option Plan for U.S. Employees, as
amended. The Minkel Stock Option shall permit Mr. Minkel to acquire that number
of Ordinary Shares equal in amount to the result of dividing four times Mr.
Minkel's base salary by the fair market value of an Ordinary Share on the date
of the execution of the Minkel Employment Agreement. The Minkel Stock Option
will become nonforfeitable and exercisable in three installments: (i) 60% on the
day immediately preceding the third anniversary of the Effective Time; (ii) 20%
on the day immediately preceding the fourth anniversary of the Effective Time;
and (iii) 20% on the day immediately preceding the fifth anniversary of the
Effective Time. At the same time, Mr. Minkel also received options (the "Minkel
Options") to purchase, at an exercise price equal to the fair market value on
the date of the execution of the Minkel Employment Agreement, that number of
Ordinary Shares equal to 30% of the Spread he would have received of each
tranche of his outstanding Company stock options with an exercise price equal to
or lower than $11.50 per share, divided by the fair market value of an Ordinary
Share on the date of the execution of the Minkel Employment Agreement. Mr.
Minkel has agreed to cancel the same percentage of his Company options for no
consideration. The Minkel Options shall be fully vested and nonforfeitable and
will become exercisable according to the following schedule: (i) 40% on the
first anniversary of the Effective Time; (ii) 30% on the second anniversary of
the Effective Time; and (iii) 30% on the third anniversary of the Effective
Time. The Minkel Options will become immediately exercisable upon Mr. Minkel's
death, disability or termination of employment. Purchaser also granted Mr.
Minkel a Bonus equal to his Spread, to be paid in installments in the same
percentages and on the same schedule as the Minkel Options become exercisable,
each installment of which shall be proportionately reduced if the price of
Ordinary Shares drops below its fair market value as of the grant date of the
Minkel Options. Each
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scheduled Bonus installment will continue to be paid to Mr. Minkel following his
termination of employment with the Surviving Corporation, regardless of the
reason for such termination.
If Mr. Minkel's employment is terminated by the Surviving Corporation
without Cause or if Mr. Minkel terminates for Good Reason during the Period of
Employment, the Surviving Corporation shall pay to Mr. Minkel a lump sum equal
to the salary for the remainder of the Period of Employment, or if the remaining
Period of Employment is less than one year, one year's salary.
(v) CERTAIN BONUSES. In addition to the consideration described above,
certain affiliates of McCown De Leeuw & Co., Inc. ("MDC") and Behrman Capital
("Behrman") have agreed to pay certain bonuses to Mr. Faulkner and Mr. Minkel in
order to compensate them for certain economic losses which they suffered as a
result of the transactions contemplated by the Merger Agreement. The aggregate
amount of these bonuses, which are payable upon consummation of the Merger, is
$450,000, in the case of Mr. Faulkner, and $350,000, in the case of Mr. Minkel.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS.
The Board of Directors of the Company (the "Board"), at a meeting duly
called and held from June 12, 1998, through June 16, 1998, acting by a unanimous
vote of directors (with one director absent), determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, are fair to and in the best interests of the Company and its
Stockholders and approved and adopted the Merger Agreement and approved the
transactions contemplated thereby, including the Offer and the Merger, in all
respects.
THE BOARD OF DIRECTORS ACTING BY A UNANIMOUS VOTE OF DIRECTORS (WITH ONE
DIRECTOR ABSENT), RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES TO PURCHASER UNDER THE OFFER. See "Background;
Opinion of Financial Advisor; Reasons for the Recommendation--Reasons for
Recommendation" for a discussion of the factors considered by the Board in
making its recommendation.
As set forth in the Offer, upon the terms and subject to the conditions of
the Offer (including satisfaction of the Minimum Condition), Purchaser will
accept for payment and pay for all Shares validly tendered on or prior to the
Expiration Date (as defined in the Schedule 14D-1) and not properly withdrawn.
Stockholders considering not tendering their Shares in order to wait for the
Merger should note that Purchaser is not obligated to purchase any Shares, and
can terminate the Offer and the Merger Agreement and not proceed with the
Merger, if the Minimum Condition is not satisfied or any of the other conditions
to the Offer are not satisfied.
A copy of the press release issued by Parent announcing the signing of the
Merger Agreement is filed as Exhibit 5 to this Statement and is incorporated
herein by reference.
(b) BACKGROUND; OPINION OF FINANCIAL ADVISOR; REASONS FOR RECOMMENDATION.
BACKGROUND
In the fourth quarter of 1996, the Company engaged Berenson Minella &
Company ("Berenson Minella") and Bear, Stearns & Co. Inc. ("Bear Stearns") to
assist it in considering its strategic alternatives, including, but not limited
to a potential sale of the Company. Berenson Minella and Bear Stearns contacted
approximately thirteen potential purchasers of Company, including Parent. All of
the potential purchasers of the Company indicated that, at that time, they had
no interest in pursuing a transaction with the Company.
Beginning in the first quarter of 1997, the Company engaged in a number of
periodic and generally inconclusive discussions with Parent, which had been the
only party to visit the Company's facilities during
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the original search conducted by Berenson Minella. These discussions covered a
broad range of potential relationships.
On October 15, 1997, Mr. Lyndon Faulkner, Chairman of the Board of
Directors, Chief Executive Officer and President of the Company and Mr. Orlando
F. Raimondo, President of Technicolor, met in Los Angeles. At that meeting,
there was a discussion about digital versatile disc ("DVD") technology generally
and the possibility of Technicolor and the Company entering into a relationship
aimed at better serving the motion picture industry. Mr. Faulkner and Mr.
Raimondo agreed to meet again to pursue a possible transaction.
On November 11, 1997, Mr. Faulkner and representatives of the Company met
with Mr. Raimondo and representatives of Parent, to discuss possible
relationships between the Company and Parent. The discussion focused on several
possible strategic business combinations between the Company and Technicolor. At
this meeting representatives of the Company delivered certain publicly-available
information regarding the Company to representatives of Parent. At this meeting,
Parent's representatives expressed an interest in proceeding with the
acquisition of the Company and Mr. Faulkner agreed to discuss the matter with
the Board. Technicolor inquired as to whether the Company's significant
investors would consider a partial sale of their interests.
On December 9, 1997, the Board held a regularly scheduled meeting in New
York. The status of the discussions with Parent was fully described. At this
meeting the Board agreed to engage Berenson Minella as its financial advisor in
connection with the potential transaction with Parent and White & Case LLP was
engaged to provide legal advice. The Board agreed at this meeting that it would
not consider a sale of a partial interest in the Company. The Board instructed
Berenson Minella to make clear to Technicolor that the Board would expect that
any offer made be at a premium to the then market price of approximately $10 1/8
per Share.
On December 10, 1997, representatives of the Company and Parent met with
representatives of Berenson Minella at their offices. At such time, Technicolor
entered into a confidentiality agreement with the Company. Parent was informed
that the Company would only consider a sale of the entire Company.
On December 11, 1997, representatives of the Company and Technicolor met
again at the Company's offices in Charlottesville, Virginia to discuss possible
strategies for combining the two companies and potential business synergies.
After that meeting, Mr. Faulkner and Howard Nash, European Managing Director of
a subsidiary of the Company, visited Parent's offices in London and met with
senior officers of Parent. In early January 1998, Mr. Faulkner and Mr. Minkel
visited Parent's offices in London and met several directors and officers of
Parent and Technicolor and made presentations regarding the Company and its
business.
On December 19, 1997, the Company entered into a formal engagement letter
with Berenson Minella.
During the first three weeks of January, discussions continued among the
parties regarding possible transactions. On January 23, 1998, representatives of
the Company met with senior executive officers of Parent, who proposed a
transaction in which Parent would acquire all of the outstanding common stock of
the Company for $10.00 per Share. Later that day, Berenson Minella responded to
Lazard Freres & Co. LLC, Parent's financial advisor ("Lazard Freres") that
Parent's proposal did not form the basis for a transaction.
On January 29, 1998, senior directors and executive officers of Parent met
with representatives of certain stockholders of the Company affiliated with MDC
and Behrman and representatives of Berenson Minella and Lazard Freres, in New
York, New York to discuss whether and at what price such stockholders might be
willing to agree to sell their Shares. At such meeting the representatives of
such stockholders advised the representatives of Parent that they would only
consider a sale of their Shares as part of a sale of the entire Company.
15
<PAGE>
Discussions continued thereafter between the parties and their advisors. On
February 9, 1998, Parent made a preliminary proposal to acquire the Company for
a consideration equal to $14.00 per Share, such consideration to be comprised of
an aggregate of $200.0 million in cash with the remainder being comprised of
equity in a new company which would combine the Company with certain assets of
Technicolor. The parties thereafter engaged in discussions regarding the
feasibility of implementing this proposal. This proposal was subsequently
withdrawn by Parent in late March of 1998. Prior to the withdrawal of this
proposal, the Company had not conducted any detailed due diligence in respect of
Parent or Technicolor.
On March 24, 1998, in a conversation with directors affiliated with MDC and
Behrman, representatives of Parent indicated that Parent still wished to
purchase the Company at a price between $10.00 and $11.00 per Share. On March
25, 1998, this offer was reported to management and representatives of Berenson
Minella.
At a meeting of the Board held on March 31, 1998, the Board received a full
report in respect of the status of the proposed transaction with Parent and
received advice from Berenson Minella and its legal advisors as to how it should
proceed. The Board determined to authorize Berenson Minella to conduct a market
check and solicit indications of interest from other persons who might be
interested in acquiring the Company. After discussion at the Board meeting and
with the Board's knowledge, certain directors affiliated with MDC and Behrman
communicated to Parent that MDC and Behrman would be prepared to sell their
shares in the Company for a price of $11.50 per Share and that, at that price,
MDC and Behrman, in their capacity as stockholders, would be prepared to
recommend the transaction to the Board.
During the month of April, Berenson Minella, after consultation with
management of the Company, approached eleven additional potential strategic
purchasers who it was believed might be interested in pursuing a transaction
with the Company. Most of these parties indicated that they had no interest in
pursuing a transaction. On April 8, 1998, representatives of Berenson Minella
met with representatives of a second interested party (the "Second Interested
Party") and the Company and the Second Interested Party entered into a
confidentiality agreement. A further meeting between representatives of the
Second Interested Party and the Company was held on April 13, 1998, for purposes
of exploring the possibility of entering into a transaction between the Company
and the Second Interested Party.
In addition, in early April, an approach was made to a third interested
party (the "Third Interested Party") and to a fourth interested party (the
"Fourth Interested Party"), each of which expressed interest in pursuing a
possible transaction with the Company and entered into a Confidentiality
Agreement with the Company. During this period the Company continued to have
discussions with Parent concerning the possibility of entering into transaction.
On May 5, 1998, representatives of the Company and the Third Interested
Party met and the Third Interested Party was given the opportunity to conduct
due diligence on the Company.
On May 8, 1998, representatives of the Company and the Fourth Interested
Party met and the Fourth Interested Party was given the opportunity to conduct
due diligence on the Company.
On May 11, 1998, further discussions occurred between the Company and the
Third Interested Party in respect of a possible transaction. During this period,
the Second Interested Party indicated to Berenson Minella that it was no longer
interested in an acquisition of the Company.
During the month of May 1998, the Company continued to pursue discussions
with all interested parties. On May 26, 1998, the Third Interested Party made a
written preliminary proposal, subject to due diligence and numerous other
conditions, to acquire the Company for a consideration of approximately $12.00
per Share in "total value" including $6.00 per Share in cash, with the residual
consideration to be comprised of equity in a new entity to be formed by the
merger of the Third Interested Party into the Company. On June 2, 1998,
financial advisors to the Third Interested Party revised this proposal orally in
a conversation with Berenson Minella, indicating that the consideration to be
paid for the Company was to be comprised of approximately $15.00 per Share in
"total value" including $4.00 per Share in cash, with the
16
<PAGE>
residual consideration to be comprised of equity in a new entity to be formed by
a merger of the Third Interested Party with and into the Company. Both of these
proposals were highly conditional and were dependent, among other things, on due
diligence, financing and the resolution of certain key operating issues between
the existing owners of the Third Interested Party. Additionally, the Third
Interested Party, did not provide the Company or its advisors with any detailed
financial, operating or structural information which would enable the Company or
its financial advisors to value accurately the "total value" of either of the
proposals made by the Third Interested Party. Representatives of the Company
subsequently requested more information regarding these proposals and made clear
to the Third Interested Party the Company's preference for a competitive cash
transaction.
On June 1, 1998, representatives of the Fourth Interested Party indicated to
Mr. Faulkner that, on a preliminary basis the Fourth Interested Party would
consider an offer for the Company. Further conversations with the financial
advisors to the Fourth Interested Party indicated that, if made, such offer
would be at market value and that the Fourth Interested Party was not prepared
to proceed before its Board meeting scheduled for June 12, 1998.
On June 3, 1998, representatives of Parent and representatives of Behrman
met and representatives of Parent proposed a transaction at $11.50 per Share.
Parent indicated that it expected MDC and Behrman to commit to support the
transaction and requested that MDC and Behrman grant to Parent an option on
their Shares at the price of $11.50 per Share. Parent also requested that the
Company agree not to solicit competing offers and to a termination fee of four
percent of the transaction value and grant Parent an option to purchase 19.9% of
its outstanding shares.
Upon receiving this proposal, the Company forwarded proposed drafts of a
Merger Agreement and Stockholders' Agreement containing an agreement to tender
Shares into an offer. The Company rejected Parent's request for an option to
purchase 19.9% of its outstanding Shares. Parent and its representatives
conducted due diligence of the Company on June 5, 1998, and June 6, 1998.
On June 9, 1998, Parent's and the Company's legal advisors discussed the
provisions of the proposed agreements. Also on that date the Board met with its
legal and financial advisors and the Company's management and received an update
regarding the status of the transaction. Among the matters which the Board
discussed were: (i) the status of Parent's due diligence efforts; (ii) the
status of the Company's discussions with the Third Interested Party and the
Fourth Interested Party; (iii) the adequacy of a price of $11.50 per Share; and
(iv) the nature of the Stockholders Agreement and whether such agreement with
the Selling Stockholders would contain an option on the Stockholders Shares or
merely an obligation to tender (and not to withdraw) such shares into the offer
to be made by Parent for so long as the Merger Agreement is in effect. The Board
determined that it would only proceed with the proposed transaction if there was
unanimity among all directors. Certain directors expressed concern about the
ability of a subsequent bidder to put forth a higher offer if the Selling
Stockholders granted Parent an option on the Stockholder Shares.
On Wednesday June 10, 1998, the Company, in response to a substantial
increase in the trading volume of the Shares on the NASDAQ National Market,
issued a press release which is reprinted below in relevant part:
"Nimbus CD International, Inc. . . . today announced in response to
increased trading of its shares, that it is in discussions for the sale
of the Company in a transaction which would offer $11.50 per common
share in cash. There are no assurances that any transaction will result
from these discussions."
Later on June 10, 1998, the Board met by telephone conference to discuss the
events transpiring from their last meeting and was informed that the Company had
issued the press release. The Board received an update of discussions with
Parent and the Third Interested Party and the Fourth Interested Party.
On June 10, 1998, and June 11, 1998, the Company's legal advisors negotiated
with Parent's legal advisors in respect of the terms of the Merger Agreement and
the Stockholders Agreement.
17
<PAGE>
On June 11, 1998, the Third Interested Party delivered a letter to the
Company's financial advisors, proposing to acquire the Company for consideration
purportedly equal to $14.00 per Share, comprised of $7.00 per Share in cash and
with the residual consideration to be comprised of stock in a newly formed
company resulting from the merger of the Third Interested Party with and into
the Company. This new proposal was also highly conditional and was dependent,
among other things, on due diligence, financing and the resolution of certain
key operating issues between the existing owners of the Third Interested Party.
As with its previous proposals, the Third Interested Party did not provide the
Company or its advisors with any detailed financial, operating or structural
information which would enable the Company or its financial advisors to value
accurately the stock portion of the total consideration proposed to be paid by
the Third Interested Party. The Company, through its financial advisors,
subsequently requested more information regarding these proposals and reiterated
to the Third Interested Party the Company's preference for a competitive cash
transaction.
On June 12, 1998, the Board held an all-day meeting to address Parent's
offer. After a description of its legal duties in considering the acquisition,
the Board then examined the strategic position of the Company. Mr. Faulkner
described the historical product life cycle of CD products, as experienced by
the Company, with reduced profit margins as additional capacity entered the
market. Mr. Faulkner noted several challenges facing the ability of the Company
to compete as a stand-alone entity, including the known or anticipated capacity
that could be entering the DVD market in the next 12 to 18 months. Mr. Faulkner
also noted that previously the Company had been able to defend its market share
and profit margins through technical excellence. He noted, however, that, as DVD
has substantial appeal to the motion picture industry as a replacement to VHS
tape as a medium for the home viewing of motion pictures and that as DVD
replaced VHS tape, the market was opening to new competitors and the competitive
dynamics of the market were changing. Mr. Faulkner noted that the primary driver
of market share in the VHS tape market was not only production capacity or
technical excellence, but the availability of a large and efficient distribution
network. In management's view, in order to compete in the DVD market, it would
be necessary to establish a substantial distribution arm for the Company within
the next 18 months. Management estimated that establishing this capacity would
require an additional capital investment of up to approximately $50.0 million
and that there could be no assurances that the Company could successfully
compete against competitors with established distribution networks, such as
Parent. The Company's management concluded that it believed that this was an
appropriate time to sell the Company. After the management discussion, the
directors questioned management at length about this assessment.
The Board reviewed the history of the negotiations with Parent. There was a
detailed review of the efforts to sell the Company 18 months earlier and of the
recent efforts undertaken by Berenson Minella to identify other potential
bidders. Berenson Minella detailed its recent contacts with potential bidders,
including the Third Interested Party. Berenson Minella then presented detailed
financial analyses of Parent's proposal, concluding that the consideration to be
paid to the stockholders of the Company in the Offer and the Merger was fair to
the stockholders of the Company, from a financial point of view. The directors
then heard a detailed presentation on the terms of the Merger Agreement and the
Stockholders Agreement from counsel. Next, a lengthy discussion ensued among the
directors, at the conclusion of which the directors determined that it was an
appropriate time to sell the Company and that $11.50 per Share was fair to the
stockholders. Certain directors expressed concern that, if the Selling
Stockholders granted Parent an option on the Stockholder Shares, there was only
a remote possibility that an unidentified subsequent bidder could successfully
tender for the Company's shares. The directors, therefore, determined not to
approve the Merger Agreement unless Parent agreed to strike the option from the
Stockholders Agreement and proceed only with an agreement by the Selling
Stockholders to tender the Stockholder Shares. The Board also concluded that the
Third Interested Party's proposal was too conditional and uncertain in value in
comparison to Parent's fully financed and all-cash offer.
The meeting was recessed until the next day. The Company asked Parent to
consider a proposal under which the Selling Stockholders would agree to tender
the Stockholder Shares into the offer and to forego any incremental value over
$11.50 per Share if, in fact, a subsequent bidder emerged to purchase the
18
<PAGE>
Company. The Company indicated that it would enter into a merger agreement with
a reasonable non-solicitation provision, which would be subject to the fiduciary
duties of the Board, a $3.0 million termination fee and reimbursement of up to
$2.0 million of documented expenses upon the termination of the Merger Agreement
under certain circumstances, as requested by Parent.
On June 13, 1998, counsel for Parent proposed an alternate transaction for
consideration by the Board, whereby the Board would agree not to take any action
to impede a tender offer by Parent at $11.50 per Share for all outstanding
Shares of the Company, but not enter into a merger agreement to force the sale
of minority Shares at $11.50 per Share. Parent would enter into the Stockholders
Agreement, including the "lock-up" option, with the Selling Stockholders.
On June 13, 1998, the Board continued its meeting by conference telephone to
discuss the alternate proposal and to be updated on other developments. The
Board took no action at that time.
On June 14, 1998, the Company's legal advisor asked Parent's legal advisor
whether Parent would agree to enter into a merger agreement with Company which
contained no restriction on solicitation of higher offers and no provisions
regarding termination fees or expense reimbursement. In the course of the day,
this proposal was confirmed, subject to the granting of an option by the Selling
Stockholders. On the evening of June 14, 1998, the Board again reconvened by
conference telephone to discuss alternate forms of a transaction. After an
extensive discussion, the Board determined that it was preferable to proceed
pursuant to a merger transaction and instructed counsel to communicate to
counsel for Parent that the Board would act promptly to approve a merger
agreement providing for $11.50 per Share, a reasonable non-solicitation
provision and a break-up fee as outlined in the earlier proposal, but would not
approve a merger agreement if the Selling Stockholders were required to enter
into a stockholders agreement containing an option on their Shares. The Board
further instructed its counsel to inquire definitively of Parent whether it
would proceed with a transaction at all, in the absence of an option on the
Stockholders Shares.
On June 15, 1998, Parent communicated to the Company a final proposal for a
merger agreement containing a restriction on solicitation of higher offers, a
break-up fee of $10.0 million, but agreed to enter into a stockholders agreement
with the Selling Stockholders that did not provide for an option over their
shares. In subsequent negotiations between respective counsel, the amount of the
break-up fee was reduced to $8.0 million with an expense reimbursement of $2.0
million and the terms of the non-solicitation covenant of the Merger Agreement
were further refined. This proposal was discussed when the Board reconvened that
same day by conference telephone at which time the Board discussed the revised
proposal and determined to reconvene on Tuesday, June 16, 1998 in New York to
act on Parent's proposal in the absence of an intervening proposal or bid.
On June 16, 1998, the Board reconvened at the offices of White & Case LLP in
New York to discuss Parent's final proposal. The Board reviewed the status of
discussions with the Third Interested Party and confirmed that the Fourth
Interested Party had not responded to Berenson Minella's inquiries after such
party's board of directors meeting on June 12, 1998. The Board again concluded
that the Third Interested Party's proposal was too conditional and uncertain in
value in comparison to Parent's fully financed and all-cash offer. The Board
further concluded, based on discussion with management and its financial
advisors, that the surviving entity in any business combination with the Third
Interested Party would be highly leveraged and provide no strategic advantage
over the Company's present situation. The Board then reviewed the terms of the
Merger Agreement and the Stockholders Agreement. At the request of the Board,
Berenson Minella rendered its opinion that the consideration to be received by
the stockholders of the Company in the Offer and the Merger was fair to the
stockholders of the Company from a financial point of view. After further
discussion, the Board, by a unanimous vote of all directors participating in the
meeting, approved and adopted the Merger Agreement and approved the Offer, the
Merger and the other transactions contemplated by the Merger Agreement and the
Stockholders Agreement and recommended that the stockholders of the Company
tender their Shares in the Offer. Later that evening, the Merger Agreement was
executed and delivered by representatives of Parent, Purchaser and the Company.
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OPINION OF FINANCIAL ADVISOR
The Company retained Berenson Minella to render an opinion to the Board of
Directors of the Company with respect to whether or not the Consideration to be
paid to the stockholders of the Company pursuant to the Offer and the Merger is
fair to the stockholders of the Company from a financial point of view. Berenson
Minella is a nationally recognized investment banking firm and was selected by
the Company based on its substantial experience and expertise in transactions
similar to the Offer and the Merger. On June 12, 1998, at a meeting of the Board
of Directors held to evaluate the Offer and the Merger, Berenson Minella
reviewed with the Board of Directors the financial analyses performed by
Berenson Minella in connection with the preparation of its opinion and, on June
16, 1998, Berenson Minella confirmed its analyses to the Board of Directors and
delivered to the Board of Directors a written opinion to the effect that, as of
the date of such opinion, and subject to certain factors and limitations stated
therein, the Consideration to be paid to the shareholders of the Company
pursuant to the Offer and the Merger is fair to the stockholders of the Company
from a financial point of view.
The full text of the opinion of Berenson Minella, dated June 16, 1998, which
sets forth the assumptions made, matters considered, and limitations on the
review undertaken, is attached hereto as Annex B and is incorporated herein by
reference. The opinion of Berenson Minella is directed solely to the Board of
Directors of the Company, and not to the stockholders of the Company. The
opinion does not address any other aspects of the Offer, the Merger or the
Merger Agreement and does not constitute a recommendation to any stockholder to
tender their shares in the Offer or to vote in favor of the Merger. This summary
of the opinion is qualified in its entirety by reference to the full text of
such opinion.
REASONS FOR RECOMMENDATION
In reaching its determination and recommendations with respect to the Merger
Agreement, the Offer and the Merger, as indicated above, the Board reviewed in
detail the Merger Agreement, the Offer and the Merger, together with the various
alternative transactions reviewed by management and its financial advisors, and
deliberated extensively with its legal and financial advisors regarding the
foregoing. At the end of its meeting, the Board determined by unanimous vote of
the directors participating in the meeting that the Merger Agreement, the Offer
and the Merger, are fair to, and in the best interest of, the Company and its
stockholders and authorized the execution and delivery of the Merger Agreement.
Numerous factors were taken into account including, among other things, the
following:
(i) Management's view of the strategic position of the Company and the
actions the Board believed necessary for the Company to remain competitive
in light of the changes taking place in its industry;
(ii) The familiarity of the Board of Directors with the financial
condition, results of operations, strategic position, business and prospects
of the Company, including the prospects of the Company were it to remain
independent or other alternative strategic transactions;
(iii) The canvas of other potential strategic bidders conducted by
Berenson Minella;
(iv) The Board's belief, based on the advice and analysis of Berenson
Minella presented to the Board at the meetings beginning on June 12, 1998,
that alternative financial transactions were not likely to provide values to
the stockholders of the Company superior to the Offer;
(v) The recommendation of (x) management and (y) the Selling
Stockholders that the Merger Agreement, the Offer and the Merger be approved
and the fact that the Selling Stockholders had agreed to tender (and not to
withdraw) their shares into the Offer and to pay to Purchaser any amount in
excess of $11.50 that the Selling Stockholders received as consideration for
their Shares;
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<PAGE>
(vi) The presentation of Berenson Minella, financial advisor to the
Company, at the Board meeting beginning on June 12, 1998 and the Berenson
Minella Opinion that, based upon and subject to the information contained
therein, as of the date of the opinion, the consideration to be received by
the stockholders of the Company in connection with the Offer and the Merger
is fair to the stockholders of the Company from a financial point of view.
The full text of the Berenson Minella Opinion, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken by Berenson Minella is attached hereto as Annex B and is
incorporated herein by reference. The Company's stockholders are urged to
read the attached Berenson Minella Opinion in its entirety;
(vii) The financial and other terms and conditions of the Offer and
Merger Agreement, including, without limitation, the fact that the terms of
the Merger Agreement should not unduly discourage other interested third
parties, if any, from making BONA FIDE proposals to acquire the Company
subsequent to the execution of the Merger Agreement and, if any such
proposals were made, the Board could determine to provide information to and
engage in negotiations with any such third party, subject to the terms and
conditions of the Merger Agreement; and
(viii) The fact that the obligations of Parent and Purchaser to
consummate the Offer and the Merger pursuant to the terms of the Merger
Agreement are not conditioned upon financing.
The foregoing discussion of the information and factors considered and given
weight by the Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation, the Board did not find it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determinations and recommendation.
In addition, individual members of the Board may have given different weight to
different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement dated December 19, 1997 (the
"Engagement Letter"), the Company has retained Berenson Minella as its exclusive
financial advisor in connection with evaluating strategic alternatives available
to the Company. Pursuant to the terms of the Engagement Letter, the Company has
agreed to pay Berenson Minella a fee equal to 1.1875% of the amount of cash
payable to the stockholders and option holders of the Company in the Offer and
the Merger pursuant to the Merger Agreement (the "Transaction Value") upon
consummation of the Merger. Without duplicating the foregoing fees set forth in
the immediately preceding sentence, upon Purchaser's acceptance for payment of
any shares tendered in the Offer, Berenson Minella will be entitled to a fee
equal to 1.1875% of the product of (x) the number of shares tendered and
accepted for payment in the Offer and (y) the price per share of Common Stock
paid in the Offer. The Company has also agreed to reimburse Berenson Minella for
its reasonable expenses, including the reasonable fees and disbursements of
outside counsel, and to indemnify Berenson Minella and certain related persons
against certain liabilities in connection with their engagement, including
certain liabilities under the federal securities laws.
Pursuant to the terms of a letter agreement dated June 16, 1998 (the
"Opinion Engagement Letter"), the Company has retained Berenson Minella to
render a written opinion addressed to the Board of Directors whether or not the
proposed merger consideration is fair to the stockholders of the Company from a
financial point of view. Pursuant to the Opinion Engagement Letter, the Company
has also agreed to reimburse Berenson Minella for its reasonable expenses
(subject to certain limitations), including the reasonable fees and
disbursements of outside counsel, and to indemnify Berenson Minella and certain
related persons against certain liabilities in connection with their engagement,
including certain liabilities under the federal securities laws.
Neither the Company nor any person acting on its behalf has or currently
intends to employ, retain or compensate any person to make solicitations or
recommendations to the stockholders of the Company on its behalf with respect to
the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected within the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company, except for the
Selling Stockholders entering into the Stockholders Agreement. The full text of
the Stockholders Agreement is attached hereto as Exhibit 2.
