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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BT OFFICE PRODUCTS INTERNATIONAL, INC.
Commission File No. 1-13858
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(a)(3).
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies: Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies:
10,071,000 shares of Common Stock
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: $13.75
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid: $27,696.00 (1/50 of 1% of $138,476,250)
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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[BT OFFICE PRODUCTS INTERNATIONAL, INC.]
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, ILLINOIS 60089
July __, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of BT Office Products International, Inc. (the "Company"),
which will be held on [_____________], August __, 1998 at 10:00 a.m. at [to
come].
At the Special Meeting, you will be asked to approve and adopt an
Agreement and Plan of Merger dated as of June 2, 1998 (the "Merger Agreement")
among the Company, NV Koninklijke KNP BT, a Netherlands corporation ("Parent"),
KNP BT International, B.V., a Netherlands corporation and wholly-owned
subsidiary of Parent ("International"), and BT OPI Acquisition Corp., a Delaware
corporation wholly-owned by Parent and International (the "Purchaser"), which
provides for the merger (the "Merger") of the Purchaser with and into the
Company, with the Company as the surviving corporation. Pursuant to the Merger
Agreement, each share of common stock, par value $.01 per share, of the Company
("Common Stock") which is issued and outstanding immediately prior to the
effective time of the Merger (other than shares of Common Stock as to which
dissenters' rights of appraisal have been duly asserted and perfected under
Delaware law and other than shares of Common Stock held by Parent, International
or the Company or any wholly-owned subsidiary of the Company) will be converted
into the right to receive $13.75 in cash, without interest.
The Board of Directors of the Company, upon the recommendation of an
Independent Committee of the Board and after careful consideration of the terms
of the proposed Merger, has unanimously approved the Merger and recommends that
you vote FOR the Merger. The accompanying Proxy Statement provides a description
of the proposal to be presented at the meeting and information concerning the
Merger. Please give this information your careful attention.
Your vote is important regardless of the number of shares you own. Please
be sure you are represented at the Special Meeting, whether or not you plan to
attend, by signing, dating and mailing the enclosed proxy promptly. A
postage-paid return envelope is enclosed for your convenience.
If you have any questions prior to the Special Meeting, or need further
assistance, please call Thomas F. Cullen, Vice President, General Counsel and
Secretary of the Company at (847) 793-7500.
Sincerely yours,
Frans H.J. Koffrie
Chairman of the Board
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On August __, 1998
To the Stockholders:
NOTICE IS HEREBY GIVEN that a special meeting (together with any
adjournment(s) or postponement(s) thereof, the "Special Meeting") of the
Stockholders (the "Stockholders") of BT Office Products International, Inc., a
Delaware corporation (the "Company"), will be held on [_____________], August
__, 1998 at 10:00 a.m. at [to come].
The Special Meeting is being held for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger dated as of June 2, 1998 (the "Merger Agreement") among
the Company, NV Koninklijke KNP BT, a Netherlands corporation ("Parent"),
KNP BT International, B.V., a Netherlands corporation and wholly-owned
subsidiary of Parent ("International"), and BT OPI Acquisition Corp., a
Delaware corporation wholly-owned by Parent and International (the
"Purchaser"), which provides for the merger (the "Merger") of the
Purchaser with and into the Company, with the Company as the surviving
corporation. Pursuant to the Merger Agreement, each share of common stock,
par value $.01 per share, of the Company ("Common Stock") which is
outstanding immediately prior to the effective time of the Merger (other
than shares of Common Stock as to which dissenters' rights of appraisal
have been duly asserted and perfected under Delaware law and other than
shares of Common Stock held by Parent, International or the Company or any
wholly-owned subsidiary of the Company) will be converted into the right
to receive $13.75 in cash, without interest.
2. To transact such other business as may properly come before the Special
Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY, BASED UPON THE UNANIMOUS RECOMMENDATION
OF AN INDEPENDENT COMMITTEE OF DISINTERESTED MEMBERS OF THE BOARD, HAS
UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The accompanying Proxy Statement sets forth in more detail information
concerning the Merger Agreement, the Merger and the actions to be taken in
connection with the Merger.
The Board of Directors has fixed the close of business on _______, 1998 as
the record date for determining the Stockholders entitled to notice of and to
vote at the Special Meeting or any adjournment or postponement thereof. Only
Stockholders of record at the close of business on _________, 1998 will be
entitled to vote.
Stockholders of the Company who do not vote in favor of approval and
adoption of the Merger Agreement and who otherwise comply with the provisions of
Section 262 of the Delaware General Corporation Law will have the right if the
Merger is consummated to dissent and to seek appraisal of the fair market value
of their shares. See "The Merger -- Appraisal Rights" in the accompanying Proxy
Statement, and Annex III thereto, for a description of the procedures required
to be followed in order to exercise properly dissenters' rights.
BY ORDER OF THE BOARD OF DIRECTORS,
Thomas F. Cullen
Secretary
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Buffalo Grove, Illinois
July __, 1998
It is important that your shares be represented at the Special Meeting
regardless of the number of shares you hold. Please complete, date, sign and
return the enclosed Proxy in the accompanying envelope even if you intend to be
present at the Special Meeting. Returning the Proxy will not limit your right to
vote in person or to attend the Special Meeting, but will ensure your
representation if you cannot attend. If you hold shares in more than one name,
or if your stock is registered in more than one way, you may receive more than
one copy of the proxy material. If so, please sign and return each of the proxy
cards that you receive so that all of your shares may be voted.
BT OFFICE PRODUCTS INTERNATIONAL, INC.
2150 East Lake Cook Road
Buffalo Grove, IL 60089
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TABLE OF CONTENTS
Page
----
INTRODUCTION................................................................1
AVAILABLE INFORMATION.......................................................3
SUMMARY.....................................................................4
SELECTED FINANCIAL DATA.....................................................8
THE SPECIAL MEETING........................................................10
General..............................................................10
Matters to be Considered at the Special Meeting......................10
Required Votes.......................................................10
Voting and Revocation of Proxies.....................................10
Record Date; Stock Entitled to Vote; Quorum..........................10
Appraisal Rights.....................................................11
Solicitation of Proxies..............................................11
SPECIAL FACTORS............................................................11
Background of the Merger.............................................11
Determinations of the Independent Committee and the Board;
Fairness of the Merger.............................................13
Opinion of Financial Advisor.........................................15
Position of Parent, International and Purchaser......................19
Interests of Certain Persons in the Merger...........................19
Security Ownership of Certain Beneficial Owners and Management.......20
THE MERGER.................................................................21
Purpose and Structure of the Merger..................................21
Certain Consequences of the Merger...................................21
Plans for the Company After the Merger...............................22
Financing the Merger.................................................22
Fees and Expenses....................................................22
Accounting Treatment.................................................22
Certain Federal Income Tax Consequences to Stockholders..............22
Regulatory Approvals.................................................23
Appraisal Rights.....................................................23
THE MERGER AGREEMENT.......................................................26
The Merger...........................................................26
Representations and Warranties ......................................28
Certain Covenants....................................................29
Conditions to the Merger.............................................30
Termination of the Merger Agreement..................................32
Fees & Expenses .....................................................32
Amendment; Waiver ...................................................32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................32
Relationship with Parent.............................................32
Credit Facilities....................................................33
Registration Rights..................................................34
Tax Matters..........................................................34
Intellectual Property................................................35
Services.............................................................35
Guaranties...........................................................35
Sales to and Purchases From Affiliates...............................35
Leases...............................................................36
Article 403 Statement................................................36
Business Acquisition.................................................36
STOCKHOLDER LITIGATION.....................................................36
MARKET PRICE AND DIVIDEND INFORMATION......................................37
INDEPENDENT AUDITORS.......................................................37
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................38
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Annex I Agreement and Plan of Merger..................................I-1
Annex II Opinion of BT Wolfensohn......................................II-1
Annex III Section 262 of the Delaware General Corporation Law...........III-1
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BT OFFICE PRODUCTS INTERNATIONAL, INC.
2150 EAST LAKE COOK ROAD
BUFFALO GROVE, ILLINOIS 60089
PROXY STATEMENT FOR A SPECIAL MEETING
OF STOCKHOLDERS
To Be Held On August __, 1998
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is being furnished on behalf
of BT Office Products International, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at a special meeting (together with any
adjournment(s) or postponement(s) thereof, the "Special Meeting") of the
Stockholders of the Company (the "Stockholders") to be held on [_____________],
August __, 1998 at 10:00 a.m. at [to come]. This Proxy Statement and the Proxy
are first being mailed to Stockholders on or about July __, 1998.
The Board of Directors of the Company (the "Board") is soliciting the
proxies of the Stockholders who were shown on the Company's records as holders
of issued and outstanding shares of common stock, par value $.01 per share
("Common Stock"), of the Company as of the close of business on [ ], 1998 (the
"Record Date") to consider and vote upon a proposal to adopt and approve an
Agreement and Plan of Merger, dated as of June 2, 1998, (the "Merger
Agreement") by and among the Company, NV Koninklijke KNP BT, a Netherlands
corporation (the "Parent"), KNP BT International, B.V., a Netherlands
corporation and wholly-owned subsidiary of Parent ("International"), and BT OPI
Acquisition Corp., a Delaware corporation wholly-owned by Parent and
International (the "Purchaser"). A copy of the Merger Agreement is attached
hereto as Annex I. Pursuant to the Merger Agreement, the Purchaser will be
merged with and into the Company, and the Company will be the surviving
corporation in the Merger (the "Surviving Corporation"). The effect of the
Merger will be to convert the Company from a publicly held corporation to a
privately held corporation wholly owned by Parent.
Pursuant to the Merger Agreement, each share of Common Stock which is
outstanding immediately prior to the effective time (the "Effective Time") of
the Merger (other than shares of Common Stock as to which dissenter's rights of
appraisal have been duly asserted and perfected under Delaware law and other
than shares of Common Stock held by Parent, International or the Company or any
wholly-owned subsidiary of the Company) will be converted into the right to
receive $13.75 in cash, without interest (the "Merger Consideration").
At the Effective Time, each option to purchase shares of Common Stock (an
"Option") granted under the Company's 1995 Stock Option Plan or the Company's
Amended and Restated Non-Qualified Stock Option Agreement dated as of June 25,
1996, whether or not vested, will be terminated and, in exchange for such
option, the holder will be entitled to receive from the Company, for each share
of Common Stock subject to such option, a cash payment equal to the excess, if
any, of the Merger Consideration over the applicable exercise price.
An Independent Committee (the "Independent Committee") consisting of
disinterested members of the Board, was appointed by the Board to review the
terms of the Merger Agreement and to report to the Board regarding the fairness
of the Merger to the Stockholders (other than Parent, International and their
affiliates) (the "Public Stockholders"). The Board, upon the recommendation of
its Independent Committee, has determined that the Merger is fair to and in the
best interest of the Public Stockholders and unanimously recommends that the
Public Stockholders vote FOR approval of the Merger. In making its
recommendation, the Independent Committee relied upon, among other things, the
opinion of BT Wolfensohn (the "Financial Advisor"), to the effect that, as of
June 2, 1998, the date of such opinion and based upon and subject to certain
limitations, qualifications and assumptions stated therein, the Merger
Consideration of $13.75 per share of Common Stock is fair to the Public
Stockholders from a financial point of view. See "Special Factors --
Determination of the Independent Committee and the Board; Fairness of the
Merger" and "Special Factors -- Opinion of Financial Advisor."
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Consummation of the Merger is subject to certain conditions, including the
affirmative vote of a majority of the outstanding shares of Common Stock held by
Public Stockholders of record on the Record Date that are voted at the Special
Meeting. As of the Record Date, Parent and International together hold 70% of
the outstanding Common Stock. Parent and International have agreed, among other
things, to vote their shares in favor of the Merger and the adoption of the
Merger Agreement.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Proxy Statement is July __, 1998.
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AVAILABLE INFORMATION
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copies obtained from the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. In addition, the Common Stock is
listed and traded on the New York Stock Exchange (the "NYSE"). Reports, proxy
statements and other information can also be inspected and copied at the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company will file with the Commission a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") under the Exchange Act. This
Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. The Schedule 13E-3 and any amendments
thereto, including exhibits filed as a part thereof, may be examined and copied
at the principal executive offices of the Company, located at 2150 East Lake
Cook Road, Buffalo Grove, Illinois 60089, during regular business hours by any
Stockholder or such Stockholder's representative who has been so designated in
writing. A copy of the Schedule 13E-3 and any amendments thereto, including
exhibits filed as a part thereof, will be transmitted by the Company to any
Stockholder or such Stockholder's representative who has been so designated in
writing upon written request and at the expense of the requesting Stockholder.
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement. This summary is not intended to be complete and is qualified in
its entirety by reference to the more detailed information contained elsewhere
or incorporated by reference in this Proxy Statement and the Annexes hereto.
Stockholders are urged to read this Proxy Statement and the Annexes hereto
carefully and in their entirety. Unless otherwise defined herein, capitalized
terms used in this summary have the respective meanings ascribed to them
elsewhere in this Proxy Statement.
The Company
BT Office Products International, Inc., a Delaware corporation (the
"Company"), is a leading full-service distributor of office products, serving
primarily medium- and large-sized businesses and institutions in major markets
in both the United States and Europe. The Company offers its customers a full
range of office products, including traditional office supplies, office
furniture, computer supplies and accessories, copiers and office equipment,
business forms and advertising specialty and promotional products. In the United
Sates, the Company services major business markets through 24 sales and
distribution centers and 56 branch sales offices in 35 states as of February 27,
1998. In Europe, the Company is the largest office products distributor in
Germany and one of the leading office products distributors in The Netherlands,
Sweden and the United Kingdom. The Company also serves markets in Austria,
Italy, Switzerland and the Baltic States through licensed dealers for its
"Classic" brand of office products. The principal executive offices of the
Company are located at 2150 East Lake Cook Road, Buffalo Grove, Illinois,
60089-1877 and its telephone number is (847) 793-7500.
Parent, International and the Purchaser
NV Koninklijke KNP BT, a Netherlands corporation ("Parent"), is an
international trading house with activities aimed at the graphic industry and
the office market. Parent's operating companies distribute graphic paper,
graphic equipment, office products, personal computers and related equipment.
Parent, which will be renamed Buhrmann NV in the course of 1998, has operating
companies in more than 20 countries with annual sales of NLG 12 billion. KNP BT
International B.V., a Netherlands corporation ("International"), is a holding
company and wholly-owned subsidiary of Parent. The principal executive offices
of the Parent and International are located at Museumplein 9, 1071 DJ Amsterdam
and their telephone number is 31-20-5747474.
BT OPI Acquisition Corp., a Delaware corporation (the "Purchaser"), wholly
owned by Parent and International, was recently incorporated and organized for
the purpose of merging into the Company and has conducted no business to date
except in conjunction therewith. The principal executive offices of the
Purchaser are located at Museumplein 9, 1071 DJ Amsterdam and its telephone
number is 31-20-5747474.
The Special Meeting
Time, Date and Place; Record Date. The special meeting of the
stockholders of the Company (the "Stockholders") (together with any
adjournment(s) or postponement(s) thereof, the "Special Meeting") will be held
on [_____________], August __, 1998 at 10:00 a.m. at [to come]. Stockholders of
record at the close of business on [ ], 1998 (the "Record Date") will be
entitled to notice of and to vote at the Special Meeting. Holders of Common
Stock are entitled to one vote per share of Common Stock. This Proxy Statement
is first being mailed to Stockholders of the Company on or about July __, 1998.
At the close of business on the Record Date, there were [ ] shares of Common
Stock outstanding and entitled to vote, held by approximately [___]
Stockholders of record.
Matters to be Considered at the Special Meeting. At the Special Meeting,
the Stockholders of the Company will consider and vote upon (i) a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of June 2, 1998,
among the Company, Parent, International and the Purchaser (the "Merger
Agreement"), which provides for the merger (the "Merger") of the Purchaser with
and into the Company, with the Company as the surviving corporation (the
"Surviving Corporation") and (ii) such other matters as may properly be brought
before the Special Meeting. See "The Special Meeting -- Matters to be Considered
at the Special Meeting."
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Required Votes. The Merger Agreement provides that it must be approved and
adopted by the affirmative vote of (i) a majority of the shares of Common Stock
outstanding and (ii) a majority of the shares of Common Stock held by
Stockholders (other than Parent or International or their respective affiliates
(the "Public Stockholders")) that are voted at the Special Meeting. As of the
Record Date, Parent and International, together, held approximately 70% of the
outstanding shares of Common Stock. Parent and International have agreed to vote
their shares of Common Stock in favor of the Merger.
Voting and Revocation of Proxies; Adjournments. This Proxy Statement is
being furnished to Stockholders of record at the close of business on the Record
Date in connection with the solicitation of Proxies by the Board of Directors of
the Company (the "Board") for use at the Special Meeting. All shares of Common
Stock which are represented at the Special Meeting by a properly executed proxy
received and not duly and timely revoked will be voted at the Special Meeting in
accordance with the instructions contained therein. Proxies that do not contain
any instruction to vote for or against or to abstain from voting on the Merger
will be voted in accordance with the recommendations of the Board.
If the Special Meeting is adjourned, for whatever reason, the approval of
the Merger shall be considered and voted upon by the Stockholders of the Company
at the subsequent, reconvened meeting, if any.
Any Proxy signed and returned by a Stockholder may be revoked by such
Stockholder at any time before it is voted by giving due notice of such
revocation to the Secretary of the Company at 2150 East Lake Cook Road, Buffalo
Grove, Illinois, 60089-1877, by signing and delivering a Proxy bearing a later
date or by attending the Special Meeting and voting in person. Attendance at the
Special Meeting without taking other affirmative action as aforementioned will
not constitute a revocation of a Proxy. See "The Special Meeting -- Voting and
Revocation of Proxies."
Solicitation of Proxies. The cost of soliciting Proxies will be borne by
the Company. The Company may solicit Proxies and the Company's directors,
officers and employees may also solicit Proxies by telephone, telegram or
personal interview. Arrangements will be made to furnish copies of Proxy
materials to fiduciaries, custodians and brokerage houses for forwarding to
beneficial owners of Common Stock. Such persons will be paid reasonable
out-of-pocket expenses. See "The Special Meeting -- Solicitation of Proxies."
The Merger
Effect of the Merger; Merger Consideration. Pursuant to the Merger
Agreement, the Purchaser will be merged with and into the Company, with the
Company continuing as the surviving corporation. The effect of the Merger will
be to convert the Company from a publicly held corporation to a privately held
corporation wholly owned by Parent. Pursuant to the Merger Agreement, each
outstanding share of Common Stock (other than shares of Common Stock as to which
dissenters' rights have been duly asserted and perfected under the Delaware
General Corporation law (the "DGCL") and other than shares of Common Stock held
by Parent, International, the Company or any wholly owned subsidiary of the
Company) will be converted into the right to receive $13.75 in cash, without
interest (the "Merger Consideration"). See "The Merger Agreement -- The Merger."
Effective Time. The Merger Agreement provides that, as soon as practicable
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of all conditions to the Merger, the Company and the Purchaser
will file a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required by the DGCL in
connection with the Merger, and the Merger will become effective upon such
filing or at such later time as is specified in such certificate of merger (the
"Effective Time"). If the Stockholders of the Company approve and adopt the
Merger Agreement, the Effective Time is expected to occur as soon as practicable
following the Special Meeting.
Treatment of Stock Options. At the Effective Time, each option to purchase
shares of Common Stock ( an "Option") granted under the Company's 1995 Stock
Option Plan (the "Stock Option Plan") or the Company's Amended and Restated
Non-Qualified Stock Option Agreement dated as of June 25, 1996 (the "Option
Agreement"), whether or not vested, will be terminated and, in exchange for such
Option, the holder will be entitled to receive from the Company, for each share
of Common Stock subject to such Option, a cash payment equal to the
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excess, if any, of the Merger Consideration over the applicable exercise price.
See "The Merger Agreement -- The Merger -- Options."
Recommendation of the Board of Directors. The Board, upon the
recommendation of its Independent Committee of disinterested members and the
factors relied on by the Independent Committee, has (i) determined that the
Merger Agreement and the Merger are fair to and in the best interests of the
Company and its Public Stockholders and (ii) unanimously recommends a vote FOR
approval and adoption of the Merger Agreement and the transactions contemplated
thereby. In reaching its determination that the Merger Agreement and the Merger
are fair to and in the best interests of the Company and its Public
Stockholders, the Independent Committee and the Board considered a number of
factors, as more fully described under "Special Factors -- Determinations of the
Independent Committee and the Board; Fairness of the Merger."
Opinion of Financial Advisor. BT Wolfensohn has acted as financial advisor
(the "Financial Advisor") to the Independent Committee in connection with the
Merger. At the June 2, 1998 meeting of the Independent Committee at which the
Merger Agreement was approved by the Independent Committee, BT Wolfensohn
delivered its opinion dated June 2, 1998 (the "Financial Advisor Opinion"), to
the effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Merger Consideration was fair, from a
financial point of view, to the Public Stockholders. The full text of the
Financial Advisor Opinion, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is attached as Annex II to
this Proxy Statement and should be read carefully in its entirely. The Financial
Advisor Opinion relates only to the fairness of the Merger Consideration to the
Public Stockholders, from a financial point of view, does not address any other
aspect of the Merger or any related transactions and does not constitute a
recommendation to any Stockholder of the Company as to how such Stockholder
should vote a the Special Meeting. See "Special Factors -- Opinion of Financial
Advisor."
Interests of Certain Persons in the Merger. Certain directors and
executive officers of the Company may have interests that present them with
potential conflicts of interest in connection with the Merger. In particular,
pursuant to the Merger Agreement, the Company has agreed to take all actions
necessary to provide that at the Effective Time each outstanding Option held by
an executive officer or director of the Company will be terminated and in
exchange for such Option, the holder thereof will be entitled to receive from
the Company, for each share of Common Stock subject to such Option, a cash
payment equal to the excess, if any, of the Merger Consideration over the
applicable exercise price. Executive officers and directors of the Company will
receive an aggregate of approximately $3.0 million in respect of their Options.
In addition, three of the Company's directors are officers of the Parent or its
affiliates. The Independent Committee and the Board were aware of these
interests and potential conflicts and considered them in addition to the other
matters described under "Special factors - Determinations of the Independent
Committee and the Board; Fairness of the Merger." For information concerning
such benefits, see "Special Factors -- Interests of Certain Persons in the
Merger."
Security Ownership of Certain Beneficial Owners and Management. As of June
2, 1998, the directors and executive officers of the Company beneficially owned
31,550 shares of Common Stock (other than shares of Common Stock issuable upon
exercise of Options), representing less than 1% of such shares outstanding. To
the knowledge of the Company, all directors and officers of the Company intend
to vote their shares eligible to be voted for the approval and adoption of the
Merger Agreement.
