\n SECTION 9.5. PARTIES IN INTEREST……………………………. 66
\n SECTION 9.6. GOVERNING LAW…………………………………. 66
\n SECTION 9.7. HEADINGS……………………………………… 66
\n SECTION 9.8. SPECIFIC PERFORMANCE…………………………… 66
\n SECTION 9.9. ALTERNATIVE TRANSACTION STRUCTURE……………….. 66
\n SECTION 9.10. COUNTERPARTS………………………………….. 66
\n<\/c><\/s><\/table>\nEXHIBITS
\n——–<\/p>\n
EXHIBIT A FORM OF STOCK OPTION AGREEMENT
\nEXHIBIT B FORM OF STOCKHOLDER SUPPORT AGREEMENT
\nEXHIBIT C FORM OF COMPANY AFFILIATE LETTER
\nEXHIBIT D FORM OF ACQUIROR AFFILIATE LETTER<\/p>\n
iv<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER, dated as of December 13, 1998
\n(the “Agreement”), between MATTEL, INC., a Delaware corporation (“Acquiror”),
\n ——— ——–
\nand THE LEARNING COMPANY, INC., Delaware corporation (the “Company”).
\n ——-<\/p>\n
RECITALS<\/p>\n
WHEREAS, the Boards of Directors of Acquiror and the Company
\nhave each approved the merger of the Company with and into Acquiror (the
\n“Merger”) in accordance with the Delaware General Corporation Law (the “DGCL”)
\n —— —-
\nupon the terms and subject to the conditions set forth herein;<\/p>\n
WHEREAS, concurrently with the execution and delivery of this
\nAgreement and as a condition and inducement to Acquiror’s willingness to enter
\ninto this Agreement, Acquiror and the Company have entered into Stock Option
\nAgreement, dated as of the date of this Agreement, in the form attached hereto
\nas Exhibit A (the “Stock Option Agreement”), pursuant to which the Company has
\n ———————-
\ngranted to Acquiror an option to purchase shares of common stock of the Company
\nunder certain circumstances;<\/p>\n
WHEREAS, concurrently with the execution and delivery of this
\nAgreement and as a condition and inducement to Acquiror’s willingness to enter
\ninto this Agreement, certain stockholders of the Company have entered into
\nStockholder Support Agreements with Acquiror, dated as of the date of this
\nAgreement, in the form attached hereto as Exhibit B (the “Stockholder Support
\n ——————-
\nAgreements”), pursuant to which such stockholders have agreed, among other
\n———-
\nthings, to vote all voting securities of the Company beneficially owned by them
\nin favor of approval and adoption of the Agreement and the Merger;<\/p>\n
WHEREAS, for federal income tax purposes, it is intended that
\nthe Merger shall qualify as a reorganization within the meaning of Section
\n368(a) of the Internal Revenue Code of 1986, as amended (the “Code”); and
\n —-<\/p>\n
WHEREAS, it is intended that, for accounting purposes, the
\nMerger will be accounted for as a “pooling of interests” under GAAP and
\napplicable rules and regulations of the SEC.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the
\nmutual covenants and agreements herein contained, and intending to be legally
\nbound hereby, Acquiror and the Company hereby agree as follows:<\/p>\n
1<\/p>\n
ARTICLE I.
\n DEFINITIONS<\/p>\n
For purposes of this Agreement, the term:<\/p>\n
“Acquiror” shall have the meaning set forth in the Preamble.