(b) To the best of the Company's knowledge, (i) each of its executive
officers, directors, affiliates or subsidiaries presently intends to tender all
of their Shares to Purchaser pursuant to the Offer and (ii) none of its
executive officers, directors, affiliates or subsidiaries presently intends to
otherwise sell any Shares which are owned beneficially or held of record by such
persons. Each of the Selling Stockholders has entered into the Stockholders
Agreement, pursuant to which the Selling Stockholders have committed to tender
the Stockholder Shares into the Offer. The foregoing does not include any Shares
over which, or with respect to which, any such executive officer, director or
affiliate or subsidiary acts in a fiduciary or representative capacity or is
subject to instructions from a third party with respect to such tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth in this Statement, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to, or would result in, one or more of the events referred to
in Item 7(a) above. Subject to the terms of the Merger Agreement described
herein, the Company may, directly or indirectly, furnish information only in
response to an unsolicited request for such information by any person, pursuant
to appropriate confidentiality agreements, and participate in discussions,
investigations and/or negotiations with such entity or group concerning a BONA
FIDE offer or proposal regarding a transaction that would result in a superior
acquisition proposal.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The information statement attached as Annex A hereto is being furnished in
connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors of the
Company other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
1. Agreement and Plan of Merger, dated as of June 16, 1998, among the
Company, Parent and Purchaser.
2. Agreement, dated as of June 16, 1998 among Parent, Purchaser and the
stockholders named therein.
3. Opinion of Berenson Minella & Company dated June 16, 1998 (attached
hereto as Annex B to this Schedule 14D-9).*
4. Letter to stockholders of the Company dated June 23, 1998.*
5. Press release issued by Parent on June 17, 1998.
6. Agreement, dated as of June 16, 1998 by and between Purchaser and
Lyndon J. Faulkner.
7. Agreement, dated as of June 16, 1998 by and between Purchaser and L.
Steven Minkel.
- ------------------------
* Included in copies mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
NIMBUS CD INTERNATIONAL, INC.
By: /s/ L. STEVEN MINKEL
------------------------------------------
L. Steven Minkel
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Dated: June 23, 1998
S-1
<PAGE>
ANNEX A
NIMBUS CD INTERNATIONAL, INC.
623 Welsh Run Road
Guildford Farm
Ruckersville, Virginia 22968
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED, AND RULE 14(F)-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about June 23, 1998 as part
of Nimbus CD International, Inc.'s (the "Company's") Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
the Company's common stock, par value $.01 per share (the "Shares"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Schedule 14D-9. You are receiving this Information Statement
in connection with the possible election of persons designated by Neptune
Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of Carlton
Communications Plc ("Parent"), to seats on the Company's Board of Directors (the
"Board"). You are urged to read this Information Statement carefully. You are
not, however, required to take any action.
The Agreement and Plan of Merger dated as of June 16, 1998 by and among the
Company, Parent and Purchaser (the "Merger Agreement") provides that, promptly
upon the acceptance for payment of, and payment by Purchaser in accordance with
the Offer (as defined in the Merger Agreement) for, any shares of Common Stock
(as defined in the Merger Agreement) pursuant to the Offer (as defined in the
Merger Agreement), Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as shall give
Purchaser, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), representation on the Board equal
to at least the number of directors which equals the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence) multiplied by a fraction, the numerator of which shall be the
number of Shares so accepted for payment and paid for pursuant to the Offer or
otherwise acquired or issued and owned by Purchaser or Parent and the
denominator of which shall be the number of Shares then outstanding. Subject to
applicable law, the Company and the Board shall promptly increase the size of
the Board or exercise all reasonable efforts to secure the resignations of such
number of directors as is necessary to provide Purchaser with such level of
representation and shall cause Purchaser's designees to the Board (the
"Purchaser Designees") to be elected. This Information Statement is required by
Section 14(f) of the Exchange Act, as amended, and Rule 14f-1 promulgated
thereunder.
Pursuant to the Merger Agreement, on June 23, 1998, Parent and Purchaser
commenced the Offer. The Offer is scheduled to expire at 12:00 midnight, New
York City time, on July 21, 1998, unless extended pursuant to the terms of the
Offer. The terms of the Merger Agreement, a summary of the events leading up to
the Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Schedule 14D-9.
The information contained in this Information Statement concerning Purchaser
and the Purchaser Designees has been furnished to the Company by Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
The outstanding voting securities of the Company as of June 15, 1998,
consisted of 21,469,754 shares of common stock, par value $.01 per share (the
"Common Stock") and the record holder of each such share is entitled to one
vote.
A-1
<PAGE>
PURCHASER DESIGNEES
Purchaser has informed the Company that it currently intends to choose the
Purchaser Designees that it has the right to designate to the Board pursuant to
the Merger Agreement from among the persons listed on Schedule I attached hereto
which sets forth the name, age, business address, present principal occupation
and material positions and occupations within the past five years of the persons
who may be Purchaser Designees. Unless otherwise specified, each person listed
on such Schedule I is a citizen of the United States.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Purchaser of Shares pursuant to the Offer, which
purchase cannot be earlier than July 21, 1998, and that, upon assuming office,
the Purchaser Designees will thereafter constitute at least a majority of the
Board.
None of the Purchaser Designees or their associates (except, if chosen as
Purchaser Designees, Lyndon J. Faulkner and L. Steven Minkel) is a director of,
or holds any position with, the Company. To the best knowledge of the Company,
none of the Purchaser Designees or their associates (except, if chosen as
Purchaser Designees, Lyndon J. Faulkner and L. Steven Minkel) beneficially owns
any equity securities, or rights to acquire any equity securities, of the
Company or has been involved in any transactions with the Company or any of its
directors or executive officers that are required to be disclosed pursuant to
the rules and regulations of the Securities and Exchange Commission (the "SEC").
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 15, 1998, as to shares
of Common Stock owned by (i) each person who is known by the Company to own
beneficially more than five percent of the Company's Common Stock, (ii) each
director of the Company, (iii) each executive officer named in the Summary
Compensation Table and currently employed by the Company, and (iv) all directors
and executive officers as a group, together with their respective percentages.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF % OF CLASS
BENEFICIALOWNERSHIP (IF MORE
NAME OF PERSON OR NUMBER OF PERSONS IN GROUP (1) THAN 1%) (2)
- --------------------------------------------------------------------------- ---------------------- -------------
<S> <C> <C>
McCown De Leeuw & Co. III, L.P.(3)......................................... 5,528,901 25.8
McCown De Leeuw & Co. (Europe) III, L.P. (3)............................... 5,528,901 25.8
McCown De Leeuw & Co. (Asia) III, L.P. (3)................................. 5,528,901 25.8
Gamma Fund LLC (3)......................................................... 5,528,901 25.8
Behrman Capital L.P. (4)................................................... 3,670,066 17.1
Behrman Capital "B" L.P. (4)............................................... 3,670,066 17.1
Strategic Entrepreneur Fund, L.P. (4)...................................... 3,670,066 17.1
Charles Ayres (3).......................................................... 5,575,744 26.0
Darryl G. Behrman (4)...................................................... 3,670,066 17.1
Grant G. Behrman (4)....................................................... 3,670,066 17.1
Robert M. Davidson (5)..................................................... 9,165 *
David E. De Leeuw (3)(6)................................................... 5,615,076 26.1
Anthony V. Dub (7)......................................................... 19,165 *
Lyndon J. Faulkner (8)..................................................... 484,789 2.2
George E. McCown (3)(9).................................................... 5,579,954 26.0
Glenn S. McKenzie (10)..................................................... 1,000 *
L. Steven Minkel (11)...................................................... 335,651 1.6
Robert J. Headrick (12).................................................... 55,658 *
Howard G. Nash (13)........................................................ 113,259 *
All directors and executive officers as a group (14 persons)(14)........... 10,498,325 46.9
</TABLE>
- ------------------------
* Less than one percent of the issued and outstanding shares of Common Stock.
(1) The amount and percentage of securities beneficially owned by an individual
are determined in accordance with the definition of beneficial ownership set
forth in the regulations of the SEC and,
A-2
<PAGE>
accordingly, may include securities owned by or for, among others, the
spouse and/or minor children of the individual and any other relative who
has the same home as such individual, as well as other securities as to
which the individual has or shares voting or investment power or has the
right to acquire within 60 days after June 15, 1998. Beneficial ownership
may be disclaimed as to certain of the securities. Unless otherwise
indicated, the persons and entities named have sole voting and dispositive
power over their shares.
(2) Individual percentages have been rounded. Shares subject to outstanding
stock options or warrants which the individual has the right to acquire
within 60 days after June 15, 1998, are deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of the class
owned by such individual, or any group including such individual, but are
not deemed outstanding for the purpose of computing the percentage of the
class owned by any other individual.
(3) Includes 4,478,412 shares owned by McCown De Leeuw & Co. III, L.P., an
investment partnership whose general partner is MDC Management Company III,
L.P. ("MDC III"), 774,046 shares held by McCown De Leeuw & Co. (Europe) III,
L.P., an investment partnership whose general partner is MDC Management
Company IIIE, L.P. ("MDC IIIE"), 82,931 shares held by McCown De Leeuw & Co.
(Asia) III, L.P., an investment partnership whose general partner is MDC
Management Company IIIA, L.P. ("MDC IIIA"), and 193,512 shares owned by
Gamma Fund LLC, a California limited liability company ("Gamma"). The voting
members of Gamma are George E. McCown, David E. De Leeuw, David E. King,
Robert B. Hellman, Jr., Charles Ayres and Steven Zuckerman, who are also the
only general partners of MDC III, MDC IIIE and MDC IIIA. Voting and
dispositive decisions regarding the Common Stock owned by MDC III, MDC IIIE
and MDC IIIA are made by Messrs. McCown and De Leeuw, as Managing General
Partners of each of such partnerships, who together have more than the
required two-thirds-in-interest vote of the Managing General Partners
necessary to effect such decision on behalf of any such entity. Voting and
dispositive decisions regarding the Common Stock owned by Gamma are made by
a vote or consent of a majority in number of the members of Gamma. No
general partner is able to individually direct the voting or disposition of
Common Stock beneficially owned by MDC III, MDC IIIE and MDC IIIA. Messrs.
McCown, De Leeuw, King, Hellman, Ayres and Zuckerman, disclaims beneficial
ownership of any shares of Common Stock owned by MDC III, MDC IIIE, MDC IIIA
and Gamma except to the extent of their proportionate partnership interests
or membership interests (in the case of Gamma). The address of each of MDC
III, MDC IIIE, MDC IIIA and Gamma is c/o McCown De Leeuw & Co., Inc., 3000
Sand Hill Road, Building 3, Suite 290, Menlo Park, California 94025.
(4) Includes 3,306,037 shares owned by Behrman Capital L.P., an investment
partnership whose general partner is Behrman Brothers, L.P., and 298,278
shares owned by Behrman Capital "B" L.P., an investment partnership whose
general partner is Behrman Brothers, L.P., and 65,751 shares owned by
Strategic Entrepreneur Fund, L.P., an investment partnership whose general
partners are Darryl G. Behrman and Grant G. Behrman. Darryl Behrman and
Grant Behrman are the only general partners of each of Behrman Brothers,
L.P. and Strategic Entrepreneur Fund, L.P., and, as such, each may make
voting and dispositive decisions regarding the Common Stock. Messrs. Darryl
Behrman and Grant Behrman have no direct ownership of any shares of Common
Stock and disclaim beneficial ownership of any shares of Common Stock except
to the extent of their proportionate partnership interests. The address of
Behrman Capital is c/o Behrman Capital L.P., 126 East 56th Street, New York,
New York 10022.
(5) Includes 9,165 shares subject to stock options.
(6) Includes 4,000 shares held for the benefit of Mr. De Leeuw in the MDC
Management Company, Inc. Retirement Savings and Investment Plan of which Mr.
De Leeuw is a trustee. Also includes 1,000 shares held in trust for the
benefit of Brian De Leeuw, Mr. De Leeuw's son, of which Treva De Leeuw, Mr.
De Leeuw's wife, serves as trustee. Mr. De Leeuw disclaims beneficial
ownership of the shares held in trust for the benefit of Brian De Leeuw.
(7) Includes 4,165 shares subject to stock options.
(8) All shares are subject to stock options.
(9) Includes 4,000 shares held for the benefit of Mr. McCown in the MDC
Management Company, Inc. Retirement Savings and Investment Plan of which Mr.
McCown is a trustee.
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<PAGE>
(10) Mr. McKenzie is a consultant to McCown De Leeuw & Co., Inc.
(11) Includes 160,296 shares subject to stock options. Also includes 500 shares
owned by each of Lewis C. Minkel and Carter P. Minkel, Mr. Minkel's adult
sons, of which Mr. Minkel expressly disclaims beneficial ownership.
(12) All shares are subject to stock options.
(13) All shares are subject to stock options.
(14) Includes 922,632 shares issuable upon the exercise of stock options and
9,198,967 shares beneficially owned by the MDC Entities and Behrman Capital.
DIRECTORS AND EXECUTIVE OFFICERS
CURRENT DIRECTORS
The names, ages and positions of all the directors of the Company, as of
June 15, 1998, are listed below together with their business experience during
the past five years. At each annual meeting of the stockholders of the Company,
all directors are elected for a one year term. At a meeting of the Board of the
Company held on May 21, 1997, the Bylaws of the Company were amended to provide
for a Board consisting of a minimum of eight (8) and a maximum of thirteen (13)
persons. In addition, the Board determined that the number of directors would be
ten (10). There are no arrangements or understandings between any director or
any other person pursuant to which the director was elected.
The Board is composed of the following persons:
LYNDON J. FAULKNER. President, Chief Executive Officer and Director since
October 1992 and Chairman of the Board of Directors since March 1995 and
Treasurer since August 1996. Mr. Faulkner, age 37, was employed in various
capacities by Nimbus Records Limited (the "Predecessor") from 1985 until October
1992, most recently as Manufacturing Director. Mr. Faulkner was initially
responsible for the design and development of the manufacturing process utilized
by the Predecessor. Mr. Faulkner was educated in electrical and electronic
engineering in the United Kingdom. Mr. Faulkner is a director of Tad Coffen
Performance Saddles Inc., a privately owned company.
CHARLES AYRES. Director of the Company since March 1995. Mr. Ayres, age 38,
is a general partner of MDC Management Company III, L.P., which is the general
partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw & Co. Offshore
(Europe) III, L.P., a general partner of MDC Management Company IIIA, L.P.,
which is the general partner of McCown De Leeuw & Co. III (Asia), L.P. and a
member of Gamma Fund, LLC. Mr. Ayres has been affiliated with McCown De Leeuw &
Co., Inc., an affiliate of McCown De Leeuw & Co. III, L.P., since 1991. Prior to
that he was a founding general partner of HMA Investments, Inc., a private
investment firm focused on middle-market management buyouts. He currently is a
director of certain privately held companies, including Aurora Foods Inc. and
The Brown Schools.
DARRYL G. BEHRMAN. Director of the Company since March 1995. Mr. Behrman,
age 47, is a general partner of Behrman Brothers, L.P., the general partner of
Behrman Capital L.P. and Behrman Capital "B" L.P. The Behrman Capital entities
are private investment firms focused on management buyouts of emerging growth
companies. Prior to founding Behrman Capital in 1992, Mr. Behrman was a partner
at Wertheim Schroder & Co. Incorporated where he specialized in middle market
mergers and acquisitions, recapitalizations and management buyouts. Prior to
that he worked for Citicorp's Merchant Banking
Group where he served as Vice President and head of the Corporate Advisory Group
in London. Mr. Behrman is a Director of several privately held companies
including Condor Systems, Inc., Professional Dental Associates, Inc. and Total
Physician Services, Inc. He is Chairman of the Board of Esoterix, Inc., a
privately held company. Darryl Behrman and Grant Behrman are brothers.
A-4
<PAGE>
GRANT G. BEHRMAN. Director of the Company since March 1995. Mr. Behrman,
age 44, is a general partner of Behrman Brothers, L.P., the general partner of
Behrman Capital L.P. and Behrman Capital "B" L.P. The Behrman Capital entities
are private investment firms focused on management buyouts of emerging growth
companies. Prior to founding Behrman Capital in 1992, Mr. Behrman was employed
for ten years by Morgan Stanley & Co. Incorporated, most recently as a general
partner in its Venture Capital Group. Mr. Behrman is a Director of Visual
Networks, Inc., which is a publicly traded company, as well as serving as
Director of several privately held companies including Esoterix, Inc. and Condor
Systems, Inc. Darryl Behrman and Grant Behrman are brothers.
ROBERT M. DAVIDSON. Director of the Company since July 1994. Since February
1997, Mr. Davidson, age 55, has been Chairman and Chief Executive Officer of The
Davidson Group, a privately held investment company. From 1989 to February 1997,
Mr. Davidson was Chairman of the Board of Directors and Chief Executive Officer
of Davidson & Associates, Inc., a publicly-held educational software company
that develops, publishes and manufactures high quality educational software
products for home and school use. In 1996, Mr. Davidson also served as Vice
Chairman of CUC International, Inc., a publicly held membership-based, consumer
services company. Mr. Davidson held senior management positions at The Parsons
Corporation, a large engineering and construction company, from 1978 to 1989.
During his last five years at Parsons, he served as Executive Vice President,
and was responsible for managing a major portion of the firm's operations and
overseeing acquisitions of businesses and new technologies.
DAVID E. DE LEEUW. Director of the Company since March 1995. Mr. De Leeuw,
age 54, is a managing general partner of MDC Management Company III, L.P., which
is the general partner of McCown De Leeuw & Co. III, L.P. and McCown De Leeuw &
Co. Offshore (Europe) III, L.P., a managing general partner of MDC Management
Company IIIA, L.P., which is the general partner of McCown De Leeuw & Co. III
(Asia), L.P. and a member of Gamma Fund, LLC. Mr. De Leeuw was the co-founder in
1984 of McCown De Leeuw & Co., Inc., an affiliate of McCown De Leeuw & Co. III,
L.P. He currently serves as Vice Chairman of Vans, Inc. and a director of
American Residential Investment Trust, Inc., both publicly held companies. He
also currently serves as a director of Aurora Foods Inc., AmeriComm Holdings,
Inc., Outsourcing Solutions Inc. and Home Asset Management Corp., all privately
held companies.
ANTHONY V. DUB. Director of the Company since May 1996. Mr. Dub, age 48, is
an Advisor of Credit Suisse First Boston, an international investment banking
firm with headquarters in New York City. Mr. Dub joined Credit Suisse First
Boston in 1971 and served as a Managing Director from 1981 until 1997. He
currently serves as a director of Lomak Petroleum, Inc., a publicly held
company.
GEORGE E. MCCOWN. Director of the Company since March 1995. Mr. McCown, age
63, is a managing general partner of MDC Management Company III, L.P., which is
the general partner of McCown De Leeuw & Co. III, L.P., and McCown De Leeuw &
Co. Offshore (Europe) III, L.P., a managing general partner of MDC Management
Company IIIA, L.P., which is the general partner of McCown De Leeuw & Co. III
(Asia), L.P. and a member of Gamma Fund, LLC. Mr. McCown was the co-founder in
1984 of McCown De Leeuw & Co., Inc., an affiliate of McCown De Leeuw & Co. III,
L.P. He serves as Chairman of the Board of Building Materials Holding Corp., and
as Vice Chairman of Vans, Inc., both publicly held companies as well as Chairman
of Pelican Companies, Inc., a privately held company. Mr. McCown also serves as
a director of Fibermark, Inc., a publicly held company, as well as serving as a
director of International Data Response Corp., Fitness Holdings, Inc., The Brown
Schools, RSP Manufacturing Corp., Home Asset Management Corp. and Fitness
Europe, all privately held companies.
GLENN S. MCKENZIE. Director of the Company since March 1995. Mr. McKenzie,
age 45, has been President of Alpha Investments, Inc., a management consulting
firm, since October 1991. He currently serves as a director of Fibermark, Inc.,
a publicly held company, and DEC International, Inc., a privately held company.
L. STEVEN MINKEL. Director of the Company since August 1997. Mr. Minkel,
age 56, has been Executive Vice President, Chief Financial Officer and Secretary
since November 1992. Before joining the
A-5
<PAGE>
company, from February 1986 to October 1992, he was Vice President and Chief
Financial Officer of Duchossois Industries, Inc., a privately owned
manufacturing conglomerate. Mr. Minkel served as a director of the Company from
November 1992 through March 1995.
BOARD MEETINGS OF THE BOARD OF DIRECTORS
The Board met five times during fiscal 1998. All such meetings were special
meetings. Except for David E. De Leeuw and George E. McCown, all directors
attended at least 75% of the aggregate number of meetings of the Board and
standing committees on which they served. Each of David E. De Leeuw and George
E. McCown attended, respectively, three out of five meetings of the Board and
the standing committees on which they served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has an Executive Committee comprised of the Chief Executive
Officer, the Chief Financial Officer and two non-employee directors, an Audit
Committee comprised of three non-employee directors and a Compensation Committee
comprised of four directors, two of whom the Company has deemed to be
independent.
The Executive Committee held monthly meetings during fiscal 1998. The
Executive Committee is authorized, within parameters and limitations set out by
the Company's Board of Directors, to meet and act on behalf of the Board during
interim periods between regular meetings of the Board. During fiscal 1998, the
members of the Executive Committee included Messrs. Faulkner, Minkel, Ayres, and
G. Behrman.
The Audit Committee held one meeting during fiscal 1998. Its principal
functions are to recommend the firm of independent accountants to serve the
Company each fiscal year to the Board of Directors and to review the plan and
results of the prior year's audit by the independent accountants as well as the
scope, results, and adequacy of the Company's internal accounting controls and
procedures. In addition, the Audit Committee reviews the independence of the
accountants and reviews their fees for audit and non-audit services rendered to
the Company. During fiscal 1998, the members of the Audit Committee included
Messrs. Davidson, Dub and McKenzie.
The Compensation Committee held two meetings during fiscal 1998. Its
principal functions are to approve remuneration of the officers of the Company,
review certain benefit programs, and approve and administer remuneration plans,
including the stock incentive plans of the Company. During fiscal 1998, the
members of the Compensation Committee included Messrs. Ayres, D. Behrman,
Davidson and Dub.
CURRENT EXECUTIVE OFFICERS
The names, ages and positions of all of the executive officers of the
Company, as of June 15, 1998, are listed below together with their business
experience during the past five years. All executive officers are appointed by,
and serve at the discretion of, the Board of Directors. There are no
arrangements or understandings between any executive officer or any other person
pursuant to which any of the executive officer was elected.
A-6
<PAGE>
The following table lists the executive officers of the Company and its
affiliates.
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE DURING
NAME AND AGE WITH THE COMPANY PAST FIVE YEARS
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Lyndon J. Faulkner (37)....... President, Chief Executive Officer, *
Treasurer and Chairman of the Board of
Directors
L. Steven Minkel (56)......... Executive Vice President, Chief *
Financial Officer and Secretary
Howard G. Nash (49)........... European Managing Director, Nimbus Mr. Nash has served as European
Manufacturing (UK) Limited Managing Director of Nimbus
Manufacturing (UK) Limited since
January 1994. Prior to that time, he
was employed in various management
capacities, including Finance Director,
by Nimbus Manufacturing (UK) Limited
and the Predecessor.
Robert J. Headrick (41)....... President, Nimbus Information Systems, Mr. Headrick has served as President of
Inc., Executive Vice President, Nimbus Nimbus Information Systems, Inc. since
Manufacturing Inc. March 1993 and as Executive Vice
President of Nimbus Manufacturing Inc.
since March 1994.
Robert J. Lynch (37).......... Vice President, Nimbus Manufacturing Mr. Lynch has served as Vice President
Inc. of Nimbus Manufacturing Inc. since
March 1994. Prior to that time, he was
employed in various management
capacities, including Operations
Manager, by Nimbus Manufacturing Inc.
and the Predecessor.
Gary E. Krutul (42)........... Controller and Chief Accounting Mr. Krutul has served as Controller and
Officer, Assistant Secretary and Chief Accounting Officer since June
Assistant Treasurer 1995 and Assistant Secretary and
Assistant Treasurer since August 1996.
From September 1991 to February 1995,
Mr. Krutul served as Financial Manager
for Bally's Total Fitness, Inc.
</TABLE>
- ------------------------
* See "DIRECTORS AND EXECUTIVE OFFICERS--Current Directors"
FAMILY RELATIONSHIPS
Directors Grant and Darryl Behrman are brothers. Otherwise, there is no
family relationship between any director, executive officer, or person nominated
or chosen by the Company to become a director or executive officer.
A-7
<PAGE>
COMPENSATION
EXECUTIVE OFFICERS COMPENSATION
The following sections disclose detailed information about cash and
equity-based executive compensation paid by the Company to certain of its
executive employees. The information is comprised of a Summary Compensation
Table and additional tables which provide further details on stock options
issued by the Company.
SUMMARY COMPENSATION TABLE
The following summary compensation table presents information about the
compensation paid by the Company during its three most recent fiscal years to
those individuals who were (i) the Company's Chief Executive Officer (the "CEO")
at the end of the last completed fiscal year, regardless of compensation level
and (ii) the four other most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
----------------------------------- ------------------------
OTHER ALL
FISCAL YEAR ANNUAL OPTIONS OTHER
ENDED MARCH SALARY BONUS COMPENSATION GRANTED COMPENSATION
NAME AND PRINCIPAL POSITION 31 ($) ($) ($)(2) (#) ($) (3)
- ------------------------------------------------ ------------- --------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lyndon J. Faulkner.............................. 1998 242,550 25,000 0 15,000 12,230
President, Chief Executive Officer, Treasurer 1997 242,550 0 0 35,000 11,422
and Chairman of the Board of Directors 1996 231,000 73,600 0 475,326 12,486
L. Steven Minkel................................ 1998 200,000 25,000 0 15,000 9,549
Executive Vice President, Chief Financial 1997 191,260 0 0 32,000 9,992
Officer and Secretary 1996 177,876 73,600 0 316,821 9,070
David J. Trudel (4)............................. 1998 181,000 0 0 15,000 3,680
Executive Vice President, Nimbus Manufacturing 1997 145,792 0 28,443 20,000 1,370
Inc.
Robert J. Headrick.............................. 1998 180,180 0 0 10,000 7,143
President, Nimbus Information Systems, Inc., 1997 180,180 0 0 5,000 7,265
Executive Vice President, Nimbus Manufacturing 1996 173,828 23,400 0 105,670 7,211
Inc.
Howard G. Nash.................................. 1998 128,427 11,541 0 15,000 28,070
European Managing Director, Nimbus 1997 105,650 32,000 0 20,000 22,489
Manufacturing (UK) Limited 1996 92,918 31,746 0 131,993 19,528
</TABLE>
- ------------------------
(1) While each of the five Named Executive Officers received perquisites or
other personal benefits in the years shown, in accordance with SEC
regulations, the value of these benefits are not indicated since they did
not exceed the lesser of $50,000 or 10% of the individual's salary and bonus
in any year.
(2) The amount set forth in the Summary Compensation Table under the heading
"Other Annual Compensation" includes (i) $21,243 for reimbursements made by
the Company to Mr. Trudel or on behalf of Mr. Trudel for relocation costs
and (ii) $7,200 as an automobile allowance on behalf of Mr. Trudel.
A-8
<PAGE>
(3) Amounts set forth in the Summary Compensation Table under the heading "All
Other Compensation" include (i) contributions made by the Company to the
Company's 401(k) plan or, in the case of Messrs. Faulkner and Nash, to the
Company's U.K. Pension Scheme for the benefit of the Named Executive Officer
and (ii) the Company's payment of life insurance premiums on behalf of the
Named Executive Officer. In fiscal 1998, the Company paid $885, $2,254,
$1,141 and $743 in life insurance premiums on behalf of Messrs. Faulkner,
Minkel, Trudel and Headrick, respectively. In fiscal 1997, the Company paid
$330, $2,250, $487 and $330 in life insurance premiums on behalf of Messrs.
Faulkner, Minkel, Trudel and Headrick, respectively. In fiscal 1996, the
Company paid $330, $1,440 and $330 in life insurance premiums on behalf of
Messrs. Faulkner, Minkel and Headrick, respectively.
(4) Mr. Trudel ceased to be employed by the Company in February 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Faulkner,
Minkel, Headrick and Nash. The employment agreement with Mr. Faulkner provides
for a base salary of not less than $200,000 and provides for an initial term
ended March 31, 1994 and for continuation thereafter for additional one year
periods until terminated in accordance with the agreement. The agreement also
provides for an annual bonus subject to the achievement of annual performance
criteria (such bonus for fiscal 1998 was $25,000). The agreement may be
terminated by the Company with or without cause, provided that if it is
terminated without cause the Company will be obligated to pay the greater of one
year's salary plus the previous year's bonus or all salary and benefits
specified in the agreement from the date of termination to the end of the then
current contract term.
Purchaser has entered into the Faulkner Employment Agreement (as defined in
the Schedule 14D-9). A summary of such agreement is contained in the Schedule
14D-9. The summary is not a complete description of the terms and conditions
thereof and is qualified in its entirety by reference to the full text thereof,
which is incorporated herein by reference and a copy of which has been filed
with the SEC as Exhibit 6 to the Schedule 14D-9.
The employment agreement with Mr. Minkel provides for a base salary of not
less than $150,000 and provides for an initial term ended November 8, 1994 and
for continuation thereafter for additional one year periods until terminated in
accordance with the agreement. The agreement also provides for an annual bonus
subject to the achievement of annual performance criteria (such bonus for fiscal
1998 was $25,000). The agreement may be terminated by the Company with or
without cause, provided that if it is terminated without cause the Company will
be obligated to pay the greater of one year's salary plus the previous year's
bonus or all salary and benefits specified in the agreement from the date of
termination to the end of the then current contract term.