Parent and International have agreed in the Merger Agreement to vote their
shares of Common Stock in favor of the Merger.
Financing the Merger. The total amount of funds required to pay the Merger
Consideration is estimated to be approximately $138.5 million. Parent has
agreed that it will ensure that the Purchaser has sufficient funds to pay the
Merger Consideration and will provide for such funds from Parent's available
cash or lines of credit. Approximately $6.5 million will be required to pay
holders of outstanding Options upon cancellation of such Options and
approximately $2.6 million will be required to pay related fees and expenses of
the Company. Such amounts are expected to be obtained from available cash of
the Company. "The Merger -- Financing the Merger."
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Conditions to the Merger. The obligations of each of the Company, Parent,
International and the Purchaser to consummate the Merger are subject to various
conditions, including, without limitation, obtaining requisite Stockholder and
Public Stockholder approval, the receipt of all consents, authorizations and
approvals, the accuracy of the representations and warranties of each of the
parties to the Merger Agreement and the absence of any injunction, proceeding or
other legal restraint prohibiting the consummation of the Merger. See "The
Merger Agreement -- Conditions to the Merger."
Termination of the Merger Agreement. The Merger Agreement will be
subject to termination at any time prior to the Effective Time by the mutual
written consent of the Boards of Directors of the Parent, International and
Purchaser and the Board of the Company upon the recommendation of the
Independent Committee. The Merger Agreement also will be subject to termination
by either Parent, International and Purchaser, on the one hand, or the Company
upon the recommendation of the Independent Committee, on the other hand if (i)
the Public Stockholders fail to approve and adopt the Merger Agreement at the
Special Meeting, (ii) the Merger is not consummated by November 30, 1998, or
(iii) prior to the consummation of the Merger, the Independent Committee shall
have withdrawn, or modified or changed in any manner adverse to Parent,
International or Purchaser its approval of the Merger Agreement or the Merger
after having concluded in good faith after consultation with independent legal
counsel that there is a reasonable probability that the failure to take such
action would result in a violation of fiduciary obligations under applicable
law. If the Merger Agreement is terminated as described therein, there shall be
no liability on the part of Parent, International, Purchaser or the Company. See
"The Merger Agreement -- Termination of the Merger Agreement."
Appraisal Rights. Holders of Common Stock on the Record Date who do not
vote in favor of approving and adopting the Merger Agreement and who otherwise
comply with the applicable statutory procedures of Section 262 of the DGCL will
be entitled to appraisal rights under Section 262 of the DGCL in connection
with the Merger and will be entitled to receive, in lieu of the Merger
Consideration, payment in cash of the "fair value" of their shares of Common
Stock. The full text of Section 262 of the DGCL is attached as Annex III to
this Proxy Statement. See "The Merger -- Appraisal Rights" for a further
discussion of such rights and legal consequences of voting shares of Common
Stock in favor of the Merger.
Certain Federal Income Tax Consequences. The receipt of cash pursuant to
the Merger by a Stockholder of the Company who is a U.S. Stockholder (as defined
herein) will be a taxable transaction for United States federal income tax
purposes and may also be taxable under applicable state, local and foreign
income and other tax laws. In general, a U.S. Stockholder will recognize gain or
loss for United States federal income tax purposes in an amount equal to the
difference between the adjusted tax basis of his, her or its Common Stock and
the amount of cash received in exchange therefor in the Merger. If the Common
Stock is a capital asset in the hands of such U.S. Stockholder at the Effective
Time, such gain or loss generally will be capital gain or loss that generally
will be mid-term capital gain or loss if the holding period for the Common Stock
is more than one year but not more than 18 months at the Effective Time and
generally will be long-term capital gain or loss if the holding period is more
than 18 months at the Effective Time. See "The Merger -- Certain Federal Income
Tax Consequences to Stockholders."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING ON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER, IT IS RECOMMENDED THAT HOLDERS OF
COMMON STOCK CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL (AND ANY STATE,
LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR
CIRCUMSTANCES.
Market Price of the Company's Common Stock
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
ticker symbol "BTF." On January 13, 1998, one week prior to the public
announcement of Parent's proposal to the Company to acquire all of the shares of
Common Stock held by the Public Stockholders, the high and low sales prices of
the Common Stock, were $7 7/8 and $7 3/4 per share, respectively. On January
21, 1998 the last trading date prior to public announcement of Parent's proposal
to the Company to acquire the shares of Common Stock of Public Stockholders, the
high and low sales prices of the Common Stock on the NYSE were $10 1/2 and $9
9/16 per share, respectively. On [ ] 1998, the last trading day before the
printing of this Proxy Statement, the high and the low sales prices of the
Common Stock, as quoted on the NYSE were [ ] and [ ] per share, respectively.
Stockholders are urged to obtain current market prices for the Common Stock
prior to making any decision with respect to the Merger. See "Market Price and
Dividend Information."
Background of the Merger
For a description of the events leading up to the approval and adoption of
the Merger Agreement by the Board, see "Special Factors -- Background to the
Merger."
Selected Financial Data
Certain financial data of the Company is set forth herein. See
"Selected Financial Data."
- - - - --------------------------------------------------------------------------------
7
<PAGE> 14
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
the Company and its subsidiaries for each of the five fiscal years ended
December 31, 1993 through December 31, 1997 and the three months ended March 31,
1997 and March 31, 1998. The year-end data has been derived from, should be read
in conjunction with, and are qualified in their entirety by, the audited
consolidated financial statements of the Company, including the notes thereto,
which are included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. The interim data has been derived from, should be read
in conjunction with, and are qualified in their entirety by, the unaudited
quarterly consolidated financial statements of the Company, including the notes
thereto, which are included in the Company Quarterly Report on Form 10-Q for the
period ended March 31, 1998. See "Available Information" and "Incorporation of
Certain Documents by Reference."
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------
1997 1996 1995 1994(8) 1993
--------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales:
United States $1,147,689 $1,086,960 $ 833,010 $ 589,823 $ 469,263
Europe 471,055 325,554 299,360 199,718 117,591
---------- ---------- ---------- --------- ---------
Total 1,618,744 1,412,514 1,132,370 789,541 586,854
Costs of products sold 1,162,737 1,004,713 819,078 557,737 408,514
---------- ---------- ---------- --------- ---------
Gross Profit 456,007 407,801 313,292 231,804 178,340
---------- ---------- ---------- --------- ---------
Selling and administrative
expenses 383,758 345,879 266,163 197,088 157,370
Depreciation and amortization 16,485 13,693 10,339 7,796 6,961
Amortization of intangibles 10,636 10,046 8,117 6,111 4,737
---------- ---------- ---------- --------- ---------
Operating income (loss):
United States 34,836 31,335 22,797 18,541 12,879
Europe 10,292 6,848 5,876 2,268 (3,607)
---------- ---------- ---------- --------- ---------
Total 45,128 38,183 28,673 20,809 9,272
---------- ---------- ---------- --------- ---------
Other income (expense):
Interest income and other 2,749 2,091 1,287 629 339
Equity in earnings (loss) of
affiliated company (1) -- -- -- (112) 153
Interest expense (15,283) (7,401) (3,561) (4,389) (2,122)
Interest expense to affiliates (2) (639) (5,172) (12,372) (12,641) (10,078)
---------- ---------- ---------- --------- ---------
Total (13,173) (10,482) (14,646) (16,513) (11,708)
---------- ---------- ---------- --------- ---------
Income (loss) before income taxes and
cumulative effect of accounting change 31,955 27,701 14,027 4,296 (2,436)
Income tax expense 14,700 13,000 7,337 4,455 1,764
---------- ---------- ---------- --------- ---------
Income (loss) before cumulative effect
of accounting change 17,255 14,701 6,690 (159) (4,200)
Cumulative effect of accounting change,
net of income tax benefit (3) -- -- -- -- (692)
---------- ---------- ---------- --------- ---------
Net Income (loss) $ 17,255 $ 14,701 $ 6,690 $ (159) $ (4,892)
---------- ---------- ---------- --------- ---------
Per Share Data (4)
Income (loss) before cumulative effect
of accounting change $ 0.52 $ 0.44 $ 0.24 $ (0.01) $ (0.18)
Net Income (loss) -- Basic $ 0.52 $ 0.44 $ 0.24 $ (0.01) $ (0.21)
Net income (loss) -- Diluted $ 0.51 $ 0.44 $ 0.24 $ (0.01) $ (0.21)
Balance Sheet Data (at period end):
Total assets 763,701 742,819 524,647 429,371 287,794
Short-term debt (5) 225,407 47,934 25,619 282,015 174,114
Long-term debt (6) 31,837 219,702 99,551 13,399 23,521
Stockholders' equity (7) 273,713 268,652 260,235 21,933 7,707
<CAPTION>
Three months
ended March 31
---------------------------
1998 1997
---------------------------
<S> <C> <C>
Statement of Operations Data:
Net Sales:
United States $ 312,623 $ 288,467
Europe 131,600 113,095
--------- ---------
Total 444,223 401,562
Costs of products sold 324,474 286,011
--------- ---------
Gross Profit 119,749 115,551
--------- ---------
Selling and administrative
expenses 101,466 97,043
Depreciation and amortization 4,493 4,206
Amortization of intangibles 2,391 2,683
--------- ---------
Operating income (loss):
United States 8,999 9,968
Europe 2,400 1,651
--------- ---------
Total 11,399 11,619
--------- --------- s
</TABLE>
8
<PAGE> 15
<TABLE>
<S> <C> <C>
Other income (expense):
Interest income and other 667 651
Equity in earnings (loss) of
affiliated company (1) -- --
Interest expense (3,912) (3,903)
Interest expense to affiliates (2) (121) (149)
--------- ---------
Total (3,366) (3,401)
--------- ---------
Income (loss) before income taxes and
cumulative effect of accounting change 8,033 8,218
Income tax expense 3,700 3,850
--------- ---------
Income (loss) before cumulative effect
of accounting change 4,333 4,368
Cumulative effect of accounting change,
net of income tax benefit (3) -- --
--------- ---------
Net Income (loss) 4,333 4,368
--------- ---------
Per Share Data (4)
Income (loss) before cumulative effect
of accounting change $ 0.13 $ 0.13
Net Income (loss) -- Basic $ 0.13 $ 0.13
Net income (loss) -- Diluted $ 0.13 $ 0.13
Balance Sheet Data (at period end):
Total assets 768,942 726,503
Short-term debt (5) 224,281 39,061
Long-term debt (6) 32,838 218,416
Stockholders' equity (7) 274,942 266,124
</TABLE>
- - - - ----------
(1) Represents earnings (loss) on the Company's 40% interest in Bierbrauer +
Nagel GmbH & Co. KG ("B+N") accounted for on the equity method through
June 30, 1994. Effective July 1, 1994, the operating results of B+N have
been consolidated with those of the Company reflecting the acquisition of
the remaining 60% beneficial interest in B+N.
(2) The substantial decrease in interest expense to affiliates in 1996 was
largely attributable to the pay down of debt with proceeds from a $250
million revolving credit facility.
(3) In 1993, the Company adopted Statement of Financial Accounting Standards
No. 106. "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The effect of this adoption increased 1993 net periodic
postretirement cost by $1.1 million and increased the 1993 net loss by
$692,000.
(4) For 1994 and 1993, gives effect to stock split that occurred in connection
with the Reorganization resulting in 23,400,000 shares outstanding.
(5) Short-term debt includes amounts due within twelve months to third parties
and affiliates of KNP BT, including the current portion of long-term debt.
For 1997, the $194.7 million outstanding under the syndicated bank
Competitive Advance and Revolving Credit Facility (the "Bank Credit
Agreement") has been classified as current portion of the long-term debt.
The balances in 1994 and prior years consisted principally of amounts due
to affiliates of KNP BT. The Company also received in 1995 and 1994
non-interest bearing advances from affiliates of KNP BT associated with
acquisitions during these periods totaling $21.9 million and $43.9
million, respectively.
(6) Consists of long-term debt with third parties, affiliates of KNP BT, and
capitalized leases, less current portion.
(7) The Company has never declared or paid cash dividends on its Common Stock.
(8) In March 1996, the Company discovered certain accounting and financial
reporting irregularities at its New York Division. The irregularities
involved misstatements in the reporting of gross profit margins and
operating expenses principally in 1995 and 1994, as well as concealment in
the accounting records of theft of Company assets. The impact of the
charges associated with these issues resulted in a reduction of operating
income for 1995 by approximately $7.5 million and for 1994 by
approximately $2.9 million. An independent investigation, completed in
August 1996, uncovered no basis for any further adjustment to the
financial statements.
9
<PAGE> 16
THE SPECIAL MEETING
General
This Proxy Statement is being furnished on behalf of the Company in
connection with the solicitation of Proxies by the Board for use at the Special
Meeting to be held at [ ] a.m., local time, on [ ], August 1998, at [ ],
and at any adjournments or postponements thereof.
Matters to be Considered at the Special Meeting
At the Special Meeting, the Stockholders of the Company will consider and
vote on a proposal to approve and adopt the Merger Agreement and such other
matters as may properly be brought before the Special Meeting. The Merger
Agreement is attached to this Proxy Statement as Annex I. See "The Merger" and
"The Merger Agreement." The Board, upon recommendation of its Independent
Committee, has determined that the Merger is fair to and in the best interests
of the Public Stockholders and unanimously recommends a vote FOR approval and
adoption of the Merger Agreement. See "Special Factors -- Background of the
Merger" and "-- Determinations of the Independent Committee and the Board;
Fairness of the Merger."
Required Votes
The approval and adoption of the Merger Agreement will require the
affirmative vote of (i) a majority of the shares of Common Stock outstanding and
(ii) a majority of the shares held by Public Stockholders that are voted at the
Special Meeting.
As of the Record Date, Parent and International, together, held
approximately 70% of the outstanding Common Stock. Parent and International have
agreed in the Merger Agreement that they will vote their shares of Common Stock
in favor of the Merger. See "Special Factors -- Security Ownership of Certain
Beneficial Owners and Management."
Voting and Revocation of Proxies
All shares of Common Stock which are represented at the Special Meeting by
a properly executed Proxy received and not duly and timely revoked will be voted
at the Special Meeting in accordance with the instructions contained therein. If
a Proxy is signed and returned without indicating any voting instructions,
shares of Common Stock represented by such Proxy will be voted FOR the Merger.
The Board is not currently aware of any business to be acted upon at the Special
Meeting other than as described herein. If, however, other matters are properly
brought before the Special Meeting or any adjournments or postponements thereof,
the persons appointed as proxies will have the discretion to vote or act thereon
in accordance with their best judgment, unless authority to do so is withheld in
the Proxy. The persons appointed as proxies will not exercise their
discretionary voting authority to vote any such Proxy in favor of any
adjournments or postponements of the Special Meeting if instruction is given to
vote against the Merger.
A Proxy signed and returned by a Stockholder may be revoked prior to its
being voted by (i) delivering to the Company, at or before the Special Meeting,
a written notice of revocation, (ii) duly executing a subsequent Proxy relating
to the same shares at or before the Special Meeting or (iii) attending the
Special Meeting and voting in person. Any written instrument revoking a Proxy
must be received before the taking of the votes at the Special Meeting and
should be sent to: BT Office Products International, Inc., 2150 East Lake Cook
Road, Buffalo Grove, Illinois, 60089-1877, Attention: Secretary.
Record Date; Stock Entitled to Vote; Quorum
The Board has fixed [ ], 1998 as the Record Date for the
determination of the holders of Common Stock entitled to notice of and to vote
at the Special Meeting. Only holders of Common Stock at the close of business
on the Record Date will be entitled to notice of, and to vote at, the Special
Meeting. At the close of business on the Record Date, there were [ ] shares of
Common Stock outstanding and entitled to vote at the Special Meeting, held by
approximately [ ] Stockholders of record.
10
<PAGE> 17
The presence, in person or by properly executed Proxy, of the holders of a
majority of the outstanding shares of Common Stock is necessary to constitute a
quorum at the Special Meeting.
Holders of Common Stock on the Record Date are entitled to one vote per
share of Common Stock, exercisable in person or by properly executed Proxy, upon
each matter properly submitted for the vote of stockholders at the Special
Meeting.
If fewer shares of Common Stock are voted in favor of approval and
adoption of the Merger Agreement than the number required for approval, it is
expected that the Special Meeting will be adjourned for the purpose of allowing
additional time for soliciting and obtaining additional proxies or votes, and,
at any subsequent reconvening of the Special Meeting, all proxies will be voted
in the same manner as such proxies would have been voted at the original
convening of the Special Meeting, except for any proxies which have theretofore
effectively been revoked or withdrawn.
Appraisal Rights
Holders of Common Stock on the Record Date who do not vote in favor of
approving and adopting the Merger Agreement and who otherwise comply with the
applicable statutory procedures of Section 262 of the DGCL will be entitled to
appraisal rights under Section 262 of the DGCL in connection with the Merger and
will be entitled to receive, in lieu of the Merger Consideration, payment in
cash of the "fair value" of their shares of Common Stock. The full text of
Section 262 of the DGCL is attached as Annex III to this Proxy Statement. See
"The Merger -- Appraisal Rights" for a further discussion of such rights and
legal consequences of voting shares of Common Stock in favor of the Merger.
Solicitation of Proxies
The Company will bear the cost of solicitation of Proxies and the cost of
printing and mailing this Proxy Statement. In addition to solicitation by mail,
the Company's directors, officers and employees may also solicit Proxies from
stockholders of the Company by telephone, telegram or personal interview. Such
directors, officers and employees will not be additionally compensated for any
such solicitation but may be reimbursed for reasonable out-of-pocket expenses in
connection therewith. Arrangements will also be made with brokerage houses and
other fiduciaries, custodians and nominees for the forwarding of solicitation
material to the beneficial owners of shares of Common Stock held of record by
such persons and the Company will reimburse such brokerage houses, fiduciaries,
custodians and nominees for their reasonable out-of-pocket expenses in
connection therewith.
If you have any questions or require additional material, please call
Thomas F. Cullen, Vice President, General Counsel and Secretary of the Company
at 847-793-7500.
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY TO THE COMPANY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
STOCKHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING COMMON STOCK WITH
THEIR PROXY. IN THE EVENT THE MERGER IS CONSUMMATED, CERTIFICATES SHOULD BE
DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL
WHICH WILL BE SENT TO STOCKHOLDERS PROMPTLY AFTER THE EFFECTIVE TIME. SEE "THE
MERGER AGREEMENT -- THE MERGER -- EXCHANGE OF CERTIFICATES."
SPECIAL FACTORS
Background of the Merger
The Company was organized in 1984 as a subsidiary of the predecessor
of Parent. On June 30, 1995, Parent and the Company effected a series of
transactions (the "Corporate Reorganization") in order to reorganize the
legal ownership of various of their businesses and to recapitalize the ongoing
office products distribution business which now constitutes the "Company."
11
<PAGE> 18
Prior to the Corporate Reorganization, the Company was a holding company which
operated mainly Parent's U.S. office products distribution business. The
Corporate Reorganization included, among other things, the transfer by Parent of
its European office products businesses to the Company and the transfer by the
Company of its packaging business to Parent.
In July of 1995, the Company completed its initial public offering at
$11.50 per share. The primary reason that Parent took the Company public was its
belief that as a public company the Company would significantly lower its cost
of capital, increase its access to capital, create a currency for use by the
Company in making acquisitions and provide liquidity for the Company's
stockholders. At that time the Parent did not have the access to capital to
continue to fund the Company's acquisitions. Since the Company's initial public
offering, trading values for the Common Stock have been, on average, relatively
low, resulting in a relatively illiquid trading market for the Common Stock.
In December 1997, the Company announced its U.S. plan to implement an
enterprise-wide system solution, known as "Project Millennium" which is designed
to standardize business processes, centralize certain business functions, and
enhance customer service capabilities. The Company anticipates that the
implementation of Project Millennium will take approximately three and one half
years and that earnings for 1998 and 1999 would be adversely impacted, although
the Company expects to realize some economic benefits from Project Millennium
starting in late 1998. In addition, the Company could be neither assured that
Project Millennium would be successful or that actual costs would not exceed
those estimated.
At the time of the Company's initial public offering, Parent's business
activities consisted of distribution, packaging and paper products divisions,
with the Company a part of its distribution division. In the fall of 1997,
Parent sold KNP Leykam, its paper production division, which left Parent with
the distribution and packaging divisions and the proceeds of the sale.
In December of 1997, Morgan Stanley & Co. Incorporated ("Morgan Stanley")
was retained by Parent to assist it in formulating and analyzing a possible
restructuring of the business and capital structure of the Company and its
subsidiaries. At the same time, Parent was evaluating the effect of Project
Millennium, the Company's need for additional capital, and the effect of
competition in the office products distribution industry on the Company's
margins.
As a result of Parent's review of its structure and strategy, Parent
concluded that its packaging division should be sold and that Parent would focus
on its distribution division (including office products distribution) as its
core business. After considering these factors and the fact that the sale of its
paper production division provided it with a source of financing, Parent
determined that it should attempt to acquire the approximately 30% interest in
the Company that it did not currently own.
On January 20, 1998, Parent informed the Company's outside directors, Mr.
Philip E. Beekman and Mr. Lorrence T. Kellar, of its intention to make an offer
to acquire all publicly held shares of Common Stock of the Company. In light of
its equity ownership of approximately 70% of the Company's Common Stock, Parent
suggested that the Company form a special committee of disinterested directors
to consider its proposal. At a special telephonic meeting of the Board on
January 21, 1998, the Board formed the Independent Committee and appointed Mr.
Beekman and Mr. Kellar as members of the Independent Committee, with Mr. Beekman
serving as Chairman. Neither Mr. Beekman nor Mr. Kellar are employees of the
Company or affiliates of Parent. For their services on the Independent
Committee, the Company has agreed to pay Mr. Beekman and Mr. Kellar each for
each meeting of the Independent Committee they attended in accordance with the
Company's normal practice. On January 22, 1998, the Company issued a press
release to the effect that Parent was prepared to make an offer to acquire the
remaining publicly held shares of Common Stock of the Company for a cash
purchase price of $10.50 per share.
After the January 22, 1998 Board meeting, the Independent Committee
immediately began the process of retaining a financial advisor and legal
counsel. The Independent Committee considered several nationally recognized
investment banking firms for possible retention to act as financial advisor to
the Independent Committee. During January 1998, the Financial Advisor was
retained to act as the Independent Committee's financial advisor, and the
Independent Committee also retained independent legal counsel to assist in its
review of and response to Parent's proposal.