\n ——–<\/p>\n
“Acquiror Board” shall have the meaning set forth in Section
\n ————–
\n2.8(a).<\/p>\n
“Acquiror Common Stock” shall mean the common stock, par value
\n ———————
\n$1.00 per share, of Acquiror.<\/p>\n
“Acquiror Contract” shall mean any note, bond, mortgage,
\n —————–
\nindenture, guarantee, other evidence of indebtedness, lease, license, contract,
\nagreement or other instrument or obligation to which Acquiror or any of its
\nSubsidiaries is a party or by which any of them or any of their properties or
\nassets may be bound and which involves the payment or receipt of money in excess
\nof $5,000,000 in any year.<\/p>\n
“Acquiror Employee Plans” shall mean all Employee Plans with
\n ———————–
\nrespect to which Acquiror, any of its Subsidiaries or any ERISA Affiliates of
\nAcquiror or any Subsidiary of Acquiror has or may have any liability (accrued,
\ncontingent or otherwise).<\/p>\n
“Acquiror Disclosure Schedule” shall have the meaning set
\n —————————-
\nforth in Article IV.<\/p>\n
“Acquiror Intellectual Property Rights” shall have the meaning
\n ————————————-
\nset forth in Section 4.16(a).<\/p>\n
“Acquiror Option Plans” shall have the meaning set forth in
\n ———————
\nSection 4.3(a).<\/p>\n
“Acquiror Options” shall have the meaning set forth in
\n —————-
\nSection 4.3(a).<\/p>\n
“Acquiror Preferred Stock” shall have the meaning set forth
\n ————————
\nin Section 4.3(a).<\/p>\n
“Acquiror Right” shall mean a Right (as defined in the
\n ————–
\nAcquiror Rights Agreement).<\/p>\n
“Acquiror Rights Agreement” shall mean the Rights Agreement,
\n ————————-
\ndated as of February 7, 1992, between Acquiror and The First National Bank of
\nBoston, as Rights Agent.<\/p>\n
“Acquiror SEC Reports” shall have the meaning set forth in
\n ——————–
\nSection 4.8(a).<\/p>\n
“Acquiror Series E Preference Stock” shall have the meaning
\n ———————————-
\nset forth in Section 4.3(a).<\/p>\n
“Acquiror Special Voting Share” shall mean the one share of a
\n —————————–
\nclass or series of capital stock of Acquiror, to be issued by Acquiror to, and
\ndeposited with, the trustee under the Old Voting and Exchange Trust Agreement,
\nand to entitle the holder of record thereof to a <\/p>\n
2<\/p>\n
number of votes at meetings of holders of shares of Acquiror Common Stock equal
\nto the number of shares of Acquiror Common Stock into which the Exchangeable
\nShares outstanding from time to time after the Effective Time (other than
\nExchangeable Shares held by Acquiror, its Subsidiaries and Affiliates) are
\nexchangeable, and to have substantially the rights, privileges, restrictions and
\nconditions to be described in the Old Voting and Exchange Trust Agreement.<\/p>\n
“Acquiror Stockholder Approval” shall have the meaning set
\n —————————–
\nforth in Section 4.22.<\/p>\n
“Acquiror Stockholder Meeting” shall have the meaning set
\n —————————-
\nforth in Section 3.19.<\/p>\n
“Acquisition Proposal” shall have the meaning set forth in
\n ——————–
\nSection 6.3(b).<\/p>\n
“Acquisition Transaction” shall have the meaning set forth in
\n ———————–
\nSection 6.3(b).<\/p>\n
“Action” shall mean any action, order, writ, injunction,
\n ——
\njudgment or decree outstanding or claim, suit, litigation, proceeding,
\narbitration or investigation by or before any court, governmental or other
\nregulatory or administrative agency or commission or any other Person.<\/p>\n
“Additional Termination Fee” shall have the meaning set forth
\n ————————–
\nin Section 8.2(b).<\/p>\n
“Affiliate” shall mean, with respect to any Person, any other
\n ———
\nPerson that directly, or through one or more intermediaries, controls or is
\ncontrolled by or is under common control with such Person.<\/p>\n
“Affiliate Agreement” shall have the meaning set forth in
\n ——————-
\nSection 2.15.<\/p>\n
“Agreement” shall have the meaning set forth in the Preamble.
\n ———<\/p>\n
“Assets” shall mean, with respect to any Person, all land,
\n ——
\nbuildings, improvements, leasehold improvements, Fixtures and Equipment and
\nother assets, real or personal, tangible or intangible, owned, leased or
\nlicensed by such Person or any of its Subsidiaries.<\/p>\n
“Average Acquiror Price” shall mean the average of the closing
\n ———————-
\nprices of the Acquiror Common Stock on the NYSE as reported on the NYSE
\nComposite Transaction Tape for the Random Trading Days. “Random Trading Days”
\nmeans the ten trading days selected by lot out of the twenty trading days ending
\non and including the fifth trading day preceding the Effective Time. The Random
\nTrading Days shall be selected by lot by designated representatives of Acquiror
\nand the Company at 5:00 p.m. New York City time on the second trading day
\npreceding the Effective Time.<\/p>\n
“Benefit Arrangement” shall mean, with respect to any Person,
\n ——————-
\nany employment, consulting, severance, change in control or other similar
\ncontract, arrangement or policy and each plan, arrangement (written or oral),
\nprogram, agreement or commitment providing for insurance <\/p>\n
3<\/p>\n
coverage (including without limitation any self-insured arrangements), workers’
\ncompensation, disability benefits, life, health, disability or accident benefits
\n(including without limitation any “voluntary employees’ beneficiary association”
\nas defined in Section 501(c)(9) of the Code providing for the same or other
\nbenefits) or for deferred compensation, profit-sharing bonuses, stock options,
\nstock appreciation rights, stock purchases or other forms of incentive
\ncompensation other than Welfare Plan, Pension Plan or Multiemployer Plan, in
\neach case with respect to which such Person or any ERISA Affiliate has or may
\nhave any liability (accrued, contingent or otherwise).<\/p>\n
“Blue Sky Laws” shall have the meaning set forth in Section
\n ————-
\n3.6(b).<\/p>\n
“Business Day” shall mean each day other than Saturdays,
\n ————
\nSundays and days when commercial banks are authorized to be closed for business
\nin New York, New York.<\/p>\n
“Bylaws” shall have the meaning set forth in Section 2.5(b).