Purchaser has entered into the Minkel Employment Agreement (as defined in
the Schedule 14D-9). A summary of such agreement is contained in the Schedule
14D-9. The summary is not a complete description of the terms and conditions
thereof and is qualified in its entirety by reference to the full text thereof,
which is incorporated herein by reference and a copy of which has been filed
with the SEC as Exhibit 7 to the Schedule 14D-9.
The employment agreement with Mr. Headrick provides for a base salary of not
less than $140,000 and provides for an initial term ended March 7, 1994.
Thereafter, the agreement continues for additional six month periods until
terminated in accordance with the agreement. The agreement also provides for an
annual bonus, subject to achievement of annual performance criteria (such bonus
for fiscal 1998 was $0). The agreement may be terminated by the Company with or
without cause, provided that if it is terminated without cause the Company is
obligated to pay Mr. Headrick the greater of six months' salary or all salary
and benefits specified in the agreement from the date of termination to the end
of the then current term.
A-9
<PAGE>
Mr. Nash is employed under a standard contract for employment of directors
in the United Kingdom which provides, among other things, certain statutory
entitlements and a base salary of L38,250 which is reviewed annually. The
agreement does not have a fixed term and, except in the case of serious employee
misconduct or gross negligence, requires the parties to the agreement to provide
12 months prior written notice of a desire to terminate. The Company may make a
payment in lieu of notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From October 1992 until June 1993, the executive compensation program of the
Company was administered by the Board of Directors. During such period Mr.
Faulkner, President, and Mr. Minkel, Executive Vice President, participated in
the deliberations of the Board of Directors concerning executive officer
compensation. On June 3, 1993, the Board of Directors established a Compensation
Committee to administer the Company's executive compensation program. The
Compensation Committee is currently comprised of four non-employee directors.
STOCK OPTIONS
The Company has adopted the Amended and Restated Nimbus CD International,
Inc. 1995 Stock Option and Stock Award Plan (the "Nimbus Plan"). The Nimbus Plan
is intended to further the long-term stability and financial success of the
Company by attracting and retaining key employees through the use of stock
incentives, including stock options. The Company does not award stock
appreciation rights under the Nimbus Plan. The Company has reserved a total of
2,715,449 shares (adjusted to give effect to the Company's 3.76049 stock split
effective October 16, 1995) of common stock for issuance under the Nimbus Plan.
The following table sets forth additional information concerning individual
grants of stock options made under the Nimbus Plan during the last completed
fiscal year to each of the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
- -------------------------------------------------------------------------------------------------------- OF STOCK PRICE
% OF TOTAL APPRECIATION FOR
OPTIONS OPTIONS GRANTED OPTION TERM (1)
GRANTED TO ---------------------
(2) EMPLOYEES IN EXERCISE OR EXPIRATION 5% 10%
NAME (#) FISCAL YEAR BASE PRICE ($/SH) DATE ($) ($)
- ---------------------------------------- ----------- ----------------- ----------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lyndon J. Faulkner...................... 15,000 7.1% $ 9.13 3/31/07 $ 86,142 $ 218,298
L. Steven Minkel........................ 15,000 7.1% $ 9.13 3/31/07 $ 86,142 $ 218,298
David J. Trudel......................... 15,000 7.1% $ 9.13 3/31/07 $ 86,142 $ 218,298
Robert J. Headrick...................... 10,000 4.7% $ 9.13 3/31/07 $ 57,428 $ 145,532
Howard G. Nash.......................... 15,000 7.1% $ 9.13 3/31/07 $ 86,142 $ 218,298
</TABLE>
- ------------------------
(1) The potential realized values in the table assume that the market price of
the Company's Common Stock appreciates in value from the date of grant to
the end of the option term at the annualized rates of five percent and ten
percent, respectively. The actual value, if any, an executive may realize
will depend on the excess, if any, of the stock price over the exercise
price on the date the option is exercised. There is no assurance that the
value realized by an executive will be at or near the value estimated in the
table.
(2) Options were granted April 1, 1997. The options will vest ratably over a
five year period with one fifth of the options becoming exercisable on March
31, 1998 and one fifth vesting each March 31 thereafter until the options
are fully vested on March 31, 2002.
A-10
<PAGE>
The following table sets forth information concerning each exercise of stock
options during fiscal 1998 by each of the Named Executive Officers and the
fiscal year-end value of unexercised options, provided on an aggregated basis:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END UNEXERCISED OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY(2)
SHARES ACQUIRED VALUE(1) OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- --------------------- ------------- ----------------------- ------------------------
Lyndon J. Faulkner.............. 0 $ 0.00 484,789/264,196 $4,089,504/$1,785,385
L. Steven Minkel................ 0 $ 0.00 160,296/185,287 $1,111,096/$1,194,152
David J. Trudel................. 0 $ 0.00 11,000/ 24,000 $ 3,173/$ 12,690
Robert J. Headrick.............. 0 $ 0.00 55,658/ 62,406 $ 405,140/$ 402,616
Howard G. Nash.................. 0 $ 0.00 113,259/ 88,192 $ 870,931/$ 504,882
</TABLE>
- ------------------------
(1) The dollar values referred to in columns (C) and (E) are calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise price of the options at exercise or
fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
DIRECTORS COMPENSATION
Beginning November 1995, the Company began paying an annual fee of $10,000
to directors of the Company who are not compensated as officers of the Company
or employed by an affiliate of the Company, including the MDC Entities and
Behrman Capital. The Company also reimburses each director for out-of-pocket
expenses incurred in attending meetings of the Board of Directors and its
committees.
In addition, in October 1995, the Board of Directors, with the approval of
the stockholders, adopted the Nimbus CD International, Inc. 1995 Stock Option
Plan for Non-Employee Directors (the "Directors' Plan"). The Directors' Plan is
designed to attract and retain the services of experienced and highly qualified
outside directors and to create a proprietary interest for such directors in the
Company's continued success. Under the Directors' Plan, grants of stock options
will be made to each member of the Board, who is (a) not an employee of the
Company, (b) not an employee of an affiliate of the Company, and (c) otherwise
not eligible for selection to participate in any plan of the Company or its
affiliates that entitles such member to acquire securities or derivative
securities of the Company. An aggregate of 50,000 shares of Common Stock have
been reserved for issuance under the Directors' Plan. Notwithstanding the
foregoing, adjustments may be made by the Company's Board of Directors in the
number and class of shares available under the Directors' Plan and the number,
class and price of shares subject to outstanding option grants, in each such
case, to reflect changes in the Company's corporate structure or capitalization,
such as through a merger or stock split.
Options awarded under the Directors' Plan expire ten years from the date of
grant (unless the period is shortened by the non-employee independent director's
retirement, death, disability or a change of control as defined in the
Directors' Plan). Options awarded subsequent to October 31, 1995 will permit the
non-employee independent director, for a period of up to ten years from the date
of grant (unless the period is shortened by the non-employee independent
director's retirement, death, disability or a change in control as defined in
the Directors' Plan), to purchase 2,500 shares of Common Stock from the Company
at the fair market value of such shares on the date such option is granted.
A-11
<PAGE>
Each non-employee independent director will receive such an option whenever
he or she is elected, re-elected or appointed to the Company's Board of
Directors and otherwise satisfies the requirements for participation in the
Directors' Plan. Generally, an option shall only be exercisable with respect to
one-third of the shares subject to the option on the first anniversary of the
date of grant (and not prior thereto) and then with respect to an additional
one-third of such shares beginning on each of the second and third anniversaries
of the date of grant; provided, however, the option shall be fully exercisable
upon (i) the attainment of age 70 by the optionee or (ii) the death or
disability (as defined in the Directors' Plan) of the optionee. Notwithstanding
the foregoing, in no event may an option under the Directors' Plan be exercised
prior to the expiration of six months from the date of grant. Except in certain
limited circumstances, an option may be exercised only if the optionee at the
time of exercise is, and at all times following the grant of the option remains,
a non-employee director of the Company.
On October 30, 1995, Robert M. Davidson was awarded options to purchase
10,000 shares of the Company's Common Stock at an exercise price equal to $7.00.
Such options vest ratably over a three year period with the first options
vesting on October 30, 1996. On May 20, 1996, upon his appointment to the
Company's Board of Directors, Anthony V. Dub was awarded options to purchase
2,500 shares of the Company's Common Stock at an exercise price of $11.25 per
share. Such options shall vest ratably over three years beginning May 20, 1997.
On August 6, 1996, upon their re-election to the Board, each of Messrs. Davidson
and Dub were granted options to purchase 2,500 additional shares of the
Company's Common Stock under the Directors' Plan at an exercise price of $12.63.
Such options shall vest ratably over three years beginning August 6, 1997. On
August 5, 1997, upon their re-election to the Board, each of Messrs. Davidson
and Dub were granted options to purchase 2,500 additional shares of the
Company's Common Stock under the Directors' Plan at an exercise price of $12.37.
Such options will vest ratably over three years beginning August 5, 1998.
The Directors' Plan will terminate upon the earlier to occur of (i) the
adoption of a resolution of the Company's Board of Directors terminating the
Directors' Plan, (ii) the date all shares of Common Stock subject to the
Directors' Plan are purchased according to the provisions of the Directors' Plan
or (iii) ten years from the date of adoption of the Directors' Plan by the
Company's Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1995 RECAPITALIZATION. On March 31, 1995, certain affiliates of McCown De
Leeuw & Co., Inc. (the "MDC Entities") and Behrman Capital L.P. ("Behrman
Capital") replaced affiliates of DLJ Merchant Banking, Inc. (the "DLJMB
Investors") as the Company's majority stockholders through a series of
transactions (the "Recapitalization"). The MDC Entities and Behrman Capital
acquired 10,698,970 shares of the Company's Common Stock for an aggregate
purchase price of $27 million and another investor acquired 118,876 shares of
Common Stock for $300,000. The Company refinanced its then-outstanding debt and
borrowed an additional $41.1 million. The Company also received $1.7 million
from Chase Manhattan Investment Holdings, Inc. ("Chase Manhattan") for the
issuance of warrants to purchase 693,453 shares of its Common Stock for $0.01
per share. The warrants became exercisable upon the occurrence of the Company's
initial public offering and Chase Manhattan exercised its right to purchase
175,000 shares of Common Stock. Chase Manhattan exercised their remaining
518,453 warrants, which converted into 518,002 shares of Common Stock in a
cashless transaction, on September 2, 1997.
The proceeds from the issuance of Common Stock, warrants and additional debt
were used by the Company to acquire 22,333,768 shares of its Common Stock held
by the DLJMB Investors and 2,834,436 shares of Common Stock from certain members
of management and other stockholders (including 2,174,015 shares received by
management upon exercise of stock options which became fully vested in the
Recapitalization) for an aggregate cost of $65.3 million, including related fees
and expenses.
INITIAL PUBLIC OFFERING. On October 16, 1995, the Company declared a
3.76049 for one stock split which was distributed to stockholders on October 18,
1995. Thereafter, on October 30, 1995, the Company
A-12
<PAGE>
completed an initial public offering of securities with the sale of 6,350,000
shares of Common Stock at a price per share (net of underwriting discounts and
commissions) of $6.55. Of the 6,350,000 shares of Common Stock offered for sale,
5,080,000 shares were purchased and offered for sale to the public by
underwriters in the United States (the "U.S. Offering"), with the remaining
1,270,000 shares being purchased and offered for sale to the public by foreign
underwriters (the "International Offering", together with the U.S. Offering, the
"Offerings"). Contemporaneously with the Offerings, Behrman Capital, a principal
stockholder of the Company, purchased 500,000 shares of Common Stock of the
Company at $6.55 per share in a private placement transaction.
STOCKHOLDERS AGREEMENT. On March 31, 1995, the Company and holders of
Common Stock (collectively, the "Holders") entered into a Stockholders Agreement
(the "1995 Stockholders Agreement"). The 1995 Stockholders Agreement contains,
among other things, restrictions on the transfer of shares of Common Stock and
certain registration rights with respect thereto and matters related to the
Board of Directors of the Company. Upon completion of the Offerings, all of the
provisions of the 1995 Stockholders Agreement terminated except for provisions
relating to certain registration rights. These provisions state that after March
31, 2000, Behrman Capital and the DLJMB Investors, and after March 31, 2002,
Chase Manhattan, shall each have a one time right to demand that the Company
register for sale under the Securities Act of 1933 (the "Securities Act") all or
a portion of the shares of Common Stock of such Holder as then owned by it. Any
such registration is subject to certain time and size limitations. In addition,
the Holders are also entitled to require the Company to use its best efforts to
include shares owned by them in a registered offering of equity securities of
the Company, subject to marketing restrictions determined by the managing
underwriter.
REGISTRATION RIGHTS AGREEMENT. Upon consummation of the Offerings, the
Company and the MDC Entities entered into a registration rights agreement
pursuant to which the Company will grant certain registration rights to the MDC
Entities and certain of their transferees and assignees with respect to shares
of Common Stock owned or acquired by the MDC Entities following the Offerings
(the "Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, the MDC Entities will have the right to require the Company to file
up to five registration statements under the Securities Act, which may be
increased by an additional three registrations if effected on Form S-3, covering
the MDC Entities' shares and the shares of Common Stock of certain transferees
and assignees of the MDC Entities. The Company has agreed to pay all costs and
expenses relating to the exercise of the MDC Entities' registration rights,
except for underwriting commissions relating to shares sold by the MDC Entities.
The Company will indemnify the MDC Entities for certain liabilities, including
liabilities under the Securities Act, in connection with any such registration.
Under the Registration Rights Agreement, the MDC Entities will have the right to
transfer their respective rights to a transferee or assignee of their shares of
the Common Stock in a transfer other than pursuant to a public offering.
By letter agreement dated October 31, 1995, the MDC Entities and Behrman
Capital agreed that upon request of Behrman Brothers, L.P., the general partner
of Behrman Capital L.P., the MDC Entities will agree to exercise one of the
demand registration rights conferred on the MDC Entities pursuant to the
Registration Rights Agreement. This agreement will enable Behrman Capital to
exercise incidental registration rights with respect to their shares of Common
Stock which were granted pursuant to the Stockholders Agreement.
Pursuant to Rule 144 promulgated under the Securities Act, the MDC Entities
and Behrman Capital may, without registration under the Securities Act, sell,
within any three-month period, a number of shares less than or equal to the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly reported trading volume of the Common Stock during the four calendar
weeks preceding such sale, subject, in some cases, to the two year holding
period described in Rule 144. Shares owned by the MDC Entities and Behrman
Capital will be eligible for sale to "qualified institutional buyers" pursuant
to Rule 144A under the Securities Act without regard to the volume limitations
contained in Rule 144.
A-13
<PAGE>
TRANSACTIONS WITH THE INVESTORS. In connection with the Recapitalization,
the Company paid MDC Management Company III, L.P., an affiliate of the MDC
Entities, and Behrman Brothers Management Corporation, an affiliate of Behrman
Capital, transaction fees of $2,425,000 and $1,575,000, respectively, plus
reimbursement for out-of-pocket expenses incurred in connection with services
rendered in connection with the Recapitalization.
TRANSACTIONS WITH MANAGEMENT STOCKHOLDERS. In connection with the
Recapitalization, the Company (i) purchased 296,549 shares of Common Stock
received pursuant to the exercise of stock options from Messrs. Faulkner,
Minkel, Headrick, Nash and Lynch on March 31, 1995 for $2,814,250 and (ii)
purchased 117,628 additional shares of Common Stock from Mr. Minkel for
$296,847. The shares were reacquired at their then fair value of $2.52 per
share, the price paid by the MDC Entities, Behrman Capital and other
stockholders in the Recapitalization.
TRANSACTIONS WITH OTHER PARTIES. The Company's United Kingdom subsidiary
employs the services of Whitehead Electrical Company, Ltd., an electrical
contracting company of which Lyndon Faulkner's brother is the Managing Director.
The services are supplied on competitive terms. The Company paid Whitehead
Electrical Company, Ltd. $141,904 during the fiscal year ended March 31, 1998.
In April 1994, the Company entered into the Donnelley CD-ROM Agreement with
R.R. Donnelley & Sons Company ("Donnelley"), whereby the Company established a
multiline compact disc manufacturing facility in Provo, Utah, requiring capital
expenditures of approximately $13 million by the Company. In April 1995, as
permitted by the Donnelley CD-ROM Agreement, Donnelley assigned substantially
all of its rights in, and obligations under, the Donnelley CD-ROM Agreement to
Stream (as assigned, the "Stream CD-ROM Agreement"). Effective April 1, 1997,
the Company entered into a new agreement with Stream which terminated the Stream
CD-ROM Agreement and set forth Stream's commitment to purchase 27.5 million
discs during fiscal 1998 and 20.6 million discs for the first nine months of
fiscal 1999. The agreement was scheduled to terminate on December 31, 1998. In
December 1997, Stream assigned substantially all of its rights and obligations
under the Stream Agreement to Modus Media International, Inc. ("MMI"). Effective
March 31, 1998, the Company and MMI determined that, in furtherance of their
mutual best interests, they would terminate the Agreement.
The Company provides CD manufacturing services to Cedant Software, formerly
known as CUC International, Inc., a software company. Robert M. Davidson, a
director of the Company, served as Vice Chairman of the Board of CUC
International, Inc. until his resignation of May 27, 1997. These services
supplied to CUC International, Inc. are on competitive terms. Sales to Cedant
Software were $4.5 million for fiscal 1998.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than ten percent of the
Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common stock and to provide copies of the reports to the Company. To
the Company's knowledge, based solely on a review of the copies of reports
furnished to the Company, and written representations that no other reports were
required to be filed, during the fiscal year ended March 31, 1998, the Company's
directors, executive officers, and stockholders beneficially owning more than
ten percent of the Company's Common Stock complied with their respective Section
16(a) reporting requirements.
A-14
<PAGE>
SCHEDULE I
POTENTIAL PURCHASER DESIGNEES
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME, AGE AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
ORLANDO F. President; Chief President of various wholly owned United States
RAIMONDO (54).................. Executive Officer; subsidiaries of Parent comprising
3233 East Mission Oaks Director of Neptune the Technicolor Packaged Media
Boulevard Acquisition Corp. Group.
Camarillo, CA 93012
GARY JOYCE (36).................. Vice President; Senior Vice President and Chief United Kingdom
3233 East Mission Oaks Treasurer; Assistant Financial Officer of Technicolor
Boulevard Secretary; Director of Packaged Media Group since July
Camarillo, CA 93012 Neptune Acquisition 1996. Prior to that time,
Corp. Divisional Controller of Carlton
Communications Plc.
THOMAS M. COLLINS, JR. (44)...... Vice President; Senior Vice President and General United States
3233 East Mission Oaks Secretary; Assistant Counsel of Technicolor Packaged
Boulevard Treasurer; Director of Media Group; executive officer of
Camarillo, CA 93012 Neptune Acquisition a wholly owned subsidiary of
Corp. Parent since 1993. Partner,
Thelen, Marrin, Johnson & Bridges
prior to July 1993.
JUNE F. DE MOLLER (50)........... Managing Director of Managing Director of Carlton United Kingdom
25 Knightsbridge Carlton Communications since July 1993. Director since
London SW1X 7RZ Plc February 1983. Non-executive
England Director of Anglian Water Plc.
WILLIAM ROLLASON (37)............ Not applicable Joined Carlton in 1996 as an United Kingdom
25 Knightsbridge employee. From June 1992 to 1996,
London SW1X 7RZ Chief Financial Officer and
England Finance Director of Marling
Industries Plc, a publicly quoted
manufacturer of industrial
textiles.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT AND
NAME, AGE AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY CITIZENSHIP
- --------------------------------- ---------------------- --------------------------------- -------------------
<S> <C> <C> <C>
B. QUENTIN LILLY (36)............ Chief Operating Chief Operating Officer of United States
3233 East Mission Oaks Officer of Technicolor Technicolor Packaged Media Group
Boulevard Packaged Media Group since 1997. Joined as Vice
Camarillo, CA 93012 President, Planning and
Development in March 1994. Prior
to that time, Vice President,
Corporate Finance at Crowell,
Weeden & Co. in Los Angeles.
LYNDON J. FAULKNER (37).......... President, Treasurer, Joined Nimbus Records Limited in United Kingdom
623 Welsh Run Road Chief Executive 1985. Appointed President, Chief
Guildford Farm Officer and Chairman Executive Officer and Director of
Ruckersville, Virginia 22968 of the Board of Nimbus since October 1992 and
Directors of Nimbus Chairman of the Board of
Directors since March 1995 and
Treasurer since August 1996.
Director of Tad Coffen
Performance Saddles Inc., a
privately owned company.
L. STEVEN MINKEL (56)............ Executive Vice Joined Nimbus in November 1992. United States
623 Welsh Run Road President, Chief Appointed Executive Vice
Guildford Farm Financial Officer, President, Chief Financial
Ruckersville, Virginia 22968 Secretary and Director Officer and Secretary since
of Nimbus November 1992. Elected Director
in August 1997. Was a Director
from November 1992 through March
1995.
</TABLE>
I-2
<PAGE>
ANNEX B
[LOGO]
June 16, 1998
The Board of Directors
Nimbus CD International, Inc.
623 Welsh Run Road
Ruckersville, Virginia 22968
Gentlemen:
Nimbus CD International, Inc., a Delaware corporation (the "Company"), has
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Carlton Communications Plc, a Public Limited Company organized under the laws of
England and Wales ("Parent"), and Neptune Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), whereby Sub will
commence a tender offer (the "Offer") to purchase all of the issued and
outstanding shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company at a price of $11.50 per share net to the seller in cash
(the "Consideration"). The Merger Agreement also provides that, following the
consummation of the Offer, the Company will be merged with and into Sub in a
transaction (the "Merger") pursuant to which each outstanding share of Common
Stock not owned by Parent, Sub or their respective affiliates will be converted
into the right to receive an amount in cash equal to the per share consideration
paid in the Offer and the Company will become a wholly owned subsidiary of
Parent. In addition, we understand that, in connection with the Offer and the
Merger, Parent, Sub and certain stockholders of the Company (the "Stockholders")
who own, in aggregate, approximately 44 percent of the outstanding Common Stock
on a fully-diluted basis, propose to enter into an agreement (the "Stockholders
Agreement") whereby the Stockholders will agree to tender (and not withdraw)
their shares of Common Stock into the Offer and to grant to Parent and/or Sub
the right, subject to certain conditions, to receive the proceeds received by
such Stockholders from the sale of such shares for a consideration in excess of
$11.50 per share. You have asked us to render an opinion to you as to whether or
not the Consideration to be paid to the stockholders of the Company is fair to
the stockholders of the Company from a financial point of view.
In arriving at our opinion, we have, among other things:
(i) reviewed a draft of the Merger Agreement, and a draft of the
Stockholders' Agreement, each dated June 16, 1998;
(ii) reviewed (x) the Company's 1999 budget, and (y) the Company's 2000
and 2001 projected financial results, dated April 15, 1998, which
were received by us on June 4, 1998 (collectively, with the 1999
budget, the "Forecasts"), and discussed such Forecasts with the
Company's management;
(iii) discussed with management of the Company, the business, operations,
historical financial results and Forecasts of the Company;
(iv) reviewed the audited financial statements and Annual Reports on
Form 10-K of the Company for the fiscal years ended March 31, 1995,
1996 and 1997;
B-1
<PAGE>
(v) reviewed the preliminary unaudited financial statements of the
Company for the fiscal year ended March 31, 1998 and a Company press
release, dated May 21, 1998, relating to the Company's fiscal year
end 1998 financial results;
(vi) reviewed the historical stock prices and trading volumes of the
Company's common stock;
(vii) reviewed certain publicly available information regarding publicly
traded companies we deemed reasonably comparable to the Company;
(viii) reviewed certain publicly available information regarding a merger
and acquisition transaction involving a company we deemed
reasonably comparable to the Company;
(ix) discussed with other potential acquirers of the Company, potential
merger and acquisition transactions involving the Company;
(x) reviewed certain information regarding premiums paid in all cash
acquisitions of a size comparable to the Merger for publicly traded
companies;
(xi) performed discounted cash flow analyses based on the Forecasts;
(xii) performed leveraged buyout analyses based on the Forecasts; and
(xiii) reviewed such other information, performed such other analyses and
taken into account such other factors as we deemed relevant.
For purposes of rendering our opinion, we have assumed and relied upon the
accuracy and completeness of all information provided to us by and on behalf of
the Company and have not assumed any responsibility for independent verification
of such information or for any independent valuation or appraisal of any assets
of the Company, nor were we furnished with any such valuations or appraisals. We
have assumed, without independent investigation, the accuracy of all
representations and statements made by officers and management of the Company.
With respect to the Forecasts, we have assumed that they were reasonably
prepared on bases reflecting the best estimates and good faith judgment of the
Company's management as of the date of their preparation and that management has
informed us of all circumstances occurring since such date that could make the
Forecasts incomplete or misleading. Our opinion is necessarily based on
economic, market and other conditions, and information made available to us as
of the date hereof.
This opinion was provided at the request and solely for the benefit of the
Board of Directors of the Company in connection with its consideration of the
Offer and the Merger and shall not be reproduced, summarized, described, relied
upon, or referred to, or furnished to any other person without Berenson
Minella's prior written consent; PROVIDED that, subject to our prior review, the
Company may refer to this opinion on any Solicitation/Recommendation Statement
on Schedule 14D-9 filed by the Company with respect to the Offer or any Proxy
Statement filed by the Company with respect to the Merger, without such written
consent. The opinion does not and will not constitute a recommendation to
stockholders of the Company to tender their shares in the Offer or to vote in
favor of the Merger. This opinion is delivered subject to the conditions, scope
of engagement, standard of care, limitations, and understandings set forth in
the engagement agreement between Berenson Minella and the Company, dated June
16, 1998.
This opinion is delivered with the explicit understanding that this opinion
is based on standards of assessment in existence as of the date hereof, and that
standards of assessment may change in the future. Berenson Minella disclaims any
responsibility for any impact any such changes may have on the assessment of the
Offer and the Merger. Unforeseen future events that could affect the fairness of
the Consideration to be paid to the stockholders in the Offer and the Merger,
from a financial point of view, have not been factored into this opinion.
Berenson Minella disclaims any obligation to update or revise this opinion for
events occurring subsequent to the date hereof, whether foreseen or unforeseen.
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This opinion is a fairness opinion only from a financial point of view.
Berenson Minella makes no representations with respect to questions of legal
interpretation or enforceability and expressly disclaims that this opinion may
be construed in any way as a legal opinion. In addition, without limiting the
foregoing, we express no opinion regarding the fairness of the Consideration to
(i) holders of options issued pursuant to any stock option plan of the Company
in which the exercise price of such options exceeds the Offer Price (as defined
in the Merger Agreement) and (ii) holders of options of the Company who exchange
such options for securities of Parent. Our opinion is limited to the matters
expressly set forth in this letter, and no opinions may be implied or may be
inferred beyond the matters expressly so stated.
We note that we have acted as financial advisor to the Company in connection
with the Offer and the Merger and will receive a fee for our services, which is
contingent upon the consummation of the Offer.
Based upon and subject to the foregoing, and subject to the various
assumptions, qualifications, and limitations set forth herein, it is our opinion
that, as of the date hereof, the Consideration to be paid to the stockholders of
the Company pursuant to the Offer and the Merger is fair to the stockholders of
the Company from a financial point of view.
Very truly yours,
BERENSON MINELLA & COMPANY
B-3
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CARLTON COMMUNICATIONS PLC
NEPTUNE ACQUISITION CORP.
AND
NIMBUS CD INTERNATIONAL, INC.