12
<PAGE> 19
On February 3, 1998 and February 4, 1998, management of the Company
presented forecasts and budgets for the Company to the Independent Committee and
its advisors and to Parent and Morgan Stanley. These presentations included a
review of the Company's financial projections for the next five years and a
discussion of the possible effect on the Company's results of operations from
expenditures and anticipated benefits relating to Project Millennium. Over the
next several weeks, in order to evaluate Parent's proposal, the Financial
Advisor conducted a review of the business, operations and prospects of the
Company and legal counsel to the Independent Committee performed legal due
diligence on the Company. On February 6, 1998, Mr. Koffrie, the Company's
Chairman, met with the Financial Advisor and legal counsel in New York to
answer questions regarding the Financial Advisor's evaluation of the Company.
On February 11, 1998, the Financial Advisor met with management of the Company
at the Company's headquarters in Buffalo Grove, Illinois as part of the due
diligence process.
On February 26, 1998, the Financial Advisor and Morgan Stanley met to
begin discussions on the Merger Consideration. During the course of the
following two months, representatives of the Independent Committee's financial
advisors and Parent's financial advisors met to discuss the terms of the
proposed transaction.
On May 6, 1998, representatives from Parent met with the members of the
Independent Committee to discuss Parent's proposal. The negotiations lasted into
the evening with the parties agreeing to continue negotiating the following day.
On May 7, 1998, Parent and the Independent Committee reached an agreement in
principle on the Merger Consideration of $13.75 per share and issued a press
release to that effect and that the agreement was subject to definitive
documentation, final board approval by the Company and approval by a majority of
the Company's public stockholders.
On May 8, 1998, Parent's counsel sent a draft of the Merger Agreement to
counsel to the Independent Committee for review and comment. From May 8, 1998
through May 28, counsel for Parent and counsel for the Independent Committee
negotiated the terms of the Merger Agreement.
On June 2, 1998, the Independent Committee met to consider the terms of
the Merger Agreement and the Merger. The Financial Advisor made a presentation
to the Independent Committee and allowed the members of the Independent
Committee to ask questions regarding the Financial Advisor's analysis. Legal
counsel to the Independent Committee was available to answer legal questions.
The Independent Committee was advised by the Financial Advisor that, in the
Financial Advisor's view, the per share amount to be received in the Merger was
fair from a financial point of view to the Public Stockholders. After further
discussion and deliberation, a motion determining the Merger and the Merger
Agreement to be fair and in the best interests of the Public Stockholders and to
approve the Merger and the Merger Agreement was made and carried unanimously,
and the Independent Committee resolved to recommend that similar action be taken
by the Board of the Company.
Based on the Financial Advisor Opinion and such other factors as the Board
deemed relevant, the Board unanimously approved and adopted the Merger Agreement
and the transactions contemplated thereby and deemed the Merger fair to and in
the best interest of the stockholders of the Corporation. The Board unanimously
resolved that the Merger Agreement be recommended to the Stockholders of the
Corporation for consideration and adoption at the Special Meeting.
Determinations of the Independent Committee and the Board; Fairness of the
Merger
As discussed under "--Background of the Merger," the Independent Committee
unanimously recommended the Merger Agreement and the Merger to the Board,
determining the Merger Agreement and the Merger to be fair to and in the best
interests of the Public Stockholders. In reaching this conclusion, the
Independent Committee considered a number of factors, including, among other
things, the Financial Advisor Opinion which states that, as of the date and
subject to the assumptions and limitations therein, the consideration to be
received by Public Stockholders pursuant to the Merger Agreement is fair from a
financial point of view to such holders. The full text of such opinion, which
sets forth, among other things, the opinion expressed, procedures followed,
matters considered and limitations on review undertaken in connection with such
opinion, is attached as Annex II to this Proxy Statement. Stockholders are urged
to read the opinion in its entirety.
Reasons for the Independent Committee's Determination. In reaching its
recommendation, the Independent Committee considered the following material
factors:
13
<PAGE> 20
(a) The terms of the proposed Merger, including, among other things, the
consideration to be paid to holders of Common Stock, which represents a 79%
premium to the closing price of the Common Stock one week prior to the
announcement of Parent's initial proposal, and the circumstances under which the
Merger Agreement could be terminated. The Independent Committee determined that
these terms, which were the product of intensive arm's-length negotiations,
provide Stockholders with a transaction that, taking into account the risks and
potential rewards of continued investment in the Company, is more attractive to
the Public Stockholders than retaining their shares of Common Stock.
(b) Statements by representatives of Parent that Parent had no intention
of selling its investment in the Company and that Parent had no interest in, and
would not support, any transaction involving the acquisition of the Company by a
third party. Based on Parent's stated intention to retain control of the
Company, the Independent Committee believed that the Company's stockholders were
unlikely to realize in the foreseeable future a price for their shares that
includes a control premium.
(c) The presentation and opinion of the Financial Advisor, which included,
among other things, analyses of the value of the Company and comparisons with
similar companies and similar going-private transactions, and which indicated
that the consideration to be received by the Public Stockholders was fair to
such holders from a financial point of view (such Financial Advisor Opinion was
given subject to certain limitations, qualifications and assumptions specified
therein; see "Opinion of Financial Advisor").
(d) The Company's business, condition and prospects. In this respect, the
Independent Committee considered that the Company has recently underperformed
its primary competitors in certain respects, but that current management
initiatives (particularly Project Millennium) have the potential to
significantly improve the Company's operating results. In addition, the
Independent Committee considered that there were other strategies available,
such as a more aggressive acquisition policy, that could improve the Company's
competitive position, although such strategies entailed additional risks to the
Company.
(e) The current and historical trading prices for the Company's shares. In
this respect the Independent Committee considered that the Company's shares were
trading at an all-time low in December 1997 and early January 1998, and that
certain factors, such as the relatively small public float for the shares and
the fact that few research analysts follow the Company, may have led to the
Common Stock being undervalued in the market.
(f) The risks to Public Stockholders associated with the Common Stock,
including, without limitation, the continuing pressure from competition, which
recently has caused erosion of the Company's operating margins, and the
possibility that Project Millennium will not be implemented successfully or that
its anticipated benefits will be significantly delayed. The Independent
Committee believed that the uncertainty relating to these risks might be an
obstacle to realizing stockholder value, and the Independent Committee
recognized that these risks to Public Stockholders would be eliminated by the
Merger.
(g) The fact that the Merger Agreement provides that the Merger will be
subject to the approval of a majority of the Public Stockholders voting at the
Special Meeting.
The foregoing discussion of the information and factors considered and
given weight by the Independent Committee is not intended to be exhaustive. In
view of the wide variety of the factors considered in connection with its
evaluation of the proposed Merger, the Independent Committee did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the foregoing factors or determine that any factor was of particular
importance. Rather, the Independent Committee viewed its position and
recommendation as being based on the totality of the information presented and
considered by it.
Reasons for the Board's Determination. In reaching its decision to approve
the Merger Agreement, the Board relied on the Independent Committee's
recommendation and the factors relied on by the Independent Committee as
described above. In view of the wide variety of factors considered in connection
with its evaluation of the proposed Merger, the Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the foregoing factors or determine that any factor was of particular
importance. Rather, the Board viewed its position as being based on the totality
of the information presented and considered by it. In connection with its
consideration of the determination by the Independent Committee, as part of its
determination with respect to the fairness of the consideration to be received
by holders of Common Stock pursuant to the Merger Agreement, the Board adopted
the conclusion, and the analyses underlying such conclusion, of the Independent
Committee, based upon its view as to the reasonableness of such analyses.
14
<PAGE> 21
Fairness of the Merger to Unaffiliated Stockholders. The Board believes
that the Merger is fair to and in the best interests of unaffiliated
stockholders for all of the reasons set forth above. In addition, in light of
Parent's control of the Company through majority representation on the Company's
Board of Directors, the Company formed the Independent Committee, which was
comprised of all of the independent directors of the Company, none of whom are
officers or employees of the Company, Parent, the Purchaser or their respective
affiliates, to consider Parent's proposal. The Independent Committee engaged
independent counsel and the Financial Advisor. The Merger Consideration was the
highest price obtained following intensive arm's-length negotiations between the
Independent Committee and representatives of Parent. The Financial Advisor
Opinion considered the fairness of the consideration to be received by the
Public Stockholders pursuant to the Merger Agreement. Except with respect to
options to purchase Common Stock, none of Parent, the Purchaser nor any of their
affiliates will receive the Merger Consideration. See "--Interests of Certain
Persons in the Merger -- Interests in Common Stock and Options." The Independent
Committee unanimously determined that the Merger Agreement and the Merger are
fair to and in the best interests of the Public Stockholders. Finally, the Board
considered the fact that the Merger would be subject to the approval of a
majority of the Public Stockholders voting at the Special Meeting.
In light of all of the foregoing, neither the Independent Committee nor
the Board considered it necessary to, and both the Independent Committee and the
Board believe the proposed transaction is fair despite the fact they did not,
retain an unaffiliated representative to act solely on behalf of unaffiliated
stockholders for purposes of negotiating the terms of the Merger and the Merger
Agreement.
Opinion of Financial Advisor
BT Wolfensohn has acted as financial advisor to the Independent Committee
in connection with the Merger. At the June 2, 1998 meeting of the Independent
Committee, the Financial Advisor delivered its oral opinion, subsequently
confirmed in writing as of the same date to the Independent Committee, to the
effect that, as of the date of such opinion, based upon and subject to the
assumptions made, matters considered and limits of the review undertaken by the
Financial Advisor, the consideration to be paid in the Merger is fair to the
Public Stockholders.
The full text of the Financial Advisor Opinion, which sets forth, among
other things, the assumptions made, matters considered and limits on the review
undertaken by the Financial Advisor in connection with the opinion, is attached
as Annex II to this Proxy Statement and is incorporated herein by reference. The
Company's Stockholders are urged to read the Financial Advisor Opinion in its
entirety. The summary of the Financial Advisor Opinion set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of the
Financial Advisor Opinion.
In connection with the Financial Advisor's role as financial advisor to
the Independent Committee, and in arriving at its opinion, the Financial Advisor
has, among other things, reviewed certain publicly available financial
information and other information concerning the Company and certain internal
analyses and other information furnished to it by the Company. The Financial
Advisor also held discussions with the members of the senior management of the
Company regarding the businesses and prospects of the Company. In addition, the
Financial Advisor (i) reviewed the reported prices and trading activity for the
Common Stock of the Company, (ii) compared certain financial and stock market
information for the Company with similar information for selected companies
whose securities are publicly traded, (iii) reviewed the financial terms of
selected going private transactions which it deemed comparable in whole or in
part, (iv) reviewed the terms of the Merger Agreement, and (v) performed such
other studies and analyses and considered such other factors as it deemed
appropriate.
In preparing its opinion, the Financial Advisor did not assume
responsibility for the independent verification of, and did not independently
verify, any information, whether publicly available or furnished to it,
concerning the Company, including, without limitation, any financial
information, forecasts or projections, considered in connection with the
rendering of its opinion. Accordingly, for purposes of its opinion, the
Financial Advisor assumed and relied upon the accuracy and completeness of all
such information. The Financial Advisor did not conduct a physical inspection of
any of the properties or assets, and did not prepare or obtain any independent
evaluation or appraisal of any of the assets or liabilities of the Company.
15
<PAGE> 22
With respect to the financial forecasts and projections made available to the
Financial Advisor and used in its analysis, the Financial Advisor assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
matters covered thereby. In rendering its opinion, the Financial Advisor
expressed no view as to the reasonableness of such forecasts and projections or
the assumptions on which they are based. The Financial Advisor Opinion was
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to the Financial Advisor as of, the date of
such opinion.
For purposes of rendering its opinion, the Financial Advisor assumed that,
in all respects material to its analysis, the representations and warranties
contained in the Merger Agreement are true and correct, that each party will
perform all of the covenants and agreements to be performed by it under the
Merger Agreement and all conditions to the obligation to consummate the Merger
will be satisfied without any waiver thereof. The Financial Advisor also assumed
that all material governmental, regulatory or other approvals and consents
required in connection with the consummation of the transactions contemplated by
the Merger Agreement will be obtained and that in connection with obtaining any
necessary governmental, regulatory or other approvals and consents, or any
amendments, modifications or waivers to any agreements, instruments or orders,
no limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on any
party thereto or materially reduce the contemplated benefits of the Merger.
The Financial Advisor relied on Parent's statements that it has no
interest in any transaction that would result in the sale of shares of Common
Stock owned by it. The Financial Advisor was not requested or authorized to
solicit, and did not solicit, interest from any party with respect to an
acquisition of the outstanding shares of Common Stock, the Company or its
constituent businesses. In addition, the Financial Advisor was informed by
Parent that Parent has no intention to pursue a sale of the Company after
consummating the Merger pursuant to the Merger Agreement.
Set forth below is a brief summary of certain financial analyses performed
by the Financial Advisor in connection with its opinion and reviewed with the
Independent Committee at its meeting on June 2, 1998.
Historical Stock Performance. The Financial Advisor reviewed and analyzed
recent and historical market prices and trading volume for Company's Common
Stock and compared such market prices to certain stock market and industry
indices. The Financial Advisor also noted that the $13.75 per share
consideration exceeded the Company's 52-week high.
Analysis of Selected Publicly Traded Companies. The Financial Advisor
compared certain financial information and commonly used valuation measurements
for the Company implied by the cash consideration to be received in the Merger
by the Public Stockholders to corresponding information and measurements for a
group of three publicly traded contract stationers (the "Core Comparables"):
Boise Cascade Office Products Corporation, Corporate Express, Inc., and U.S.
Office Products Company. The Financial Advisor also compared certain financial
information and commonly used valuation measurements for the Company implied by
the cash consideration to be received in the Merger by the Public Stockholders
to corresponding information and measurements for 11 publicly traded office
products distributors (along with the Core Comparables, the "Composite Group"):
Staples, Inc., Office Depot, Inc., OfficeMax, Inc., Unisource Worldwide, Inc.,
United Stationers Inc., Viking Office Products, Inc., Pitney Bowes Inc., IKON
Office Solutions, Inc., Samas Groep N.V., Koninklijke Ahrend NV, and Guilbert
S.A. Such financial information and valuation measurements included, among other
things, (i) common equity market valuation; (ii) capitalization ratios; (iii)
operating performance; (iv) ratios of common equity market value as adjusted for
debt and cash ("Enterprise Value") to earnings before interest expense, income
taxes and depreciation and amortization ("EBITDA"); and (v) ratios of common
equity market prices per share ("Equity Value") to earnings per share ("EPS").
Such multiples were based on closing share prices on May 27, 1998, except for
U.S. Office Products Company which is from January 12, 1998, the last trading
day prior to its restructuring announcement, and Viking Office Products, Inc.
which is from May 15, 1998, the last trading day prior to its merger
announcement. To calculate the trading multiples of the Composite Group, the
Financial Advisor used publicly available information concerning historical and
projected financial performance, including published historical financial
information and earnings estimates reported by the Institutional Brokers
Estimate System ("IBES"). IBES is a data service that monitors and publishes
compilations of earnings estimate by selected research analysts regarding
companies of interest to institutional investors. The Financial Advisor
calculated that, on a trailing 12-month ("LTM") basis, the multiple of
Enterprise Value to EBITDA was 9.0x for the Company, compared to a range of 8.9x
to 12.3x, with a median of 9.6x, for the Core Comparables.
16
<PAGE> 23
The Financial Advisor further calculated that the multiple of Equity Value to
trailing LTM EPS was 24.1x for the Company, compared to a range of 15.1x to
30.8x, with a median of 18.2x, for the Core Comparables; and the multiple of
Equity Value to estimated calendar year 1998 EPS was 24.0x for the Company,
compared to a range of 15.0x to 24.2x, with a median of 21.9x, for the Core
Comparables.
None of the companies utilized as a comparison are identical to the
Company. Accordingly, the Financial Advisor believes that the analysis of
publicly traded comparable companies is not simply mathematical. Rather, it
involves complex considerations and qualitative judgments, reflected in the
Financial Advisor Opinion, concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies.
Premium Analysis. The Financial Advisor compared the premiums paid in 24
transactions (the "Selected Large Stockholder Transactions") having a
transaction valuation over $100 million and where the bidder owned at least 40%
of the outstanding shares prior to the transaction consisting of
(acquiror/target, date announced): MascoTech, Inc./TriMas Corporation (December
11, 1997), Rexel S.A./Rexel Inc. (August 29, 1997), Anthem Inc./Accordia Inc.
(May 2, 1997), Samsung Electronics Co. Ltd./AST Research Inc. (January 30,
1997), Mafco Holdings Inc./Mafco Consolidated Group (January 21, 1997), Zurich
Versicherungs GmbH/Zurich Reinsurance Centre (January 13, 1997), Novartis
AG/SyStemix Inc. (May 27, 1996), Berkshire Hathaway Inc./GEICO Corporation
(August 25, 1995), COBE Laboratories/REN Corporation - USA (July 14, 1995), BIC
S.A./Bic Corporation (May 15, 1995), McCaw Cellular Communications/LIN
Broadcasting (April 7, 1995), Club Mediterranee S.A./Club Med Inc. (April 5,
1995), Conseco Inc./CCP Insurance Inc. (February 27, 1995), Arcadian
Corp./Arcadian Partners L.P. (January 18, 1995), WMX Technologies Inc./Chemical
Waste Management Inc. (July 28, 1994), Rust International Inc./Brand Companies
Inc. (November 13, 1992), American Maize-Products Co./American Fructose Corp.
(September 9, 1992), Leucadia National Corporation/PHLCORP Inc. (August 17,
1992), Tele-Communications Inc./United Artists Entertainment (May 1, 1991), BHP
Holdings (USA) Inc./Hamilton Oil Corporation (February 6, 1991), Murphy Oil
Corporation/Ocean Drilling & Exploration (January 3, 1991), Renault Vehicules
Industriels/Mack Trucks Inc. (July 6, 1990), American Express Company/Shearson
Lehman Brothers Holdings (March 2, 1990) and Fuji Heavy Industries Ltd./Subaru
of America Inc. (January 16, 1990). The premiums paid in the Selected Large
Stockholder Transactions (i) based on the target company's closing stock price
four weeks prior to the public announcement of such transactions, ranged from 1%
to 69% (with a median of 26%); (ii) based on the target's closing stock price
one week prior to the public announcement, ranged from 8% to 70% (with a median
of 21%), and (iii) based on the target's closing stock price one day prior to
the public announcement ranged from (1%) to 66% (with a median of 18%).
The Financial Advisor also reviewed the historical trading prices and
trading volumes for the shares of Common Stock. This review indicated that the
consideration to be received in the Merger by the Public Stockholders represents
a premium of 33% to the closing price on January 21, 1998 ($10.38); a premium of
79% to the closing price on January 15, 1998 ($7.69); and a premium of 76% to
the closing price on December 22, 1997 ($7.81).
Discounted Cash Flow Analysis. The Financial Advisor performed a
discounted cash flow analysis for the Company. The Financial Advisor calculated
the discounted cash flow values for the Company as the sum of the net present
values of (i) the estimated future cash flow that the Company will generate for
the years 1998 through 2002, plus (ii) the value of the Company at the end of
such period. The estimated future cash flows were based on the financial
projections for the Company for the years 1998 through 2002 prepared by the
Company's management. The terminal values of the Company were calculated based
on projected EBITDA for 2002 and a range of multiples of 7.0x, 8.0x and 9.0x.
The Financial Advisor used discount rates ranging from 9.0% to 10.0%. The
Financial Advisor used such discount rates based on its judgment of the
estimated weighted average cost of capital of the Company and the Core
Comparables, and used such multiples based on its review of the trading
characteristics of the common stock of the Company and Core Comparables. This
analysis indicated a range of values of $10.64 to $16.15 per share. Based on the
midpoint of the terminal value multiple range and the midpoint of the discount
rate range, the analysis indicated a value of $13.34 per share. The Financial
Advisor noted that in various past periods the Company's multiple of EBITDA has
tended to be at a discount to that of the Core Comparables.
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<PAGE> 24
Other Considerations. The Financial Advisor also took notice that other
alternatives to the proposed transaction, including retaining the status quo of
the Company ownership, engaging in a recapitalization or seeking to enter into a
transaction with a third party, were unlikely to be achieved under the
circumstances, given that Parent and International held, in the aggregate,
approximately 70% of the outstanding shares of Common Stock, and the stated
unwillingness of Parent to sell its interest in the Company.
The foregoing summary describes all analyses and factors that the
Financial Advisor deemed material in its presentation to the Independent
Committee, but is not a comprehensive description of all analyses performed and
factors considered by the Financial Advisor in connection with preparing its
opinion. A copy of the Financial Advisor's written presentation to the
Independent Committee with respect to its opinion has been filed as an exhibit
to the Schedule 13E-3 and may be inspected, copied and obtained in the manner
specified in "Available Information." The preparation of a fairness opinion is a
complex process involving the application of subjective business judgment in
determining the most appropriate and relevant methods of financial analysis and
the application of those methods to the particular circumstances and, therefore,
is not readily susceptible to summary description. The Financial Advisor
believes that its analyses must be considered as a whole and that considering
any portion of such analyses and of the factors considered without considering
all analyses and factors could create a misleading view of the process
underlying the opinion. In arriving at its fairness determination, the Financial
Advisor did not assign specific weights to any particular analyses.
In conducting its analyses and arriving at its opinions, the Financial
Advisor utilized a variety of generally accepted valuation methods. The analyses
were prepared solely for the purpose of enabling the Financial Advisor to
provide its opinion to the Independent Committee as to the fairness of the
consideration to be received in the Merger by the Public Stockholders and does
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold, which are inherently subject to
uncertainty. In connection with its analyses, the Financial Advisor made, and
was provided by the Company's management with, numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Analyses based on
estimates or forecasts of future results are not necessarily indicative of
actual past or future values or results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the Company or its advisors, neither the Financial Advisor nor any
other person assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions.
The terms of the Merger were determined through negotiations between the
Independent Committee and Parent and were approved by the Independent Committee.
Although the Financial Advisor provided advice to the Independent Committee
during the course of these negotiations, the decision to recommend the Merger
was solely that of the Independent Committee. As described above, the opinion
and presentation of the Financial Advisor to the Independent Committee were only
one of a number of factors taken into consideration by the Independent Committee
in making its determination to recommend the Merger. The Financial Advisor's
opinion was provided to the Independent Committee to assist it in connection
with its consideration of the Merger and does not constitute a recommendation to
any stockholder as to how to vote with respect to the Merger.