\n —— <\/p>\n
“Canadian Sub” shall mean SoftKey Software Products Inc., a
\n ————
\ncorporation governed by the Business Corporations Act (Ontario), all of the
\nissued and outstanding shares of which, other than 5,205,191 Exchangeable
\nShares, are, as of the date hereof, owned, directly or indirectly, by the
\nCompany.<\/p>\n
“Canadian Sub Board” shall have the meaning set forth in
\n ——————
\nSection 2.9(a).<\/p>\n
“Certificate of Incorporation” shall have the meaning set
\n —————————-
\nforth in Section 2.5(a).<\/p>\n
“Certificate of Merger” shall have the meaning set forth in
\n ———————
\nSection 2.3.<\/p>\n
“Certificates” shall have the meaning set forth in Section
\n ————
\n2.11(b).<\/p>\n
“Claims” shall have the meaning set forth in Section 4.12(d).
\n —— <\/p>\n
“Closing” shall have the meaning set forth in Section 2.2.
\n ——-<\/p>\n
“Closing Date” shall have the meaning set forth in Section
\n ————
\n2.2.<\/p>\n
“Code” shall have the meaning set forth in the Recitals.
\n —-<\/p>\n
“Common Merger Consideration” shall have the meaning set
\n —————————
\nforth in Section 2.7(a).<\/p>\n
“Company” shall have the meaning set forth in the Preamble.
\n ——-<\/p>\n
“Company Affiliate” shall have the meaning set forth in
\n —————–
\nSection 6.9.<\/p>\n
“Company Board” shall have the meaning set forth in Section
\n ————-
\n2.8(a).<\/p>\n
“Company Common Stock” shall have the meaning set forth in
\n ——————–
\nSection 2.7(a).<\/p>\n
4<\/p>\n
“Company Contract” shall have the meaning set forth in
\n —————-
\nSection 3.14(a).<\/p>\n
“Company Disclosure Schedule” shall have the meaning set
\n —————————
\nforth in Article III.<\/p>\n
“Company Employee Plans” shall mean all Employee Plans with
\n ———————-
\nrespect to which the Company, any of its Subsidiaries or any ERISA Affiliates of
\nthe Company or any Subsidiary of the Company has or may have any liability
\n(accrued, contingent or otherwise).<\/p>\n
“Company Financial Advisor” shall have the meaning set forth
\n ————————-
\nin Section 3.20.<\/p>\n
“Company Insurance Policies” shall have the meaning set forth
\n ————————–
\nin Section 3.25.<\/p>\n
“Company Intellectual Property Rights” shall have the meaning
\n ————————————
\nset forth in Section 3.16(a).<\/p>\n
“Company Leased Property” shall have the meaning set forth in
\n ———————–
\nSection 3.13(a).<\/p>\n
“Company Options” shall have the meaning set forth in Section
\n —————
\n3.3(a).<\/p>\n
“Company Owned Property” shall have the meaning set forth in
\n ———————-
\nSection 3.13(a).<\/p>\n
“Company Preferred Stock” shall have the meaning set forth in
\n ———————–
\nSection 2.7(b).<\/p>\n
“Company Real Property” shall have the meaning set forth in
\n ———————
\nSection 3.13(a).<\/p>\n
“Company SEC Reports” shall have the meaning set forth in
\n ——————-
\nSection 3.8(a).<\/p>\n
“Company Special Voting Stock” shall have the meaning set
\n —————————-
\nforth in Section 2.7(c).<\/p>\n
“Company Stock” shall have the meaning set forth in Section
\n ————-
\n2.11(a).<\/p>\n
“Company Stock Plans” shall mean the LTIP, the Non-Employee
\n ——————-
\nDirector Plans, the Stock Option Plan, the Employee Stock Purchase Plan and any
\nother stock option, performance unit or similar plan of the Company and its
\nSubsidiaries provided, however, that “Company Stock Plans” shall not include the
\nStock Option Agreement.<\/p>\n
“Company Stock Rights” shall mean all stock options,
\n ——————–
\nrestricted stock awards, performance awards, dividend equivalents, deferred
\nstock, stock payments, stock appreciation rights and shares of capital stock
\ngranted, awarded, earned or purchased pursuant to any Company Stock Plan.<\/p>\n
“Company Stockholder Approval” shall have the meaning set
\n —————————-
\nforth in Section 3.22.<\/p>\n
“Company Stockholder Meeting” shall have the meaning set
\n —————————
\nforth in Section 3.19.<\/p>\n
5<\/p>\n
“Confidentiality Agreement” shall have the meaning set forth
\n ————————-
\nin Section 6.4.<\/p>\n
“Consents” shall have the meaning set forth in Section 7.3(e).