Dated as of June 16, 1998
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<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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ARTICLE I
THE OFFER
1.01 The Offer.......................................................................................2
1.02 Company Actions.................................................................................3
1.03 Composition of the Board of Directors...........................................................4
ARTICLE II
THE MERGER AND RELATED MATTERS
2.01 The Merger......................................................................................5
2.02 Conversion of Stock.............................................................................6
2.03 Dissenting Stock................................................................................6
2.04 Surrender of Certificates.......................................................................7
2.05 Payment.........................................................................................8
2.06 No Further Rights of Transfers..................................................................8
2.07 Stock Option and Other Plans....................................................................9
2.08 Certificate of Incorporation of the Surviving Corporation......................................10
2.09 By-Laws of the Surviving Corporation...........................................................10
2.10 Directors and Officers of the Surviving Corporation............................................10
2.11 Closing........................................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company..................................................10
(a) Due Organization, Good Standing and Corporate Power...................................10
(b) Authorization and Validity of Agreement...............................................11
(c) Capitalization........................................................................11
(d) Consents and Approvals; No Violations.................................................13
(e) Company Reports and Financial Statements..............................................13
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(f) Absence of Certain Changes............................................................14
(g) Title to Properties; Encumbrances.....................................................15
(h) Compliance with Laws..................................................................15
(i) Litigation............................................................................16
(j) Employee Benefit Plans................................................................16
(k) Taxes.................................................................................18
(l) Liabilities...........................................................................19
(m) Intellectual Properties...............................................................19
(n) Material Contracts....................................................................19
(o) Proxy Statement and Schedule l4D-9....................................................21
(p) Broker's or Finder's Fee..............................................................22
(q) Environmental Laws and Regulations....................................................22
(r) State Takeover Statutes; Charter Provisions...........................................24
(s) Opinion of Financial Advisor..........................................................24
(t) Rights Agreement......................................................................24
(u) Voting Requirements...................................................................24
3.02 Representations and Warranties of Parent and Sub...............................................25
(a) Due Organization; Good Standing and Corporate Power...................................25
(b) Authorization and Validity of Agreement...............................................25
(c) Consents and Approvals; No Violations.................................................25
(d) Offer Documents, Schedule l4D-9 and Proxy Statement...................................26
(e) Broker's or Finder's Fee..............................................................26
(f) Financing.............................................................................27
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records........................................27
4.02 Confidentiality................................................................................27
4.03 Conduct of the Business of the Company Pending the Closing Date................................27
4.04 Proxy Statement................................................................................30
4.05 Stockholder Approval...........................................................................30
4.06 Reasonable Efforts.............................................................................30
4.07 No Solicitation of Other Offers................................................................31
4.08 Notification of Certain Matters................................................................33
4.09 HSR Act........................................................................................33
4.10 Employee Benefits..............................................................................33
4.11 Directors' and Officers' Insurance; Indemnification............................................34
4.12 Guaranty of Performance........................................................................35
4.13 Financing......................................................................................35
</TABLE>
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ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and the Company.............................35
(a) Approval of Company's Stockholders....................................................35
(b) HSR Act...............................................................................35
(c) Injunction............................................................................35
(d) Statutes..............................................................................36
(e) Payment for Common Stock..............................................................36
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination....................................................................................36
6.02 Effect of Termination..........................................................................38
ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses..............................................................................39
7.02 Representations and Warranties.................................................................39
7.03 Extension; Waiver..............................................................................40
7.04 Public Announcements...........................................................................40
7.05 Notices........................................................................................40
7.06 Entire Agreement...............................................................................41
7.07 Binding Effect; Benefit; Assignment............................................................42
7.08 Amendment and Modification.....................................................................42
7.09 Further Actions................................................................................42
7.10 Headings.......................................................................................42
7.11 Counterparts...................................................................................42
7.12 Applicable Law; Jurisdiction...................................................................42
7.13 Severability...................................................................................43
7.14 Certain Definitions............................................................................43
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1998 (this
"Agreement"), by and among Carlton Communications Plc, a company organized under
the laws of England ("Parent"), Neptune Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Sub"), and Nimbus CD
International, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have approved and determined that it is in the best interests of
their respective companies and stockholders for Sub to acquire the Company;
WHEREAS, in contemplation thereof it is proposed that Sub will
make a tender offer (the "Offer") to purchase all the issued and outstanding
shares of common stock, $0.01 par value, of the Company ("Common Stock"), upon
the terms and subject to the conditions of this Agreement (including the
conditions set forth in Annex A hereto), at a price of 11.50 per share net to
the seller in cash (the "Offer Price");
WHEREAS, to complete such acquisition, the respective Boards
of Directors of Parent, Sub and the Company, have approved the merger of Sub
into the Company, with the Company being the surviving corporation (the
"Merger"), upon the terms and subject to the conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously
determined that each of the Offer and the Merger are fair to, and in the best
interests of, the holders of Common Stock, approved the Offer and the Merger and
recommended the acceptance of the Offer and approval and adoption of this
Agreement by the stockholders of the Company; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, as a condition and inducement to Parent's and Sub's willingness
to enter into this Agreement, certain stockholders of the Company (the "Selling
Stockholders") are entering into an agreement with Parent and Sub (the
"Stockholder Agreement"), pursuant to which, and upon the terms and subject to
the conditions of which, the Selling Stockholders have agreed to tender (and not
to withdraw) all of the shares of Common Stock currently owned and hereafter
acquired by them pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements herein contained,
the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE OFFER
1.01 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Article VI hereof and so long as none of
the events set forth in Annex A hereto (the "Tender Offer Conditions") shall
have occurred and are continuing, as promptly as practicable, but in no event
later than the fifth business day after the date of this Agreement, Sub shall
commence (within the meaning of Rule 14d-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) the Offer. The
obligations of Sub to accept for payment and to pay for any shares of Common
Stock validly tendered and not withdrawn prior to the expiration of the Offer
shall be subject only to the Tender Offer Conditions, any of which may be waived
by Parent or Sub; provided, however, that neither Parent or Sub shall waive the
Minimum Condition (as defined in Annex A) without the prior written consent of
the Company. The Tender Offer Conditions are for the sole benefit of Parent and
Sub and may be asserted by Parent and Sub regardless of the circumstances giving
rise to any such Tender Offer Conditions and, subject to the immediately
preceding sentence, may be waived by Parent and Sub in whole or in part. Parent
and Sub expressly reserve the right to modify the terms of the Offer, including
without limitation to extend the Offer beyond any scheduled expiration date;
provided, however, without the consent of the Company, Sub shall not (i) reduce
the number of shares of Common Stock to be purchased in the Offer, (ii) reduce
the Offer Price, (iii) add to the Tender Offer Conditions or otherwise modify
the Tender Offer Conditions in a manner that is adverse to the holders of Common
Stock or (iv) change the form of consideration payable in the Offer. Parent and
Sub covenant and agree that, subject to the terms and conditions of this
Agreement, including, but not limited to, the Tender Offer Conditions, unless
the Company otherwise consents in writing, Sub will accept for payment and pay
for the Common Stock in accordance with Rule 14e-1(c) of the Exchange Act;
provided, however, that unless (i) any Person has made an Acquisition Proposal
(as hereinafter defined), or (ii) any of the conditions of the Offer set forth
in Annex A hereto shall not have been satisfied, the expiration date may not be
extended beyond the 10th business day after the initial expiration date of the
Offer without the Company's prior written consent, such consent not to be
unreasonably withheld (it being expressly understood and agreed that, if all of
the conditions set forth in Annex A hereto shall have been satisfied and no
Person has made an Acquisition Proposal, Sub shall have the right, in its sole
discretion, to extend the expiration date (through one or more extensions)
through the 10th business day after the initial expiration date).
(b) As soon as reasonably practicable (and no more than five
business days) after the date hereof, Parent and Sub shall file, and Parent, if
necessary, shall cause Sub to file, with the Securities and Exchange Commission
(the "Commission") a Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with respect to the
Offer. The Schedule 14D-1 shall contain (included
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<PAGE>
as an exhibit) or shall incorporate by reference an offer to purchase (the
"Offer to Purchase") and a form of the related letter of transmittal (the
"Letter of Transmittal"), as well as all other information and exhibits required
by law (which Schedule 14D-1, Offer to Purchase, Letter of Transmittal and such
other information and exhibits, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents"). The
Offer Documents will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the Commission
and the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Sub with respect
to any information supplied by the Company in writing for inclusion in the
Schedule 14D-1 or derived from the Company's Commission Filings. Each of Parent
and Sub agrees promptly to correct any information provided by it for use in the
Offer Documents that shall be, or have become, false or misleading in any
material respect, and Parent and Sub further agree to take all steps necessary
to cause the Schedule 14D-1 as so corrected to be filed with the Commission and
the other Offer Documents as so corrected to be disseminated to holders of
Common Stock, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and Sub agrees to provide the Company and its
counsel with copies (which shall be treated confidentially) of any written
comments Parent and Sub or their counsel may receive from the Commission or its
staff with respect to the Offer Documents promptly after the receipt of such
comments and shall, to extent practicable, provide the Company and its counsel
an opportunity to comment on the proposed response of Parent and Sub to such
comments.
1.02 Company Actions. The Company hereby approves of and
consents to the Offer and the Merger and represents that (a) its Board of
Directors (at a meeting duly called and held) has (i) determined by the
unanimous vote of the Directors that each of the Offer and the Merger is fair
to, and in the best interests of, the holders of Common Stock, (ii) approved the
Offer and the Merger and approved and adopted this Agreement in accordance with
the provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), (iii) recommended the acceptance of the Offer and the approval and
adoption of this Agreement by the stockholders of the Company, (iv) taken all
other applicable action necessary to render Section 203 of the DGCL and all
other applicable state takeover statutes, if any, inapplicable to the Offer, the
Merger and the acquisition of shares of Common Stock by Sub pursuant to the
Stockholders Agreement and the actions contemplated hereby and thereby;
provided, however, that such recommendation may be withdrawn, modified or
amended at any time or from time to time if the Board of Directors of the
Company determines in its good faith judgment after consulting with independent
outside counsel to the Company, that failing to take such action would
constitute a breach of the Board's fiduciary obligations under applicable law;
and (b) Berenson Minella & Company ("Berenson Minella") has delivered to the
Board of Directors of the Company its opinion that the consideration per share
of Common Stock to be received by the holders of Common
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<PAGE>
Stock (other than Parent and Sub) pursuant to the Offer and the Merger is fair
to the holders of Common Stock from a financial point of view, subject to the
assumptions and qualifications contained in such opinion. The Company shall file
with the Securities and Exchange Commission (the "Commission"), as soon as
practicable after the date of the commencement of the Offer, a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule l4D-9")
containing the recommendations referred to in clause (a) of the preceding
sentence and shall disseminate the Schedule 14D-9 as required by Rule 14d-9
under the Exchange Act; provided, however, that such recommendation or other
action may be withdrawn, modified or amended at any time or from time to time if
the Board of Directors of the Company determines in its good faith judgment,
after consulting with independent outside counsel to the Company, that failing
to take such action would constitute a breach of the Board's fiduciary
obligations under applicable law. Parent and Sub and their counsel shall be
given the opportunity to review and comment upon the Schedule l4D-9 prior to its
filing with the Commission. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the Commission and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or Sub in
writing for inclusion in the Schedule 14D-9. The Company agrees to provide
Parent and its counsel with any comments the Company or its counsel may receive
from the Commission or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments and shall, to the extent practicable, provide
Parent and its counsel an opportunity to comment on the proposed response of the
Company to such comments.
In connection with the Offer, the Company will promptly
furnish Sub with mailing labels, security position listings and any available
listing or computer list containing the names and addresses of the record
holders of the Common Stock as of the most recent practicable date and shall
furnish Sub with such additional information (including, but not limited to,
updated lists of holders of Common Stock and their addresses, mailing labels and
lists of security positions) and such other assistance as Sub or its agents may
reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Sub and their respective affiliates,
associates, agents, and advisors, shall keep confidential and use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information then in their possession.
1.03 Composition of the Board of Directors. Promptly upon the
acceptance for payment of, and payment by Sub in accordance with the Offer for,
any shares of Common Stock pursuant to the Offer, Sub shall be entitled to
designate such number of directors on
-4-
<PAGE>
the Board of Directors of the Company, rounded up to the next whole number, as
will give Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock so accepted for payment and paid for or otherwise acquired or
owned by Sub or Parent and the denominator of which shall be the number of
shares of Common Stock then issued and outstanding, and the Company and its
Board of Directors shall, at such time, take any and all such action needed to
cause Sub's designees to be appointed to the Company's Board of Directors
(including to cause directors to resign). Subject to applicable law, the Company
shall take all action requested by Parent which is reasonably necessary to
effect any such election, including mailing to its stockholders the Information
Statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such
mailing with the mailing of the Schedule 14D-9, so long as Sub shall have
provided to the Company on a timely basis all information required to be
included in the Information Statement with respect to Sub's designees. In
furtherance thereof, the Company will increase the size of the Company's Board
of Directors, or use its reasonable efforts to secure the resignation of
directors, or both, as is necessary to permit Sub's designees to be elected to
the Company's Board of Directors.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.01 The Merger. (a) Subject to the terms and conditions of
this Agreement, at the time of the Closing (as defined in Section 2.11 hereof),
a certificate of merger (the "Certificate of Merger") shall be duly prepared,
executed and acknowledged by Sub and the Company in accordance with the DGCL and
shall be filed on the Closing Date (as defined in Section 2.11 hereof). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the
provisions and requirements of the DGCL. The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time."
(b) At the Effective Time, Sub shall be merged with and into
the Company and the separate corporate existence of Sub shall cease, and the
Company shall continue as the surviving corporation under the laws of the State
of Delaware (the "Surviving Corporation").
(c) From and after the Effective Time, the Merger shall have
the effects set forth in Section 259 of the DGCL.
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<PAGE>
2.02 Conversion of Stock. At the Effective Time:
(a) Each share of Common Stock then issued and outstanding
(other than (i) any shares of Common Stock which are held by any
subsidiary of the Company or in the treasury of the Company, or which
are held, directly or indirectly, by Parent or any direct or indirect
subsidiary of Parent (including Sub), all of which shall be cancelled
and none of which shall receive any payment with respect thereto and
(ii) shares of Common Stock held by Dissenting Stockholders (as defined
in Section 2.03 hereof)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and
represent the right to receive an amount in cash, without interest,
equal to the price paid for each share of Common Stock pursuant to the
Offer (the "Merger Consideration"); and
(b) Each share of common stock, par value $0.01 per share, of
Sub then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the holder thereof, become one fully
paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
2.03 Dissenting Stock. Notwithstanding anything in this
Agreement to the contrary but only to the extent required by the DGCL, shares of
Common Stock that are issued and outstanding immediately prior to the Effective
Time and are held by holders of Common Stock who comply with all the provisions
of Delaware law concerning the right of holders of Common Stock to dissent from
the Merger and require appraisal of their shares of Common Stock ("Dissenting
Stockholders") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due such Dissenting Stockholder pursuant to the law of the
State of Delaware; provided, however, that (i) if any Dissenting Stockholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Stockholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law or (iii) if within 120 days of
the Effective Time neither any Dissenting Stockholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of the
shares of Common Stock outstanding at the Effective Time and held by Dissenting
Stockholders, in accordance with applicable law, then such Dissenting
Stockholder or Stockholders, as the case may be, shall forfeit the right to
appraisal of such shares and such shares shall thereupon be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration, without interest. The Company shall give Parent and Sub (A)
prompt notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other related instruments received by the Company, and (B) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company will not voluntarily make any payment with respect to
any demands for appraisal and will not, except with the prior written consent of
Parent, settle or offer to settle any demand.
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<PAGE>
2.04 Surrender of Certificates. (a) Concurrently with or prior
to the Effective Time, Parent shall designate a bank or trust company located in
the United States and reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") for purposes of making the cash payments contemplated
hereby. As soon as practicable after the Effective Time, Sub shall (and if
necessary Parent shall cause Sub to) cause the Paying Agent to mail and/or make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which are held by any subsidiary of the Company
or in the treasury of the Company or which are held directly or indirectly by
Parent or any direct or indirect subsidiary of Parent (including Sub)) a Letter
of Transmittal advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Paying Agent such certificate or certificates
which immediately prior to the Effective Time represented outstanding Common
Stock (the "Certificates") in exchange for the Merger Consideration deliverable
in respect thereof pursuant to this Article II. Upon the surrender for
cancellation to the Paying Agent of such Certificates, together with a Letter of
Transmittal, duly executed and completed in accordance with the instructions
thereon, and any other items specified by the Letter of Transmittal, the Paying
Agent shall promptly pay to the Person (as defined in Section 7.14 hereof)
entitled thereto the Merger Consideration deliverable in respect thereof. Until
so surrendered, each Certificate shall be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the Merger Consideration
deliverable in respect thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect of such cash
payments.
(b) If the Merger Consideration (or any portion thereof) is to
be delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article II; provided that, the Person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
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<PAGE>
2.05 Payment. Concurrently with or immediately prior to the
Effective Time, Sub or , if necessary, Parent shall deposit in trust with the
Paying Agent cash in United States dollars in an aggregate amount equal to the
product of (i) the number of shares of Common Stock outstanding immediately
prior to the Effective Time (other than shares of Common Stock which are held by
any subsidiary of the Company or in the treasury of the Company or which are
held directly or indirectly by Parent or any direct or indirect subsidiary of
Parent (including Sub) or a Person known at the time of such deposit to be a
Dissenting Stockholder) and (ii) the Merger Consideration (such amount being
hereinafter referred to as the "Payment Fund"). The Payment Fund shall be
invested by the Paying Agent as directed by Sub in direct obligations of the
United States, obligations for which the full faith and credit of the United
States is pledged to provide for the payment of principal and interest,
commercial paper rated of the highest quality by Moody's Investors Services,
Inc. or Standard & Poor's Ratings Group or certificates of deposit, bank
repurchase agreements or bankers' acceptances of a commercial bank having at
least $500,000,000 in assets (collectively "Permitted Investments") or in money
market funds which are invested in Permitted Investments, and any net earnings
with respect thereto shall be paid to Parent as and when requested by Parent.
The Paying Agent shall, pursuant to irrevocable instructions, make the payments
referred to in Section 2.02(a) hereof out of the Payment Fund. The Payment Fund
shall not be used for any other purpose except as otherwise agreed to by Parent.
Promptly following the date which is six months after the Effective Time, the
Paying Agent shall return to the Surviving Corporation all cash, certificates
and other instruments in its possession that constitute any portion of the
Payment Fund, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without interest,
but shall have no greater rights against the Surviving Corporation or Parent
than may be accorded to general creditors of the Surviving Corporation or Parent
under applicable law. Notwithstanding the foregoing, neither the Paying Agent
nor any party hereto shall be liable to a holder of shares of Common Stock for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
2.06 No Further Rights of Transfers. At and after the
Effective Time, each holder of a Certificate shall cease to have any rights as a
stockholder of the Company, except for, in the case of a holder of a Certificate
(other than shares to be cancelled pursuant to Section 2.02(a) hereof and other
than shares held by Dissenting Stockholders), the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration or, in the case
of a Dissenting Stockholder, to perfect his or her right to receive payment for
his or her shares pursuant to Delaware law if such holder has validly perfected
and not withdrawn his or her right to receive payment for his or her shares, and
no transfer of shares of Common Stock shall be made on the stock transfer books
of the Surviving Corporation. Certificates presented to the Surviving
Corporation after the Effective Time shall be cancelled and exchanged for cash
as provided in this Article II. At the close of business on the day of the
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Effective Time the stock ledger of the Company with respect to Common Stock
shall be closed.
2.07 Stock Option and Other Plans. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any Committee
thereof) shall adopt appropriate resolutions and use its reasonable best efforts
to take all other actions necessary to (i) provide for the cancellation,
effective at the Effective Time of all the outstanding stock options and other
rights to purchase shares of Common Stock ("Options") and (ii) terminate, as of
the Effective Time, the Stock Option Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any of its subsidiaries (collectively,
the "Stock Incentive Plans") and (iii) amend, as of the Effective Time, the
provisions in any U.S. or Foreign Employee Benefit Plan providing for the
issuance, transfer or grant of any capital stock of the Company or any of its
subsidiaries or any interest in respect of any capital stock of the Company or
its subsidiaries to provide that there shall be no continuing rights to acquire,
hold, transfer or grant any capital stock of the company or its subsidiaries or
any interest in the capital stock of the Company or its subsidiaries.
Immediately prior to the Effective Time, the Company shall use its reasonable
best efforts to ensure that (i) each Option, whether or not then vested or
exercisable, shall no longer be exercisable for the purchase of shares of Common
Stock but shall entitle each holder thereof, in cancellation and settlement
therefor, to payments by the Company in cash (subject to any applicable
withholding taxes, the "Cash Payment"), at the Effective Time, equal to the
product of (x) the total number of shares of Common Stock subject to such Option
whether or not then vested or exercisable and (y) the excess of the Merger
Consideration over the exercise price per share of Common Stock subject to such
Option, each such Cash Payment to be paid to each holder of an outstanding
Option at the Effective Time and (ii) each share of Common Stock previously
issued in the form of grants of restricted stock or grants of contingent shares
shall fully vest in accordance with their respective terms. In addition, any
outstanding stock appreciation rights or limited stock appreciation rights shall
be cancelled immediately prior to the Effective Time without any payment or
other consideration therefor. As provided herein, the Company shall use its
reasonable best efforts to ensure that the Stock Incentive Plans shall terminate
as of the Effective Time. The Company will take all necessary steps to ensure
that neither the Company nor any of its subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
Person, other than Parent or its affiliates, to own any capital stock of the
Surviving Corporation or any of its subsidiaries or to receive any payment in
respect thereof. The Company will use its reasonable best efforts to obtain all
necessary consents to ensure that after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will be to receive the Cash Payment in cancellation and settlement
thereof. Notwithstanding any other provision of this Section 2.07 to the
contrary, payment of the Cash Payment may be withheld with respect to any Option
until the necessary consents are obtained.
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2.08 Certificate of Incorporation of the Surviving
Corporation. The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation.
2.09 By-Laws of the Surviving Corporation. The By-Laws of Sub,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation.
2.10 Directors and Officers of the Surviving Corporation. At
the Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Company immediately prior to the Effective Time shall,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of the Surviving Corporation, be the officers of the Surviving
Corporation until their respective successors shall be duly elected or appointed
and qualified.
2.11 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Sullivan and Cromwell, 125 Broad Street, New York,
New York, as soon as practicable after the last of the conditions set forth in
Article V hereof is fulfilled or waived (subject to applicable law) but in no
event later than the fifth business day thereafter, or at such other time and
place and on such other date as Parent and the Company shall mutually agree (the
"Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of the Company. The
Company hereby represents and warrants to Parent and Sub as follows:
(a) Due Organization, Good Standing and Corporate Power. Each
of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Except
as set forth in Section 3.01(a) of the Company's disclosure letter (the
"Company Disclosure Letter") delivered concurrently with the delivery
of this Agreement, each of the Company and its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated
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by it or the nature of the business conducted by it makes such
qualification necessary, except where such failure to be so qualified
or licensed and in good standing would not have a material adverse
effect on the business, operations or results of operations, financial
condition (the "Condition") of the Company and its subsidiaries taken
as a whole, or would not be reasonably likely to prevent or materially
delay consummation of the transactions contemplated by this Agreement.
The Company has made available to Parent and Sub complete and correct
copies of the Certificate of Incorporation and By-Laws of the Company
and the comparable governing documents of each of its subsidiaries, in
each case as amended to the date of this Agreement.
(b) Authorization and Validity of Agreement. The Company has
the corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company, and the consummation by
it of the transactions contemplated hereby, have been duly authorized
and unanimously approved by its Board of Directors and no other
corporate action on the part of the Company is necessary to authorize
the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
(other than the approval of this Agreement by the holders of a majority
of the outstanding shares of Common Stock entitled to vote) or the
consummation of the transactions contemplated by the Stockholders
Agreement. This Agreement has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
(c) Capitalization. (i) The authorized capital stock of the
Company consists of 60,000,000 shares of Common Stock and 2,000,000
shares of preferred stock, par value $0.01. As of June 15, 1998, (1)
39,012,786 shares of Common Stock are issued of which 21,469,754 are
outstanding, (2) 2,164,077 shares of Common Stock are reserved for
issuance pursuant to outstanding Options granted under the Stock Plans,
(3) 17,543,032 shares of Common Stock are held in the Company's
treasury and (4) no shares of preferred stock were issued and
outstanding. All issued and outstanding shares of Common Stock have
been duly authorized, validly issued and are fully paid and
nonassessable and are not subject to, nor were they issued in violation
of any preemptive rights. Except as set forth in this Section 3.01(c)
or in Section 3.01(c) of the Company Disclosure Letter, (i) there are
no shares of capital stock of the Company authorized, issued or
outstanding and (ii) there are not as of the date hereof, and at the
Effective Time there will not be, any outstanding or authorized
options, warrants, rights, subscriptions, claims of any character,
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agreements, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to
Common Stock or any other shares of capital stock of the Company,
pursuant to which the Company is or may become obligated to issue
shares of Common Stock, any other shares of its capital stock or any
securities convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of the capital stock of the Company. After
the Effective Time, the Surviving Corporation will have no obligation
to issue, transfer or sell any shares of or common stock of the
Surviving Corporation pursuant to any Employee Benefit Plan (as defined
in Section 3.01(j)). Neither the Company nor any of its subsidiaries
has authorized or issued any bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having
the right to vote) with the stockholders of the Company or any of its
subsidiaries on any matter.
(ii) Section 3.01(c)(ii) of the Company Disclosure
Letter lists all of the Company's subsidiaries. All of the
outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were
they issued in violation of, any preemptive rights, and are
owned, of record and beneficially, by the Company, free and
clear of all liens, security interests, rights of first
refusal, charges, security agreements, encumbrances, options,
claims or any other encumbrances of any kind whatsoever
("Encumbrance") except as set forth in Section 3.01(c)(ii) of
the Company Disclosure Letter. No shares of capital stock of
any of the Company's subsidiaries are reserved for issuance or
are held in the treasury of such subsidiary and there are no
outstanding or authorized options, warrants, rights, calls,
subscriptions, claims of any character, agreements,
obligations, rights of redemption, convertible or exchangeable
securities, or other commitments, contingent or otherwise,
relating to the capital stock of any subsidiary, pursuant to
which such subsidiary is or may become obligated to issue any
shares of capital stock of such subsidiary or any securities
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of such subsidiary. Other than as
set forth in Section 3.01(c)(ii) of the Company Disclosure
Letter, there are no restrictions of any kind which prevent
the payment of dividends by any of the Company's subsidiaries.
Except for the subsidiaries listed in Section 3.01(c)(ii) of
the Company Disclosure Letter, the Company does not own,
directly or indirectly, any capital stock or other equity
interest in any Person or have any direct or indirect equity
or ownership interest in any Person and neither the Company
nor any of its subsidiaries is subject to any obligation or
requirement to provide funds for or to make any investment (in
the form of a loan or capital contribution) to or in any
Person.
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<PAGE>
(d) Consents and Approvals; No Violations. Assuming (i) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), are made and the waiting period
thereunder has been terminated or has expired, (ii) the requirements of
the Exchange Act relating to the Proxy Statement and the Offer are met,
(iii) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by DGCL are made and (iv)
approval of the Merger by holders a majority of the outstanding shares
of Common Stock entitled to vote, if required by the DGCL, is received,
the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
will not: (1) violate any provision of the Certificate of Incorporation
or By-Laws of the Company or the comparable governing documents of any
of its subsidiaries, in each case, as amended; (2) violate any statute,
code, ordinance, rule, regulation, order or decree (collectively
"Laws") of any court, arbitrator or of any governmental or regulatory
body, agency or authority (each a "Governmental Entity") applicable to
the Company or any of its subsidiaries or their respective properties
or assets; (3) require any filing with, or permit, consent or approval
of, or the giving of any notice to, any Governmental Entity by the
Company; or (4) except as set forth in Section 3.01(d) of the Company
Disclosure Letter, result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation,
payment, acceleration or other material right or obligation or
limitation) under, or result in the creation of any Encumbrance upon
any of the properties or assets of the Company or any of its
subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement,
lease, franchise agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party, or by which it or
any of their respective properties or assets are bound or subject
except for in the case of clauses (3) and (4) above for any such
filings, permits, consents, approvals, violations, breaches or
Encumbrances which, individually or in the aggregate would not have a
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole, or would not be reasonably likely to
prevent or materially delay consummation of the transactions
contemplated by this Agreement (including the transactions contemplated
by the Stockholders Agreement).
(e) Company Reports and Financial Statements. (i) Since
January 1, 1996 the Company has filed all forms, reports and documents
with the Commission required to be filed by it pursuant to the federal
securities laws and the Commission rules and regulations thereunder,
and all forms, reports and documents filed with the Commission by the
Company have complied in all material respects with all applicable
requirements of the federal securities laws and the Commission rules
and regulations promulgated thereunder. The Company has made available
to Parent true and complete copies of all forms, reports, registration
statements and other filings filed by the Company with the Commission
from January 1, 1996 through the date
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<PAGE>
of this Agreement (such forms, reports, registration statements and
other filings, together with any exhibits, any amendments thereto and
information incorporated by reference therein, are sometimes
collectively referred to as the "Commission Filings"). As of their
respective dates, the Commission Filings did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets, and the consolidated
statements of operations, consolidated statements of stockholders'
equity and consolidated statements of cash flows, included in the
Commission Filings, were prepared in accordance with generally accepted
accounting principles ("GAAP") (as in effect from time to time) applied
on a consistent basis, (except as may be indicated therein or in the
notes or schedules thereto) and fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the results of
their operations and changes in cash flows for the periods then ended.
(ii) The Company shall deliver to Sub and Parent as
soon as they become available true and complete copies of any
report or statement mailed by it to its stockholders generally
or filed by it with the Commission subsequent to the date
hereof and prior to the Effective Time. As of their respective
dates, such reports and statement will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they are made, not misleading and will comply in all material
respects with all applicable requirements of the federal
securities laws and the Commission rules and regulations
thereunder. The consolidated financial statements of the
Company included in such reports and statement will be
prepared in accordance with GAAP applied on a consistent basis
(except as may be indicated therein or in the notes or
schedules thereto) and will fairly present in all material
respects the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the
periods then ended (subject in the case of any unaudited
financial statements, to normal year-end adjustments).
(f) Absence of Certain Changes. Except as previously disclosed
in the Commission Filings or as set forth in Section 3.01(f) of the
Company Disclosure Letter, since March 31, 1997 or as specifically
contemplated by this Agreement (i) there has not been any material
adverse change in the Condition of the Company and its subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
subsidiaries have been conducted only in the ordinary course consistent
with past practice; (iii) neither the Company nor any of its
subsidiaries has incurred any material liabilities (direct, contingent
or otherwise) or engaged in any material
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transaction or entered into any material agreement outside of the
ordinary course of business consistent with past practice; (iv) the
Company and its subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their
employees, in each case other than in the ordinary course of business
consistent with past practice; (v) neither the Company nor any of its
subsidiaries has taken any action referred to in Section 4.03 hereof,
except as permitted thereby; (vi) there has been no declaration,
setting aside or payment of any dividend or other distribution with
respect to the capital stock of the Company; (vii) there has been no
change by the Company in accounting principles, practices or methods,
except as may have been required by GAAP or applicable Law and (viii)
neither the Company nor any of its subsidiaries has agreed (whether or
not in writing) to do any of the foregoing.