The Independent Committee selected the Financial Advisor as financial
advisor in connection with the Merger based on the Financial Advisor's
qualifications, expertise, reputation and experience in mergers and
acquisitions. The Financial Advisor is engaged in the merger and acquisition and
client advisory business and, for legal and regulatory purposes, is a division
of BT Alex. Brown Incorporated, a registered broker dealer and member of the New
York Stock Exchange. The Independent Committee has retained the Financial
Advisor pursuant to a letter agreement dated January 30, 1998 (the "Engagement
Letter"). As compensation for the Financial Advisor's services in connection
with the Merger, the Company agreed to pay the Financial Advisor a fee of
$125,000 upon the execution of the Engagement Letter, $125,000 upon the
expiration of 90 days from the date of such execution if discussions regarding a
transaction were continuing, and $500,000 upon the announcement of an agreement
in principle to consummate the Merger. Upon consummation of the transactions
contemplated by the Merger Agreement, the Company will pay the Financial Advisor
an aggregate financial advisory fee equal to 1.25% of the total consideration to
be received in the Merger by the Public Stockholders and the option holders
other than Parent and International, reduced by the amount of any fees
previously paid pursuant to the Engagement Letter. Regardless of whether the
Merger is consummated, the Company has agreed to reimburse the Financial Advisor
for reasonable fees and disbursements of the Financial Advisor's counsel and all
of the Financial Advisor's reasonable travel and other out-of-pocket expenses
incurred in connection with the Merger or otherwise arising out of the retention
of the Financial Advisor under the Engagement Letter.
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<PAGE> 25
The Company has also agreed to indemnify the Financial Advisor and certain
related persons to the full extent lawful against certain liabilities, including
certain liabilities under the federal securities laws arising out of its
engagement or the Merger.
The Financial Advisor is an internationally recognized investment banking
firm experienced in providing advice in connection with mergers and acquisitions
and related transactions. The Financial Advisor and its affiliates may actively
trade securities of the Company for their own account or the account of their
customers and, accordingly, may from time to time hold a long or short position
in such securities.
Position of Parent, International and Purchaser
Parent, International and the Purchaser had no involvement in the
Independent Committee's evaluation of the fairness of the Merger Consideration
to the Public Stockholders and none of such parties has undertaken any formal
evaluation of its own as to the fairness of the Merger Consideration. Parent,
International and Purchaser, however, have considered the factors set forth
above under "-- Determinations of the Independent Committee and the Board;
Fairness of the Merger" and "-- Opinion of Financial Advisor" and based on such
factors, Parent, International and Purchaser have determined that the Merger
Consideration is fair to and in the best interests of the Public Stockholders.
In connection with their consideration of the determination by the Independent
Committee and, as part of their determination with respect to the fairness of
the consideration to be received by the Public Stockholders pursuant to the
Merger Agreement, Parent, International and Purchaser adopted the conclusion,
and the analyses underlying such conclusion, of the Independent Committee,
based upon their view as to the reasonableness of such analyses.
In view of the wide variety of factors considered in connection with their
evaluation of the Merger, Parent, International and the Purchaser did not find
it practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the individual factors, or determine that any factor was of
particular importance, in reaching their determination. Rather, Parent,
International and Purchaser viewed their position as being based on the totality
of the information presented and considered by them.
Interests of Certain Persons in the Merger
Certain members of the Board and of the Company's management have
interests, described herein, that present them with potential conflicts of
interest in connection with the Merger. The Board is aware of the conflicts
summarized below and considered them along with the other matters described
under "--Determinations of the Independent Committee and the Board; Fairness of
the Merger."
Interests in Common Stock and Options. At the Effective Time, each
outstanding Option granted under the Stock Option Plan or Option Agreement,
whether or not vested, will be terminated and, in exchange for such Option, the
holder will be entitled to receive from the Company, for each share of Common
Stock subject to such Option, a cash payment equal to the excess, if any, of
the Merger Consideration over the applicable exercise price. Executive officers
and directors of the Company will receive an aggregate of approximately $3.0
million in respect of their Options.
Indemnification and Insurance. 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 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 Company, unless such
modification is required by law.
Parent or the Surviving Corporation shall maintain in effect for three
years from the Effective Time policies of directors' and officers' liability
insurance containing terms and conditions which are not less advantageous to the
insured than any such policies of the Company currently in effect on the date of
the Merger Agreement (the "Company Insurance Policies"), with respect to matters
occurring prior to the Effective Time, to the extent available, and having the
maximum available coverage under any such Company Insurance Policies; provided,
that
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<PAGE> 26
in no event shall Parent or the Surviving Corporation be required to pay annual
premiums for insurance in excess of that which is commercially reasonable; and
provided further, however, that if the annual premiums for such insurance
coverage exceed that which is commercially reasonable, Parent or the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage at
a cost which is commercially reasonable.
The officers of the Company immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation. The directors of Parent
will be the initial directors of the Surviving Corporation. See "The Merger
Agreement -- The Merger -- Certificate of Incorporation; By-laws; Officers and
Directors."
Security Ownership of Certain Beneficial Owners and Management
Prior to the initial public offering of 10,000,000 shares of Common Stock
of the Company on the NYSE on July 19, 1995, all of the Common Stock of the
Company was beneficially owned by Parent.
By virtue of its beneficial ownership of a majority of the outstanding
shares of the Company's Common Stock, Parent is in a position to control
substantially all corporate transactions requiring the vote of a majority of
Stockholders, including election of the entire Board, without the concurrence of
other Stockholders, and thereby is in a position to control the Company. Parent
is the beneficial owner of 23,400,000 shares of Common Stock, or approximately
70% of the issued and outstanding shares of Common Stock. Approximately 27% of
such shares are held of record by International, a wholly-owned subsidiary of
Parent, and the balance is held of record by Parent.
The following table sets certain information regarding the beneficial
ownership of the Company's voting securities as of March 30, 1998 by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each director and executive officer of
the Company; and (iii) all executive officers and directors of the Company as a
group (unless otherwise indicated, all addresses are c/o the Company at 2150
East Lake Cook Road, Buffalo Grove, Illinois 60089):
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name and Address Ownership Class(1)
- - - - ---------------
<S> <C> <C>
NV Koninklijke KNP BT 23,400,000(2) 70.0
KNP BT International B.V. 6,411,600 19.1
Rudolf A.J. Huyzer 466,670(3) 1.4
Frans H.J. Koffrie -- --
Harry G. Vreedenburgh -- --
George Dean -- --
Lorrence T. Kellar 1,000 *
Philip E. Beekman 6,000 *
Richard C. Dubin 169,140(4) *
Michael J. Miller 123,750(5) *
David Kirshner 107,835(6) *
Janhein H. Pieterse 156,300(7) *
All Directors and Executive Officers as
a Group (12 persons) 1,062,485(8) 3.2
</TABLE>
- - - - ----------
(1) An asterisk denotes beneficial ownership of 1% or less of the Common
Stock
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<PAGE> 27
(2) Includes 6,411,600 shares of Common Stock which are held of record
by International.
(3) Includes 446,670 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
(4) Includes 169,140 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
(5) Includes 123,750 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
(6) Includes 104,835 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
(7) Includes 155,000 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
(8) Includes 1,030,935 options granted under the 1995 Stock Option Plan
which are currently exercisable or exercisable within 60 days.
THE MERGER
Purpose and Structure of the Merger
The purpose of the Merger is for Parent to acquire beneficial ownership of
the entire equity interest in the Company for the reasons described in "Special
Factors -- Background to the Merger" and "Special Factors -- Determinations of
the Independent Committee and the Board; Fairness of the Merger."
The Merger has been structured as a merger of Purchaser with and into the
Company, with the Company being the Surviving Corporation. Parent structured the
transaction as a merger because it believed a merger to be the most efficient
means of acquiring the entire public interest in the Company in a single
transaction and because a merger provides flexibility with respect to certain
financial, operational and tax planning considerations. Prior to determining to
proceed with a merger proposal, Parent also considered a cash tender offer but
rejected it because there could be no assurance that Parent would acquire the
entire equity interest in the Company.
For additional information concerning the purpose of the Merger, see
"Special Factors -- Background to the Merger" and "Special Factors --
Determinations of the Independent Committee and the Board; Fairness of the
Merger."
Certain Consequences of the Merger
As a result of the Merger, Purchaser will be merged with and into the
Company and the Company, as the Surviving Corporation, will become a
wholly-owned subsidiary of Parent. The Certificate of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation and the By-laws of
Purchaser, as in effect immediately prior to the Effective Time, will be the
By-laws of the Surviving Corporation. The directors of Purchaser immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
and the officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation.
After the Merger, the Surviving Corporation will be a wholly owned
subsidiary of Parent. Accordingly, subject to applicable law and contractual
limitations, if any, Parent will be able to distribute, by way of dividend, loan
or otherwise, some or all of the assets of the Company, or otherwise make use of
such assets for investment in affiliates or other transactions as Parent may in
its sole discretion determine. Parent will realize all of the Company's profits
and losses, as well as any future deterioration or improvement in the Company's
earnings. In addition, Parent will be able to direct and control the policies of
the Company and its subsidiaries, including with respect to any extraordinary
corporate transaction such as a merger, reorganization or liquidation involving
the Company or any of its subsidiaries, a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries, a change in the
capitalization or other changes in the Company's corporate structure or business
or the composition of the Company's Board or management, without taking into
account the current public minority equity interest.
Following consummation of the Merger, the Common Stock will be
deregistered under the Exchange Act and will no longer be publicly traded on the
NYSE. Ongoing disclosure requirements under the Exchange Act will be terminated
as well. Following the Merger, the Company's Public Stockholders will no longer
have any interest in, and will not be Stockholders of, the Company and,
therefore, will not participate in its future potential earnings and growth and
will not be subject to the risks associated with an investment in the Company.
Stockholders who properly perfect their statutory appraisal rights under
and in accordance with Section 262 of the DGCL will have the right to seek
appraisal of their Common Stock. See "-- Appraisal Rights."
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Plans for the Company After the Merger
Parent currently intends that following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they have been and are currently being conducted. It is
anticipated that Parent will from time to time evaluate and review the business,
operations and properties of the Surviving Corporation and make such changes as
are deemed appropriate.
Except as described in this Proxy Statement, Parent, International and the
Purchaser do not have any present plans or proposals involving the Company or
its subsidiaries which relate to or would result in an extraordinary corporate
transaction such as a merger, reorganization, or liquidation, or sale or
transfer of a material amount of assets, or any material change in the present
dividend policy, indebtedness or capitalization, or any other material change in
the Company's corporate structure or business. However, Parent will review
proposals or may propose the acquisition or disposition of assets or other
changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy which they consider to be in the
best interest of the Surviving Corporation and its stockholders.
Financing the Merger
The total amount of funds required to pay the Merger Consideration is
estimated to be approximately $138.5 million. Parent will ensure that the
Purchaser has sufficient funds to pay the Merger Consideration and will provide
for such funds from Parent's available cash or lines of credit. Approximately
$6.5 million will be required to pay holders of outstanding Options upon
cancellation of such Options and approximately $2.6 million will be required to
pay related fees and expenses of the Company and such amounts are expected to
be obtained from available cash of the Company.
Fees and Expenses
Estimated fees and expenses to be incurred by the Company in connection
with the Merger are as follows:
<TABLE>
<CAPTION>
<S> <C>
Investment Banker fees ....... $1,810,000
Commission filing fees ....... 27,696
Legal fees ................... 600,000
Accounting fees .............. 25,000
Printing and mailing expenses 75,000
Miscellaneous ................ 62,304
Total ........................ $2,600,000
</TABLE>
Accounting Treatment
The Merger will be accounted for by Parent in accordance with accounting
principles generally accepted in the Netherlands and comply with the financial
reporting requirements included in Part 9, Book 2 of the Dutch Civil Code. The
assets and liabilities and results of operations of the Company will be
consolidated into the assets and liabilities and results of operations of
Parent subsequent to the consummation of the Merger.
Certain Federal Income Tax Consequences to Stockholders
In the opinion of Winthrop, Stimson, Putnam & Roberts, the following are,
under currently applicable law, certain United States federal income tax
considerations generally applicable to the Merger.
This discussion addresses such considerations only as they apply to a
beneficial owner of shares of Common Stock that is (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created in or
under the laws of the United States or any political subdivision thereof or
therein, (iii) an estate the income of which is includible in gross income for
United States federal income tax purposes regardless of its source or (iv) a
trust the administration of which is subject to the primary supervision of a
court within the United States and for which one or more United States persons
have the authority to control all substantial decisions (a "U.S. Stockholder").
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<PAGE> 29
The tax treatment described herein may vary depending upon each U.S.
Stockholder's particular circumstances and tax position. Certain U.S.
Stockholders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, U.S. Stockholders that do not hold their shares as
capital assets and U.S. Stockholders that have acquired their existing stock
upon the exercise of options or otherwise as compensation) may be subject to
special rules not discussed below. No ruling from the Internal Revenue Service
(the "IRS") will be applied for with respect to the United States federal income
tax consequences discussed herein and, accordingly, there can be no assurance
that the IRS will agree with the conclusions stated herein. The discussion below
is based upon the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified so as
to result in United States federal income tax consequences different from those
discussed below. In addition, this discussion does not consider the effects of
any applicable state, local, foreign or other tax laws. Each U.S. Stockholder
should consult his, her or its own tax advisor as to the particular tax
consequences to such stockholder of the Merger, including the applicability and
effect of any state, local, foreign or other tax laws.
The receipt by a U.S. Stockholder of cash in exchange for Common Stock
pursuant to the Merger will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under applicable
state, local and foreign income and other tax laws. The tax consequences of such
receipt by a U.S. Stockholder may vary depending upon, among other things, the
particular circumstances of the U.S. Stockholder. In general, a U.S. Stockholder
will recognize gain or loss for United States federal income tax purposes equal
to the difference between the adjusted tax basis of his, her or its Common Stock
and the amount of cash received in exchange therefor in the Merger. If the
Common Stock is a capital asset in the hands of such U.S. Stockholder, such gain
or loss generally will be capital gain or loss that will be mid-term capital
gain or loss if the holding period for the Common Stock is more than one year
but not more than 18 months at the Effective Time, and generally will be
long-term capital gain or loss if the holding period for the Common Stock is
more than 18 months at the Effective Time. Generally, for U.S. Stockholders who
are individuals, mid-term capital gain will be subject to tax at a maximum rate
of 28% and long-term capital gain will be subject to a maximum rate of 20%.
The receipt of cash by a U.S. Stockholder of the Company pursuant to the
Merger may be subject to 31% "backup withholding" unless the stockholder (i) is
a corporation or comes within certain other exempt categories, or (ii) provides
a certified taxpayer identification number on Form W-9 and otherwise complies
with the backup withholding rules. Backup withholding is not an additional tax;
any amounts so withheld may be credited against the United States federal income
tax liability of the stockholder subject to the withholding.
The tax discussion set forth above is included for general information
only. Due to the individual nature of tax consequences, all Stockholders are
urged to consult their tax advisors as to the specific tax consequences to them
of the Merger, including the effects of applicable state, local or foreign
income or other tax laws.
Regulatory Approvals
The Company, Parent, International and the Purchaser are not aware of any
governmental consents or approvals that are required prior to the parties'
consummation of the Merger. It is presently contemplated that if such
governmental consents and approvals are required, such consents and approvals
will be sought. There can be no assurance that any such consents and approvals
would be obtained.
Appraisal Rights
Under the DGCL, any Stockholder that does not wish to accept $13.75 per
share for his, her or its shares of Common Stock as provided in the Merger
Agreement has the right to dissent from the Merger and to seek an appraisal of,
and to be paid the fair value (exclusive of any element of value arising from
the accomplishment or expectation of the Merger) for the shares of Common Stock,
provided that such stockholder complies with the provisions of Section 262 of
the DGCL.
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<PAGE> 30
Holders of record of Common Stock who do not vote in favor of the Merger
Agreement and who otherwise comply with the applicable statutory procedures will
be entitled to appraisal rights under Section 262 of the DGCL. A person having a
beneficial interest in shares of Common Stock held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL that is reprinted in its entirety as Annex III.
All references in Section 262 of the DGCL and in this summary to a "Stockholder"
or "holder" are to the record holder of the shares of Common Stock as to which
appraisal rights are asserted.
Under Section 262 of the DGCL, holders of shares of Common Stock
("Appraisal Shares") who follow the procedures set forth in Section 262 of the
DGCL will be entitled to have their Appraisal Shares appraised by the Delaware
Chancery Court and to receive payment in cash of the "fair value" of such
Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court.
Under Section 262 of the DGCL, where a proposed merger is to be submitted
for approval at a meeting of Stockholders, the corporation, not less than 20
days prior to the meeting, must notify each of its Stockholders who was a
Stockholder on the record date for such meeting with respect to shares for which
appraisal rights are available, that appraisal rights are so available, and must
include in such notice a copy of Section 262 of the DGCL.
This Proxy Statement constitutes such notice to the holders of Appraisal
Shares and the applicable statutory provisions of the DGCL are attached to this
Proxy Statement as Annex III. Any Stockholder who wishes to exercise such
appraisal rights or that wishes to preserve his, her or its right to do so
should review the following discussion and Annex III carefully, because failure
to timely and properly comply with the procedures therein specified will result
in the loss of appraisal rights under the DGCL.
A holder of Appraisal Shares wishing to exercise such holder's appraisal
rights (i) must not vote in favor of the Merger Agreement or consent thereto in
writing (including by returning a signed Proxy without indicating any voting
instructions as to the Proposal) and (ii) must deliver to the Company prior to
the vote on the Merger Agreement at the Special Meeting, a written demand for
appraisal of such holder's Appraisal Shares. This written demand for appraisal
must be in addition to and separate from any proxy or vote abstaining from or
against the Merger. This demand must reasonably inform the Company of the
identity of the Stockholder and of the Stockholder's intent thereby to demand
appraisal of his, her or its shares. A holder of Appraisal Shares wishing to
exercise such holder's appraisal rights must be the record holder of such
Appraisal Shares on the date the written demand for appraisal is made and must
continue to hold such Appraisal Shares until the consummation of the Merger.
Accordingly, a holder of Appraisal Shares who is the record holder of Appraisal
Shares on the date the written demand for appraisal is made, but who thereafter
transfers such Appraisal Shares prior to consummation of the Merger, will lose
any right to appraisal in respect of such Appraisal Shares.
Only a holder of record of Appraisal Shares is entitled to assert
appraisal rights for the Appraisal Shares registered in that holder's name. A
demand for appraisal should be executed by or on behalf of the holder of record,
fully and correctly, as such holder's name appears on such holder's stock
certificates. If the Appraisal Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the Appraisal Shares are owned of record
by more than one owner as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or officers. A record holder such as a broker who holds
Appraisal Shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the Appraisal Shares held for one or more beneficial
owners while not exercising such rights with respect to the Appraisal Shares
held for other beneficial owners; in such case, the written demand should set
forth the number of Appraisal Shares as to which appraisal is sought.
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<PAGE> 31
When no number of Appraisal Shares is expressly mentioned, the demand will be
presumed to cover all Appraisal Shares in brokerage accounts or other nominee
forms and those who wish to exercise Appraisal Rights under Section 262 of the
DGCL are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee.
All written demands for appraisal should be sent or delivered to Thomas F.
Cullen, Vice President, General Counsel and Secretary of the Company at BT
Office Products International, Inc., 2150 East Lake Cook Road, Suite 590,
Buffalo Grove, Illinois 60089.
Within ten days after the consummation of the Merger, the Company will
notify each Stockholder that has properly asserted appraisal rights under
Section 262 of the DGCL and that has not voted in favor of the Merger Agreement
of the date the Merger became effective.
Within 120 days after the consummation of the Merger, but not thereafter,
the Company or any Stockholder who has complied with the statutory requirements
summarized above may file a petition in the Delaware Chancery Court demanding a
determination of the fair value of the Appraisal Shares that are entitled to
appraisal rights. The Company is under no obligation to and has no present
intention to file a petition with respect to the appraisal of the fair value of
the Appraisal Shares that are entitled to appraisal rights. Accordingly, it will
be the obligation of Stockholders wishing to assert appraisal rights to initiate
all necessary action to perfect their appraisal rights within the time
prescribed in Section 262 of the DGCL.
Within 120 days after the consummation of the Merger, any Stockholder that
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of Appraisal Shares not voted in favor of adoption of
the Merger Agreement and with respect to which demands for appraisal have been
received and the aggregate number of holders of such Appraisal Shares. Such
statements must be mailed within 10 days after a written request therefor has
been received by the Company, or within 10 days after expiration of the period
for delivery of demands for appraisal under Section 262 of the DGCL, whichever
is later.
If a petition for an appraisal is filed on a timely basis, after a hearing
on such petition, of which the Register in Chancery (if so ordered by the
Delaware Chancery Court) shall give notice to Stockholders, the Delaware
Chancery Court will determine the Stockholders entitled to appraisal rights and
will appraise the "fair value" of their Appraisal Shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. Stockholders considering seeking appraisal
should be aware that the fair value of their Appraisal Shares as determined
under Section 262 of the DGCL could be more than, the same as or less than the
value of the consideration they would receive pursuant to the Merger Agreement
if they did not seek appraisal of their Appraisal Shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262 of the DGCL. The
Delaware Supreme Court has stated, however, that "proof of value by any
techniques or methods that are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if any,
to be paid upon the amounts to be received by Stockholders whose Appraisal
Shares have been appraised. The costs of the action may be determined by the
Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
Court deems equitable. The Delaware Chancery Court may also order that all or a
portion of the expenses incurred by any Stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares that has duly demanded an appraisal in
compliance with Section 262 of the DGCL will not, after the consummation of the
Merger, be entitled to vote the Appraisal Shares subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those Appraisal Shares (except dividends or other distributions payable to
holders of record of Appraisal Shares as of a record date prior to the
consummation of the Merger).
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<PAGE> 32
If any Stockholder that properly demands appraisal of his, her or its
Appraisal Shares under Section 262 of the DGCL fails to perfect, or effectively
withdraws or loses, his, her or its right to appraisal, as provided in Section
262 of the DGCL, the Appraisal Shares of such stockholder will be converted into
the right to receive the consideration receivable with respect to such Appraisal
Shares in accordance with the Merger Agreement. A stockholder will fail to
perfect, or effectively lose or withdraw, his, her or its right to appraisal if,
among other things, no petition for appraisal is filed within 120 days after the
consummation of the Merger, or if such Stockholder delivers to the Company a
written withdrawal of his, her or its demand for appraisal. Any such attempt to
withdraw an appraisal demand more than 60 days after the consummation of the
Merger will require the written approval of the Company.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights (in which
event a Stockholder will be entitled to receive the consideration receivable
with respect to his, her or its Appraisal Shares in accordance with the Merger
Agreement).
THE MERGER AGREEMENT
The following is a brief summary of certain material provisions of the
Merger Agreement that is attached as Annex I to this Proxy Statement and
incorporated herein by reference. Such summary does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement. All
capitalized terms used herein and not defined are used as defined in the Merger
Agreement. Stockholders are urged to review the Merger Agreement carefully and
in its entirety.
The Merger
In General. The Merger Agreement provides that, following the approval and
adoption of the Merger Agreement by the affirmative vote of (i) a majority of
the shares of Common Stock outstanding and (ii) a majority of the shares held by
the Public Stockholders that are voted at the Special Meeting and the
satisfaction or waiver of the other conditions to the Merger, Purchaser will be
merged with and into the Company, the separate existence of Purchaser will cease
and the Company will be the Surviving Corporation. Following the Merger, the
Surviving Corporation will be a wholly-owned subsidiary of Parent. As a result
of the Merger, all the rights, privileges, powers and franchises of the Company
and Purchaser will vest in the Surviving Corporation and all restrictions,
liabilities and duties of the Company and Purchaser will become the
restrictions, liabilities and duties of the Surviving Corporation.
Effective Time. The Merger Agreement provides that, as soon as practicable
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of all conditions to the Merger, the Company and Purchaser
will file a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required by the DGCL in
connection with the Merger, and the Merger will become effective upon such
filing or at such later time as is specified in such certificate of merger.
Conversion of Securities. At the Effective Time, (i) each outstanding
share of Common Stock held by the Company or any wholly owned subsidiary of the
Company as treasury stock immediately prior to the Effective Time shall be
canceled and no payment shall be made with respect thereto; (ii) outstanding
shares of Common Stock held by Parent and International immediately prior to the
Effective Time shall be converted into fully paid and non-assessable shares of
common stock of the Surviving Corporation at a rate of one share of Common Stock
of the Surviving Corporation for each 23,400 shares of Common Stock owned by
Parent and International, respectively; (iii) each share of common stock of
Purchaser outstanding immediately prior to the Effective Time will be canceled;
and (iv) each share of Common Stock outstanding immediately prior to the
Effective Time shall, except as otherwise provided in (i), (ii) and (iii) above
or as provided in the following paragraph, be converted into the right to
receive the Merger Consideration.
Shares of Common Stock outstanding immediately prior to the Effective Time
and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has delivered a written demand for appraisal of such
shares in accordance with Section 262 of the DGCL shall not be converted into a
right to receive the Merger Consideration, if any, unless such holder fails to
perfect, withdraws or otherwise loses his, her or its right to appraisal.
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<PAGE> 33
If after the Effective Time such holder fails to perfect, withdraws or loses
his, her or its right to appraisal, such shares shall be treated as if they had
been converted as of the Effective Time into a right to receive the Merger
Consideration. See "The Merger -- Appraisal Rights."
Certificate of Incorporation; By-laws; Officers and Directors. At the
Effective time, the directors ofthe Purchaser immediately prior to the
Effective Time will become the directors, and the officers of the Company
immediately prior to the Effective Time will become the officers, of the
Surviving Corporation until the earlier of their death, resignation or removal
or until their respective successors are duly elected or appointed and
qualified, as the case may be. At the Effective Time, the Certificate of
Incorporation and By-laws of the Purchaser as in effect immediately prior to
the Effective Time, will be the Certificate of Incorporation and By-laws of the
Surviving Corporation until thereafter changed or amended as provided therein
or with applicable law.
Exchange of Certificates. As soon as practicable after the Effective Time,
an exchange agent designated by Parent (the "Exchange Agent") will mail to each
holder of shares of Common Stock a letter of transmittal for use in effecting
the surrender of the certificates representing shares of Common Stock (the
"Certificates") in exchange for the Merger Consideration. The letter of
transmittal shall specify that the delivery shall be effected and risk of loss
and title shall pass only upon proper delivery of the Certificates to the
Exchange Agent. Upon surrender of a Certificate to the Exchange Agent, together
with a duly executed letter of transmittal and any other required documents, the
holder of such shares will be entitled to receive the Merger Consideration and
until so surrendered, each such Certificate shall, after the Effective Time,
represent for all purposes, only the right to receive the Merger Consideration.
After the Effective Time, holders of Certificates will have no right to vote or
to receive any dividends or other distributions with respect to any shares of
Common Stock, other than any distributions payable to holders of record as of a
date prior to the Effective Time, and shall have no other rights other than as
provided in the Merger Agreement or by applicable law. After the Effective Time,
there shall be no further registration of transfers of shares of Common Stock.
If, after the Effective Time, certificates representing shares of Common Stock
are presented to the Surviving Corporation, they shall be canceled and exchanged
for the Merger Consideration provided for, and in accordance with the procedures
set forth, above.
If any portion of the Merger Consideration is to be paid to a Person other
than the registered holder of the shares of Common Stock represented by the
Certificate or Certificates surrendered in exchange therefor, it shall be a
condition to such payment that the Certificate or Certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall: (i) pay to the Exchange Agent any
transfer or other taxes required as a result of such payment to a Person other
than the registered holder of such Common Stock; or (ii) establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
Any portion of the Merger Consideration made available to the Exchange
Agent that remains unclaimed by the holders of shares of Common Stock six months
after the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any such holder who has not exchanged his, her or its shares of
Common Stock for the Merger Payment prior to that time shall thereafter look
only to the Company for payment of the Merger Payment in respect of such shares.
Notwithstanding the foregoing, the Company shall not be liable to any holder of
shares of Common Stock for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Common Stock five years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of the Company free and clear of any claims
or interest of any Person previously entitled thereto.
Any portion of the Merger Consideration made available to the Exchange
Agent to pay for Common Stock for which appraisal rights have been perfected
shall be delivered to the Surviving Corporation upon demand. The Exchange Agent
will be entitled to deduct and withhold from the Merger Consideration such
amounts as may be required under the Code. Such withheld amounts shall be
treated as having been paid to the holder of the Certificates in respect of
which such deduction and withholding was made by the Exchange Agent.
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<PAGE> 34
STOCKHOLDERS OF THE COMPANY SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO
THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL AND SHOULD NOT RETURN THEIR
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Dissenting Stockholders. Shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a holder (if any) who has
not voted in favor of the Merger or consented thereto in writing and who demands
appraisal for such shares of Company Common Stock in accordance with Section 262
of the DGCL shall not be converted into a right to receive the Merger
Consideration unless such holder fails to perfect or withdraws or otherwise
loses such holder's right to appraisal, if any. If, after the Effective Time,
such holder fails to perfect or withdraws or loses any such right to appraisal,
each such share of such holder shall be treated as a share that had been
converted as of the Effective Time into the right to receive Merger
Consideration. The Company shall give Parent (i) prompt notice of any demands
for appraisal of any shares of Company Common Stock received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without the
prior written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
Options. At the Effective Time,each outstanding Option granted under the
Stock Option Plan or Option Agreement, whether or not vested, will be
terminated and, in exchange for such Option, the holder will be entitled to
receive from the Company, for each share of Common Stock subject to such
Option, a cash payment equal to the excess, if any, of the Merger Consideration
over the applicable exercise price.
Representations and Warranties
The Merger Agreement contains various representations and warranties of
the Company, subject to certain exceptions, regarding the Company and the
Subsidiaries as to, among other things: (i) due organization, existence, good
standing, corporate power and authority, and qualifications or licensing to do
business; (ii) the requisite corporate power, authorization, execution, and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby and the validity and enforceability thereof; (iii) consents
and approvals necessary for consummation of the Merger; (iv) the absence of any
violations, breaches or defaults under charter documents, laws, orders or
agreements that would result from compliance with any provisions of the Merger
Agreement; (v) capitalization, including the number of shares of Common Stock
outstanding, the number of shares issuable upon the exercise of options and
warrants, and obligations to issue, transfer, sell or vote in any particular
manner any equity or debt instrument; (vi) the due organization, existence, good
standing, corporate power and authority, qualifications or licensing to do
business, and capitalization of the Subsidiaries; (vii) compliance with the
Securities Act and the Exchange Act in connection with the documents filed by
the Company with the Commission and the fair presentation, in conformity with
generally accepted accounting principles applied on a consistent basis, of the
consolidated financial position of the Company by the financial statements
included in the documents filed by the Company with the Commission; (viii) no
untrue statement of a material fact or omissions of any material facts in this
Proxy Statement or in the 13E-3 Statement; (ix) compliance of this Proxy
Statement with the applicable provisions of the Exchange Act; (x) the absence of
pending litigation or violation of any law that is reasonably likely to have a
Material Adverse Effect; (xi) certain tax matters including the filing and
correctness of material Tax Returns, the payment or accrual of all material
Taxes and the absence of any deficiency for any proposed Taxes; (xii) certain
employee benefit plan and ERISA matters including the compliance of such plans
with applicable law, the payment of all contributions and payments due and non
minimum funding requirements; (xiii) compliance with applicable laws; (xiv) the
absence of any undisclosed fees or commissions owed to investment bankers or
brokers; and (xv) approval by the Independent Committee of the Merger Agreement
and the Merger as well as receipt of the Financial Advisor's Opinion. For
purposes of the Merger Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, liabilities, results of operations or
financial condition of the Company and the Subsidiaries taken as a whole.
The Merger Agreement also contains various representations and warranties
of Parent, International and Purchaser as to, among other things: (i) due
organization, existence, good standing, corporate power and authority and
qualifications or licensing to do business; (ii) the requisite corporate power,
authorization, execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby and the validity and
enforceability thereof; (iii) consents and approvals necessary for consummation
of the Merger; (iv) the absence of any violations, breaches or defaults under
charter documents, laws, orders or agreements that would result from
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<PAGE> 35
compliance with any provisions of the Merger Agreement; (v) no untrue statement
of a material fact or omissions of any material facts in this Proxy Statement or
in the 13E-3 Statement; (vi) the absence of any undisclosed fees or commissions
owed to investment bankers or brokers; and (vii) absence of litigation that
would reasonably be expected to have a material adverse effect on the ability of
Parent, International or Purchaser to perform their respective obligations under
the Merger Agreement.
Certain Covenants
The Company has also agreed that until the Effective Time, except as
contemplated by the Merger Agreement:
(i) it will, and will ensure that each of its Subsidiaries, operate
the businesses conducted by it in the ordinary course and usual course,
and will use its reasonable efforts to preserve intact its present
business organizations, keep available the services of its present
officers and key employees and preserve its relationships with material
customers and suppliers and others having business dealings with it to the
end that its goodwill and ongoing business will not be impaired at the
Effective Time;
(ii) it will not adopt or propose any change in its Certificate of
Incorporation or By-laws;
(iii) it will not, and will not permit any Subsidiary to, merge or
consolidate with any other Person or acquire or agree to acquire a
substantial portion of assets of any other Person except in the ordinary
course of business consistent with past practice;
(iv) it will not, and will not permit any Subsidiary to, sell,
lease, license or otherwise dispose of any material assets or property
except in the ordinary course consistent with past practice;
(v) it will not, and will not permit any Subsidiary to, (a) declare
or pay any dividends on or make other distributions in respect of any of
its capital stock; (b) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (c) repurchase, redeem or otherwise acquire any share of
its capital stock, or (d) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any share of its capital stock of any
class or any securities convertible into, or any rights, warrants or
options to acquire, any such shares or convertible securities;
(vi) it will not, and will not permit any Subsidiary to, other than
in the ordinary course of business consistent with prior practice, incur
any indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities of the Company or any Subsidiary or
guarantee any debt securities of others; and
(vii) it will not, and will not permit any Subsidiary to, (a) adopt,
amend or terminate any material employee benefit plan or (b) grant to any
executive officer any increase in compensation or in severance or
termination pay, or enter into or amend any employment, severance or
similar agreement, arrangement or plan with any executive officer, except
for normal increases in compensation in the ordinary course of business.
In addition, the Company has agreed that it will not, and will not permit
any Subsidiary to, agree or commit to do any of the foregoing and will not, and
will not permit any Subsidiary to: (i) take or agree or commit to take any
action that would result in any of the representations and warranties of the
Company under the Merger Agreement becoming untrue; or (ii) take or agree to
commit to take any action that would result in any of the conditions to the
Merger not being satisfied.
Announcement. Neither the Company, on the one hand, nor Parent,
International and Purchaser, on the other hand, will issue any press release or
otherwise make any public statement with respect to the Merger Agreement and the
Merger without the prior consent of the other, except as may be required by
applicable law or stock exchange regulation.
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<PAGE> 36
No Solicitation. Under the Merger Agreement, the Company and the
Subsidiaries have agreed that until the Effective Time, the Company and the
Subsidiaries and the officers, directors, employees or other agents of the
Company and the Subsidiaries will not, directly or indirectly, take any action
to solicit, initiate or take any action knowingly to facilitate the submission
of any Acquisition Proposal or, subject to the fiduciary duties of the Board of
Directors under applicable law as advised by counsel to the Company, engage in
negotiations with, or disclose any nonpublic information relating to the Company
or any Subsidiary or afford access to the properties, books or records of the
Company or any Subsidiary to, any Person, except to customers and suppliers of
the Company and the Subsidiaries in the ordinary course of business. The Company
has also agreed to promptly notify Parent after receipt of any Acquisition
Proposal or any indication that any Person is considering making an Acquisition
Proposal or any request for nonpublic information relating to the Company or any
Subsidiary or for access to the properties, books or records of the Company or
any Subsidiary by any Person that may be considering making, or has made, an
Acquisition Proposal and to keep Parent fully informed of the status and,
subject to the fiduciary duties of the Board of Directors of the Company under
the DGCL, details of any such Acquisition Proposal, indication or request. For
purposes of the foregoing, "Acquisition Proposal" means any offer or proposal
for, or any indication of interest in, a merger or other business combination
involving the Company or any Subsidiary or the acquisition of any equity
interest in, any voting securities of, or a substantial portion of the assets
of, the Company or any Subsidiary, other than the transactions contemplated by
the Merger Agreement.
Notification of Certain Matters. The Company, on the one hand, and Parent,
on the other hand, agree to give prompt notice to the other party of (i) the
occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence, of
which would be likely to cause any representation or warranty contained in the
Merger Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time and (ii) any material failure of the Company, or Parent,
International or Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
the Merger Agreement.
Director and Officer Liability. 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 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 Company, unless such modification is
required by law. Parent has guaranteed the obligations of the Company under
these provisions.
Parent or the Surviving Corporation shall maintain in effect for three
years from the Effective Time policies of directors' and officers' liability
insurance containing terms and conditions which are not less advantageous to the
insured than any such policies of the Company currently in effect on the date of
this Agreement (the "Company Insurance Policies"), with respect to matters
occurring prior to the Effective Time, to the extent available, and having the
maximum available coverage under any such Company Insurance Policies; provided,
that in no event shall Parent or the Surviving Corporation be required to pay
annual premiums for insurance in excess of that which is commercially
reasonable; and provided further, however, that if the annual premiums for such
insurance coverage exceed that which is commercially reasonable, Parent or the
Surviving Corporation shall be obligated to obtain a policy with the greatest
coverage at a cost which is commercially reasonable.
Conditions to the Merger
Conditions to the Obligations of Parent, International and Purchaser. The
obligations of Parent, International and Purchaser to consummate the Merger are
subject to the satisfaction of the following conditions:
(i) The representations and warranties of the Company contained in
the Merger Agreement shall be true and correct in all material respects at
and as of the Effective Time as though made at and as of the Effective
Time, except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty
shall have been true and correct in all material respects as of such date;
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<PAGE> 37
(ii) The Company shall have performed and complied in all material
respects with all of its undertakings and agreements required by the
Merger Agreement to be performed or complied with by it prior to or at the
closing;
(iii) No injunction, restraining order or decree of any governmental
authority shall be in effect, no statute, rule or regulation shall have
been enacted by a governmental authority and no action, suit or proceeding
shall have been instituted or threatened that prevents the consummation of
the Merger or materially changes the transactions contemplated under the
Merger Agreement;
(iv) All consents, approvals and authorizations, and all material
filings with and notifications of governmental entities or other entities
which regulate the businesses of the Company or any Subsidiary, necessary
on the part of the Company or any Subsidiary, to the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby shall have been obtained or effected or filed;
(v) Except as set forth in the Disclosure Letter (as defined in the
Merger Agreement) dated June 2, 1998 or as set forth in the Company's
Commission reports, there shall have been no material adverse change since
December 31, 1997 in the business, assets, liabilities, results of
operations or financial condition of the Company and any Subsidiary, taken
as a whole; and
(vi) The Merger Agreement shall have been approved and adopted by
the affirmative vote of a majority of the shares of Common Stock held by
Public Stockholders that are voted at the Special Meeting.
Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the satisfaction of the
following conditions:
(i) The representations and warranties of Parent, International and
Purchaser contained in the Merger Agreement shall be true and correct in
all material respects at and as of the Effective Time as though made at
and as of the Effective Time, except to the extent that any such
representation or warranty is made as of a specified date, in which case
such representation or warranty shall have been true and correct in all
material respects as of such date;
(ii) Each of Parent, International and Purchaser each shall have
preformed and complied in all material respects with all of its
undertakings and agreements required by this Agreement to be performed or
complied with by Parent and Purchaser prior to or at the closing;
(iii) No injunction, restraining order or decree of any governmental
authority shall be in effect no statute, rule or regulation shall have
been enacted by a governmental authority and no action, suit or proceeding
shall have been instituted or threatened, that prevents the consummation
of the Merger or materially changes the transactions contemplated under
the Merger Agreement;
(iv) All consents, approvals and authorizations, and all material
filings with and notifications of governmental entities or other entities
which regulate the businesses of Parent, International or Purchaser,
necessary on the part of Parent or Purchaser, to the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby shall have been obtained or effected or filed;
(v) The Merger Agreement shall have been approved and adopted by the
affirmative vote of (i) a majority of the shares of Common Stock
outstanding and (ii) majority of the shares held by Public Stockholders
that are voted at the Special Meeting; and
(vi) The Financial Advisor Opinion shall not have been withdrawn or
revoked.
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<PAGE> 38
Termination of the Merger Agreement
Termination. The Merger Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of the Merger Agreement by the Stockholders of the Company) by:
(i) mutual written consent of the Boards of Directors of Parent,
International and Purchaser and the Board of the Company upon
recommendation of the Independent Committee;
(ii) either the Company upon the recommendation of the Independent
Committee, on the one hand, or Parent, International and Purchaser, on the
other hand, if the Merger has not been consummated by November 30, 1998;
(iii) either the Company upon the recommendation of the Independent
Committee, on the one hand, or Parent, International and Purchaser, on the
other hand, if prior to the consummation of the Merger, the Independent
Committee shall have withdrawn or modified or changed in any manner
adverse to Parent or Purchaser its approval of the Merger Agreement or the
Merger after having concluded in good faith after consultation with
independent legal counsel that there is reasonable probability that the
failure to take such action would result in a violation of fiduciary
obligations under applicable law; and
(iv) either the Company upon the recommendation of the Independent
Committee, on the one hand, or Parent, International and Purchaser, on the
other hand, if the Special Meeting shall have been held and the Public
Stockholders of the Company shall have failed to approve and adopt the
Merger Agreement and the Merger at such meeting;
Effect of Termination. If the Merger Agreement is terminated in accordance
with its terms, it shall become void and of no effect with no liability on the
part of any party thereto, except that the agreements contained in the Merger
Agreement with respect to termination costs and expenses shall survive the
termination thereof.
Fees and Expenses
Except as contemplated by the Merger Agreement, all costs and expenses
incurred in connection with the Merger Agreement and the consummation of the
transactions contemplated thereby will be paid by the party incurring such
expenses.
Amendment; Waiver
The Merger Agreement may be amended in writing by the Company, Parent,
International or Purchaser; provided, however, that after adoption of the Merger
Agreement and the Merger by the Stockholders of the Company no such amendment
may be made without the further approval of the Stockholders of the Company
except to the extent permitted by Delaware Law. Notwithstanding the foregoing,
any amendment of the Merger Agreement on behalf of the Company shall be subject
to the approval of the Board of the Company upon the recommendation of the
Independent Committee.
At any time prior to the Effective Time, whether before or after the
Special Meeting, Parent by action taken by its Board of Directors or the
Company, by action taken by its Board upon the recommendation of the Independent
Committee, may (i) extend the time for the performance of any of the obligations
or other acts of any other party hereto or (ii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party by a duly authorized officer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with Parent
In the normal course of business, the Company, which was established as a
division of Parent's predecessor in 1990 to administer its office products
distribution businesses in the United States and Europe, and Parent and its
other affiliates have from time to time entered into various business
transactions and agreements, and the Company and its subsidiaries and Parent and
its affiliates may enter into additional material transactions in the future.
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The following is a summary of each of the material agreements between
the Company and Parent as well as all material transactions between the Company
and Parent and its other subsidiaries since January 1, 1996. Unless otherwise
expressly indicated, such transactions were not necessarily conducted on an
arm's length basis. Certain of the transactions are evidenced by agreements
which are summarized below.
In connection with Mr. Huyzer's relocation from The Netherlands to the
United States in 1994, the Company advanced Mr. Huyzer $1,017,928 for the
purchase of a residence in the Chicago area. The collateralized note evidencing
the advance provided that interest was payable quarterly and accrued at a rate
of 7.25% per annum beginning on November 6, 1994 with respect to $915,428 of the
principal amount thereof and beginning on January 1, 1995 with respect to the
balance of the principal amount. Principal has been repayable in quarterly
installments since September 1996 and thereafter until September 2024. As of
December 31, 1996, the aggregate principal amount outstanding under such note
was $850,000 and as of December 31, 1997, the aggregate principal amount
outstanding under such note was $650,000. The note was repaid in full in
April 1998. Mr. Huyzer served as President and Chief Executive Officer of the
Company from April 1995 until his retirement in August 1997.
Credit Facilities
The Company and certain of its European subsidiaries (the "European
Subsidiaries") entered into a credit agreement dated as of June 16, 1997 (the
"Affiliate Credit Agreement") with KNP BT Europcenter N.V. ("Europcenter"),
which facility expires in July 1999. Pursuant to the terms of the Affiliate
Credit Agreement, the Antilliana Credit Agreement, as modified by the Assignment
and Modification Agreement dated June 26, 1996 among the Company, Antilliana and
KNP BT Finance (USA), Inc., an affiliate of KNP BT, was terminated.
The Company currently has a commitment of NLG 80 million (approximately
$35 million) under the Affiliate Credit Agreement, which commitment is available
for borrowings to be used for the Company's European operations. Pursuant to the
terms of the Affiliate Credit Agreement, the European Subsidiaries may also lend
funds representing positive balances in certain cash management accounts of up
to NLG 20 million (approximately $10 million) to Europcenter.