(g) Title to Properties; Encumbrances. The Company and each of
its subsidiaries has good, valid and marketable title to (i) all of its
material tangible properties and assets (real and personal), including,
without limitation, all the properties and assets reflected in the
consolidated balance sheet as of December 31, 1997 except as indicated
in the notes thereto and except for properties and assets reflected in
the consolidated balance sheet as of March 31, 1997 which have been
sold or otherwise disposed of in the ordinary course of business
consistent with past practice after such date, and (ii) all the
material tangible properties and assets purchased by the Company and
any of its subsidiaries since March 31, 1997 except for such properties
and assets which have been sold or otherwise disposed of in the
ordinary course of business consistent with past practice; in each case
subject to no Encumbrance, except for (1) Encumbrances set forth in the
consolidated balance sheet as of March 31, 1997 (including the notes
thereto) or as set forth in Section 3.01(g) of the Company Disclosure
Letter, (2) Encumbrances consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of
real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such
property by the Company or any of its subsidiaries in the operation of
its respective business, (3) statutory liens or liens of landlords,
carriers, warehousemen, mechanics, suppliers, materialmen or repairmen
arising in the ordinary course of business, (4) Encumbrances for
current taxes, assessments or governmental charges or levies on
property not yet due and delinquent and (5) such Encumbrances as,
individually or in the aggregate, would not be reasonably expected to
have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole. All of the material properties and
assets of the Company and its subsidiaries are in good working order,
normal wear and tear excepted and are suitable for their current uses
in their respective businesses.
(h) Compliance with Laws. Except as set forth in Section
3.01(h) of the Company Disclosure Schedule, the Company and its
subsidiaries are in compliance with applicable Laws except where the
failure to so comply would not have a
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<PAGE>
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or would not prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(i) Litigation. Except as disclosed in the Commission Filings
or as set forth in Section 3.01(i) of the Company Disclosure Letter,
there is no action, suit, proceeding at law or in equity, or any
arbitration or any administrative or other proceeding by or before (or
to the knowledge of the Company any investigation by) any Governmental
Entity, pending, or to the best knowledge of the Company, threatened,
against or affecting the Company or any of its subsidiaries, or any of
their properties, assets or rights which would be reasonably likely to
have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or would prevent or materially delay
consummation of the transactions contemplated by this Agreement. Except
as disclosed in the Commission Filings, neither the Company nor any of
its subsidiaries is subject to any judgment, order or decree entered in
any lawsuit, arbitration or other proceeding which would have a
material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or on the ability of the Company or any
subsidiary to conduct its business as presently conducted or would
prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(j) Employee Benefit Plans. (i) Each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by the Company
and/or any of its United States subsidiaries or to which the Company or
any such subsidiary contributes (or has any obligation to contribute)
(collectively, the "US Employee Benefit Plans") is listed in Section
3.01(j)(i) of the Company Disclosure Letter. Also listed on the
Disclosure Schedule are any bonus, deferred compensation, profit
sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination,
severance, change of control or incentive compensation plan or
agreement maintained by the Company or any of its subsidiaries. Except
as set forth in Section 3.01(j)(i) of the Company Disclosure Letter:
(1) each US Employee Benefit Plan is in material compliance with
applicable law and has been administered and operated in all respects
in accordance with its terms; (2) each US Employee Benefit Plan which
is intended to be "qualified" within the meaning of Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), has
received a favorable determination letter from the Internal Revenue
Service with respect to "TRA" (as defined in Section 1 of Rev. Proc.
93-39) and, to the knowledge of the Company, no event has occurred and
no condition exists which would result in the revocation of any such
determination; (3) no US Employee Benefit Plan is covered by Title IV
of ERISA or subject to Section 412 of the Code or Section 302 of ERISA;
(4) no liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company or any of its subsidiaries
with
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respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, covered by Title IV
of ERISA ("Single Employer Plan") currently or formerly maintained by
any of them, or the Single-Employer Plan of any entity which is
considered one employer with the Company under Section 4001 of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate"); (5) no notice
of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has
been required to be filed for any U.S. Employee Benefit Plan covered by
Title IV of ERISA ("Pension Plan") within the 12-month period ending on
the date hereof or will be required to be filed in connection with the
transactions contemplated by this Agreement; (6) neither any Pension
Plan nor any Single-Employer Plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver; (7) neither the Company
nor any of its subsidiaries has provided, or is required to provide,
security to any Pension Plan or to any Single-Employer Plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code; (8) under each
Pension Plan which is a Single-Employer Plan, as of the last day of the
most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Plan, and there has been no material change in the financial condition
of such Plan since the last day of the most recent plan year; (9) the
withdrawal liability of the Company and its subsidiaries under each
U.S. Employee Benefit Plan which is a multiemployer plan to which the
Company, any of its subsidiaries or an ERISA affiliate has contributed
during the preceding 12 months, determined as if a "complete
withdrawal", within the meaning of Section 4203 of ERISA, had occurred
as of the date hereof, does not exceed $100,000; (10) neither the
Company nor any of its subsidiaries, nor, to the Company's knowledge,
any other "disqualified person" or "party in interest" (as defined in
Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transactions in connection with any US
Employee Benefit Plan that would result in the imposition of a penalty
pursuant to Section 502 of ERISA, damages pursuant to Section 409 of
ERISA or a tax pursuant to Section 4975 of the Code; (11) no US
Employee Benefit Plan provides for post-employment or retiree health or
life insurance benefits, except to the extent required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code; (12) no
litigation or administrative proceeding has been commenced, or, to the
Company's knowledge, threatened with respect to any US Employee Benefit
Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied such claims); (13) all contributions
required to be made under the terms of any US Employee Benefit Plan
have been timely made or have been reflected in the Audited Financial
Statements or the Preliminary Financial Statements.
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(ii) Each employee benefit plan other than any US Employee
Benefit Plan maintained or contributed to by any non-United States
subsidiary of the Company is listed in Section 3.01(j)(ii) of the
Company Disclosure Letter (collectively, the "Foreign Employee Benefit
Plans"). Except as set forth in Section 3.01(j)(ii) of the Company
Disclosure Letter: (1) each Foreign Employee Benefit Plan is in
compliance with applicable law and has been administered and operated
in all respects in accordance with its terms; and (2) no litigation or
administrative proceeding has been commenced, or, to the Company's
knowledge, threatened, with respect to any Foreign Employee Benefit
Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied such claims); and (3) with respect to
each Foreign Employee Benefit Plan which is a pension plan, the Company
and its subsidiaries have no material unfunded liabilities with respect
to any such pension plan.
(k) Taxes. (i) The Company has filed or caused to be filed, or
will file or cause to be filed on or prior to the Closing Date, all
material federal, state, local and foreign tax returns and tax reports
which are required to be filed by, or with respect to, the Company on
or prior to the Closing Date (taking into account any extension of time
to file granted to or on behalf of the Company) (collectively, the
"Returns"). Except as set forth in Section 3.01(k) of the Company
Disclosure Letter, all material federal, state, local and foreign
income, gross receipts, windfall profits, severance, property, sales,
use, license, excise, franchise, employment, withholding or similar
taxes imposed on the income, properties or operations of the Company,
together with any interest, additions to tax or penalties with respect
thereto and any interest in respect of such additions to tax or
penalties ("Taxes") due and payable by the Company have been, or prior
to the Closing Date will be, paid or fully provided for on the books
and records of the Company in accordance with GAAP, and all material
Taxes not yet due and payable with respect to periods (or portions
thereof) ending on or prior to the Closing Date have been or will be
fully provided for on the books and records of the Company in
accordance with generally accepted accounting principles. Except as set
forth in Section 3.01(k) of the Company Disclosure Letter, (a) all
Returns with respect to periods ending on or before the Closing Date
have been examined by the Internal Revenue Service or the appropriate
state, local or foreign taxing authority or the period for assessment
of the Taxes in respect of which such Returns were required to be filed
has expired, (b) no issues have been raised by any relevant taxing
authority in connection with an audit or examination of any such
Returns which are currently pending, and (c) no waivers of statutes of
limitation are in effect with respect to any Taxes of the Company.
(ii) The Company is not, nor was it at any time
during the five-year period ending on the Closing Date, a
"United States real property holding corporation" within the
meaning of Section 897(c) of the Code.
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(iii) Except as set forth in Section 3.01(k) of the
Company Disclosure Letter, none of the Company, Parent or Sub
will be obligated as a result of the transactions contemplated
by this Agreement to make a payment that would be a "parachute
payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code without regard to whether
such payment is reasonable compensation for personal services
performed or to be performed in the future.
(l) Liabilities. Except as set forth in Section 3.01(l) of the
Company Disclosure Letter, neither the Company nor any of its
subsidiaries has any material claims, liabilities or indebtedness
outstanding except (i) as set forth in the consolidated balance sheet
of the Company as of March 31, 1997, (ii) for liabilities incurred
subsequent to March 31, 1997, in the ordinary course of business
consistent with past practice, (iii) as set forth in the Commission
Filings.
(m) Intellectual Properties. Except as would not have a
material adverse effect on the Condition of the Company and its
subsidiaries, taken as a whole, the Company and its subsidiaries own or
have valid, binding and enforceable rights to use all patents,
trademarks, trade names, service marks, service names, copyrights,
applications therefor and licenses or other rights in respect thereof
("Intellectual Property") used or held for use in connection with the
business of the Company or its subsidiaries, without any known conflict
with the rights of others. Except as set forth in Section 3.01(m) of
the Company Disclosure Letter, neither the Company nor any of its
subsidiaries has received any notice from any other Person pertaining
to or challenging the right of the Company or any of its subsidiaries
to use any Intellectual Property or any trade secrets, proprietary
information, inventions, know-how, processes and procedures owned or
used by or licensed to the Company or its subsidiaries, except with
respect to rights the loss of which, individually or in the aggregate,
would not be reasonably likely to have a material adverse effect on the
Condition of the Company and its subsidiaries, taken as a whole.
(n) Material Contracts. Except as set forth in Section
3.01(n) of the Company Disclosure Letter, neither the Company nor
any of its subsidiaries has or is bound by:
(i) any agreement, contract or commitment that
involves the performance of services by it of an amount or
value (as measured by the revenue derived therefrom during
1997) in excess of $500,000 annually, unless terminable by the
Company or its relevant subsidiary on not more than 90 days
notice,
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(ii) any agreement, indenture or other instrument
which contains restrictions with respect to payment of
dividends or any other distribution in respect of its capital
stock,
(iii) any agreement, contract or commitment to be
performed relating to capital expenditures in excess of
$100,000 in any calendar year, or in the aggregate require
expenditures in excess of $1,000,000 other than those capital
expenditures approved as part of the Company's fiscal 1999
budget a true and correct copy of which has heretofore been
provided to Parent,
(iv) any agreement, indenture or instrument relating
to indebtedness for borrowed money or the deferred purchase
price of property (excluding trade payables in the ordinary
course of business, intercompany indebtedness and leases for
telephones, copy machines, facsimile machines and other office
equipment),
(v) any loan or advance to (other than advances to
employees in the ordinary course of business in amounts of
$25,000 or less to any individual and $100,000 in the
aggregate), or investment in (other than investments in
subsidiaries), any Person, or any agreement, contract or
commitment relating to the making of any such loan, advance or
investment or any agreement, contract or commitment involving
a sharing of profits (except for bonus arrangements with
employees entered into in the ordinary course of business
consistent with past practice),
(vi) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person (other
than in the ordinary course of business, consistent with past
practice or with respect to any indebtedness or obligation of
the Company or any subsidiary),
(vii) any management service, consulting or any other
similar type of contract, involving payments of more than
$250,000 annually, unless terminable by the Company on not
more than 90 days notice,
(viii) any agreement, contract or commitment limiting
the ability of the Company or any of its subsidiaries to
engage in any line of business or to compete with any Person,
(ix) any warranty, guaranty or other similar
undertaking with respect to a contractual performance extended
by the Company or any of its subsidiaries other than in the
ordinary course of business, or
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(x) any material amendment, modification or
supplement in respect of any of the foregoing.
Except as otherwise set forth in Section 3.01(n) of the
Company Disclosure Letter, each contract or agreement set forth in Section
3.01(n) of the Company Disclosure Letter is in full force and effect and (A)
there exists no default or event of default or event, occurrence, condition or
act (including the consummation of Offer or the Merger) on the part of the
Company or any subsidiary which, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or event
of default thereunder and (B) no approval or consent of, or notice to, any
person is needed in order that each such contract or agreement shall continue in
full force and effect in accordance with its terms without penalty, acceleration
or rights of early termination by reason of the consummation of the transactions
contemplated by this Agreement.
(o) Proxy Statement and Schedule l4D-9. The definitive proxy
statement and related materials, if required, to be furnished to the
holders of Common Stock in connection with the Merger pursuant to
Section 4.04 hereof (the "Proxy Statement") will comply in all material
respects with the Exchange Act and the rules and regulations thereunder
and any other applicable laws. If at any time prior to the Effective
Time any event occurs which should be described in an amendment or
supplement to the Proxy Statement, the Company will promptly file and
disseminate, as required, an amendment or supplement which complies in
all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. Prior to its
filing with the Commission, Parent and Sub and their Counsel shall have
a reasonable opportunity to review the amendment or supplement. None of
the information supplied by the Company for inclusion in the Proxy
Statement, will, at the date such information is supplied and at the
Effective Time, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
made, in light of the circumstance under which they are made, not
misleading. None of the information in the Schedule 14D-9, at the
respective times the Schedule 14D-9 is filed with the Commission, will
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the
circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made
with respect to any information with respect to Parent, Sub or their
officers, directors or affiliates provided to the Company by Parent or
Sub in writing for inclusion in the Schedule 14D-9. The Schedule l4D-9
will comply in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. If at
any time prior to the expiration or termination of the Offer any event
occurs which should be described in an amendment or supplement to the
Schedule l4D-9 or any amendment or supplement thereto, the Company will
promptly file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the
rules and regulations
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thereunder and any other applicable laws. Prior to its filing with the
Commission, Parent and Sub and their Counsel shall have a reasonable
opportunity to review the amendment or supplement. None of the
information supplied by the Company to Parent or Sub for inclusion or
incorporation by reference in the Offer Documents contained, at the
respective times the Offer Documents were filed with the SEC, any
untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(p) Broker's or Finder's Fee. Except for Berenson Minella
(whose fees and expenses will be paid by the Company in accordance with
the Company's agreement with such firm) no agent, broker, Person or
firm acting on behalf of the Company is, or will be, entitled to any
fee, commission or broker's or finder's fees from any of the parties
hereto, or from any Person controlling, controlled by, or under common
control with any of the parties hereto, in connection with this
Agreement or any of the transactions contemplated hereby.
(q) Environmental Laws and Regulations. Except as set forth in
Section 3.01(q) of the Company Disclosure Letter, or as would not have
a material adverse effect on the Condition of the Company and its
subsidiaries, taken as a whole:
(i) Hazardous Materials have not been generated,
used, treated or stored on any Company Property, except for
quantities used or stored at such Property in compliance with
Environmental Laws, required in connection with the normal
operations and maintenance of such Property and as would not
reasonably be expected to result in liability under any
Environmental Law.
(ii) Hazardous Materials have not been released or
disposed of on any Company Property, except for quantities
released on such Property in compliance with Environmental
Laws and required in the normal operation and maintenance of
such Property.
(iii) The Company and its subsidiaries are in
compliance with Environmental Laws and the requirements of
permits issued under such Environmental Laws with respect to
any Company Property.
(iv) There are no pending or threatened Environmental
Claims against the Company, any of its subsidiaries or, to the
knowledge of the Company, any Company Property.
(v) neither the Company nor any subsidiary is subject
to any order, decree, injunction or other arrangement with any
Governmental Entity
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or any indemnity or other agreement with any third party
relating to liability under any Environmental Law.
(vi) none of the properties of the Company or any
subsidiary contain any underground storage tanks,
asbestos-containing material, lead products, or
polychlorinated biphenyls.
(vii) there are no other circumstances or conditions
involving the Company or any subsidiary that could reasonably
be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use,
or transfer of any property in connection with any
Environmental Law.
As used in this Section 3.01(q), the following terms shall
have the meanings set forth below:
(i) "Company Property" means any real property and
improvements currently or formerly owned, leased, used,
operated or occupied by the Company or any of its
subsidiaries.
(ii) "Hazardous Materials" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls, and radon gas;
and (b) any chemicals, materials or substances defined as or
included in the definition of "Hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law or otherwise regulated
under any Environmental Law.
(iii) "Environmental Law" means any applicable
federal, state, foreign or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law in
effect and in each case as amended as of the Closing Date, and
any judicial or administrative interpretation thereof as of
the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including
the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. ss. 9601 et seq.;
the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401 et seq.; the Occupational Safety
and Health Act, 28 U.S.C. ss. 2412; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Oil
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Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.; and their
state and local counterparts and equivalents.
(iv) "Environmental Claims" means administrative,
regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or
violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such
Law (hereafter "Claims"), including (a) Claims by governmental
or regulatory authorities for enforcement, investigations,
monitoring, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental
Law, and (b) Claims by any third party relating to any
Environmental Law seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
(v) "Release" means disposing, discharging,
injecting, spilling, leaking, leaching, dumping, emitting,
escaping, emptying, seeping, placing and the like, into or
upon any land or water or air, or otherwise entering into the
environment.
(r) State Takeover Statutes; Charter Provisions. Section 203
of the DGCL is inapplicable to the Offer, the Merger, this Agreement
and the Stockholders Agreement and the transactions contemplated hereby
and thereby. No other state takeover statute or similar statute or
regulation applies to the Offer, the Merger or the transactions
contemplated hereby or by the Stockholders Agreement.
(s) Opinion of Financial Advisor. The Company has received the
opinion of Berenson Minella, to the effect that, as of the date of this
Agreement, the consideration per share of Common Stock to be received
in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders from a financial point of view, and a
complete and correct signed copy of such opinion has been, or will be,
delivered to Sub and Parent.
(t) Rights Agreement. The Company has not adopted or otherwise
implemented a stockholder rights plan or other similar agreement or
instrument.
(u) Voting Requirements. Unless the Merger is consummated in
accordance with the provisions of Section 253 of the DGCL, the
affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated hereby.
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3.02 Representations and Warranties of Parent and Sub. Each of
Parent and Sub represents and warrants to the Company as follows:
(a) Due Organization; Good Standing and Corporate Power.
Parent is a corporation duly organized and validly existing and in good
standing under the laws of its jurisdiction of incorporation. Sub is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of Parent and Sub
has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted except such instances where the failure to have such power
and authority, individually or in the aggregate, would not prevent or
materially delay the consummation of the transactions contemplated by
this Agreement.
(b) Authorization and Validity of Agreement. Each of Parent
and Sub has the corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Parent and Sub, and the consummation
by each of them of the transactions contemplated hereby, have been duly
authorized by the Boards of Directors of each of Parent and Sub. No
other corporate action on the part of either of Parent or Sub is
necessary to authorize the execution, delivery and performance of this
Agreement by each of Parent and Sub and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Sub and is a valid and binding
obligation of each of Parent and Sub, enforceable against each of
Parent and Sub in accordance with its terms, except that such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, and general equitable principles.
(c) Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired, (ii) the requirements of
the Exchange Act relating to the Proxy Statement and the Offer are met,
and (iii) the filing of the Certificate of Merger and other appropriate
merger documents, if any, as required by the laws of the State of
Delaware, the execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions
contemplated hereby will not: (1) violate any provision of the
Certificate of Incorporation or By-Laws of either Parent or Sub; (2)
violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or
authority applicable to Parent or Sub or by which either of their
respective properties or assets may be bound; (3) require any filing
with, or permit, consent or approval of, or the giving of any notice to
any governmental or regulatory body, agency or authority; or (4) result
in a violation or breach of, conflict with, constitute (with or without
due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation
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or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
the Parent, Sub or any of their subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or
obligation to which Parent or Sub or any of their subsidiaries is a
party, or by which they or their respective properties or assets may be
bound except for in the case of clauses (3) and (4) above for such
filing, permit, consent, approval or violation, which would not prevent
or materially delay consummation of the transactions contemplated by
this Agreement.
(d) Offer Documents, Schedule l4D-9 and Proxy Statement. The
Offer Documents will comply in all material respects with the Exchange
Act and the rules and regulations thereunder and any other applicable
laws. The Offer Documents will not, at the time such Offer Documents
are filed with the Commission or are first published, sent or given to
the Company's stockholders, as the case may be, contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the expiration or
termination of the Offer any event occurs which should be described in
an amendment or supplement to the Schedule l4D-1 or any amendment or
supplement thereto, Sub will file and disseminate, as required, an
amendment or supplement which complies in all material respects with
the Exchange Act and the rules and regulations thereunder and any other
applicable laws. Prior to its filing with the Commission, the amendment
or supplement shall be delivered to the Company and its counsel and the
Company shall be given the opportunity to comment thereon. The written
information supplied or to be supplied by Parent and Sub for inclusion
in the Proxy Statement and the Schedule l4D-9 of the Company will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in light
of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made
with respect to any information with respect to the Company or its
officers, directors and affiliates provided to Parent or Sub by the
Company in writing for inclusion in the Offer Documents or amendments
or supplements thereto.
(e) Broker's or Finder's Fee. Except for Lazard Freres & Co.
LLC (whose fees and expenses as financial advisor to Parent and Sub
will be paid by Parent or Sub), no agent, broker, Person or firm acting
on behalf of Parent or Sub is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto,
or from any Person controlling, controlled by, or under common control
with any of the parties hereto, in connection with this Agreement or
any of the transactions contemplated hereby.
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<PAGE>
(f) Financing. Parent has available to it sufficient funds to
consummate the transactions contemplated hereby. On or prior to the
purchase of shares of Common Stock pursuant to the Offer and Effective
Time Parent shall provide or cause to be provided to Sub the funds
necessary to consummate the transactions contemplated hereby.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.01 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending at the Effective
Time, the Company shall, and shall cause each of its subsidiaries to, upon
reasonable notice, afford Parent and Sub, and their respective counsel,
accountants, consultants and other authorized representatives, reasonable access
during normal business hours to the employees, properties, books and records of
the Company and its subsidiaries in order that they may have the opportunity to
make such investigations as they shall desire of the affairs of the Company and
its subsidiaries and all other information concerning the Company's or its
subsidiaries' business, properties and personnel as Parent and Sub may
reasonably request. The Company shall furnish promptly to Parent and Sub (a) a
copy of each report, schedule, registration statement and other document filed
by it or its subsidiaries during such period pursuant to the requirements of
Federal or state securities laws and (b) all other information concerning its or
its subsidiaries' business, properties and personnel as Parent and Sub may
reasonably request. The Company agrees to cause its officers and employees to
furnish such additional financial and operating data and other information and
respond to such inquiries as Parent and Sub shall from time to time reasonably
request.
4.02 Confidentiality. Information obtained by Parent and Sub
and their respective counsel accountants, consultants and other authorized
representatives pursuant to Section 4.01 hereof shall be subject to the
provisions of the Confidentiality Agreement between the Company and Technicolor
Video Cassettes, Inc. dated December 10, 1997.
4.03 Conduct of the Business of the Company Pending the
Closing Date. The Company agrees that, except as specifically permitted,
required or specifically contemplated by or otherwise described in this
Agreement or otherwise consented to or approved by Sub and Parent (which consent
or approval shall not be unreasonably withheld, conditioned or delayed), during
the period commencing on the date hereof and, except with respect to Section
4.03(b)(xiv) which shall survive any termination of this Agreement in accordance
with Section 6.02 hereof, ending at the Effective Time.
(a) The Company and each of its subsidiaries will conduct
their respective businesses and operations only according to their
ordinary course of business
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consistent with past practice and will use their reasonable best
efforts to preserve intact their respective business organization, keep
available the services of their officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors,
clients, landlords, joint venture partners, employees, agents and
others having business relationships with them;
(b) Neither the Company nor any of its subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or
By-Laws (or comparable governing documents); (ii) distribute, issue or
sell any shares of its capital stock (other than in connection with the
exercise of Options outstanding on the date hereof) or any of its other
securities, or issue any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of, any
shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) sell or pledge or agree
to sell or pledge any stock owned by it in any of its subsidiaries;
(iv) declare, pay, set aside or make any dividend or other distribution
or payment with respect to, or split or combine, redeem or reclassify,
or purchase or otherwise acquire any shares of its capital stock or its
other securities, other than dividends in the ordinary course,
consistent with past practice by a direct or indirect wholly owned
subsidiary to is parent, (v) (A) enter into any contract or commitment
with respect to capital expenditures in excess of $100,000,
individually or $1,000,000, in the aggregate, other than those capital
expenditures approved as part of the Company's fiscal 1999 budget; (B)
acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business or division thereof; or
(C) enter into, amend, modify, supplement or cancel any material
contract, (vi) except in the ordinary course of business, acquire a
material amount of assets or securities or release or relinquish any
material contract rights; (vii) except to the extent required under
existing employee and director benefit plans, agreements or
arrangements as in effect on the date of this Agreement, (a) increase
the compensation or fringe benefits of any of its directors, officers
or employees, except for increases in salary or wages of employees
(other than officers) of the Company and its subsidiaries in the
ordinary course of business, consistent with past practice, (b) grant
any severance or termination pay not currently required to be paid
under existing severance plans, (c) enter into any employment,
consulting or severance agreement or arrangement with any present or
former director, officer or other employee of the Company or any of its
subsidiaries, or (d) establish, adopt, enter into or amend or terminate
any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
present or former directors, officers or employees; (viii) transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber
or subject to any lien, any material properties or assets or incur or
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modify any indebtedness or other material liability (other than
indebtedness incurred in the ordinary course under the Amended and
Restated Credit Agreement among the Company, certain of its
subsidiaries and NationsBank, N.A. (the "Existing Credit Facility") or
issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for the obligations of another
Person or, otherwise than in the ordinary course of business,
consistent with past practice make any loan or extend credit; (ix) make
any material tax election or settle or compromise any material tax
liability; (x) except as required by applicable law or generally
accepted accounting principles, make any material change in its method
of accounting; (xi) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger); (xii)
agree to the settlement of any material claim or litigation (including,
but not limited to any claim or litigation in respect of or related to
any Environmental Law), (xiii) permit any material insurance policy
naming it as beneficiary or a loss payable payee to be cancelled or
otherwise terminate without notice to Parent unless such insurance
policy is immediately replaced, with no gaps or lapses in coverage,
with an insurance policy issued by a financially sound and reputable
insurance company in at least such amounts and against at least such
risks as the cancelled policy for a premium not greater than 110% of
the premium for the cancelled or otherwise terminated policy, (xiv)
take any action, including, without limitation, the adoption of any
stockholder rights plan or similar agreement, arrangement or instrument
or amendments to its Certificate of Incorporation (or other
organizational or governing documents), which would, directly or
indirectly, restrict or impair the ability of Parent or Sub to vote, or
otherwise to exercise the rights and receive the benefits of a
stockholder with respect to, securities of the Company that may be
acquired or controlled by Parent or Sub or permit any stockholder to
acquire securities of the Company on a basis not available to Parent or
(xv) agree, in writing or otherwise, to take any of the foregoing
actions; and
(c) The Company shall not, and shall not permit any of its
subsidiaries to, (i) take any action (or knowingly omit to take any
action), engage in any transaction or enter into any agreement which
action, knowing omission, transaction or agreement would cause any of
the representations or warranties set forth in Section 3.01 hereof to
be untrue as of the Closing Date, or (ii) purchase or acquire, or offer
to purchase or acquire, any shares of capital stock of the Company; and
(d) The Company and each of its subsidiaries shall pay all
material Taxes and shall use reasonable best efforts to pay all other
Taxes as the same become due other than Taxes which are being contested
in good faith.
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4.04 Proxy Statement. If stockholder approval of the Merger is
required by law, as promptly as practicable, the Company will promptly prepare
and file a preliminary Proxy Statement with the Commission and will use its
reasonable efforts to respond to the comments of the Commission in connection
therewith and to furnish all information required to prepare the definitive
Proxy Statement (including, without limitation, financial statements and
supporting schedules and certificates and reports of independent public
accountants). Parent, Sub and Company will cooperate with each other in
connection with the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, each of Parent and Sub will furnish to the Company
the information relating to it required by the Exchange Act to be set forth in
the Proxy Statement. Promptly after the expiration or termination of the Offer,
if required by the DGCL in order to consummate the Merger, the Company will
cause the definitive Proxy Statement to be mailed to the stockholders of the
Company and, if necessary, after the definitive Proxy Statement shall have been
so mailed, promptly circulate amended, supplemental or supplemented proxy
material and, if required in connection therewith, resolicit proxies. The
Company will not use any proxy material in connection with the meeting of its
stockholders without providing Parent and Sub with a reasonable opportunity to
review and comment on such proxy material.
4.05 Stockholder Approval. (a) Promptly after the expiration
or termination of the Offer, if required by DGCL in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law, duly call, convene and hold a meeting of the holders of
Common Stock for the purpose of voting upon this Agreement and the Merger and
the Company agrees that this Agreement and the Merger shall be submitted at such
special meeting. The Company shall use its reasonable best efforts to solicit
from its stockholders proxies, and, subject always to the fiduciary obligations
of the Company's directors under applicable law, shall take all other action
necessary and advisable to secure the vote of stockholders required by
applicable law to obtain the approval for this Agreement and the Merger. Subject
to Section 4.07 of this Agreement, the Company agrees that it will include in
the Proxy Statement the recommendation of its Board of Directors that holders of
Common Stock approve and adopt this Agreement and approve the Merger. Parent
will cause all shares of Common Stock owned by Parent and its subsidiaries to be
voted in favor of the Merger.
(b) Notwithstanding the foregoing, in the event that Sub shall
acquire at least 90% of the outstanding Company Common Stock, the Company
agrees, at the request of Parent and Sub, subject to Article V, to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with Section 253 of the DGCL.
4.06 Reasonable Efforts. Subject to the terms and conditions
provided herein, each of the Company, Parent and Sub shall, and the Company
shall cause each of its subsidiaries to, cooperate and use their respective
reasonable efforts to (a) take, or cause to
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be taken, all appropriate action, to do and cause to be done all things
reasonably necessary, proper and advisable and to make, or cause to be made, all
filings necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable efforts to obtain, as
promptly as practicable and prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities, regulatory organizations, and other instrumentalities and agencies
and other third parties to contracts with the Company and its subsidiaries as
are necessary in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the Offer and the Merger and (b) as
promptly as practicable, make, or cause to be made, all filings and other
submissions necessary, proper or advisable with respect to this Agreement the
transactions contemplated hereby under (x) the HSR Act and any related
governmental request thereunder and (y) any other applicable laws or
regulations; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its subsidiaries in
order to obtain any such consent, approval or authorization without the written
consent of Sub. The Company, Parent and Sub shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company, Parent and Sub shall use their respective
reasonable best efforts to furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable law in connection with the transactions contemplated by this
Agreement.
4.07 No Solicitation of Other Offers. (a) The Company and its
affiliates and each of their respective officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants and
other agents ("Agents") shall immediately cease any existing discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal (as defined below). Neither the Company nor any of its
subsidiaries shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its subsidiaries' Agents to take) any action to (i)
encourage, solicit or initiate the making of any Acquisition Proposal, (ii)
enter into any agreement with respect to any Acquisition Proposal or (iii)
participate in any way in discussions or negotiations with or furnish or
disclose any information to, any Person (other than Parent or Sub) in connection
with, or take any other action to knowingly facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal, except that, the Company may participate in
discussions or negotiations with and, provided such Person enters into a
confidentiality agreement with the Company on terms no more favorable to such
Person than the confidentiality agreement between Technicolor Videocassette
Inc., a wholly owned subsidiary of Parent, and the Company, furnish or
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disclose information to, any Person who has made, in the good faith judgment of
the Board of Directors of the Company after consultation with their financial
advisors, a bona fide offer or proposal (but not an inquiry) regarding a
transaction that would constitute an Acquisition Proposal and that, if agreed
with the Company, would constitute a Superior Proposal, provided such
Acquisition Proposal was not initially solicited, encouraged or knowingly
facilitated by the Company, its subsidiaries or their Agents in violation of
this Agreement after the date hereof, and, provided further, that nothing in
this Section 4.07 shall prevent the Company or Board of Directors from taking
and disclosing to the Company's stockholders a position contemplated by Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act with respect to any
tender offer or from making such disclosure to the Company's stockholders, upon
the advice of its independent outside legal counsel, as is required under
applicable Federal Securities law. Any actions permitted under, and taken in
compliance with, this Section 4.07 shall not be deemed a breach of any other
covenant or agreement of such party contained in this Agreement.
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any Person or group relating to any direct or indirect acquisition or
purchase of a substantial amount of assets of the Company or any of its
subsidiaries or of all or any portion of any class of equity securities of the
Company or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning all or any portion of
any class of equity securities of the Company or any of its subsidiaries, any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or any transaction having
similar economic effect involving the Company or any of its subsidiaries, other
than the transactions contemplated by this Agreement. "Superior Proposal" shall
mean a bona fide proposal made by a third party to acquire all or a portion of
the outstanding shares of the Company pursuant to a tender offer, a merger or a
sale of all of the assets of the Company (x) on terms which the Board of
Directors of the Company determines in their good faith reasonable judgment
(after consultation with its independent outside financial and legal advisors)
to be more favorable to the Company and its stockholders than the transactions
contemplated hereby.
(b) Except to the extent that, after consultation with independent
outside counsel to the Company, the Board of Directors determines in good faith
that such actions are required in order for the directors of the Company to
satisfy their fiduciary duties to the Company and its stockholders or to comply
with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act, the Board of
Directors shall not take any action to withdraw or modify in a manner adverse to
Parent or Sub, or take a public position inconsistent with, its approvals or
recommendation of the Offer, the Merger or this Agreement or to recommend
another Acquisition Proposal and shall not resolve to do any of the foregoing.
(c) In addition to the obligations of the Company set forth in
paragraph (a) above, on the date of receipt thereof, the Company shall advise
Parent of any request for information regarding or that may be reasonably likely
to result in, or any other inquiry or proposal
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relating to an Acquisition Proposal, the material terms and conditions of such
request, inquiry or proposal and of any subsequent material amendments or
changes thereto, and the identity of the Person making any such request, inquiry
or proposal.
(d) Immediately following the execution of this Agreement, the Company
will request each Person which has heretofore executed a confidentiality
agreement in connection with its consideration of making an Acquisition Proposal
with respect to the Company to return and/or destroy all confidential
information heretofore furnished to such Person by or on behalf of the Company.
4.08 Notification of Certain Matters. The Company shall give
prompt notice to Sub and Parent, and Parent and Sub shall give prompt notice to
the Company, of (a) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur has caused or would be reasonably likely cause
(i) any representation or warranty contained in the Agreement to be untrue in
any material respect or (ii) any of the Tender Offer Conditions to be
unsatisfied, (b) any notice of, or other communication relating to, a default or
event that, with notice or lapse of time or both, would become a default,
received by the Company or any of its subsidiaries under any material contract
to which the Company or any of its subsidiaries is a party or under which any of
their respective assets or properties is bound, or (c) any event, change in
circumstances or other occurrence that has or would be reasonably likely to have
a material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole. Each of the Company on the one hand and Sub and Parent on the
other shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
4.09 HSR Act. The Company and Parent shall, as soon as
practicable and in any event within ten days from the date of this Agreement,
file Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use their reasonable efforts to respond as
promptly as practicable to all inquiries received from the FTC or the Antitrust
Division for additional information or documentation.
4.10 Employee Benefits. (a) From and after the Effective Time
until the first anniversary of the Effective Time, the Surviving Corporation
shall (or, if necessary, Parent shall cause the Surviving Corporation to) ensure
that all employees and officers of the Company at the Effective Time receive
benefits in the aggregate substantially comparable to the benefits received by
such individuals under US Employee Benefit Plans and Foreign Employee Benefit
Plans immediately prior to the date hereof. Notwithstanding the foregoing,
following the Effective Time, the Surviving Corporation may terminate the
employment of any employee (subject to the payment of severance benefits payable
to the employee in connection with such termination).
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(b) From and after the Effective Time until the first
anniversary of the Effective Time, the Surviving Corporation shall (or, if
necessary, Parent shall cause the Surviving Corporation to) keep in effect all
severance policies that are applicable to employees and officers of the Company
immediately prior to the date hereof.
(c) Following the Effective Time, (i) the Surviving
Corporation shall (or, if necessary, Parent shall cause the Surviving
Corporation to) ensure that no medical, dental, health or disability plan
adopted by the Surviving Corporation shall have any preexisting condition
limitations and (ii) the Surviving Corporation shall (or, if necessary, Parent
shall cause the Surviving Corporation to) honor all deductibles and
out-of-pocket expenses paid by the employees and officers of the Company and its
U.S. subsidiaries under any medical, dental, health or disability plan of the
Company and its subsidiaries during the portion of the calendar year prior to
the time such employees become eligible to participate in any medical, dental,
health or disability plan adopted by the Surviving Corporation.
(d) Following the Effective Time, for purposes of eligibility
and vesting, the Surviving Corporation (and, if applicable, Parent) shall honor
all service credit accrued by the employees and officers of the Company under
all US Employee Benefit Plans and Foreign Employee Benefit Plans up to (and
including) the Effective Time.
4.11 Directors' and Officers' Insurance; Indemnification. (a)
From and after the Effective Time, the Surviving Corporation shall (or, if
necessary, Parent shall take all necessary action to) ensure that the
Certificate of Incorporation and the By-Laws of the Surviving Corporation shall
contain the provisions with respect to indemnification and exculpation from
liability set forth in the Company's Certificate of Incorporation and By-Laws on
the date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company, unless such modification is required by law.
(b) For six years from the Effective Time, the Surviving
Corporation shall either (x) maintain in effect the Company's current directors'
and officers' liability insurance covering those persons who are currently
covered on the date of this Agreement by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Parent) (the "Indemnified Parties"); provided that the Surviving Corporation may
substitute for such Company policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous and provided that
said substitution does not result in any gaps or lapses in coverage with respect
to matters occurring prior to the Effective Time or (y) cause the Parent's,
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy;
provided
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that the coverage provided by Parent's insurance shall be no less favorable to
the Indemnified Parties and shall provide no fewer rights than the Company's
directors' and officers' liability insurance policy currently in place.
Notwithstanding anything to the contrary in this Section 4.11, in no event shall
the Surviving Corporation be required to expend in any one year an amount in
excess of 200% of the annual premiums paid by the Company as of the date of this
Agreement for such insurance and if the annual premium for the insurance
coverage that would otherwise be required pursuant to this Section 4.11 would
exceed such amount, the Surviving Corporation shall only be obligated to obtain
a policy with the greatest coverage available for a cost not exceeding 200% of
the annual premiums currently paid by the Company.
4.12 Guaranty of Performance. If Sub fails to perform any of
its obligations under this Agreement, Parent shall, or shall cause another of
its affiliates to, perform such obligations.
4.13 Financing. Parent shall provide Sub with the funds
necessary to consummate the Offer, the Merger and the other transactions
contemplated hereby.
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.01 Conditions Precedent to Obligations of Parent, Sub and
the Company. The respective obligations of Parent and Sub, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction or waiver (subject to applicable law) at or prior to the Effective
Time of each of the following conditions:
(a) Approval of Company's Stockholders. To the extent required
by applicable law, this Agreement and the Merger shall have been
approved and adopted by holders of a majority of the outstanding shares
of the Common Stock of the Company entitled to vote in accordance with
applicable law (if required by applicable law) and the Company's
Certificate of Incorporation and By-Laws;
(b) HSR Act. Any waiting period (and any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated;
(c) Injunction. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental
or regulatory agency, body or authority which prohibits the
consummation of the Offer or the Merger and the transactions
contemplated by this Agreement and which is in effect at the Effective
Time, provided, however, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable best
efforts to prevent the entry
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of any such injunction or other order and to appeal as promptly as
possible any decree, injunction or other order that may be entered;
(d) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which
prohibits the consummation of the Offer or the Merger or has the effect
of making the purchase of the Common Stock illegal; and
(e) Payment for Common Stock. Sub shall have accepted for
payment and paid for a number of shares of Common Stock tendered
pursuant to the Offer that satisfies the Minimum Condition; provided
that the foregoing shall not be a condition to Parent's and Sub's
obligation to consummate the Merger if Sub's failure to purchase any
shares of Common Stock violates the terms of the Offer.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after approval of the Merger by the Company's
stockholders:
(a) by mutual consent of the Company, on the one hand,
and of Parent and Sub, on the other hand;
(b) by either Parent and Sub, on the one hand, or the Company,
on the other hand, if any governmental or regulatory agency shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, shares of Common Stock pursuant to the
Offer or the Merger and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by Parent and Sub, on the one hand, or the Company, on the
other hand, if the Effective Time shall not have occurred on or prior
to September 30, 1998 (the "Outside Date"), unless the Effective Time
shall not have occurred on or prior to the Outside Date because of a
material breach of any representation, warranty, obligation, covenant,
agreement or condition set forth in this Agreement on the part of the
party seeking to terminate this Agreement;
(d) by Parent and Sub, if the Offer is terminated or expires
in accordance with its terms without Sub having purchased any Common
Stock thereunder due to
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an event or occurrence which would result in a failure to satisfy any
of the conditions set forth on Exhibit A hereto, unless any such
failure shall have been caused by or resulted from the failure of
Parent or Sub to perform in a material respect any covenant or
agreement of either of them contained in this Agreement or the breach
by Parent or Sub in a material respect of any representation or
warranty of either of them contained in this Agreement;
(e) by Parent and Sub, in the event that (A) (i) any one or
more representations, warranties, covenants or agreements of the
Company contained in this Agreement that is qualified as to materiality
shall be untrue, incorrect or breached in any respect except for such
failures as would not be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole or (ii) any one or more of such representations, warranties,
covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in
the aggregate, would be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole and, (B) in each case, cannot or has not been cured prior to the
earlier of (i) 15 days after the giving of written notice of such
breach to the Company and (ii) two business days prior to the date on
which the Offer expires;
(f) by the Company, if the Board of Directors of the Company
determines that an Acquisition Proposal constitutes a Superior Proposal
and the Board of Directors determines after consulting with independent
outside counsel that a failure to terminate this Agreement and enter
into an agreement to effect the Superior Proposal would constitute a
breach of its fiduciary duties; provided, however, that the Company
shall not be permitted to terminate this Agreement pursuant to this
Section 6.01(f) unless it has provided Parent and Sub with two business
days prior written notice of its intent to so terminate this Agreement
together with a reasonably detailed summary of the terms and conditions
of such Superior Proposal; provided, further, that Parent shall receive
the fees set forth in Section 7.01(b) immediately prior to any
termination pursuant to this Section 6.01(f) by wire transfer in same
day funds;
(g) by Parent and Sub, if (i) the Company or any of its
subsidiaries or their Agents encourages, solicits or initiates the
making of any Acquisition Proposal from any Person other than Parent or
Sub or the Company or any of its subsidiaries or their Agents takes any
other action to knowingly facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to,
any Acquisition Proposal (other than as permitted by and taken in
compliance with Section 4.07), (ii) the Company enters into any
agreement with respect to or the making of an Acquisition Proposal or
(iii) if the Company's Board of Directors shall have (A) failed to
recommend to the Company's stockholders that such stockholders tender
their shares of Common Stock pursuant to the Offer and vote to approve
and
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adopt this Agreement or (B) amended, withdrawn or modified such
recommendation in a manner adverse to Parent and Sub.
(h) by the Company, in the event that (A) (i) any one or more
representations, warranties, covenants or agreements of Parent or Sub
contained in this Agreement that is qualified as to materiality shall
be untrue, incorrect or breached in any respect except where such
failures as are not reasonably likely to materially and adversely
affect Parent's or Sub's ability to complete the Offer or Merger or
(ii) any one or more of such representations, warranties, covenants or
agreements that is not so qualified shall be untrue, incorrect or
breached which, individually or in the aggregate would be reasonably
likely to materially and adversely effect Parent's or Sub's ability to
complete the Offer or the Merger and (B) in each case cannot or has not
been cured prior to the earlier of (i) 15 days after the giving of
written notice of such breach to the Parent and Sub and (ii), to the
extent applicable, two business days prior to the date on which the
Offer expires.
(i) by the Company, if Parent or Sub shall have (i) failed to
commence the Offer within 5 business days following the date of this
Agreement, (ii) terminated the Offer or (iii) failed to pay for shares
of Common Stock pursuant to the Offer on or prior to the earlier of (x)
the fifth day after any shares of Common Stock tendered in the Offer
have been accepted for payment and (y) the Outside Date, unless in the
case (i) or (ii) such failure shall have been caused by or resulted
from the failure of the Company to satisfy the Tender Offer Conditions
set forth in Annex A or a material breach by the Company of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
6.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.01 hereof by Parent or Sub, on the one
hand, or the Company, on the other hand, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall become void and have
no effect, and there shall be no liability hereunder on the part of Parent, Sub
or the Company, except that Sections 4.02, 7.01 and this Section 6.02 hereof
shall survive any termination of this Agreement and Section 4.03(b)(xiv) of this
Agreement shall survive termination of this Agreement until the thirtieth day
following the expiration, termination or withdrawal of (without recommencement
or amendment or the execution of any agreement with the Company or any one or
more Selling Stockholders relating to) any Acquisition Proposal made by any
Person prior to the expiration or termination of the Offer. Nothing in this
Section 6.02 shall relieve any party to this Agreement of liability for breach
of this Agreement.
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ARTICLE VII
MISCELLANEOUS
7.01 Fees and Expenses. (a) Except as provided in paragraph
(b) below, all costs and expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses.
(b) If (w) (i) the Offer shall have remained open for a
minimum of at least 20 business days, (ii) after the date hereof and prior to
December 31, 1998 any Person (other than Parent or Sub) shall have become the
beneficial owner of 50% or more of the outstanding shares of Common Stock and
(iii) the Minimum Condition (as defined in Annex A) shall not have been
satisfied and the Offer is terminated without the purchase of any Shares
thereunder, or (x) Parent and Sub shall have terminated this Agreement pursuant
to Section 6.01(g), or (y) the Company shall have terminated this Agreement
pursuant to Section 6.01(f), then the Company, if requested by Purchaser, shall
promptly, but in no event later than two days after the date of such request,
pay Parent up to $2,000,000 to reimburse Purchaser for the documented fees and
expenses of Parent, Purchaser and Merger Sub related to this Agreement, the
transactions contemplated hereby and any related financing and an additional fee
of $8,000,000, which amounts shall be immediately payable by wire transfer in
same day funds; provided, however, that if the Company shall have terminated
this Agreement pursuant to Section 6.01(f), such amounts shall be paid in
accordance with the provisions of such section. The Company acknowledges that
the agreements contained in this Section 7.01(b) are an integral part of the
transactions contemplated in this Agreement, and that, without these agreements,
Parent and Sub would not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amounts due pursuant to this Section 7.01(b) or
Section 6.01(f), and, in order to obtain such payments, Parent or Sub commences
a suit which results in a judgment against the Company for the fees set forth in
this paragraph (b), the Company shall pay to Parent and Sub its reasonably
documented costs and expenses (including reasonably documented attorneys' fees
and expenses) in connection with such suit, together with interest on the amount
of the fee at a rate equal to two percentage points over the prime rate of the
Morgan Guaranty Trust Company of New York on the date such payment was required
to be made.
7.02 Representations and Warranties. The respective
representations and warranties of the Company, on the one hand, and Parent and
Sub, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party. Each and every such
representation and warranty shall expire with, and be terminated and
extinguished by, the Closing and thereafter none of the Company, Parent or Sub
shall be under any liability whatsoever with respect to any such representation
or warranty. This Section 7.02 shall have no effect upon any other obligation of
the parties hereto, whether to
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be performed before or after the Effective Time.
7.03 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent or Sub, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
7.04 Public Announcements. The Company, on the one hand, and
Parent and Sub, on the other hand, agree to consult promptly with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and, unless required by
applicable law or regulation or the rules and regulations of any stock exchange
on which any of their securities are traded, shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement.
7.05 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed, certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, as follows:
(a) if to the Company, to it at:
Nimbus CD International Inc.
623 Welsh Run Road, Guildford Farm
Ruckersville, Virginia 22968
Attention: L. Steven Minkel
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr.
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(b) if to Parent, to it at:
Carlton Communications Plc
25 Knightsbridge
London SW1X 7RZ England
Attention: David Abdoo
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
(c) if to Sub, to it at:
Neptune Acquisition Corp.
3233 East Mission Oaks Blvd.
Camarillo, California 93012
Attention: Thomas Collins
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
7.06 Entire Agreement. This Agreement and the annex, schedules
and other documents referred to herein or delivered pursuant hereto,
collectively contain the entire understanding of the parties hereto with respect
to the subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
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7.07 Binding Effect; Benefit; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and, with respect
to the provisions of Section 4.11 hereof, shall inure to the benefit of the
Persons benefiting from the provisions thereof who are specifically intended to
be third party beneficiaries thereof, and, in each such case, their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding anything in this Section 7.07 to the contrary, it is expressly
understood that Parent and Sub may assign their respective rights, interests and
obligations under this Agreement to any of their affiliates provided that such
assignment shall not relieve Parent or Sub, as the case may be, from their
obligations pursuant to this Agreement. Except as set forth above, nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
7.08 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Effective Time
(notwithstanding any stockholder approval), by action taken by the respective
Boards of Directors of Parent, Sub and the Company or by the respective officers
authorized by such Boards of Directors; provided, however, that after any such
stockholder approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval.
7.09 Further Actions. Each of the parties hereto agrees that,
subject to the terms of this Agreement and its obligations under applicable Law,
it will use its reasonable best efforts to fulfill all conditions precedent
specified herein, to the extent that such conditions are within its control, and
to do all things reasonably necessary to consummate the transactions
contemplated hereby.
7.10 Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
7.11 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
7.12 Applicable Law; Jurisdiction. This Agreement and the
legal relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws rules thereof. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
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Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 7.12 and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of New York other than for such purposes. EACH PARTY
HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
7.13 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
7.14 Certain Definitions. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) "subsidiary" with respect to the Company, shall mean and
include (x) any partnership of which the Company or any subsidiary is a general
partner or (y) any corporation or other organization whether incorporated or
unincorporated of which at least a majority of the securities or interests
having by the terms thereof ordinary voting power to elect at least a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its subsidiaries, or by such
party and one or more of its subsidiaries.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company has caused this
Agreement to be executed by its respective officers thereunto duly authorized,
all as of the date first above written.
CARLTON COMMUNICATIONS PLC
By___________________________
Name: B.A. Cragg
Title: Finance Director
NEPTUNE ACQUISITION CORP.
By___________________________
Name: O.F. Raimondo
Title: President
NIMBUS CD INTERNATIONAL, INC.
By___________________________
Name: L.J. Faulkner
Title: President and Chief Executive Officer
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ANNEX A
The capitalized terms used in this Annex A shall have the
meanings set forth in the Agreement to which it is annexed, except that the term
"Merger Agreement" shall be deemed to refer to the Agreement to which this Annex
A is appended and "Purchaser" shall be deemed to refer to Sub.
Notwithstanding any other provision of the Offer or the Merger
Agreement, Purchaser shall not be required to accept for payment or subject to
any applicable rules and regulations of the Commission, including Rule 14e-1c
under the Exchange Act, pay for any shares of Common Stock tendered pursuant to
the Offer and may terminate or amend the Offer and may postpone the acceptance
of, and payment for, shares of Common Stock, if (i) there shall not have been
validly tendered and not withdrawn prior to the expiration of the Offer a number
of shares of Common Stock which represent a majority of the total voting power
of all shares of capital stock of the Company outstanding on a fully diluted
basis (the "Minimum Condition"), (ii) any applicable waiting period under the
HSR Act shall not have expired or been terminated, or (iii) if, at any time on
or after the date of the Merger Agreement and at or before the time of payment
for any such shares of Common Stock (whether or not any shares of Common Stock
have theretofore been accepted for payment or paid for pursuant to the Offer)
any of the following shall occur:
(a) there shall be instituted or pending any action or
proceeding by any government or governmental authority or agency,
domestic or foreign, or by any other Person, domestic or foreign,
before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to or which would be reasonably
likely to make illegal, impede, delay or otherwise directly or
indirectly restrain or prohibit the Offer or the Merger or seeking to
obtain material damages, (ii) seeking to compel Parent or Purchaser to
dispose of, or hold separate (through the establishment of a trust or
otherwise) material assets or properties or categories of assets or
properties or businesses of Parent, the Company or any of their
subsidiaries or to withdraw from one or more lines of business material
to the Condition of Parent, the Company or any of their subsidiaries or
to take any actions that, in the aggregate would be reasonably likely
to materially impair Parent's ability to control, direct or manage on a
day-to-day basis the business or affairs of the Company, (iii) seeking
to impose limitations on the ability of Parent or Purchaser effectively
to exercise full rights of ownership of the shares of Common Stock,
including, without limitation, the right to vote any shares of Common
Stock acquired or owned by Sub or Parent on all matters properly
presented to the Company's stockholders, (iv) seeking to require
divestiture by Parent or Purchaser of any shares of Common Stock or (v)
materially adversely affecting the Condition of the Company and its
subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
proposed, enacted, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Purchaser, the
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Company or any subsidiary of the Company or (ii) the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
other than the routine application of the waiting period provisions of
the HSR Act to the Offer or to the Merger, which would directly or
indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) any change shall have occurred (or any condition, event or
development shall have occurred), that would have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole;
(d) except as to any such representation or warranty which
speaks as of a specific date or for a specific period which must be
true and correct in the following respects only as of such specific
date or period, as of the date of the Merger Agreement and as of the
scheduled expiration date the Offer (i) any one or more
representations, warranties, covenants or agreements of the Company
contained in the Merger Agreement that is qualified as to materiality
shall be untrue, incorrect or breached in any respect except for such
failures as would not be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole or (ii) any one or more of such representations, warranties,
covenants or agreements that is not so qualified shall be untrue
incorrect or breached in any material respect which, individually or in
the aggregate, would be reasonably likely to have a material adverse
effect on the Condition of the Company and its subsidiaries taken as a
whole;
(e) (i) the Company or any of its subsidiaries or their Agents
encourages, solicits or initiates the making of any Acquisition
Proposal from any Person other than Parent or Sub or the Company or any
of its subsidiaries or their Agents takes any other action to knowingly
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal other than as permitted by and in compliance with Section
4.07, (ii) the Company enters into any agreement with respect to or the
making of an Acquisition Proposal, or (iii) if the Company's Board of
Directors shall have (A) failed to recommend to the Company's
stockholders that such stockholders tender their shares of Common Stock
pursuant to the Offer and vote to approve and adopt this Agreement or
(B) amends, withdraws or modifies such recommendation in a manner
adverse to Parent and Sub or resolves to do so.
(f) the Company shall have failed to perform in any material
respect any material obligation or to comply in any material respect
with any material agreement or material covenant of the Company to be
performed or complied with by it and its subsidiaries under the Merger
Agreement; or
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(g) the Merger Agreement shall have been terminated in
accordance with its terms;
which, in the reasonable judgment of Purchaser, in any such case and regardless
of the circumstances giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions (including those set forth in clauses
(i)-(iii) above) are for the sole benefit of the Parent and the Purchaser and
may be asserted by the Parent or the Purchaser, or may be waived by the Parent
or the Purchaser, in whole or in part at any time and from time to time in its
sole discretion. The failure by the Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
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AGREEMENT
AGREEMENT dated as of June 16, 1998, among Carlton
Communications Plc, a company organized under the laws of England ("Parent"),
Neptune Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and the other parties signatory hereto (each a "Stockholder"
and collectively, the "Stockholders").
W I T N E S S E T H :
WHEREAS, contemporaneously herewith, Parent, Sub and Nimbus CD
International, Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to and subject to the conditions of which Sub will, as soon as
practicable (and not later than five business days) after the execution and
delivery of the Merger Agreement, commence an offer to purchase all of the
issued and outstanding shares of Company Common Stock (the "Offer") and Sub will
be merged with and into the Company (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Sub have required that the Stockholders agree, and
the Stockholders have each agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Company Common Stock" shall mean at any time the common
stock, $0.01 par value, of the Company.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
2. Tender of Shares.
(a) Each Stockholder hereby agrees to, as promptly as
practicable (and in no event later than the tenth day (or if such day is not a
business day, the next succeeding business day immediately thereafter) after
commencement of the Offer), validly tender (and not to withdraw) pursuant to and
in accordance with the terms of the Offer (provided that the Offer is not
amended in a manner prohibited by the Merger Agreement), in a timely manner for
acceptance by Sub in the Offer, the number of shares of Company Common Stock set
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forth opposite such Stockholder's name on Schedule I hereto (the "Existing
Shares" and, together with any shares of Company Common Stock acquired by such
Stockholder after the date hereof and prior to the termination of this Agreement
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise and acquired by such Stockholder solely in
its capacity as a stockholder, the "Shares"), owned by such Stockholder. Each
Stockholder hereby acknowledges and agrees that Sub's obligation to accept for
payment and pay for Company Common Stock in the Offer, including the Shares, is
subject to the terms and conditions of the Offer.
(b) Each Stockholder agrees that if (i) at any time prior to
the expiration or termination of the Offer, (A) any Person shall have become the
beneficial owner of 50% or more of the outstanding shares of Common Stock or (B)
any Person makes or publicly announces an intention to make an Acquisition
Proposal or (C) the Company enters into an agreement with any Person with
respect to an Acquisition Proposal and (ii) at any time (x) in the case of (A)
within one year thereafter, (y) in the case of (B), within the period ending on
the thirtieth day after the withdrawal of such Acquisition Proposal, unless such
Person or any of its affiliates shall have entered into an Agreement with the
Company or any one or more Stockholders or their respective affiliates regarding
an Acquisition Proposal or have publicly announced a new or amended Acquisition
Proposal (in which event the termination of such period shall be tolled) and (z)
in the case of (C), within the period ending on the thirtieth day after the
termination of such agreement, unless such Person or any of its affiliates shall
have entered into a new or amended agreement with the Company or any one or more
Stockholders or their respective affiliates regarding an Acquisition Proposal or
have made or publicly announce an intention to make an Acquisition Proposal (in
which event the termination of such period shall be tolled), such Stockholder
sells or otherwise transfers or disposes of any of such Stockholder's Existing
Shares or any other shares of Common Stock of which such Stockholder becomes the
owner prior to the date of such sale or other transfer or disposition or any
shares of Common Stock that such Stockholder currently has the right to acquire
then, such Stockholder shall, as promptly as practicable (but in any event
within two business days after the later of the date of such sale or other
transfer or disposition, provided, that, if the fair market value of any portion
of the consideration is subject to the process for determination of its fair
market value set forth below, the payment relating to such portion of the
consideration shall be made no later than two business days after the date of
agreement or such determination) pay to Sub (or its designee) by wire transfer
of immediately available funds an amount in cash equal to the product of (i) the
number of such shares of Common Stock so sold or otherwise transferred and (ii)
the positive difference between value of the consideration per share of Common
Stock paid pursuant to such sale or other transfer or disposition and $11.50.