Under the Affiliate Credit Agreement, loans are available in German Marks,
British Pounds, Netherlands Guilders, Swedish Kronor and any other currency
acceptable to the lender. Loans from Europcenter to the European Subsidiaries
bear interest at 1% over the applicable interbank rate as determined therein.
Loans from the European Subsidiaries to Europcenter bear interest at 1% less
than the applicable interbank rate as determined therein.
The Affiliate Credit Agreement contains certain events of default,
including Parent's failure to beneficially own more than 50% of the issued and
outstanding share capital of the Company. There is a commitment fee payable by
the Company on the unused portion of the commitment from Europcenter, which fee
fluctuates based on the Company's consolidated leverage ratio (consisting of the
ratio of consolidated debt to EBITDA) for the period of the four consecutive
fiscal quarters most recently ended as of a given date, adjusted on a pro forma
basis to give effect to material acquisitions and divestitures. The commitment
fee at December 31, 1997 was 0.3% of the unused commitment.
At December 31, 1997, the Company had outstanding loans payable to
Europcenter under the Affiliate Credit Agreement of $16.5 million and
Europcenter had outstanding loans payable to the European Subsidiaries of $9.6
million. The latter amount is included in cash and cash equivalents.
The Company, acting for itself and each of its wholly-owned U.S.
subsidiaries, entered into an amended and restated cash management agreement
dated as of June 16, 1997 (the "Cash Management Agreement") with Sengewald USA,
Inc. and KNP BT USA Holdings, Inc., each affiliates of Parent. The Cash
Management Agreement replaced the cash management agreement dated June 24, 1996
to which the Company and certain affiliates of Parent were parties.
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<PAGE> 40
Pursuant to the Cash Management Agreement, each of the parties other than
the Company invests cash representing positive balances in certain cash
management accounts with the Company and the Company provides overdraft
protection to these U.S. affiliates of Parent up to specified limits.
Under the Cash Management Agreement, investments each interest at the LIBO
rate as determined therein less .625% and loans from the Company bear interest
at the LIBO rate plus .625%. At December 31, 1997, the investment balance for
affiliate parties totaled $629,000. Each party to the Cash management Agreement
may terminate such agreement upon thirty days notice to the other parties
thereto and the Cash Management Agreement would terminate as to all parties
upon the occurrence of certain other events, including Parent's failure to own
more than 50% of the issued and outstanding share capital of the Company.
Registration Rights
Pursuant to the terms of a registration rights agreement (the
"Registration Rights Agreement") among the Company, Parent and International,
which agreement became effective upon completion of the Company's initial
public offering in July 1995, each of International and Parent has the right to
require the Company to register for public offering and sale all or a portion
of the Common Stock held by it from time to time (and, if pursuant to a
short-form registration statement, if available, on an unlimited number of
occasions). In addition, during the term of the Registration Rights Agreement,
each of International and Parent has the right to participate in any
registration of Common Stock initiated by the Company, subject to certain
limitations. The Company will pay all out-of-pocket expenses of any such
registrations, including reasonable fees and expenses of one counsel for
International and Parent, and will indemnify certain liabilities, including
liabilities under the federal securities laws, in connection therewith. Each of
International and Parent will pay all underwriting discounts and commissions
applicable to shares of Common Stock sold by it pursuant to any such
registrations. The rights of International and Parent under the Registration
Rights Agreement are transferable to any affiliate of Parent.
Tax Matters
The Company, Parent and certain of Parent's affiliates entered into a tax
matters agreement in connection with the Reorganization and the Company's
intitial public offering (the "Tax Matters Agreement") whereby Parent will
indemnify the Company for any taxes and any related interest, penalties or
other additions to tax ("Taxes") arising in any taxable year in respect of the
certain packaging manufacturing businesses (the "Packaging Businesses") in the
United States transferred by the Company to Parent in connection with the
Corporate Reorganization and their disposition in the Corporate Reorganization
and any Taxes arising any year with respect to the Company's intitial public
offering. Under the Tax Matters Agreement, Parent will also indemnify the
Company to the extent of any Taxes relating to its office products distribution
operations prior to the Corporate Reorganization in excess of certain
thresholds specified in the agreement. The computation of any increase in Taxes
and any resulting liability for indemnity payments will be determined after
giving effect to the tax adjustment otherwise giving rise to indemnification
and to any other net refunds of Taxes to which indemnity is provided to that
indemnified party.
The Tax Matters Agreement also provides for the treatment of such matters
as allocating overlap period Taxes, return preparation, refunds, audits and
controversies with tax authorities, sharing information and resolving
controversies between parties.
During the year ended December 31, 1997, the Company received
reimbursement of $287,677 under the Tax Matters Agreement, primarily
representing the Packaging Business' share of the 1991 to 1993 Internal Revenue
Service audit that was settled in early 1997. In addition, the Company made a
payment of $153,589 under the Tax Matters Agreement representing certain tax
benefits obtained by the Company which were attributable to the Packaging
Business.
Prior to the Corporate Reorganization, the Company and certain of its
subsidiaries, as well as the Packaging Businesses, had comprised a consolidated
United States federal income tax group. For periods following the Corporate
Reorganization, the Packaging Businesses will no longer be a part of the
Company's consolidated United States federal income group.
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Intellectual Property
Pursuant to a license agreement between Parent and the Company, which
became effective upon the completion of the Company's initial public offering
in July 1995, Parent has granted a royalty-free, perpetual license to the
Company and its subsidiaries to use the "BT" along with Parent's logo in
connection with the Company's office products distribution businesses. However,
the license to use such logo terminates upon the change of control of the
Company or upon the occurrence of certain other events.
Services
Parent and its subsidiaries have provided services to the Company and its
subsidiaries, including certain financial and treasury services, as well as
insurance, tax, legal and human resource services. In connection with such
services, the Company has paid fees to Parent. The Company has also provided
certain support services to Parent and its affiliates (including the Packaging
Businesses).
The Company and Parent entered into an Intercompany Services Agreement for
the continuing provision of such services, which agreement became effective upon
completion of the Company's initial public offering in July 1995. The agreement
has a one-year term and thereafter automatically renews for successive one year
periods unless earlier terminated by either party. Such agreement provides for
fees to be paid at rates determined on the basis of costs calculated in a manner
not inconsistent with past practices, if any, but no greater than the good faith
estimate of the fee that would be charged by an independent third party. At any
time during the term of the agreement, the Company or Parent may request that
Parent or the Company, as the case may be, provide additional or different
services or case providing one or more services then being provided.
The Company uses office space provided by Parent for certain of its
executive officers and employees in Parent's headquarters in Amsterdam. During
1997, the Company reimbursed Parent at market rates for the cost of such space.
Guaranties
Parent has guarantied certain obligations of the Company under various
leases for real property and equipment. Parent continues to maintain its
outstanding guaranties and provided certain additional guaranties pursuant to
the terms of an agreement for credit support dated as of June 15, 1995 (the
"Agreement for Credit Support") with the Company and certain of its
subsidiaries. Subject to the terms and conditions of the Agreement for Credit
Support, Parent agreed to provide from time to time until January 31, 1996,
directly or through one of its affiliates, guaranties of certain obligations of
the Company and its subsidiaries up to an aggregate principal amount of all such
guaranteed obligations outstanding as specified therein. Each of the Company and
such subsidiaries will reimburse any amounts paid by Parent under any guaranty
made by Parent under the Agreement for Credit Support. Pursuant to the terms of
the Agreement for Credit Support, the Company and such subsidiaries have agreed
to pay a guaranty fee to Parent of .25% per annum of the daily aggregate
principal amount of the guaranteed obligations outstanding for each day through
the earlier of the repayment of such obligations and the release of Parent with
respect to all guaranties. The Agreement for Credit Support contains certain
events of default which include Parent's failure to own, beneficially and of
record, more than 50% of the issued and outstanding share capital of the Company
(provided, however, that Parent is obligated under the Credit Agreement to give
45 days' notice to the Company of its intention to so reduce its ownership of
the Company's share capital). The Company had $10.1 million outstanding under
the Agreement for Credit Support at December 31, 1996. The carrying amount of
such guarantees was $10.3 million at December 31, 1997.
Sales to and Purchases From Affiliates
The Company has sold office products and related services to affiliates of
Parent. Such transactions generally were effected on terms comparable to those
available in transactions with unaffiliated parties. Revenue from such
transactions amounted to approximately $1.3 million for 1996 and $1.7 million
for 1997. In addition, the Company has occasionally purchased certain products
from Parent and its other affiliates (including the Packaging Businesses) for
resale. Such purchases totaled approximately $8.6 million for 1996 and $8.1
million for 1997. The Company expects to continue to engage in similar
affiliated party transactions on generally the same basis as it would engage in
such transactions with unaffiliated third parties.
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Leases
Veenman Kantoormachines B.V., Veenman Office Management B.V., Direct
Dealer Services Nederland B.V. and Repro Copiers Nederland B.V. lease one of
their facilities from an affiliate of Parent under an operating lease that
expires on September 30, 1999. Rental expense under such lease was $0.6 million
in 1996 and $0.5 million in 1997. Future total minimum lease payments are $1.0
million. BT Office Products Deutschland GmbH, formerly known as bax Burosysteme
Vertriebsgesellschaft mbH, an indirect wholly-owned subsidiary of the Company
acquired from Parent in 1996, leases one of its facilities from an affiliate of
Parent under an operating lease that expires on June 30, 1999. Rental expenses
under such lease was $0.3 million in 1997 and future total minimum lease
payments are $0.4 million.
Article 403 Statement
Parent has issued an Article 403 Statement under Netherlands law for the
Company's Netherlands subsidiaries. Pursuant to such Article 403 Statement,
Parent is liable for claims of third parties against such companies. The
Company has agreed to indemnify Parent for any such liability.
Business Acquisition
In July 1996, the Company assumed control of bax Burosysteme
Vertriebsgesellschaft mbH ("Bax"), an office equipment distributor located in
Germany and an indirect wholly-owned subsidiary of Parent. In October 1996, the
Company completed the acquisition of Bax by acquiring the shares of Bax from
Parent for approximately $9.8 million in cash. Bax leases one of its facilities
from an affiliate of Parent under an operating lease that expires on June 30,
1999. Rental expense under such lease was $270,000 in 1996 and $0.3 million in
1997.
STOCKHOLDER LITIGATION
Five putative class action complaints have been filed in the Court of
Chancery of the State of Delaware, New Castle County, by persons claiming to
represent the Public Stockholders. Four of the complaints name several of the
Company's directors, the Company and Parent. Spitzer v. De Wit, et al., Civil
Action No. 16152NC (filed on January 22, 1998); Birnbaum v. De Wit, et al.,
Civil Action No. 16153NC (filed on January 22, 1998); David v. De Wit, et al.,
Civil Action No. 16155NC (filed on January 23, 1998); and Wright v. BT Office
Products [sic], et al., Civil Action No. 16156NC (filed on January 23, 1998). A
fifth complaint, naming several of the Company's directors, and the Company, was
filed on January 23, 1998: Howard Gunty, Inc. Profit Sharing & Trust v. BT
Office Products International, Inc., et al., Civil Action No. 16154NC. The
complaints allege, among other things, that Parent's purported proposal to
purchase the Company's publicly held stock for $10.50 a share was unfair and
inadequate; that Parent's proposal served no legitimate business purpose of the
Company; that Parent had breached its duty as a controlling shareholder of the
Company; and that the directors did not satisfy their duty of loyalty to the
Company. These matters were consolidated by the Court of Chancery on May 21,
1998.
The complaints seek, among other things, declaration of class action
status; preliminary and permanent injunctive relief; recission; monetary
damages; costs and attorneys' fees. The Company and Parent believe the
complaints are without merit, but have recently entered into a memorandum of
understanding involving all of these cases in order to minimize the expenses
associated with protracted litigation. The memorandum of understanding would
allow the various plaintiffs' shares of Company Stock to be purchased for $13.75
per share, would cause these actions to be dismissed with prejudice, and would
extinguish the plaintiffs' claims. This memorandum of understanding would be
reduced to a stipulation of settlement and would be subject to the review of the
Court of Chancery.
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MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock (NYSE symbol: BTF) commenced trading on the NYSE on July
19, 1995. Prior to that time, there was no market for the Common Stock. The
following table sets forth the range of high and low sale prices of the Common
Stock on the NYSE for the periods indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
First Quarter Fiscal Year 1996.............. $ 23 1/2 $ 13
Second Quarter Fiscal Year 1996............. 23 7/8 15 1/2
Third Quarter Fiscal Year 1996.............. 17 7/8 9 7/8
Fourth Quarter Fiscal Year 1996............. 14 8 1/8
First Quarter Fiscal Year 1997.............. $ 11 1/8 $ 6 7/8
Second Quarter Fiscal Year 1997............. 9 7 1/4
Third Quarter Fiscal Year 1997.............. 13 7 5/16
Fourth Quarter Fiscal Year 1997............. 12 7/16 6 11/16
First Quarter Fiscal Year 1998.............. $ 12 $ 7 5/16
Second Quarter Fiscal Year 1998
(through June 15, 1998) ................. $ 13 1/2 $ 11 7/16
</TABLE>
On January 21, 1998, the last trading date prior to public announcement of
Parents' proposal to the Company to acquire the shares of Common Stock of the
Public Stockholders, the high and low sales prices of the Common Stock on the
NYSE, were $10 1/2 and $ 9 9/16 per share, respectively. On [ ], 1998,
the last trading date before the printing of this Proxy Statement, the high and
low prices of the Common Stock on the New York Stock Exchange were $_______ and
$_______ per share, respectively.
Stockholders are urged to obtain current market quotations for the Common
Stock prior to making any decision with respect to the Merger.
As of the Record Date, there were [ ] shares of Common Stock outstanding
and [ ] record holders of Common Stock.
The Company has not declared or paid cash dividends on its Common Stock.
The Company currently anticipates that it will retain all available funds for
use in the operation and expansion of its business and does not anticipate
paying any cash dividends in the foreseeable future. Any future determination to
pay cash dividends will be at the discretion of the Company's Board of Directors
and will be dependent upon the Company's results of operations, financial
condition, contractual restrictions and other factors deemed relevant by the
Board of Directors.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company and its subsidiaries
for each of the two years ended December 31, 1997, incorporated by reference in
this Proxy Statement, have been audited by Coopers & Lybrand LLP, independent
auditors, as stated in their report incorporated herein by reference. The
financial statements of the Company and its subsidiaries for the year ended
December 31, 1995, incorporated by reference in this Proxy, have been audited by
Ernst & Young LLP, independent auditors, as stated in their report incorporated
herein by reference.
Representatives of Coopers & Lybrand LLP will attend the Special Meeting
and will have an opportunity to make a statement if they desire to do so and to
respond to appropriate questions from Stockholders.
37
<PAGE> 44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
(a) Current Report on Form 8-K filed pursuant to Section 13 of the
Exchange Act on February 26, 1998;
(b) Current Report on Form 8-K filed pursuant to Section 13 of the
Exchange Act on June 8, 1998.
(c) Annual Report on Form 10-K of the Company for its fiscal year
ended December 31, 1997, filed pursuant to Section 13 of the Exchange Act;
and
(d) Quarterly Report on Form 10-Q of the Company for its fiscal
quarter ended March 31, 1998, filed pursuant to Section 13 of the Exchange
Act.
In addition, all documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the date of the Special Meeting shall be deemed to
be incorporated herein by reference and shall be deemed to be a part hereof from
the date of filing of such documents (such documents, and the document
enumerated above, being herein referred to as "Incorporated Documents"). All
statements contained herein relating to the Company are qualified in their
entirety by reference to the more detailed information set forth in the
Incorporated Documents.
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
herein or in any other subsequently filed Incorporated Document modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as modified or superseded, to constitute a part of this
Proxy Statement.
NO PERSON IS AUTHORIZED TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT
OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH MATTERS NOT
CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF, AS THE CASE MAY
BE.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Proxy Statement has been delivered, upon the written or oral
request of such person, by first-class mail or other equally prompt means within
one business day of receipt of such request, a copy of any or all of the
Incorporated Documents, other than exhibits to such Incorporated Documents,
unless such exhibits are specifically incorporated by reference into the
information that this Proxy Statement incorporates. Written or oral requests for
such copies should be directed to: Thomas F. Cullen, Vice President, General
Counsel and Secretary of the Company at 2150 East Lake Cook Road, Buffalo Grove,
Illinois, 60089-1877, telephone number (847) 793-7500.
38
<PAGE> 45
ANNEX I
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
NV KONINKLIJKE KNP BT,
KNP BT INTERNATIONAL B.V.
BT OPI ACQUISITION CORP.
and
BT OFFICE PRODUCTS INTERNATIONAL, INC.
Dated as of June 2, 1998
================================================================================
<PAGE> 46
TABLE OF CONTENTS
Page
----
ARTICLE 1
SHAREHOLDERS' ACTION
Section 1.01 Proxy Statement; Other Filings.......................... I-1
Section 1.02 Meeting of Stockholders of the Company.................. I-1
Section 1.03 Legal Requirements for Merger........................... I-2
Section 1.04 Additional Agreements and Provisions.................... I-2
ARTICLE 2
THE MERGER
Section 2.01 The Merger.............................................. I-2
Section 2.02 Effective Time.......................................... I-2
Section 2.03 Closing................................................. I-2
Section 2.04 Certificate of Incorporation; By-laws; Officers and
Directors............................................... I-3
Section 2.05 Effect on Capital Stock................................. I-3
(a) Capital Stock of the Purchaser.......................... I-3
(b) Capital Stock of Company................................ I-3
(c) Cancellation of Treasury Stock.......................... I-3
(d) Capital Stock of Company Held by Parent or
International .......................................... I-3
Section 2.06 Dissenting Shares....................................... I-3
Section 2.07 Treatment of Options.................................... I-3
Section 2.08 Exchange of Certificates................................ I-4
(a) Exchange Agent.......................................... I-4
(b) Exchange Procedures..................................... I-4
(c) No Further Ownership Rights in Company Stock............ I-4
(d) Termination of Exchange Fund............................ I-4
(e) No Liability............................................ I-4
(f) Lost Certificates....................................... I-4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Organization of the Company and the Subsidiaries........ I-5
Section 3.02 Capitalization of the Company; Ownership................ I-5
Section 3.03 Subsidiaries of the Company............................. I-5
Section 3.04 Authorization........................................... I-5
Section 3.05 Fairness Opinion and Approval by the Independent
Committee............................................... I-6
Section 3.06 No Violations; Consents and Approvals................... I-6
Section 3.07 SEC Reports............................................. I-6
Section 3.08 Information Supplied.................................... I-7
Section 3.09 Litigation.............................................. I-7
Section 3.10 Compliance with Applicable Laws......................... I-7
Section 3.11 Brokers and Finders..................................... I-7
Section 3.12 Tax Matters............................................. I-7
Section 3.13 Employee Benefits....................................... I-7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PARENT, INTERNATIONAL AND THE PURCHASER
Section 4.01 Organization and Authority of Parent, International
and the Purchaser....................................... I-8
Section 4.02 Authorization........................................... I-8
I-i
<PAGE> 47
Section 4.03 No Violations; Consents and Approvals................... I-8
Section 4.04 Information in Proxy Statement; 13E-3 Statement......... I-8
Section 4.05 Brokers and Intermediaries.............................. I-9
Section 4.06 Litigation.............................................. I-9
Section 4.07 Financing............................................... I-9
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
Section 5.01 Conduct of Business..................................... I-9
(a) Ordinary Course......................................... I-9
(b) Dividends; Changes in Stock............................. I-9
(c) Governing Documents..................................... I-9
(d) No Acquisitions......................................... I-9
(e) No Dispositions......................................... I-10
(f) No Indebtedness......................................... I-10
(g) Employee Benefits; Executive Compensation............... I-10
(h) Other Business.......................................... I-10
Section 5.02 Announcement............................................ I-11
Section 5.03 No Solicitation......................................... I-11
Section 5.04 Notification of Certain Matters......................... I-11
Section 5.05 Directors' and Officers' Indemnification................ I-11
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.01 Conditions to Each Party's Obligation to Effect the
Merger.................................................. I-12
(a) No Injunction or Proceeding............................. I-12
(b) Consents................................................ I-12
(c) Approval of Holders of Company Common Stock............. I-12
Section 6.02 Conditions to the Obligation of the Company to
Effect the Merger....................................... I-12
(a) Representations and Warranties.......................... I-12
(b) Agreements.............................................. I-12
(c) Opinion of Financial Advisor............................ I-12
Section 6.03 Conditions to the Obligations of Parent,
International and the Purchaser to Effect the Merger.... I-12
(a) Representations and Warranties.......................... I-13
(b) Agreements.............................................. I-13
(c) No Material Adverse Change.............................. I-13
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination............................................. I-13
Section 7.02 Effect of Termination................................... I-13
Section 7.03 Amendment............................................... I-14
Section 7.04 Waiver.................................................. I-14
ARTICLE 8
MISCELLANEOUS
Section 8.01 Nonsurvival of Representations and Warranties........... I-14
Section 8.02 Expenses................................................ I-14
Section 8.03 Applicable Law.......................................... I-14
Section 8.04 Notices................................................. I-14
Section 8.05 Entire Agreement........................................ I-15
Section 8.06 Assignment.............................................. I-15
Section 8.07 Headings; References.................................... I-15
Section 8.08 Counterparts............................................ I-15
Section 8.09 No Third Party Beneficiaries............................ I-15
Section 8.10 Severability; Enforcement............................... I-16
I-ii
<PAGE> 48
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 2, 1998 (the "Agreement")
among BT Office Products International, Inc., a Delaware corporation (the
"Company"), NV Koninklijke KNP BT, a Netherlands corporation ("Parent"), KNP BT
International B.V., a Netherlands corporation and wholly owned subsidiary of
Parent ("International"), and BT OPI Acquisition Corp., a Delaware corporation
wholly owned by Parent and International (the "Purchaser").