For purposes of the foregoing, the parties agree that the value of the
consideration per share of Common Stock paid pursuant to such sale or other
transfer or disposition shall be deemed to include the value of any dividends or
other distributions of any kind whatsoever (including, by means of stock
dividend, cash dividend,
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<PAGE>
stock split, recapitalization, combination, reorganization, exchange of shares
of Common Stock or otherwise) received or distributable in respect of such
shares of Common Stock held on or prior to the date of such sale or other
transfer or disposition and that no Stockholder shall sell, distribute or
otherwise transfer (including by means of liquidation) such shares of Common
Stock to any of its limited partners, general partners, family members or other
affiliates unless such transferee first agrees in writing for the benefit of Sub
and Parent (in form reasonably satisfactory to Sub and Parent) that such
transferee agrees to be bound by the provisions of this Agreement. For purposes
of determining the value of the consideration paid per share of Common Stock and
the value of any distributions with respect to shares of Common Stock, the
parties agree that (i) the value of any part of such consideration or
distribution paid in cash shall be such cash value and (ii) any part of such
consideration or distribution paid in securities or other property shall be
valued at the fair market value of such securities or other property as of the
date of such sale or other transfer or disposition. For purposes of the
preceding clause (ii), the parties agree that the fair market value of
securities or other property shall be determined as follows: (A) if such
securities or other property are publicly traded, the fair market value of such
securities or other property shall be the average of the high and low sales
prices of such securities or other property as publicly reported by or for the
principal exchange or other market on which such securities or other property
are traded on the date of such sale or other transfer or disposition and (B) if
such securities or other property are not publicly traded and the parties cannot
otherwise agree on their fair market value within two business days after the
sale or other transfer or disposition, by averaging the fair market values of
such securities or other property as determined within five business days after
such sale or other transfer or disposition by two internationally recognized
investment banking firms, one chosen by Sub and one chosen by the Stockholders
(acting together); provided, however, that if such investment banking firms
shall fail to make such determinations within such time period or the fair
market values of such securities or other property as of the date of such sale
or other transfer or disposition as determined by such investment banking firms
differ by more than 10% of the lower of the two values, such determination
(which shall be final and binding on all parties hereto) shall be made witin 10
business days after the sale or other transfer or disposition by a third
internationally recognized investment banking firm chosen by the other two
investment banking firms. The parties agree to use reasonable best efforts to
ensure the prompt payment, and if necessary, the prompt determination of the
fair market value of any securities or other property pursuant to this
paragraph, it being understood and agreed that, without limiting the generality
of the foregoing, it is the intent of the parties that Sub, and not the
Stockholders, should receive the value of the consideration in excess of
$11.50 from any sale or other transfer or disposition of the shares of Common
Stock subject to this Agreement as a result of any change in control or
agreement relating to or public announcement of the making of or an intention
to make an Acquisition Proposal prior to the date the Offer is terminated or
otherwise expires. For purposes of this Agreement, an Acquisition Proposal
shall be deemed to include an acquisition (or series of acquisitions) by the
Company pursuant to which the Company issues shares of Common Stock
constituting, in the aggregate, more than the
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number of issued and outstanding shares of Common Stock as of the date of this
Agreement and, in such circumstances, the value of the consideration received
for the shares of Common Stock subject to this paragraph shall be the fair
market value of such shares of Common Stock as of the date of any such
acquisitions by the Company.
(c) Each Stockholder hereby agrees to permit Parent and Sub to
publish and disclose in the Offer Documents and, if approval of the stockholders
of the Company is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
Company Common Stock and the nature of its commitments, arrangements and
understandings under this Agreement.
3. Provisions Concerning Company Common Stock. Each
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the first to occur of (i) the Effective Time and (ii) the
termination of this Agreement pursuant to Section 8 hereof at any meeting of the
holders of Company Common Stock, however called, or in connection with any
written consent of the holders of Company Common Stock, such Stockholder shall
vote (or cause to be voted) the Shares owned by such Stockholder whether issued,
heretofore owned or hereafter acquired, (i) in favor of the Merger and each of
the other actions contemplated by the Merger Agreement and this Agreement and
any actions required in furtherance thereof and hereof; (ii) against any action
or agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or of such Stockholder under this Agreement; and
(iii) except as otherwise agreed to in writing in advance by Parent, against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; or (C) (1) any
change in a majority of the persons who constitute the board of directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of Company's Certificate of Incorporation or By-laws; (3) any other
material change in the Company's corporate structure or business; or (4) any
other action involving the Company or its subsidiaries which is intended, or
could reasonably be expected, to prevent, impede, interfere with, delay,
postpone, or materially adversely affect the Offer, the Merger or the
consummation of the transactions contemplated by this Agreement and the Merger
Agreement. No Stockholder shall enter into any agreement or understanding with
any Person or entity the effect of which would be to violate the provisions and
agreements contained in this Section 3.
4. Representations and Warranties of the Stockholders. Each
Stockholder, as to itself, hereby severally represents and warrants to Sub and
Parent as follows:
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(a) Legal Status. If such Stockholder is a corporation,
partnership or other similar business entity, such Stockholder is a duly
organized and validly existing corporation, partnership or other similar
business entity, as the case may be, in good standing under the laws of its
jurisdiction of organization.
(b) Ownership of Shares. Such Stockholder is the record and
beneficial owner of the number of Shares set forth opposite such Stockholder's
name on Schedule I hereto. On the date hereof, the Existing Shares set forth
opposite such Stockholder's name on Schedule I hereto constitute all of the
Shares owned by such Stockholder. Except as set forth on Schedule I, such
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares set forth opposite such
Stockholder's name on Schedule I hereto, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the terms
of this Agreement. Other than this Agreement and the Merger Agreement, there is
no option, warrant, right, call, proxy, agreement, commitment or understanding
of any nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the sale, pledge or other transfer or disposition of any of the
Existing Shares, any interest therein or any rights with respect thereto, or
related to the voting, disposition or control of the Existing Shares, or (ii)
obligates such Shareholder to grant, offer or enter into any of the foregoing.
(c) Power; Binding Agreement. Such Stockholder has the legal
capacity, power and authority to execute, deliver and enter into this Agreement,
comply with all of terms and provisions of this Agreement, perform all of such
Stockholder's obligations under this Agreement and consummate all of the
transactions involving such Stockholder contemplated by this Agreement and has
taken all necessary corporate or other action necessary to authorize the
execution, delivery and performance by such Stockholder of this Agreement and
the consummation of the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by such Stockholder will not violate
any other agreement to which such Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly authorized (if such Stockholder is a
corporation, partnership or other similar business entity), executed and
delivered by such Stockholder and constitutes a valid and binding agreement of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting creditors' rights generally or by general
principles of equity. There is no other person whose consent is required for the
execution, delivery and performance of this Agreement or the consummation by
such Stockholder of the transactions contemplated hereby whose unconditional and
irrevocable consent has not heretofore been obtained.
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<PAGE>
(d) No Conflicts. Except for the required filings and the
expiration or earlier termination of the required waiting period under the HSR
Act, (A) No filing with, and no permit, authorization, consent or approval of,
any state or federal public body or authority is necessary for the execution of
this Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (B) none of the execution and delivery
of this Agreement by such Stockholder, the consummation by such Stockholder of
the transactions contemplated hereby or compliance by such Stockholder with any
of the provisions hereof shall (1) if such Stockholder is a corporation,
partnership or other similar business entity, conflict with or violate the
certificate of incorporation, bylaws, partnership agreement or other
organizational documents or instruments of such Stockholder, as the case may be,
(2) conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which such Stockholder is a
party or by which such Stockholder or any of its properties or assets may be
bound, (3) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Stockholder or to which any of
its properties or assets are subject or (4) result in the creation of any
claims, liens, restrictions, security interests, pledges, limitations and
encumbrances of any kind.
(e) No Encumbrances. Such Stockholder's Shares and the
certificates representing such Shares are now, and at all times during the term
hereof will be, held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances of any kind whatsoever, except for any such
encumbrances or proxies arising hereunder. The transfer by such Stockholder of
its Shares to Sub in the Offer or otherwise pursuant to this Agreement shall
pass to and unconditionally vest in Sub good and valid title to all Shares, free
and clear of all claims, liens, restrictions, security interests, pledges,
limitations and encumbrances of any kind whatsoever.
(f) Broker's or Finder's Fees. No agent, broker, person or
firm acting on behalf of such Stockholder or any of its Affiliates (other than
the Company) is, or will be, entitled to any commission or broker's or finder's
fees from any Person other than such Stockholder or its Affiliates (other than
the Company) in connection with any of the sale of its Shares as contemplated by
this Agreement.
(g) Offer Documents and Schedule 14D-9. None of the
information supplied by such Stockholder for inclusion or incorporation by
reference in the Offer Documents, the Company's Schedule 14D-9, at the
respective times the Offer Documents or the Company's Schedule 14D-9 are filed
with the SEC and the date they are first
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published, sent or given to the holders of Common Stock, will contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstances under which
they are made, not misleading. Such Stockholder agrees promptly to correct any
information provided by it for use in the Offer Documents, or the Company's
Schedule 14D-9 that shall be, or shall have become, false or misleading in any
material respect.
(h) Reliance by Parent. Such Stockholder understands and
acknowledges that Sub and Parent are each entering into the Merger Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
5. Covenants of the Stockholders. Each Stockholder covenants
and agrees as follows:
(a) Restriction on Transfer, Proxies and Non-Interference.
Beginning on the date hereof and ending on the date this Agreement shall
terminate pursuant to Section 8 hereof, such Stockholder shall not (i) except as
contemplated by the Offer or this Agreement, directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares or any interest therein; (ii) grant any proxies or powers
of attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement.
(b) Waiver of Appraisal Rights. Such Stockholder hereby
irrevocably waives any rights of appraisal or rights to dissent from the Merger
that such Stockholder may have.
(c) Stop Transfer; Changes in Shares. Such Stockholder agrees
with, and covenants to, Parent and Sub that such Stockholder shall not request
that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of such Stockholder's
Shares, unless such transfer is made to Sub in compliance with the Offer or this
Agreement. In the event of a stock dividend or distribution, or any change in
the capital stock of the Company by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged and the purchase price per Share shall be
appropriately adjusted. Such Stockholder shall be entitled to receive any cash
dividend paid by the
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Company during the term of this Agreement until its Shares are purchased in the
Offer or hereunder.
(d) Exclusive Dealing. (a) Such Stockholder and each of its
officers, directors, employees, representatives, consultants, investment banker,
attorneys, accountants, agents or advisors (collectively "Agents") shall
immediately cease any discussions or negotiations with any other parties that
may be ongoing with respect to any purchase of such Stockholder's Shares or any
Acquisition Proposal (as defined below). Such Stockholder shall not, directly or
indirectly, take (and no Stockholder shall authorize or permit its Agents to so
take) any action to (i) encourage, solicit or initiate the making of any offer
to purchase such Stockholder's Shares or any Acquisition Proposal, (ii) enter
into any agreement with respect to any offer to purchase such Stockholder's
Shares or any Acquisition Proposal, or (iii) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than Parent or Sub) in connection with, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any offer to purchase such Stockholder's
Shares or any Acquisition Proposal.
6. Fiduciary Duties. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein shall
not require any Stockholder, acting in his capacity as an officer or director of
the Company, to breach his fiduciary duties as a director of the Company to the
Company and its stockholders.
7. Miscellaneous.
(a) Further Assurances. From time to time, at the other
party's request and without further consideration, each of the parties hereto
shall execute and deliver such additional documents and take all such further
lawful action as may be necessary or desirable to consummate and make effective,
in the most expeditious manner practicable, the transactions contemplated by
this Agreement.
(b) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(c) Certain Events. Each Stockholder agrees that this
Agreement and the obligations hereunder shall attach to such Stockholder's
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares, the
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transferor shall remain liable for the performance of all obligations under this
Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party provided that Parent and Sub may assign, at their respective sole
discretion, their respective rights and obligations hereunder to any direct or
indirect wholly-owned subsidiary of Parent, although no such assignment shall
relieve Parent or Sub of their respective obligations hereunder if such assignee
does not perform such obligations and provided further that, in the event of a
Stockholder's death or incapacity, such Stockholder's rights hereunder shall
inure to his heirs, guardians, administrators or successors.
(e) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
relevant parties (e.g., Parent, Sub and, any one or more Stockholders with
respect to the respective rights and obligations as among Parent, Sub and such
Stockholders under this Agreement).
(f) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to a Stockholder: At the address set forth on Schedule I hereto
copy to: White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: William F. Wynne, Jr.
If to Parent:
Carlton Communications Plc
25 Knightsbridge
London SW1X 7RZ England
Attention: David Abdoo
-9-
<PAGE>
copy to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
If to Sub:
Neptune Acquisition Corp.
3233 East Mission Oaks Blvd.
Camarillo, California 93012
Attention: Thomas Collins
copy to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: David M. Kies
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(h) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be
-10-
<PAGE>
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(k) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(l) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
(m) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (m) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of New York other than for such purposes. EACH PARTY
HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
(n) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(o) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
8. Termination. This Agreement (other than Section 2(b) and
Sections 7 and 8 which shall survive termination of this Agreement until any
amounts due and payable by any Stockholder pursuant to Section 2(b) have been
paid) shall terminate upon the termination of the Merger Agreement pursuant to
Article VI thereof and thereafter no party
-11-
<PAGE>
shall have any rights or obligations hereunder and this Agreement shall become
null and void and have no effect except that nothing in this Section 8 shall
relieve any party of liability for a breach of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-12-
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Stockholders
has caused this Agreement to be duly executed as of the day and year first above
written.
CARLTON COMMUNICATIONS PLC
By:
--------------------------------------
Name:
Title:
NEPTUNE ACQUISITION CORP.
By:
--------------------------------------
Name:
Title:
-13-
<PAGE>
STOCKHOLDERS
<TABLE>
<CAPTION>
Name of Stockholder Number of Existing Shares
- ------------------- -------------------------
<S> <C>
BEHRMAN CAPITAL L.P. 3,306,037
By: Behrman Brothers L.P., general partner
By:
-------------------------------
Darryl Behrman, general partner
BEHRMAN CAPITAL "B" L.P. 298,278
By: Behrman Brothers L.P., general partner
By:
-------------------------------
Darryl Behrman, general partner
STRATEGIC ENTREPRENEUR FUND, L.P. 65,751
By:
---------------------------------------
Darryl Behrman, general partner
----------
Subtotal 3,670,066
</TABLE>
The address of the foregoing Stockholders is 126 E.56th Street, New
York, New York 10022, Attention: Darryl Behrman.
(LIST OF STOCKHOLDERS CONTINUED ON NEXT PAGE)
-14-
<PAGE>
STOCKHOLDERS (cont.)
<TABLE>
<CAPTION>
Name of Stockholder Number of Existing Shares
- ------------------- -------------------------
<S> <C>
McCOWN DE LEEUW & CO. III, L.P. 4,478,412
By: MDC Management Company III, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
McCOWN DE LEEUW & CO. (Europe) III, L.P. 774,046
By: MDC Management Company IIIA, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
McCOWN DE LEEUW & CO. (Asia) III, L.P. 82,931
By: MDC Management Company IIIA, L.P., general partner
By:
------------------------------
Charles Ayres, general partner
GAMMA FUND LLC 193,512
By:
----------------------------------
Charles Ayres, member
-----------
Subtotal 5,528,901
</TABLE>
The address of each of the foregoing Stockholders is 101 East 52nd
Street, New York, New York 10022. Attention Charles Ayres.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------- 0
Lyndon J. Faulkner
- -------------------------------------- 174,355
L. Steven Minkel
\
The address of each of the foregoing Stockholders is Nimbus CD International Inc.,
623 Welsh Run Road, Guildford Farm, Ruckersville, Virginia 22968
---------
TOTAL SHARES 9,373,322
---------
</TABLE>
-15-
<PAGE>
NIMBUS CD INTERNATIONAL, INC.
623 Welsh Run Road
Guildford Farm
Ruckersville, Virginia 22968
June 23, 1998
Dear Shareholder:
We are pleased to inform you that, pursuant to the Agreement and Plan of
Merger dated as of June 16, 1998 (the "Merger Agreement"), by and among Nimbus
CD International, Inc. ("Nimbus"), Carlton Communications Plc ("Carlton"), and
Neptune Acquisition Corp., a wholly owned subsidiary of Carlton ("Purchaser"),
Purchaser today commenced a tender offer for all of the outstanding shares of
Nimbus' common stock. In the tender offer, stockholders who tender their Nimbus
shares will receive $11.50 per share in cash.
YOUR BOARD OF DIRECTORS, BY A UNANIMOUS VOTE OF DIRECTORS (WITH ONE DIRECTOR
ABSENT), HAS DETERMINED THAT PURCHASER'S TENDER OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF NIMBUS' STOCKHOLDERS AND RECOMMENDS THAT ALL
STOCKHOLDERS ACCEPT THE TENDER OFFER AND TENDER ALL OF THEIR SHARES PURSUANT TO
THE TENDER OFFER.
In approving the tender offer and the Merger Agreement and recommending that
all stockholders tender their shares pursuant to the tender offer, as more fully
described in the attached Solicitation/ Recommendation Statement on Schedule
14D-9 filed by Nimbus with the Securities and Exchange Commission, your Board of
Directors (the "Board") considered a number of factors including, among others:
(i) Nimbus' management's ("Management") view of Nimbus' strategic position; (ii)
the Board's familiarity with the financial condition, results of operations,
strategic position, business and prospects of Nimbus; (iii) the canvas of other
potential strategic bidders conducted by Berenson Minella & Company ("Berenson
Minella"), Nimbus' financial advisor; (iv) the Board's belief that superior
alternative financial transactions were not likely; (v) Management's and certain
of Nimbus' large stockholders' recommendation of the tender offer and the Merger
Agreement; (vi) Berenson Minella's presentation and opinion that the
consideration to be received by the stockholders of Nimbus in connection with
the tender offer and the Merger is fair to the stockholders of Nimbus from a
financial point of view; (vii) the financial and other terms of the tender offer
and the Merger Agreement; and (viii) the fact that the obligations of Carlton
and Purchaser to consummate the tender offer and the Merger are not conditioned
upon financing.
Purchaser's tender offer is conditioned upon, among other things, there
being validly tendered and not withdrawn in the tender offer a number of shares
of Nimbus' common stock which represent at least a majority of the total voting
power of all shares of capital stock of Nimbus outstanding on a fully-diluted
basis. The consummation of the tender offer is also conditioned upon receipt of
certain regulatory approvals and/or termination of certain waiting periods.
Under the Merger Agreement, if the tender offer is completed, it will be
followed, subject to any necessary shareholder approval, by a merger in which
non-tendering shareholders will receive the same consideration for each Nimbus
share as was paid in the tender offer and Nimbus will become a wholly owned
subsidiary of Carlton.
<PAGE>
Enclosed with this letter is a copy of Nimbus' Schedule 14D-9, which
contains important information regarding the factors considered by your Board in
its deliberations and describes in more detail the reasons for your Board's
conclusions and certain other information regarding the tender offer and the
merger. Also enclosed is Purchaser's Offer to Purchase and related materials,
including a letter of transmittal to be used for tendering your Nimbus shares.
These documents set forth in detail the terms and conditions of the tender offer
and the merger and provide instructions on how to tender your Nimbus shares. You
are urged to read and carefully consider the enclosed material and your
individual circumstances.
On behalf of the Board of Directors,
Sincerely,
[LOGO]
Lyndon J. Faulkner
Chairman of the Board, President and
Chief Executive Officer
2
<PAGE>
FOR IMMEDIATE RELEASE
WEDNESDAY, 17TH JUNE 1998
CARLTON TO ACQUIRE NIMBUS FOR $264M
Carlton Communications Plc, owner of Technicolor, announced today it has entered
into a merger agreement to acquire Nimbus CD International Inc., one of the
world's leading independent manufacturers of optical discs, including DVD,
DVD-ROM, CD-Audio and CD-ROM. Carlton plans to expand the business alongside
Technicolor, the world leader in manufacturing and distributing pre-recorded
videocassettes, which also has a growing business in manufacturing and
distributing optical discs.
Following the agreement, Carlton will make a cash tender offer of $11.50 per
share for all the outstanding shares, valuing Nimbus at approximately $264m
(L160m). Stockholders and management of Nimbus owning an aggregate of 9,373,322
shares, representing approximately 44 per cent of Nimbus' common stock, have
agreed to tender their shares into Carlton's tender offer. In the year ended
31st March 1998, Nimbus reported pre-tax profits of $21m, compared with $14m in
the previous year.
Michael Green, Chairman of Carlton, said:
"Technicolor is becoming the leading manufacturer and distributor of optical
discs. Just as the company added videocassettes to its film operations in the
'80s, now we are adding optical discs in the '90s. The penetration of VCRs, DVD
players and PC disc drives are all growing as part of the world wide expansion
of screen-based entertainment. Working together with Nimbus, we can serve a
larger part of the growing global market."
Page 1 of 3
<PAGE>
Lyndon Faulkner, Chairman and Chief Executive Officer of Nimbus, said:
"Nimbus and Technicolor are an excellent match and we look forward to working
with one of the most respected names in the packaged media industry. Together we
will be able to expand on the service that we provide to all our customers.
Technicolor has real distribution expertise. Nimbus has demonstrated the
strength of its CD-Audio and CD-ROM capabilities. As a leader in DVD production
we believe there is great potential for rapid growth as a supplier of DVD-Video,
Divx, and DVD-ROM products to the home entertainment and computer software
industries."
DVDs are capable of storing an entire film on one CD-sized disc. DVD players
were launched in the US in 1997 with first year sales of approximately 200,000
units. By comparison, sales of VCRs when introduced in 1975 took two years to
reach this level of market penetration. Over 1000 different DVD titles have been
published and the format is supported by all the major Hollywood studios.
DVD-ROMs are a CD-sized discs capable of storing up to 14 times more information
than CD-ROMs, allowing for significantly improved video and sound. DVD-ROM
drives are forecast to become standard in all PCs and independent forecasts
predict sales of over 2 billion DVD-ROMs in the US and Europe by 2003.
Based in Charlottesville, Virginia, Nimbus has the capacity to produce 260m CDs
and recently announced its intention to increase its DVD and Divx annual
capacity to 28m units. Nimbus serves over 2,000 customers and is one of a select
group of Microsoft Authorised Replicators. The company recently signed a five
year agreement with Digital Video Express, LP, to replicate the new Divx discs.
The acquisition will strengthen and expand Technicolor's leading position as a
global supplier of packaged media services. Technicolor is already the world's
largest producer and distributor of pre-recorded videocassettes for the
Hollywood studios and has a growing business in manufacturing optical discs.
Technicolor, with the capacity to produce 650m videocassettes and 40m CDs a
year, recently announced the trebling of its DVD capacity to 15m units a year.
Page 2 of 3
<PAGE>
Together with Nimbus, Technicolor will be able to provide a fully integrated
service of mastering, manufacturing and distribution in every major format in
all the key markets. Production and distribution operations will cover the US,
continental Europe and the United Kingdom. The two businesses will serve a wide
range of customers, including publishers of audio CDs, CD-ROMs, DVDs and
DVD-ROMs. Combined DVD capacity will be almost 50m units a year.
-ENDS -
FOR FURTHER INFORMATION, PLEASE CONTACT:
<TABLE>
<S> <C> <C>
David Cameron Carlton Communications Plc 0171 663 6363
Steve Minkel Nimbus CD International, Inc. 00 1 804 985 1100
(ext 371)
</TABLE>
NOTES TO EDITORS
Technicolor Video, based in Camarillo, California is the world's largest
producer of pre-recorded videocassettes. Technicolor Film, based in North
Hollywood, is the world's largest processor of motion picture film.
Technicolor also has US facilities in New York, Michigan and Tennessee, a
new business in Mexico and European plants in the United Kingdom, Holland,
Italy, Spain and Denmark. Technicolor's leading customers include the
Hollywood studios, Disney, Warner, Columbia Tristar, DreamWorks, Polygram
and New Line.
Nimbus is one of the world's leading independent manufacturers of optical discs,
distributed throughout North America, the United Kingdom and continental
Europe. Nimbus is at the forefront of optical disc manufacturing
technologies and provides complete DVD software and audio production
services. As at 31st March 1998, the company had net assets of $66m,
including net debt of $18m.
Page 3 of 3
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 16, 1998, by and between Neptune
Acquisition Corporation, a Delaware corporation (the "Company"), and Lyndon
J. Faulkner (the "Employee").
WHEREAS, the Employee's current employer, Nimbus CD
International, Inc. ("Nimbus"), has entered into an Agreement and Plan of
Merger, dated as of June 16, 1998 with the Company and with Carlton
Communications, Plc (the "Merger Agreement") pursuant to which the Company
will merge with and into Nimbus; and
WHEREAS, the Company desires to secure the continued employment
of Employee as President and Chief Executive Officer following the Effective
Time of the Merger (as such term is defined in the Merger Agreement); and
WHEREAS, the Employee and the Company desire to enter into an
agreement setting forth the terms and conditions of the employment of the
Employee with the Company on and after the Effective Time;
NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein
contained, and other good and valuable consideration, the parties hereto agree
as follows:
1. Employment.
Subject to the consummation of the transactions contemplated by
the Merger Agreement, the Company hereby agrees to employ Employee, and
Employee agrees to serve as an employee of the Company, on the terms and
conditions set forth in this Agreement, effective as of the date of this
Agreement. The continuation of such employment shall be expressly conditioned
on and subject to the consummation of the transactions contemplated by the
Merger Agreement. This Agreement shall become null and void, and shall have
no force or effect, if the transactions contemplated under the Merger
Agreement are not consummated.
<PAGE>
2. Period of Employment.
The "Period of Employment" shall be the period commencing on the
Effective Time and ending on the third anniversary of the Effective Time,
during which the Company shall pay to the Employee a base salary and annual
bonus as provided in Section 4 and shall provide the Employee with the
benefits and compensation described in Section 5. Commencing on the second
anniversary of the Effective Time, if on or before that date the Company has
not delivered to the Employee and the Employee has not delivered to the
Company notice of termination of this Agreement (in accordance with Section
11 hereof), the Period of Employment will be automatically extended each day
by one day until a date which is one year following the date on which the
Company first delivers to the Employee, or the Employee first delivers to
Company, notice of termination of the Agreement.
3. Duties During the Period of Employment.
During the Period of Employment, Employee shall serve as President
and Chief Executive Officer of the Company and shall have such duties and
responsibilities as are assigned to him by the Chairman of the Company and
the Board of Directors of the Company commensurate with such position.
Employee shall report directly to the Chairman of the Company.
Employee shall devote Employee's full business time, attention and
efforts to the affairs of the Company during the Period of Employment,
provided, however, that Employee may engage in other activities, such as
activities involving professional, charitable, educational, religious and
similar types of organizations, speaking engagements, membership on the board
of directors of such other organizations as Company may from time to time
agree to, and activities of a similar nature to the extent that such other
activities do not inhibit the performance of Employee's duties under this
Agreement, or conflict in any material way with the business of Company and
its affiliates.
Employee's principal work location will be in Charlottesville,
Virginia. Employee agrees to travel to, and work at, the offices of the
Technicolor Packaged Media
2
<PAGE>
Group in Camarillo, California as is reasonably required for the performance
of his assigned duties.
4. Annual Cash Compensation.
(a) Base Salary.
As compensation for his services hereunder, Company will pay to
Employee during the Period of Employment a base salary at the annual rate of
$300,000, payable in accordance with the Company's standard payroll practices
for senior executives. Company shall review the Employee's base salary on
October 1, 1999 and on each October 1 thereafter during the Period of
Employment and in light of such review may, in the discretion of the Board of
Directors of Company (but shall not be obligated to), increase such base
salary taking into account any change in Employee's responsibilities,
increases in the cost of living, the Employee's job performance and other
pertinent factors. Effective as of the date of any such increase, the base
salary (as increased) shall be considered the Employee's new base salary for
all purposes of this Agreement and may not thereafter be reduced. Any
increase in base salary shall not limit or reduce any other obligation of
the Company to the Employee under this Agreement.
(b) Annual Bonus Plan.
For each fiscal year during the Period of Employment, other than
with respect to the Carlton Communications, Plc ("Carlton") or Technicolor
Packaged Media Group 1998 fiscal year, Employee will participate in the
Technicolor Packaged Media Group annual bonus plan and shall be eligible to
receive an annual target bonus in accordance with the terms of such plan.
Employee shall be entitled to receive a maximum bonus of 40% of base salary
if certain operating profit and cash flow objectives (as agreed to in the
annual budget) are met and certain personal management objectives mutually
agreed to by the Employee and the Company at the beginning of each fiscal
year are satisfied. In order to receive a bonus under the plan, the Employee
must be employed by the Company at the time required for the payment of
bonuses under the terms of the annual bonus plan.
3
<PAGE>
5. Other Employee Benefits and Compensation.
(a) Initial Carlton Stock Option.