WHEREAS, the Boards of Directors of the Purchaser, Parent and
International and the Board of Directors of the Company upon the recommendation
of its independent committee of disinterested members (the "Independent
Committee") have unanimously approved, and deem advisable and in the best
interests of their stockholders, the acquisition of the Company by Parent and
International;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, International, the Purchaser and the Company and Parent and
International as the stockholders of the Purchaser have each approved this
Agreement and the merger of the Purchaser with and into the Company in
accordance with the terms, and subject to the conditions of, this Agreement (the
"Merger") and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
SHAREHOLDERS' ACTION
Section 1.01 Proxy Statement; Other Filings. As promptly as practicable
after the date hereof, the Company shall prepare and file with the Securities
and Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and shall use its best efforts to have
cleared by the Commission, and promptly thereafter shall mail to its
stockholders, a proxy statement and form of proxy with respect to the meeting of
holders of Common Stock, par value $0.01 per share, of the Company ("Company
Common Stock"). The term "Proxy Statement" shall mean such proxy statement at
the time it initially is mailed to holders of Company Common Stock and all
amendments or supplements thereto, if any, similarly filed and mailed. As soon
as practicable after the date hereof the Purchaser shall promptly prepare and
file a Rule 13E-3 Transaction Statement pursuant to Rule 13e-3 under the
Exchange Act (together with any amendment or supplement thereto, the "13E-3
Statement"). The Company shall notify Parent and International promptly of the
receipt by it of any comments of the Commission and of any request by the
Commission for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent and International with copies of
all correspondence between it and its representatives, on the one hand, and the
Commission or the members of its staff, on the other hand, with respect to the
Proxy Statement. The Company, Parent, International and the Purchaser each shall
use its best efforts to obtain and furnish the information required to be
included in the Proxy Statement and the 13E-3 Statement and to respond promptly
to any comments made by the Commission with respect to the Proxy Statement and
the 13E-3 Statement and any preliminary version thereof.
Section 1.02 Meeting of Stockholders of the Company. Promptly after the
date hereof, the Company shall take all action necessary, in accordance with the
DGCL, its Certificate of Incorporation and By-Laws and the requirements of the
New York Stock Exchange, to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the adoption of this Agreement and the
Merger. In addition to the stockholder vote required to adopt and approve this
Agreement and the Merger by the DGCL, the adoption of this Agreement and the
Merger shall require the affirmative vote of a majority of shares held by Public
Stockholders (as defined herein) that are voted at such meeting of stockholders.
Subject to the fiduciary obligations of the Board of
<PAGE> 49
Directors of the Company under applicable law as advised by outside counsel, the
Proxy Statement shall contain the determinations of the Independent Committee
and the recommendation of the Board of Directors of the Company that the holders
of Company Common Stock vote to adopt and approve this Agreement and the Merger.
At any such meeting Parent and International shall vote, or cause to be voted,
in favor of the Merger all of the shares of Company Common Stock then owned by
Parent and International, respectively, or any subsidiary or affiliate of Parent
or International, respectively.
Section 1.03 Legal Requirements for Merger. (a) Parent, International and
the Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on Parent, International or the
Purchaser with respect to the Merger and will promptly cooperate with and
furnish information to the Company in connection with any such requirements
imposed upon the Company in connection with the Merger.
(b) The Company will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
the Merger and will promptly cooperate with and furnish information to Parent,
International and the Purchaser in connection with any such requirements imposed
upon Parent, International or the Purchaser in connection with the Merger.
Section 1.04 Additional Agreements and Provisions. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use its
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Effective Time (as hereinafter defined)
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation (as hereinafter defined) with
full title to all properties, assets, rights, approvals, immunities and
franchises of either the Company or the Purchaser, the proper officers and
directors of each corporation that is a party to this Agreement shall take all
such necessary action. The parties hereto agree to use their respective best
reasonable efforts to challenge any action, including using all best reasonable
efforts to have any order or injunction vacated or reversed, brought against any
of the parties hereto seeking a temporary restraining order or preliminary or
permanent injunctive relief which would prohibit, or materially interfere with,
the consummation of the transactions contemplated by this Agreement.
ARTICLE II
THE MERGER
Section 2.01 The Merger. At the Effective Time, upon the terms and subject
to the conditions set forth in this Agreement and in accordance with the DGCL,
the Purchaser shall be merged with and into the Company, the separate existence
of the Purchaser shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). The Merger shall have the effects as
provided by the DGCL and other applicable law.
Section 2.02 Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article 6, the parties
shall file with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or at such other time as is permissible in accordance with the DGCL
and as Parent and the Company shall agree and as specified in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time").
Section 2.03 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Winthrop, Stimson, Putnam & Roberts, One Battery Park
Plaza, New York, New York at 10:00 a.m. (New York City time) on the date of the
satisfaction of the conditions provided in Article 6, or at such other time and
place as the Company and Parent shall agree (the "Closing Date").
I-2
<PAGE> 50
Section 2.04 Certificate of Incorporation; By-laws; Officers and
Directors. Pursuant to the Merger: (a) the Certificate of Incorporation and
By-laws of the Purchaser as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation and By-laws of the Surviving
Corporation following the Merger until thereafter changed or amended as provided
therein and with applicable law; (b) the directors of the Purchaser immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
following the Merger and until the earlier of their death, resignation or
removal or until their respective successors are duly elected or appointed and
qualified; and (c) the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their death, resignation or removal or until their respective
successors are duly elected or appointed and qualified.
Section 2.05 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Parent,
International, the Purchaser or the holders of any shares of Company Common
Stock:
(a) Capital Stock of the Purchaser. Each share of Common Stock of the
Purchaser, par value $1.00 per share ("Purchaser Common Stock"), which is issued
and outstanding immediately prior to the Effective Time, shall be canceled.
(b) Capital Stock of Company. Subject to Sections 2.05(c), 2.05(d) and
2.06, each share of Company Common Stock which is issued and outstanding
immediately prior to the Effective Time shall be converted into and become a
right to receive $13.75 in cash (the "Merger Consideration") and, when so
converted, shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of Company Common
Stock shall, to the extent such certificate represents such shares, cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration allocable to the shares represented by such certificate upon
surrender of such certificate in accordance with Section 2.08.
(c) Cancellation of Treasury Stock. Any shares of Company Common Stock
that are owned immediately prior to the Effective Time by the Company or any
wholly owned subsidiary of the Company which constitutes treasury stock in the
hands of the holder thereof, shall be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto.
(d) Capital Stock of Company Held by Parent or International. Any shares
of Company Common Stock that are owned immediately prior to the Effective Time
by Parent or International shall be converted into fully paid and non-assessable
shares of common stock of the Surviving Corporation at a rate of one share of
common stock of the Surviving Corporation for each 23,400 shares of Company
Common Stock owned by Parent or International, respectively.
Section 2.06 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and held by a holder (if any) who has not voted in favor of
the Merger or consented thereto in writing and who demands appraisal for such
shares of Company Common Stock in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses such holder's right to appraisal, if any. If, after the Effective Time,
such holder fails to perfect or withdraws or loses any such right to appraisal,
each such share of such holder shall be treated as a share that had been
converted as of the Effective Time into the right to receive the Merger
Consideration, without interest, in accordance with Section 2.05(b). The Company
shall give Parent (i) prompt notice of any demands for appraisal of any shares
of Company Common Stock received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
Section 2.07 Treatment of Options. Prior to the Effective Time, the
Company will take all actions necessary to provide that, at the Effective Time,
each option to purchase shares of Company Common Stock (a "Company Stock
Option") granted under the BT Office Products International, Inc. 1995 Stock
Option Plan (the "Stock Option Plan") or the BT Office Products International,
Inc. Amended and Restated Non-Qualified Stock Option Agreement dated as of June
25, 1996 (the "Option Agreement"), whether or not vested, will be terminated
I-3
<PAGE> 51
and, in exchange for such Company Stock Option, the holder will be entitled to
receive from the Company, for each share of Company Common Stock subject to such
Company Stock Option, a cash payment equal to the excess, if any, of the Merger
Consideration over the applicable exercise price.
Section 2.08 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall appoint a
bank or trust company to act as exchange agent (the "Exchange Agent") for the
payment of the Merger Consideration. As of the Effective Time, Parent shall have
deposited with the Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Section 2.08, the
aggregate amount of cash payable pursuant to Section 2.05(b) hereof in exchange
for outstanding shares of Company Common Stock (the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the Exchange
Agent shall mail (or at the request of a holder of Company Common Stock, hand
deliver) to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive cash
pursuant to Section 2.05(b) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
representing such shares of Company Common Stock shall pass, only upon delivery
of the certificates representing such shares of Company Common Stock to the
Exchange Agent and shall be in such form and have such other provisions as the
Exchange Agent may reasonably specify), and instructions for use in effecting
the surrender of the certificates representing such shares of Company Common
Stock, in exchange for the Merger Consideration. Upon surrender to the Exchange
Agent of a certificate or certificates representing shares of Company Common
Stock and acceptance thereof by the Exchange Agent, the holder thereof shall be
entitled to the amount of cash into which the number of shares of Company Common
Stock previously represented by such certificate or certificates surrendered
shall have been converted pursuant to this Agreement. The Exchange Agent shall
accept such certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective Time,
there shall be no further transfer on the records of the Company or its transfer
agent of certificates representing shares of Company Common Stock and if such
certificates are presented to the Company for transfer, they shall be canceled
against delivery of the Merger Consideration allocable to the shares of Company
Common Stock represented by such certificate or certificates. If any Merger
Consideration is to be remitted to a name other than that in which the
certificate for the Company Common Stock surrendered for exchange is registered,
it shall be a condition of such exchange that the certificate so surrendered
shall be properly endorsed, with signature guaranteed, or otherwise in proper
form for transfer and that the person requesting such exchange shall pay to the
Company, or its transfer agent, any transfer or other taxes required by reason
of the payment of Merger Consideration to a name other than that of the
registered holder of the certificate surrendered, or establish to the
satisfaction of the Company or its transfer agent that such tax has been paid or
is not applicable. Until surrendered as contemplated by this Section 2.08 each
certificate for shares of Company Common Stock shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration allocable to the shares represented by such certificate
as contemplated by Section 2.05(b). No interest will be paid or will accrue on
any amount payable as Merger Consideration. Subject to completion of the
documentation referred to above, the Merger Consideration shall be paid at the
Effective Time to holders of Company Common Stock.
(c) No Further Ownership Rights in Company Stock. Merger Consideration
paid upon the surrender for exchange of certificates representing shares of
Company Common Stock in accordance with the terms of this Section 2.08 shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock represented by such certificates.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest and other income received by the Exchange Agent in
respect of all such funds) which remains undistributed to the holders of the
certificates representing shares of Company Common Stock for six months after
the Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any holders of shares of Company Common Stock prior to the Merger who have
not theretofore complied with this Section 2.08 shall thereafter look only to
the Surviving Corporation and only as general creditors thereof for payment of
their claim for Merger Consideration to which such holders may be entitled.
(e) No Liability. No party to this Agreement shall be liable to any Person
(as hereinafter defined) in respect of any amount from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Lost Certificates. In the event any certificate or certificates
representing shares of Company Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate or certificates to be lost, stolen or destroyed, the Exchange
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 Section 2.08, provided that the Person to whom the Merger
Consideration is paid shall, as a condition precedent to the payment thereof,
indemnify Parent in an agreement reasonably satisfactory to it against any claim
that may be made against Parent or the Company with respect to the certificate
claimed to have been lost, stolen or destroyed.
I-4
<PAGE> 52
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, International and the
Purchaser as follows:
Section 3.01 Organization of the Company and the Subsidiaries. The Company
and each of its Subsidiaries (as hereinafter defined) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all the requisite corporate power and
authority to carry on its business as now being conducted and to own, lease, use
and operate the properties owned and used by it. The Company and each of its
Subsidiaries is qualified or licensed and in good standing to do business in
each jurisdiction in which the nature of its business requires it to be so
qualified or licensed, except to the extent the failure to be so qualified or
licensed has not had, and would not reasonably be expected to have, a Material
Adverse Effect. The term "Material Adverse Effect" means a material adverse
effect of the business, assets, liabilities, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole. The term
"Subsidiary" means any corporation, joint venture, partnership, limited
liability company or other entity of which the Company, directly or indirectly,
owns or controls capital stock (or other equity interests) representing more
than fifty percent of the general voting power under ordinary circumstance of
such entity. The term "Person" means any individual, corporation, partnership,
trust or unincorporated organization or a government or any agency or political
subdivision thereof.
Section 3.02 Capitalization of the Company; Ownership. The authorized
capital stock of the Company consists of 90,000,000 shares of Company Common
Stock, of which 33,471,000 shares are issued and outstanding as of the date
hereof, and 10,000,000 shares of Preferred Stock, par value $.01 per share, of
which no shares are issued and outstanding as of the date hereof. All of the
issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable and free of preemptive
rights. Except for outstanding Company Stock Options, there are no outstanding
options, warrants or other rights of any kind to acquire (including preemptive
rights) any additional shares of capital stock of the Company or securities
convertible into or exchangeable for, or which otherwise confer on the holder
thereof any right to acquire, any such additional shares, nor is the Company
committed to issue any such option, warrant, right or security. Following the
Merger, the Company will have no obligation to issue, transfer or sell any
shares of its capital stock or other securities of the Company pursuant to any
employee benefit plan or otherwise.
Section 3.03 Subsidiaries of the Company. The only direct or indirect
Subsidiaries of the Company are as set forth on Schedule 3.03 to the disclosure
letter dated the date hereof and delivered by the Company to Parent (the
"Disclosure Letter"). All outstanding shares of capital stock or other equity
interests of each Subsidiary are owned by the Company free and clear of any and
all liens, claims, security interests or options, except for restrictions on
transfer under federal and state securities laws. All shares of capital stock of
each Subsidiary which is a corporation have been validly issued and are fully
paid and non-assessable. There are no outstanding options, warrants or other
rights of any kind to acquire (including preemptive rights) any additional
equity interests of any Subsidiary or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any additional equity interests of any Subsidiary, nor is any
Subsidiary committed to issue any such option, warrant, right or security. Other
than the Subsidiaries referred to in the first sentence of this Section 3.03,
the Company does not own, directly or indirectly, any equity interest in any
other corporation, joint venture, partnership, limited liability company or
other entity.
Section 3.04 Authorization. The Company has all requisite corporate power
and authority to enter into this Agreement and, subject to any necessary
approval of the Merger by the stockholders of the Company, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Company (other than the approval of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company). The Board of Directors of the Company has unanimously adopted
resolutions approving this Agreement and the Merger, determined that the terms
of the Merger are fair to, and in the best interests of, the Company's
stockholders and recommended that the Company's stockholders approve and adopt
this Agreement. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
the Parent, International and the Purchaser, constitutes the valid and binding
obligation of the Company, enforceable against the Company except
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as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
Section 3.05 Fairness Opinion and Approval by the Independent Committee.
On or prior to the date hereof, the Independent Committee (i) approved the terms
of this Agreement and the transactions contemplated hereby as they relate to the
stockholders (other than Parent, International and their affiliates) of the
Company (the "Public Stockholders"), including without limitation the Merger,
(ii) has determined that the Merger is fair to and in the best interest of the
Public Stockholders and (iii) recommended that the Board of Directors of the
Company approve and authorize this Agreement and such transactions. The
Independent Committee has received the opinion, dated as of the date hereof, of
BT Wolfensohn to the effect that the consideration to be received by the Public
Stockholders in the Merger is fair to such stockholders from a financial point
of view. Based on such opinion, and such other factors as it deemed relevant,
the Board of Directors of the Company has taken all of the actions set forth in
clauses in (i) and (ii) above, and has directed that this Agreement be submitted
to a vote at a meeting of stockholders.
Section 3.06 No Violations; Consents and Approvals.
(a) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) violate any provision of the Certificate of
Incorporation or By-Laws of the Company or any of its Subsidiaries, (ii)
conflict with, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or to the
imposition of any lien) under, or result in the acceleration or trigger of any
payment, time of payment, vesting or increase in the amount of any compensation
or benefit payable pursuant to, the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee or other evidence of indebtedness, lease,
license, contract, agreement, plan or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their assets may be bound or (iii) conflict with or violate any federal,
state, local or foreign order, writ, injunction, judgment, award, decree,
statute, law, rule or regulation (collectively, "Laws") applicable to the
Company, any of its Subsidiaries or any of their properties or assets, except in
the case of clauses (ii) or (iii) for such conflicts, violations, breaches,
defaults or liens which individually and in the aggregate would not have or
result in a Material Adverse Effect or materially impair or delay the
consummation of the transactions contemplated hereby.
(b) No filing or registration with, declaration or notification to,
or order, authorization, consent or approval of, any federal, state, local or
foreign court, legislative, executive or regulatory authority or agency (a
"Governmental Entity") or any other Person is required in connection with the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except (i)
applicable requirements under the Exchange Act, (ii) the filing of the
Certificate of Merger with the Secretary of State and (iii) such other consents,
approvals, orders, authorizations, notifications, registrations, declarations
and filings the failure of which to be obtained or made individually and in the
aggregate would not have or result in a Material Adverse Effect or materially
impair or delay the consummation of the transactions contemplated hereby.
Section 3.07 SEC Reports. The Company has filed all reports and schedules
(including without limitation proxy statements) required to be filed with the
Commission since December 31, 1996 (collectively, the "Company SEC Reports").
None of the Company SEC Reports, as of their respective dates (as amended
through the date hereof), contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Each of the balance sheets (including the related
notes) included in the Company SEC Reports presents fairly the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof, and the other related statements (including the related notes)
included therein present fairly the results of operations and cash flows of the
Company and its Subsidiaries for the respective periods or as of the respective
dates set forth therein, all in conformity with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein. All of the Company SEC Reports, as of their respective dates (as
amended through the date hereof), complied in all material respects with the
requirements of the Exchange Act and the applicable rules and regulations
thereunder.
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Section 3.08 Information Supplied. (a) The Proxy Statement, on the date
the Proxy Statement is mailed to stockholders of the Company and at the time of
the stockholder vote referred to in Section 6.01(c), will 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 the
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder. No representation
is made by the Company with respect to any information supplied by Parent,
International, the Purchaser or any of their affiliates (other than the Company
and its Subsidiaries) expressly for inclusion in the Proxy Statement or the
13E-3 Statement.
(b) The information supplied in writing by the Company specifically
for inclusion in the 13E-3 Statement, on the date the 13E-3 Statement is filed
with the Commission and at the time mailed to stockholders of the Company, will
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 the light of the circumstances under which they were
made, not misleading.
Section 3.09 Litigation. Except as disclosed in the Company SEC Reports or
as set forth on Schedule 3.09 of the Disclosure Letter, there is no action, suit
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary at law, in equity or otherwise, in, before, or by
any court or governmental agency or authority which is reasonably likely to have
a Material Adverse Effect.
Section 3.10 Compliance with Applicable Laws. Except as disclosed in the
SEC Reports, the businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect. No investigation or review by any Governmental Entity
with respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct the same, except for investigations or reviews which
individually or in the aggregate would not have a have a Material Adverse
Effect.
Section 3.11 Brokers and Finders. Other than BT Wolfensohn, neither the
Company nor any Subsidiary has employed any broker, finder, advisor or
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to a broker's, finder's or similar fee or commission in
connection therewith or upon the consummation thereof. Any such fees due to BT
Wolfensohn shall be paid by the Company.
Section 3.12 Tax Matters. The Company and its Subsidiaries have filed all
federal, state, county, local and material foreign Returns required to be filed
by them, and have paid all taxes shown to be due thereon, other than taxes
appropriate reserves for which have been made in the Company's financial
statements to the extent required under generally accepted accounting principles
in the United States, except where the failure to file such tax returns or to
have paid such taxes would not, singly or in the aggregate, have a Material
Adverse Effect. There are no assessments or adjustments that have been asserted
in writing against the Company or its Subsidiaries for any period for which the
Company has not made appropriate reserves in the Company's financial statements
to the extent required by generally accepted accounting principles in the United
States. The term "Returns" means all returns, reports, estimates, information
returns and statements of any nature with respect to any federal, state, local
or foreign income, gross receipts, profits, franchise, transfer, sales, use
payroll, occupation, property (real or personal), excise and similar taxes
(including interest, penalties or additions to such taxes).
Section 3.13 Employee Benefits. (a) With respect to each employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and each other plan, program, policy, contract or
arrangement providing for bonuses, pensions, deferred pay, stock or stock
related awards, severance pay, salary continuation or similar benefits, or other
employee benefits or compensation to or for the benefit of any employee of the
Company or its Subsidiaries (or the beneficiaries or dependents of such
employees ) (each such employee benefit plan and other plan, program, policy,
contract or arrangement being referred to herein as a "Company Benefit Plan"),
(i) the Company Benefit Plan has been administered in compliance with its
terms and with the requirements of all applicable laws, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"), and
(ii) all contributions and payments of insurance premiums required to be
made with respect to such Company Benefit Plans have been made when due,
except where failure to comply or to make such contributions or payments does
not have and would not reasonable be expected (so far as can be foreseen at the
time) to have a Material Adverse Effect.
(b) No Company Benefit plan is a defined benefit pension plan
subject to Title IV of ERISA or the minimum funding requirements of Section 302
of ERISA or Section 412 of the Code.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT, INTERNATIONAL AND THE PURCHASER
Section 4.01 Organization and Authority of Parent, International and the
Purchaser. Each of Parent and International is a corporation duly incorporated,
validly existing and in good standing under the laws of the Netherlands. The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
Section 4.02 Authorization. Each of Parent, International and the
Purchaser has all corporate power and authority to enter into this Agreement and
to perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of Parent,
International and the Purchaser. The appropriate governing bodies of each of
Parent and International and the Board of Directors of Purchaser have, and
Parent and International as the stockholders of the Purchaser have, approved
this Agreement and the Merger. This Agreement has been duly executed and
delivered by each of Parent, International and the Purchaser and, assuming the
due authorization, execution and delivery hereof by the Company, constitutes the
valid and binding obligation of each of Parent, International and the Purchaser,
enforceable against each of Parent, International and the Purchaser except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or similar laws affecting creditors' rights generally or by
general equitable principles.
Section 4.03 No Violations; Consents and Approvals. (a) Neither the
execution, delivery and performance of this Agreement by Parent, International
and the Purchaser nor the consummation by Parent, International and the
Purchaser of the transactions contemplated hereby will (i) violate any provision
of the respective organizational documents, including, without limitation, if
any, the certificate of incorporation or by-laws of Parent, International or the
Purchaser, (ii) conflict with, result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration or to the
imposition of any lien) under, or result in the acceleration or trigger of any
payment, time of payment, vesting or increase in the amount of any compensation
or benefit payable pursuant to, the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee or other evidence of indebtedness, lease,
license, contract, agreement, plan or other instrument or obligation to which
Parent, International or the Purchaser is a party or by which any of them or any
of their assets may be bound or (iii) conflict with or violate any Laws
applicable to Parent, International, the Purchaser or any of their properties or
assets; except in the case of clauses (ii) and (iii) for such conflicts,
violations, breaches, defaults or liens which individually and in the aggregate
would not have or result in a material adverse effect on the business, results
of operations or financial condition of Parent, International and the Purchaser,
taken as a whole, or materially impair or delay the consummation of the
transactions contemplated hereby.
(b) No filing or registration with, declaration or notification to,
or order, authorization, consent or approval of, any Governmental Entity is
required in connection with the execution, delivery and performance of this
Agreement by Parent, International or the Purchaser or the consummation by
Parent, International or the Purchaser of the transactions contemplated hereby,
except (i) applicable requirements under the Exchange Act, (ii) the filing of
the Certificate of Merger with the Secretary of State and (iii) such other
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings the failure of which to be obtained or made
individually and in the aggregate would not have a material adverse effect on
the business, results of operations or financial conditions of Parent,
International and the Purchaser, taken as a whole, or materially impair or delay
the consummation of the transactions contemplated hereby.
Section 4.04 Information in Proxy Statement; 13E-3 Statement. (a) The
information supplied in writing by Parent, International or the Purchaser
specifically for inclusion in the Proxy Statement (and any amendment thereof or
supplement thereto), on the date the Proxy Statement is mailed to stockholders
of the Company and at the time of the stockholder vote referred to in Section
6.01(c), will not contain any untrue statement
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of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading.
(b) The 13E-3 Statement on the date filed with the Commission and at
the time mailed to stockholders of the Company, (i) will 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 the
light of the circumstances under which they were made, not misleading and (ii)
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder. No representation is made
by Parent, International or the Purchaser with respect to any information
supplied by the Company or any of its Subsidiaries expressly for inclusion in
the 13E-3 Statement.
Section 4.05 Brokers and Intermediaries. Parent, International and the
Purchaser have not employed any broker, finder, advisor or intermediary other
than Morgan Stanley & Co. Incorporated in connection with the transactions
contemplated by this Agreement which would be entitled to a broker's, finder's,
or similar fee or commission in connection therewith or upon the consummation
thereof. Any such fees due to Morgan Stanley & Co. Incorporated shall be paid by
the Purchaser.
Section 4.06 Litigation. There is no action, suit or proceeding pending
or, to the knowledge of the Parent, International or Purchaser, threatened
against Parent, International or Purchaser, at law, in equity or otherwise, in,
before, or by any court or governmental agency or authority which would
reasonably be expected to have a material adverse effect on the ability of
Parent, International or Purchaser to perform their respective obligations under
this Agreement.
Section 4.07 Financing. Parent will have, at the Closing, sufficient funds
to perform its obligations hereunder.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
Section 5.01 Conduct of Business. From the date of this Agreement to the
Effective Time, the Company covenants and agrees (except as otherwise expressly
contemplated by this Agreement or consented to in writing by Parent) that:
(a) Ordinary Course. The Company and each of its Subsidiaries shall
operate the businesses conducted by it in the ordinary and usual course, and
shall use their reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and key
employees and preserve their relationships with material customers and suppliers
and others having business dealings with them to the end that their goodwill and
on-going businesses shall be unimpaired at the Effective Time.
(b) Dividends; Changes in Stock. Other than pursuant to existing stock
option plans and agreements, the Company shall not and shall not permit any of
its Subsidiaries to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock (other than dividends by
wholly owned subsidiaries of the Company); (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; (iii) repurchase, redeem or otherwise acquire any share of its
capital stock; or (iv) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any share of its capital stock of any class or
any securities convertible into, or any rights, warrants or options to acquire,
any such shares or convertible securities.
(c) Governing Documents. The Company shall not amend or propose to amend
its Certificate of Incorporation or By-laws except as otherwise contemplated
herein.
(d) No Acquisitions. The Company shall not, and shall not permit any
Subsidiary of the Company to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or
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division thereof or otherwise acquire or agree to acquire, other than in the
ordinary course of business consistent with past practice, any assets which are
material, individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole.
(e) No Dispositions. The Company shall not, and shall not permit any
Subsidiary of the Company to, sell, lease, license or otherwise dispose of, or
agree to sell, lease, license or otherwise dispose of, any of its assets, except
in the ordinary course of business consistent with past practice.
(f) No Indebtedness. The Company shall not, and shall not permit any
Subsidiary of the Company to, incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or any Subsidiary of the Company or guarantee any debt securities of
others, other than in the ordinary course of business consistent with past
practice.
(g) Employee Benefits; Executive Compensation. The Company shall not, and
shall not permit any Subsidiary to, (a) adopt, amend or terminate any material
employee benefit plan or (b) grant to any executive officer any increase in
compensation or in severance or termination pay, or enter into or amend any
employment, severance or similar agreement, arrangement or plan with any
executive officer, except for normal increases in compensation in the ordinary
course of business.
(h) Other Business. Except for such actions as may be required by law, the
Company shall not, and shall not permit any Subsidiary of the Company to, take
any action that will result in any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or in any of the conditions
to the Merger set forth in Article 6 not being satisfied.
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Section 5.02 Announcement. Neither the Company, on the one hand, nor
Parent, International or the Purchaser, on the other hand, shall issue any press
release or otherwise make any public statement with respect to this Agreement
and the transactions contemplated hereby without the prior consent of the other
(which consent shall not be unreasonably withheld), except as may be required by
applicable law or stock exchange regulation. Notwithstanding anything in this
Section 5.02 to the contrary, Parent, International, the Purchaser and the
Company will, to the extent practicable, consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any such
press release or other public statements with respect to this Agreement and the
transactions contemplated hereby whether or not required by law.
Section 5.03 No Solicitation. From the date of this Agreement to the
Effective Time, the Company covenants and agrees that the Company shall not, nor
shall it authorize or permit any of its Subsidiaries or any officer, director,
employee, investment banker, attorney or other adviser or representative of the
Company or any of its Subsidiaries ("Company Representatives") to, (i) solicit,
initiate, or encourage the submission of, any Acquisition Proposal, (ii) enter
into any agreement with respect to any Acquisition Proposal or (iii) participate
in any discussions or negotiations regarding, or furnish to any Person any
information for the purpose of facilitating the making of, 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 Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation, of which
the Company or any of its Subsidiaries had knowledge at the time of such
violation, of the restrictions set forth in the immediately preceding sentence
by any officer, director, employee, investment banker, attorney, employee, or
other adviser or representative of the Company or any of its Subsidiaries,
whether or not such Person is purporting to act on behalf of the Company or any
of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section
5.03 by the Company. The Company shall promptly advise Parent of any Acquisition
Proposal and any inquiries with respect to any Acquisition Proposal. For
purposes of this Agreement, "Acquisition Proposal" means any proposal for a
merger or other business combination involving the Company or any of its
Subsidiaries or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in the Company or any of its Subsidiaries, any
voting securities of the Company or any of its Subsidiaries or a substantial
portion of the assets of the Company. Notwithstanding the foregoing, the
Company, its Subsidiaries and Company Representatives shall not be obligated to
take or refrain from taking any action pursuant to this Section 5.03 if the
Board of Directors of the Company, after consultation with independent legal
counsel, determines in good faith that to take or refrain from taking any such
action would result in a violation of its fiduciary obligations.
Section 5.04 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or nonoccurrence, of any event the occurrence, or
nonoccurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (b) any material failure of the Company,
or Parent, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, provided,
however, that the delivery of any notice pursuant to this Section 5.04 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.05 Directors' and Officers' Indemnification. (a) Parent shall
cause the certificate of incorporation and the by-laws of the Surviving
Corporation to 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 Company, unless such modification is required
by law. Parent hereby guarantees the payment obligations of the Surviving
Corporation arising from the indemnification and exculpation provisions referred
to in the preceding sentence.
(b) Parent or the Surviving Corporation shall maintain in effect for
three years from the Effective Time policies of directors' and officers'
liability insurance containing terms and conditions which are not less
advantageous to the insured than any such policies of the Company currently in
effect on the date of this Agreement (the "Company Insurance Policies"), with
respect to matters occurring prior to the Effective Time, to the
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extent available, and having the maximum available coverage under any such
Company Insurance Policies; provided, that in no event shall Parent or the
Surviving Corporation be required to pay annual premiums for insurance under
this Section 5.05(b) in excess of that which is commercially reasonable; and
provided further, however, that if the annual premiums for such insurance
coverage exceed that which is commercially reasonable, Parent or the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage at
a cost which is commercially reasonable.
Each party hereto agrees to use its best reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable law and regulations to
consummate and make effective the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions (any of which may be waived by the parties hereto in writing, in
whole or in part, to the extent permitted by applicable law):
(a) No Injunction or Proceeding. No preliminary or permanent injunction,
temporary restraining order or other decree of a Governmental Entity shall be in
effect, no statute, rule or regulation shall have been enacted by a Governmental
Entity and no action, suit or proceeding by any Governmental Entity shall have
been instituted or threatened, which prohibits the consummation of the Merger or
materially challenges the transactions contemplated hereby.
(b) Consents. Other than filing the Certificate of Merger, all consents,
approvals and authorizations of and filings with Governmental Entities required
for the consummation of the transactions contemplated hereby, shall have been
obtained or effected or filed.
(c) Approval of Holders of Company Common Stock. This Agreement shall have
been approved and adopted by the affirmative vote of (i) a majority of the
shares of Company Common Stock outstanding and (ii) a majority of the shares of
Company Common Stock held by Public Stockholders that are voted at the meeting
referred to in Section 1.02.
Section 6.02 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further subject to
the satisfaction or waiver of each of the following conditions prior to or at
the Closing Date:
(a) Representations and Warranties. The representations and warranties of
Parent, International and the Purchaser contained in this Agreement shall be
true and correct in all material respects at and as of the Effective Time as
though made at and as of the Effective Time, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation and warranty shall have been true and correct in all material
respects as of such date.
(b) Agreements. Each of Parent, International and the Purchaser shall have
performed and complied in all material respects with all its undertakings and
agreements required by this Agreement to be performed or complied with by it
prior to or at the Closing.
(c) Opinion of Financial Advisor. The opinion of BT Wolfensohn referred to
in Section 3.05 shall not have been withdrawn or revoked.
Section 6.03 Conditions to the Obligations of Parent, International and
the Purchaser to Effect the Merger. The obligations of Parent, International and
the Purchaser to effect the Merger are further subject to the satisfaction or
waiver of each of the following conditions prior to or at the Closing Date:
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(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as though made at and as of
the Effective Time, except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct in all material respects as of such
date.
(b) Agreements. The Company shall have performed and complied in all
material respects with all of its undertakings and agreements required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
(c) No Material Adverse Change. Except as set forth on Schedule 6.03(c) of
the Disclosure Letter or as set forth in the Company SEC Reports, since December
31, 1997, there shall have been no material adverse change in the business,
assets, liabilities, results of operations or financial condition of the Company
and its Subsidiaries, taken as a whole.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after stockholder approval thereof:
(a) by the mutual written consent of the Boards of Directors of
Parent, International and the Purchaser, and the Board of Directors of the
Company upon recommendation of the Independent Committee;
(b) by either the Company upon the recommendation of the Independent
Committee, on the one hand, or Parent, International and the Purchaser, on the
other hand, if:
(i) the Merger has not been consummated on or prior to
November 30, 1998; provided, however, that the right to terminate this
Agreement under this Section 7.01(b)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Merger to occur on
or prior to such date;
(ii) the stockholders of the Company fail to approve and adopt
this Agreement and the transactions contemplated hereby at the meeting of
the holders of Company Common Stock referred to in Section 6.01(c)
(including any adjournment thereof) by the votes referred to in Section
6.01(c); provided, however, that the right to terminate this Agreement
under this Section 7.01(b)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the stockholders of the Company to
approve and adopt this Agreement; or
(iii) if, prior to the consummation of the Merger, the
Independent Committee shall have withdrawn, or modified or changed in any
manner adverse to Parent, International or the Purchaser its approval of
this Agreement or the Merger after having concluded in good faith after
consultation with independent legal counsel that there is a reasonable
probability that the failure to take such action would result in a
violation of fiduciary obligations under applicable law.
Section 7.02 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.01, written notice thereof shall
forthwith be given by the terminating party or parties to the other party or
parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void, and there shall
be no liability on the part of Parent, International, the Purchaser or the
Company (except as set forth in this Section 7.02 and Section 7.01 hereof, each
which shall survive any termination of this Agreement); provided that nothing
herein shall relieve any party from any liability or obligation with respect to
any willful breach of this Agreement.
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Section 7.03 Amendment. This Agreement may be amended in writing by the
parties hereto; provided, however, that after adoption of this Agreement and the
Merger by the stockholders of the Company no such amendment may be made without
the further approval of the stockholders of the Company except to the extent
permitted by the DGCL. Notwithstanding the foregoing, any amendment of this
Agreement on behalf of the Company shall be subject to the approval of the Board
of Directors of the Company upon the recommendation of the Independent
Committee.
Section 7.04 Waiver. At any time prior to the Effective Time, whether
before or after the meeting of holders of the Company Common Stock referred to
in Section 6.01(c) hereof, Parent by action taken by its Board of Directors or
the Company, by action taken by its Board of Directors upon the recommendation
of the Independent Committee, may (i) extend the time for the performance of any
of the obligations or other acts of any other party hereto or (ii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time and all such
representations and warranties will be extinguished on consummation of the
Merger and neither Company, any Subsidiary nor any officer, director or employee
or stockholder shall be under any liability whatsoever with respect to any such
representation or warranty after such time. This Section 8.01 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
Section 8.02 Expenses. Except as contemplated by this Agreement, all costs
and expenses incurred in connection with Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
Section 8.03 Applicable Law. The rights and duties of Parent,
International, the Purchaser and the Company under this Agreement shall be
governed by the law of the State of Delaware.
Section 8.04 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given or made as follows:
(a) if sent by registered or certified mail in the United States return receipt
requested, upon receipt; (b) if sent by reputable overnight air courier (such as
DHL or Federal Express), two business days after being so sent; (c) if sent by
telecopy transmission, with a copy mailed on the same day in the manner provided
in clauses (a) or (b) above, when transmitted and receipt is confirmed by
telephone; or (d) if otherwise actually personally delivered, when delivered and
shall be sent or delivered as follows:
If to the Company, to:
BT Office Products International, Inc.
2150 East Lake Cook Road
Suite 590
Buffalo Grove, IL 60089
Telephone: (847) 793-7500
Telecopy: (847) 808-0161
Attention: Thomas F. Cullen, Esq.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
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New York, New York 10019-6150
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
Attention: Elliott V. Stein, Esq.
If to Parent, International or the Purchaser, to:
NV Koninklijke KNP BT
Hoogoorddreef 62
1101 BE Amsterdam ZO
P.O. Box 22740
1100 DE Amsterdam ZO
The Netherlands
Telephone: 31-20-651-11-08
Telecopy: 31-20-691-88-49
Attention: Heidi van der Kooij, Esq.
with a copy to:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
P.O. Box 6760
Stamford, CT 06904-6760
Telephone: (203) 965-8262
Telecopy: (203) 965-8226
Attention: Frode Jensen, III., Esq.
Such names and addresses may be changed by such notice.
Section 8.05 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) contains the entire understanding of the parties
hereto with respect to the subject matter contained herein, supersedes and
cancels all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting such subject matter.
Section 8.06 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties; provided, however, Parent, International or the
Purchaser may assign this Agreement to any Subsidiary of Parent, International
or the Purchaser. No such assignment shall relieve Parent, International or the
Purchaser of its obligations under this Agreement. Subject to the first sentence
of this Section 8.06, this Agreement will be binding upon, inure to the benefit
of and be enforceable by, the parties hereto and their respective successors and
assigns.
Section 8.07 Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles" or "Sections" shall be deemed to be references
to Articles or Sections hereof unless otherwise indicated.
Section 8.08 Counterparts. This Agreement may be executed in one or more
counterparts, each counterpart shall be deemed to be an original but all of
which shall be considered one and the same agreement.
Section 8.09 No Third Party Beneficiaries. Except as provided in Sections
2.07 and 5.05, nothing in this Agreement, express or implied, is intended to
confer upon any Person not a party to this Agreement any rights or remedies
under or by reason of this Agreement.
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Section 8.10 Severability; Enforcement. Any term or provision of this
Agreement that is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or unenforceability
of any of the terms or provisions of this Agreement in any other jurisdiction.
If any provision of this Agreement is so broad as to be unenforceable, the
provisions shall be interpreted to be only so broad as is enforceable.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
BT OFFICE PRODUCTS INTERNATIONAL, INC.
By: /s/ RICHARD C. DUBIN
-------------------------------
Name: Richard C. Dubin
Title: Executive Vice President
NV KONINKLIJKE KNP BT
By: /s/ FRANS H.J. KOFFRIE
-------------------------------
Name: Frans H.J. Koffrie
Title: Member of Executive Board
KNP BT INTERNATIONAL B.V.
By: /s/ FRANS H.J. KOFFRIE
-------------------------------
Name: Frans H.J. Koffrie
Title: Director
BT OPI ACQUISITION CORP.
By: /s/ HARRY G. VREEDENBURGH
-------------------------------
Name: Harry G. Vreedenburgh
Title: Vice President
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<PAGE> 65
ANNEX II
BT WOLFENSOHN LOGO
June 2, 1998
The Independent Committee
of the Board of Directors
BT Office Products International, Inc.
2150 E. Lake Cook Road
Buffalo Grove, Illinois 60089-1877
Gentlemen:
BT Wolfensohn has acted as financial advisor to the Independent
Committee of the Board of Directors of BT Office Products International, Inc.
(the "Company") in connection with the proposed Agreement and Plan of Merger
(the "Merger Agreement"), dated as of June 2, 1998, among the Company, NV
Koninklijke KNP BT ("KNP"), KNP BT International B.V., a wholly owned subsidiary
of KNP ("KNP International"), and BT OPI Acquisition Corp., a corporation wholly
owned by KNP and KNP International ("Merger Sub"), which provides, among other
things, for the merger of Merger Sub with and into the Company (the
"Transaction"). As set forth more fully in the Merger Agreement, as a result of
the Transaction each share of the common stock, par value $.01 per share, of the
Company (the "Common Stock") not owned directly or indirectly by the Company,
KNP or KNP International, other than shares as to which dissenters' rights have
been perfected, will be converted into the right to receive $13.75 in cash (the
"Consideration"). The Transaction is conditioned upon the approval of holders of
a majority of the shares of Common Stock not owned by KNP or KNP International
that are voted at a meeting of shareholders. The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement. We understand that
KNP and KNP International collectively own in the aggregate approximately 70% of
the outstanding Common Stock.
You have requested BT Wolfensohn's opinion, as investment bankers, as
to the fairness, from a financial point of view, of the Consideration to be
received by the holders of the Common Stock other than KNP and KNP International
(the "Public Shareholders").
In connection with BT Wolfensohn's role as financial advisor to the
Independent Committee, and in arriving at its opinion, BT Wolfensohn has
reviewed certain publicly available financial and other information concerning
the Company and certain internal analyses and other information furnished to it
by the Company. BT Wolfensohn has also held discussions
BT Alex, Brown Incorporated, 130 Liberty Street, 33 Floor
Member NYSE New York, NY 10006
Telephone: 212 250-6000
Facsimile: 212 250-6440
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<PAGE> 66
The Independent Committee of the
Board of Directors, BT Office Products International, Inc.
June 2, 1998
Page 2
with members of the senior management of the Company regarding the Company's
business and prospects. In addition, BT Wolfensohn has (i) reviewed the reported
prices and trading activity for the Common Stock, (ii) compared certain
financial and stock market information for the Company with similar information
for certain companies whose securities are publicly traded, (iii) reviewed the
financial terms of certain transactions involving the acquisition by a
controlling stockholder of the publicly-held shares of the company which BT
Wolfensohn deemed comparable in whole or in part, (iv) reviewed the terms of the
Merger Agreement, and (v) performed such other studies and analyses and
considered such other factors as it deemed appropriate.
BT Wolfensohn has not assumed responsibility for independent
verification of, and has not independently verified, any information, whether
publicly available or furnished to it, concerning the Company, including,
without limitation, any financial information, forecasts or projections
considered in connection with the rendering of its opinion. Accordingly, for
purposes of its opinion, BT Wolfensohn has assumed and relied upon the accuracy
and completeness of all such information and BT Wolfensohn has not conducted a
physical inspection of any of the properties or assets, and has not prepared or
obtained any independent evaluation or appraisal of any of the assets or
liabilities, of the Company. With respect to the financial forecasts and
projections made available to BT Wolfensohn and used in its analyses, BT
Wolfensohn has assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of the Company as to the matters covered thereby. We understand,
based on KNP's statements, that KNP has no interest in any transaction that
would result in the sale of Common Stock owned by it, and we were not requested
or authorized to solicit, and did not solicit, interest from any party with
respect to an acquisition of the outstanding Common Stock, the Company or its
constituent businesses. In addition, we have been informed by KNP that it has no
intention to pursue a sale of the Company after consummating the merger pursuant
to the Merger Agreement. BT Wolfensohn's opinion is necessarily based upon
economic, market and other conditions as in effect on, and the information made
available to it as of, the date hereof.
For purposes of rendering its opinion, BT Wolfensohn has assumed that
the Transaction will be consummated on the terms and subject to the conditions
described in the Merger Agreement and that all conditions to the Transaction
will be satisfied without waiver of such conditions.
This opinion is addressed to, and for the use and benefit of, the
Independent Committee of the Board of Directors of the Company. This opinion is
not a recommendation to the Public Shareholders as regards the Transaction or as
to whether they should vote for the Transaction. This opinion is limited to the
fairness, from a financial point of view, of the Consideration to be received by
the Public Shareholders.
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The Independent Committee of the
Board of Directors, BT Office Products International, Inc.
June 2, 1998
Page 3
BT Wolfensohn is engaged in the merger and acquisition and client
advisory business of Bankers Trust (together with its affiliates, the "BT
Group") and, for legal and regulatory purposes is a division of BT Alex. Brown
Incorporated, a registered broker-dealer and member of the New York Stock
Exchange. BT Wolfensohn will be paid a fee for its services as financial advisor
to the Independent Committee in connection with the Transaction, a substantial
portion of which is contingent upon consummation of the Transaction. In the
ordinary course of business, members of the BT Group may actively trade in the
securities and other instruments and obligations of the Company for their own
accounts and for the accounts of their customers. Accordingly, the BT Group may
at any time hold a long or short position in such securities, instruments and
obligations.
Based upon and subject to the foregoing, it is BT Wolfensohn's opinion
as investment bankers that as of the date hereof the Consideration to be
received by the Public Shareholders pursuant to the Transaction is fair from a
financial point of view.
/s/ BT WOLFENSOHN
-----------------
BT Wolfensohn
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<PAGE> 68
ANNEX III
DELAWARE GENERAL CORPORATION LAW
ss. 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251 (g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to ss.ss.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss.253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby
to demand the appraisal of his shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to ss.228
or ss.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date,
the record date shall be the close of business on the day next preceding
the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled
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to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by one or more publications at
least one week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest that the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal fights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without
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limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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