The Company shall request as of the date of this Agreement that
Carlton grant to the Employee, effective as of the date of this Agreement, an
option (the "Stock Option") to purchase ordinary shares of Carlton pursuant
to the Carlton 1987 Incentive and Nonqualified Stock Option Plan for US
Employees, as amended. The Stock Option shall be expressly conditioned on and
subject to the consummation of the transactions contemplated by the Merger
Agreement. The Stock Option shall be null and void, and shall have no force
and effect, if the transactions contemplated under the Merger Agreement are
not consummated. The Stock Option shall permit the Employee to acquire
ordinary shares of Carlton equal in amount to the result of dividing four
times the Employee's base salary (as defined in Section 4(a)) by the fair
market value of one ordinary share of Carlton as of the date of this
Agreement. The exercise price per share of the Stock Option shall be equal to
the fair market value of one ordinary share of Carlton as of the date of this
Agreement. The Stock Option shall become nonforfeitable and exercisable in
three installments as follows: (i) 60% of the Stock Option on the day
immediately preceding the third anniversary of the Effective Time; (ii) 20%
of the Stock Option on the day immediately preceding the fourth anniversary
of the Effective Time; and (iii) 20% of the Stock Option on the day
immediately preceding the fifth anniversary of the Effective Time. The Stock
Option shall be granted on terms and conditions which are not less favorable
than those set forth in the stock option agreement attached as Exhibit A.
(b) Long Term Incentive Plan.
Employee shall be entitled to participate in the Technicolor
Packaged Media Group Long Term Incentive Plan and to receive awards
thereunder in accordance with the terms of such Plan, as summarized in the
attached Exhibit B.
4
<PAGE>
(c) Vacation and Sick Leave.
Employee shall be entitled to reasonable paid annual vacation
periods (but in no event less than four weeks in each year) and to reasonable
sick leave as determined by the Board of Directors of Company.
(d) Regular Reimbursed Business Expenses.
Company shall reimburse Employee for all expenses and
disbursements reasonably incurred by Employee in the performance of
Employee's duties during the Period of Employment, and provide such other
facilities or services as Company and Employee may, from time to time, agree
are appropriate, all in accordance with the Company's established policies.
(e) Employee Benefit Plans.
In addition to the cash compensation described in Section 4, the
Employee shall be entitled to participate in the Company's employee benefit
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement. During the Period of Employment, and
to the extent permitted under applicable law, the Company shall continue to
make contributions for the benefit of the Employee to the United Kingdom
retirement scheme in which the Employee participates as of the date of this
Agreement (the "Scheme"). Such contributions shall be made on the same
basis and under the same methods that have been used by Nimbus Manufacturing
(UK) Limited to make contributions to the Scheme for the Employee. The
Employee shall not be permitted to participate in any qualified retirement
plan (within the meaning of Section 401(a) of the Internal Revenue Code of
1986) that is sponsored by the Company while the Company is making
contributions to the Scheme.
(f) Executive Compensation Plans.
In addition to the cash compensation described in Section 4 and
the executive compensation and benefits described in this Agreement, the
Employee shall be entitled to participate in Company's executive compensation
plans, as presently in effect or
5
<PAGE>
as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(g) Relocation Expenditures.
In the event the Employee agrees to relocate to the offices of the
Technicolor Packaged Media Group in Camarillo, California, Company shall
reimburse Employee in amounts, which after provision for the net amount of
all income taxes payable by Employee with respect to the receipt of such
amounts (taking into account any moving expense or other deductions available
to Employee), shall be equal to all reasonable expenses of moving Employee and
Employee's family and their personal effects from Charlottesville, Virginia
(the "Existing Location") to Camarillo, California, including, without
limitation, (i) reasonable travel expenses, (ii) all household moving
expenses, (iii) all real estate expenses associated with selling the
Employee's Existing Location home and purchasing a new home, (iv) up to six
(6) months of reasonable temporary living costs, and (v) a cost of living
salary adjustment if a recognized national survey show the cost of living in
the new location is on average more than 5% above the cost of living for the
Existing Location.
(h) Options and Bonuses in Replacement of Nimbus Options.
The Employee shall receive additional options to purchase ordinary
shares of Carlton and a cash bonus, in accordance with the provisions of the
attached Exhibit C.
(i) U.S. Citizenship Expenses
The Company shall reimburse Employee for all reasonable expenses
related to the applications for U.S. citizenship for the Employee, his wife
and their two children.
6. Termination.
(a) Termination by Company Without Cause.
If the Company terminats the Employee's employment during the
Period of Employment without Cause (as defined below), in addition to all
other compensation and benefits payable to the Employee under this Agreement,
the Company shall pay to Employee in a lump sum an amount equal to the
greater of:
6
<PAGE>
(i) the product of (A) the number of years and
fractions thereof remaining until the third anniversary
of the Effective Time and (B) the base annual salary
payable to Employee pursuant to Section 4(a) as of the
date of termination of the Employee's employment; or
(ii) the base annual salary then payable to the
Employee pursuant to Section 4(a).
The lump sum payment shall be paid to the Employee within thirty (30) days
following the date of the Employee's termination of employement.
Until the thrid anniversary of the Effective Time, the Company
shall provide the Employee with the same level of medical and dental benefits
upon substantially the same terms and conditions (including contributions
required by Employee for such benefits), as existed immediately prior to
Employee's termination of employment.
For purposes of this Agreement, "Cause" shall mean (i) the willful
and continued failure by Employee to perform substantially his duties with
Company (other than any such failure resulting from incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to Employee by the Company which specifically identifies the manner
in which Company believes Employee has not substantially performed his
duties; (ii) the Employee's conviction of a felony; (iii) the Employee's
habitual abuse of narcotics or alcohol; or (iv) the Employee's fraud,
material dishonesty or gross misconduct in connection with the business of
the Company or its affiliates. Cause shall not exist unless and until the
Company has delivered to Employee a copy of a resolution duly adopted by
two-thirds (2/3) of the entire Board of Directors of the Company (excluding
Employee if Employee is a Board member) at a meeting of the Board held for
such purpose (after reasonable notice to Employee and an opportunity for
Employee, together with counsel, to be heard before the Board), which (i)
finds that in the good faith opinion of the Board an event constituting Cause
has occurred, and (ii) sets forth in detail the basis for the Board's
findings.
(b) Termination by Company for Cause.
7
<PAGE>
If Company terminates the Employee's employment during the Period
of Employment for Cause (as defined above), Employee will be entitled only to
(i) the base annual salary otherwise payable to Employee under Section 4(a)
through the end of the month in which the Period of Employment is terminated,
and (ii) the benefits described in Section 5(h).
(c) Termination by Employee for Good Reason.
If the Employee terminates employment during the Employee Period
after having given written notice to the Board of Directors of the Company
that an event constituting Good Reason has occurred, and the Company does not
reasonably remedy such event within the period described below, the
Employee's employment shall be deemed to have been terminated by the Company
without Cause and he shall receive the lump sum payment and all other
benefits described in Section 6(a) above.
For purposes of this Agreement, "Good Reason" shall mean; (i)
the failure of the Company or any of its affiliates to comply with any of the
material provisions of this Agreement or any agreement which relates to the
Agreement, (ii) any material adverse change in the Employee's
responsibilities and duties, or (iii) the failure by the Company to assign
this Agreement to a successor to the Company or the failure of a successor to
the Company to explicitly assume and agree to be bound by this Agreement.
Notwithstanding the foregoing, an isolated action taken in good faith and
which is remedied by the Company within ten (10) days after receipt of notice
given by Employee shall not constitute Good Reason.
7. Noncompetition.
(a) Employee covenants that at all times during the period of
his employment and for a period of one year immediately following the
termination thereof for any reason, he will not, without the prior written
consent of Company, which consent shall not be unreasonably withheld, for a
period of one year following his date of termination, either individually or
in partnership or jointly or in conjunction with any person as principal,
agent, employee, shareholder (other than by way of holding shares listed on a
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stock exchange in a number not exceeding five percent of the outstanding
class or series of shares so listed) or in any other manner whatsoever carry
on, be engaged in, be concerned with or be interested in, or advise, lend
money to, guarantee the debts or obligations of or permit his name or any
part thereof to be used or employed by, any person engaged in or concerned
with or interested in, any business in competition with the business carried
on by Company or any of its subsidiaries or affiliates.
(b) Employee hereby covenants and agrees that, at all times
during the period of his employment and for a period of one year immediately
following the termination thereof for any reason, Employee shall not employ
or seek to employ any person employed at that time by Company or any of its
subsidiaries or its affiliates who is engaged in or concerned with or
interested in, any business in competition with the business carried on by
Company or any of its subsidiaries or affiliates, or otherwise encourage or
entice such person to leave such employment.
(c) Employee hereby covenants and agrees that to the extent that
he receives compensation or benefits from other employment, the payments to
be made and the benefits to be provided by the Company shall, to the extent
permitted under applicable law, be correspondingly reduced, if such
compensation or benefits are earned through competing activity as defined in
this Section 7.
(d) It is the intention of the parties hereto that the
restrictions contained in this Section 7 be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions
is excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.
(e) Employee confirms that all restrictions in this Section 7
are reasonable and valid and all defenses to the strict enforcement thereof
by Company are hereby waived by Employee.
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<PAGE>
8. Confidential Information.
Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to Company or any affiliate
of Company, including, without limitation, customer lists, client lists,
trade secrets, pricing policies and other business affairs of Company and any
affiliate of Company learned by him from Company or any such affiliate or
otherwise before or after the date of this Agreement, and not to disclose any
such confidential matter to anyone outside Company or any of its affiliates,
whether during or after his period of service with Company, except as may be
required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information.
Employee agrees to give Company advance written notice of any disclosure
pursuant to the preceding sentence and to cooperate with any reasonable and
legally permissible efforts by Company to limit the extent of such
disclosure. Upon request by Company, Employee agrees to deliver promptly to
Company upon termination of his services for Company, or at any time
thereafter as Company may request, all Company or affiliate memoranda, notes,
records, reports, manuals, drawings, designs, computer files in any media and
other documents (and all copies thereof) relating to Company's or any
affilliate's business and all property of Company or any affiliate associated
therewith, which he may then possess or have under his control, other than
personal notes, diaries, rolodexes and correspondence.
9. Remedy.
Should Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Section 7 or 8 hereof, it is agreed
that Company shall be entitled to full injunctive relief, to be issued by any
competent court of equity, enjoining and restraining Employee and each and
every other person, firm, organization, association, or corporation concerned
therein, from the continuance of such violative acts. The foregoing remedy
available to Company shall not be deemed to limit or prevent the exercise by
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Company of any or all further rights and remedies which may be available to
Company hereunder or at law or in equity.
10. Governing Law.
This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of Virginia without reference to
principles relating to conflicts of law. If under such law, any portion of
this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation or ordinance, such portion shall be deemed to be
modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement; the invalidity of any such portion shall not
affect the force, affect and validity of the remaining portion hereof.
11. Notices.
All notices under this Agreement shall be in writing and shall be
deemed effective when delivered in person, or five (5) days after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail, addressed to the respective party at the address set forth
below or to such other address as may hereafter be designated by like notice.
Unless otherwise notified as set forth above, notice shall be sent to each
party as follows:
(a) Employee, to:
Lyndon J. Faulkner
3173 Prestwick Place
Keswick, VA 22947
(b) Company, to:
Sarah Osborne
Brandywine Corporate Center
Naamans Road, Suite 117
Claymont, DE 19703
(805) 792-2666 (facsimile)
Attention: Secretary
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with a copy to:
Thomas M. Collins, Jr.
3223 East Mission Oaks Blvd.
Camarillo, CA 93012
(805) 445-1964 (facsimile)
Attention: Vice President
In lieu of personal notice or notice by deposit in the U.S. mail,
a party may give notice by confirmed telegram, telex or fax, which shall be
effective upon receipt.
12. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire understanding between
Company and Employee relating to employment of Employee by Company and
supersedes and cancels all prior written and oral agreements and
understanding with respect to the subject matter of this Agreement, including
but not limited to the term sheet to this Agreement dated May 13, 1998.
Notwithstanding the foregoing, nothing in this Agreement shall supersede or
cancel any other written agreements or understandings between the Employee
and any affiliate of the Company. This Agreement may be amended but only by a
subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, Employee's heirs, executors,
administrators and beneficiaries, and Company and its successors and assigns.
(b) Withholding Taxes.
All amounts payable to Employee under this Agreement shall be
subject to applicable income, wage and other tax withholding requirements.
(c) Reimbursement of Legal Fees and Expenses.
The Company shall pay all reasonable legal fees and expenses, if
any, that are incurred by the Employee to successfully enforce this Agreement
and which result from a breach of this Agreement by the Company, any
affiliate of the Company, or any successor thereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.
Neptune Acquisition Corporation
By:
----------------------------------
Chairman
-------------------------------------
Lyndon J. Faulkner
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 16, 1998, by and between Neptune
Acquisition Corporation, a Delaware corporation (the "Company"), and L.
Steven Minkel (the "Employee").
WHEREAS, the Employee's current employer, Nimbus CD International,
Inc. ("Nimbus"), has entered into an Agreement and Plan of Merger, dated as
of June 16, 1998 with the Company and with Carlton Communications, Plc (the
"Merger Agreement") pursuant to which the Company will merge with and into
Nimbus; and
WHEREAS, the Company desires to secure the continued employment of
Employee as Executive Vice President, Chief Financial Officer and Secretary
following the Effective Time of the Merger (as such term is defined in the
Merger Agreement); and
WHEREAS, the Employee and the Company desire to enter into an
agreement setting forth the terms and conditions of the employment of the
Employee with the Company on and after the Effective Time;
NOW, THEREFORE, IN CONSIDERATION OF the mustial covenants herein
contained, and other good and valuable consideration, the parties hereto
agree as follows:
1. Employment
Subject to the consummation of the transactions contemplated by
the Merger Agreement, the Company hereby agrees to employ Employee, and
Employee agrees to serve as an employee of the Company, on the terms and
conditions set forth in this Agreement, effective as of the date of this
Agreement. The continuation of such employment shall be expressly conditioned
on and subject to the consummation of the transactions contemplated by the
Merger Agreement. This Agreement shall become null and void, and shall have
no force or effect, if the transactions contemplated under the Merger
Agreement are not consummated.
<PAGE>
2. Period of Employment
The "Period of Employment" shall be the period commencing on
the Effective Time and ending on the third anniversary of the Effective Time,
during which the Company shall pay to the Employee a base salary and annual
bonus as provided in Section 4 and shall provide the Employee with the
benefits and compensation as described in Section 5. Commencing on the second
anniversary of the Effective Time, if on or before that date the Company has
not delivered to the Employee and the Employee has not delivered to the
Company notice of termination of this Agreement (in accordance with Section
11 hereof), the Period of Employment will be automatically extended each day
by one day until a date which is one year following the date on which the
Company first delivers to the Employee, or the Employee first delivers to
Company, notice of termination of the Agreement.
3. Duties During the Period of Employment.
During the Period of Employment, Employee shall serve as Executive
Vice President, Chief Financial Officer and Secretary of the Company and
shall have such duties and responsibilities as are assigned to him by the
Chief Executive Officer of the Company and the Board of Directors of the
Company commensurate with such position. Employee shall report directly to
the Chief Executive Officer of the Company.
Employee shall devote Employee's full business time, attention and
efforts to the affairs of the Company during the Period of Employment,
provided, however, that Employee may engage in other activities, such as
activities involving professional, charitable, educational, religious and
similar types of organizations, speaking engagements, membership on the board
of directors of such other organizations as Company may from time to time
agree to, and activities of a similar nature to the extent that such other
activities do not inhibit the performance of Employee's duties under this
Agreement, or conflict in any material way with the business of Company and
its affiliates.
Employee's principal work location will be in Charlottesville,
Virginia. Employee agrees to travel to, and work at, the offices of the
Technicolor Packaged Media
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Group in Camarillo, California as is reasonably required for the performance
of his assigned duties.
4. Annual Cash Compensation.
(a) Base Salary.
As compensation for his services hereunder, Company will pay to
Employee during the Period of Employment a base salary at the annual rate of
$250,000, payable in accordance with the Company's standard payroll practices
for senior executives. Company shall review the Employee's base salary on
October 1, 1999 and on each October 1 thereafter during the Period of
Employment and in light of such review may, in the discretion of the Board of
Directors of Company (but shall not be obligated to), increase such base
salary taking into account any change in Employee's responsibilities,
increases in the cost of living, the Employee's job performance and other
pertinent factors. Effective as of the date of any such increase, the base
salary (as increased) shall be considered the Employee's new base salary for
all purposes of this Agreement and may not thereafter be reduced. Any
increase in base salary shall not limit or reduce any other obligations of
the Company to the Employee under this Agreement.
(b) Annual Bonus Plan.
For each fiscal year during the Period of Employment, other than
with respect to the Carlton Communications, Plc ("Carlton") or Technicolor
Packaged Media Group 1998 fiscal year, Employee will participate in the
Technicolor Packaged Media Group annual bonus plan and shall be eligible to
receive an annual target bonus in accordance with the terms of such plan.
Employee shall be entitled to receive a maximum bonus of 30% of base salary
if certain operating profit and cash flow objectives (as agreed to in the
annual budget) are met and certain personal management objectives mutually
agreed to by the Employee and the Company at the beginning of each fiscal
year are satisfied. In order to receive a bonus under the plan, the Employee
must be employed by the Company at the time required for the payment of
bonuses under the terms of the annual bonus plan.
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<PAGE>
5. Other Employee Benefits and Compensation.
(a) Initial Carlton Stock Option.
The Company shall request as of the date of this Agreement that
Carlton shall immediately grant to the Employee, effective as of the date of
this Agreement, an option (the "Stock Option") to purchase ordinary shares of
Carlton pursuant to the Carlton 1987 Incentive and Nonqualified Stock Option
Plan for US Employees and Directors, as amended. The Stock Option shall be
expressly conditioned on and subject to the consummation of the transactions
contemplated by the Merger Agreement. The Stock Option shall be null and
void, and shall have no force and effect, if the transactions contemplated
under the Merger Agreement are not consummated. The Stock Option shall permit
the Employee to acquire ordinary shares of Carlton equal in amount to the
result of dividing four times the Employee's base salary (as defined in
Section 4(a)) by the fair market value of one ordinary share of Carlton as of
the date of this Agreement. The exercise price per share of the Stock Option
shall be equal to the fair market value of one ordinary share of Carlton as
of the date of this Agreement. The Stock Option shall become nonforfeitable
and exercisable in three installments as follows: (i) 60% of the Stock Option
on the day immediately preceding the third anniversary of the Effective Time;
(ii) 20% of the Stock Option on the day immediately preceding the fourth
anniversary of the Effective Time; and (iii) 20% of the Stock Option on the
day immediately preceding the fifth anniversary of the Effective Time. The
Stock Option shall be granted on terms and conditions which are not less
favorable than those set forth in the stock option agreement attached as
Exhibit A.
(b) Long Term Incentive Plan.
Employee shall be entitled to participate in the Technicolor
Packaged Media Group Long Term Incentive Plan and to receive awards
thereunder in accordance with the terms of such Plan, as summarized in the
attached Exhibit B.
(c) Vacation and Sick Leave.
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<PAGE>
Employee shall be entitled to reasonable paid annual vacation
periods (but in no event less than four weeks in each year) and to reasonable
sick leave as determined by the Board of Directors of Company.
(d) Regular Reimbursed Business Expenses.
Company shall reimburse Employee for all expenses and
disbursements reasonably incurred by Employee in the performance of
Employee's duties during the Period of Employment, and provide such other
facilities or services as Company and Employee may, from time to time, agree
are appropriate, all in accordance with the Company's established policies.
(e) Employee Benefit Plans.
In addition to the cash compensation described in Section 4, the
Employee shall be entitled to participate in the Company's employee benefit
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(f) Executive Compensation Plans.
In addition to the cash compensation described in Section 4 and
the executive compensation and benefits described in this Agreement, the
Employee shall be entitled to participate in Company's executive compensation
plans, as presently in effect or as may be modified by the Company from time
to time, subject to meeting the eligibility conditions of such plans and any
applicable provisions of this Agreement.
(g) Relocation Expenditures.
In the event the Employee agrees to relocate to the offices of the
Technicolor Packaged Media Group in Camarillo, California, Company shall
reimburse Employee in amounts, which after provision for the net amount of
all income taxes payable by Employee with respect to the receipt of such
amounts (taking into account any moving expense or other deductions available
to Employee), shall be equal to all reasonable expenses of moving Employee
and Employee's family and their personal effects from Charlottesville,
Virginia (the "Existing Location") to Camarillo, California, including,
without limitation, (i) reasonable travel expenses, (ii) all household moving
expenses, (iii)
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<PAGE>
all real estate expenses associated with selling the Employee's Existing
Location home and purchasing a new home, (iv) up to six (6) months of
reasonable temporary living costs, and (v) a cost of living salary adjustment
if a recognized national survey shows the cost of living in the new location
is on average more than 5% above the cost of living for the Existing Location.
(h) Options and Bonuses in Replacement of Nimbus Options.
The Employee shall receive additional options to purchase ordinary
shares of Carlton and a cash bonus, in accordance with the provisions of the
attached Exhibit C.
6. Termination.
(a) Termination by Company Without Cause.
If the Company terminates the Employee's employment during the
Period of Employment without Cause (as defined below), in addition to all
other compensation and benefits payable to the Employee under this Agreement,
the Company shall pay to Employee in a lump sum an amount equal to the
greater of:
(i) the product of (A) the number of years and
fractions thereof remaining until the third anniversary
of the Effective Time and (B) the base annual salary
payable to Employee pursuant to Section 4(a) as of the
date of termination of the Employee's employment; or
(ii) the base annual salary then payable to the
Employee pursuant to Section 4(a).
The lump sum payment shall be paid to the Employee within thirty (30) days
following the date of the Employee's termination of employment.
Until the third anniversary of the Effective Time, the Company
shall provide the Employee with the same level of medical and dental benefits
upon substantially the same terms and conditions (including contributions
required by Employee for such benefits), as existed immediately prior to
Employee's termination of employment.
6
<PAGE>
For purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by Employee to perform substantially his duties
with Company (other than any such failure resulting from incapacity due to
physical or mental illness) after a demand for substantial performance is
delivered to Employee by the Company which specifically identifies the manner
in which Company believes Employee has not substantially performed his
duties; (ii) the Employee's conviction of a felony; (iii) the Employee's
habitual abuse of narcotics or alcohol; or (iv) the Employee's fraud,
material dishonesty or gross misconduct in connection with the business of
the Company or its affiliates. Cause shall not exist unless and until the
Company has deliverd to Employee a copy of a resolution duly adopted by
two-thirds (2/3) of the entire Board of Directors of the Company (excluding
Employee if Employee is a Board member) at a meeting of the Board held for
such purpose (after reasonable notice to Employee and an opportunity for
Employee, together with counsel, to be heard before the Board), which (i)
finds that in the good faith opinion of the Board an event constituting Cause
has occurred, and (ii) sets forth in detail the basis for the Board's
findings.
(b) Termination by Company for Cause.
If Company terminates the Employee's employment during the Period
of Employment for Cause (as defined above), Employee will be entitled only to
(i) the base annual salary otherwise payable to Employee under Section 4(a)
through the end of the month in which the Period of Employment is terminated,
and (ii) the benefits described in Section 5(h).
(c) Termination by Employee for Good Reason.
If the Employee terminates employment during the Employee Period
after having given written notice to the Board of Directors of the Company
that an event constituting Good Reason has occurred, and the Company does not
reasonably remedy such event within the period described below, the
Employee's employment shall be deemed to have been terminated by the Company
without Cause and he shall receive the lump sum payment and all other
benefits described in Section 6(a) above.
7
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean: (i)
the failure of the Company or any of its affiliates to comply with any of the
material provisions of this Agreement or any agreement which relates to the
Agreement, (ii) any material adverse change in the Employee's
responsibilities and duties, or (iii) the failure by the Company to assign
this Agreement to a successor to the Company or the failure of a successor to
the Company to explicitly assume and agree to be bound by this Agreement.
Notwithstanding the foregoing, an isolated action taken in good faith and
which is remedied by the Company within ten (10) days after receipt of notice
given by Employee shall not constitute Good Reason.
7. Noncompetition.
(a) Employee covenants that at all times during the period of
his employment and for a period of one year immediately following the
termination thereof for any reason, he will not, without the prior written
consent of Company, which consent shall not be unreasonably withheld, for a
period of one year following his date of termination, either individually or
in partnership or jointly or in conjunction with any person as principal,
agent, employee, shareholder (other than by way of holding shares listed on a
stock exchange in a number not exceeding five percent of the outstanding
class or series of shares so listed) or in any other manner whatsoever carry
on, be engaged in, be concerned with or be interested in, or advise, lend
money to, guarantee the debts or obligations of or permit his name or any
part thereof to be used or employed by, any person engaged in or concerned
with or interested in, any business in competition with the business carried
on by Company or any of its subsidiaries or affiliates.
(b) Employee hereby covenants and agrees that, at all times
during the period of his employment and for a period of one year immediately
following the termination thereof for any reason, Employee shall not employ
or seek to employ any person employed at that time by Company or any of its
subsidiaries or its affiliates who is engaged in or concerned with or
interested in, any business in competition with the business carried on by
Company or any of its subsidiaries or affiliates, or otherwise encourage or
entice such person or entity to leave such employment.
8
<PAGE>
(c) Employee hereby covenants and agrees that to the extent that
he receives compensation or benefits from other employment, the payments to
be made and the benefits to be provided by the Company shall, to the extent
permitted under applicable law, be correspondingly reduced, if such
compensation or benefits are earned through competing activity as defined in
this Section 7.
(d) It is the intention of the parties hereto that the
restrictions contained in this Section 7 be enforceable to the fullest extent
permitted by applicable law. Therefore, to the extent any court of competent
jurisdiction shall determine that any portion of the foregoing restrictions
is excessive, such provision shall not be entirely void, but rather shall be
limited or revised only to the extent necessary to make it enforceable.
(e) Employee confirms that all restrictions in this Section 7
are reasonable and valid and all defenses to the strict enforcement thereof
by Company are hereby waived by Employee.
8. Confidential Information.
Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to Company or any affiliate
of Company, including, without limitation, customer lists, client lists,
trade secrets, pricing policies and other business affairs of Company and
any affiliate of Company learned by him from Company or any such affiliate or
otherwise before or after the date of this Agreement, and not to disclose any
such confidential matter to anyone outside Company or any of its affiliates,
whether during or after his period of service with Company, except as may be
required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information.
Employee agrees to give Company advance written notice of any disclosure
pursuant to the preceding sentence and to cooperate with any reasonable and
legally permissible efforts by Company to limit the extent of such
disclosure. Upon request by Company, Employee agrees to deliver promptly to
Company upon termination of his services for Company, or at any time
thereafter as Company may request, all Company or
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<PAGE>
affiliate memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof)
relating to Company's or any affilliate's business and all property of
Company or any affiliate associated therewith, which he may then possess or
have under his control, other than personal notes, diaries, rolodexes and
correspondence.
9. Remedy.
Should Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Section 7 or 8 hereof, it is agreed
that Company shall be entitled to full injunctive relief, to be issued by any
competent court of equity, enjoining and restraining Employee and each and
every other person, firm, organization, association, or corporation concerned
therein, from the continuance of such violative acts. The foregoing remedy
available to Company shall not be deemed to limit or prevent the exercise by
Company of any or all further rights and remedies which may be available to
Company hereunder or at law or in equity.
10. Governing Law.
This Agreement is governed by and is to be construed and enforced
in accordance with the laws of the State of Virginia without reference to
principles relating to conflicts of law. If under such law, any portion of
this Agreement is at any time deemed to be in conflict with any applicable
statute, rule, regulation or ordinance, such portion shall be deemed to be
modified or altered to conform thereto or, if that is not possible, to be
omitted from this Agreement; the invalidity of any such portion shall not
affect the force, affect and validity of the remaining portion hereof.
11. Notices.
All notices under this Agreement shall be in writing and shall be
deemed effective when delivered in person, or five (5) days after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail, addressed to the respective party at the address set forth
below or to such other addresses as may hereafter be designated
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<PAGE>
by like notice. Unless otherwise notified as set forth above, notice shall be
sent to each party as follows:
(a) Employee, to:
L. Steven Minkel
1446 Bremerton Lane
Keswick, VA 22947
(b) Company, to:
Sarah Osborne
Brandywine Corporate Center
Naamans Road, Suite 117
Claymont, DE 19703
(805) 792-2666 (facsimile)
Attention: Chairman
with a copy to:
Thomas M. Collins, Jr.
3223 East Mission Oaks Blvd.
Camarillo, CA 93012
(805) 445-1964 (facsimile)
Attention: Vice President
In lieu of personal notice or notice by deposit in the U.S. mail,
a party may give notice by confirmed telegram, telex or fax, which shall be
effective upon receipt.
12. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire understanding between
Company and Employee relating to employment of Employee by Company and
supersedes and cancels all prior written and oral agreements and
understandings with respect to the subject matter of this Agreement, including
but not limited to the term sheet to this Agreement dated May 13, 1998.
Notwithstanding the foregoing, nothing in this Agreement shall supersede or
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<PAGE>
cancel any other written agreements or understandings between the Employee
and any affiliate of the Company. This Agreement may be amended but only by a
subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, Employee's heirs, executors,
administrators and beneficiaries, and Company and its successors and assigns.
(b) Withholding Taxes.
All amounts payable to Employee under this Agreement shall be
subject to applicable income, wage and other tax withholding requirements.
(c) Reimbursement of Legal Fees and Expenses.
The Company shall pay all reasonable legal fees and expenses, if
any, that are incurred by the Employee to successfully enforce this Agreement
and which result from a breach of this Agreement by the Company, any
affiliate of the Company, or any successor thereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.
Neptune Acquisition Corporation
By:
----------------------------------
Chairman
/s/ L. Steven Minkel
-------------------------------------
L. Steven Minkel