\n ——–<\/p>\n
“Contracts” shall have the meaning set forth in Section
\n ———
\n3.14(a).<\/p>\n
“Current Premium” shall have the meaning set forth in Section
\n —————
\n6.7(b).<\/p>\n
“DGCL” shall have the meaning set forth in the Recitals.
\n —-<\/p>\n
“Effective Time” shall have the meaning set forth in Section
\n ————–
\n2.3.<\/p>\n
“Employee Benefits” shall have the meaning set forth in
\n —————–
\nSection 6.8.<\/p>\n
“Employee Plans” shall mean all Benefit Arrangements,
\n ————–
\nMultiemployer Plans, Pension Plans and Welfare Plans.<\/p>\n
“Employee Stock Purchase Plan” shall mean the Company’s 1997
\n —————————-
\nEmployee Stock Purchase Plan.<\/p>\n
“Encumbrances” shall mean any claim, lien, pledge, option,
\n ————
\ncharge, easement, security interest, deed of trust, mortgage, right-of-way,
\ncovenant, condition, restriction, encumbrance or other rights of third parties,
\nincluding, without limitation, Encumbrances that arise pursuant to Environmental
\nLaws.<\/p>\n
“Environmental Laws” shall mean any foreign, federal, state or
\n ——————
\nlocal law, statute, ordinance, order, decree, rule or regulation relating to
\nreleases, discharges, emissions or disposals to air, water, land or groundwater
\nof Hazardous Materials; to the use, handling, transport, release or disposal of
\npolychlorinated biphenyls, asbestos or urea formaldehyde or any other Hazardous
\nMaterial; to the treatment, storage, disposal or management of Hazardous
\nMaterials; to exposure to toxic, hazardous or other controlled, prohibited or
\nregulated substances; to health or safety in the workplace; and to the
\nprotection of the public’s health and safety and the environment, including the
\nComprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
\n9601, et seq. (“CERCLA”), the Resource Conservation and Recovery Act, 42 U.S.C.
\n ——
\n6901, et seq. (“RCRA”), the Toxic Substances Control Act, 15 U.S.C. 2601, et
\n —-
\nseq. (“TSCA”), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq.,
\n —-
\nthe Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control
\nAct, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et
\nseq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq.
\n(“HMTA”) and the Emergency Planning and Community Right to Know Act, 42 U.S.C.
\n —-
\n11001 et seq. (“EPCRA”), and other comparable foreign, state and local laws and
\n —–
\nall rules, regulations and guidance documents promulgated pursuant thereto or
\npublished thereunder.<\/p>\n
“ERISA” shall mean the Employee Retirement Income Security Act
\n —–
\nof 1974, as amended.<\/p>\n
6<\/p>\n
“ERISA Affiliate” shall mean, with respect to any Person, any
\n —————-
\nentity which is (or at any relevant time was) a member of a “controlled group of
\ncorporations” with, under “common control” with, or a member of as “affiliated
\nservice group” with, such Person as defined in Section 414(b), (c), (m) or (o)
\nof the Code.<\/p>\n
“Exchange Act” shall mean the Securities and Exchange Act of
\n ————
\n1934, as amended, and the rules and regulations promulgated thereunder.<\/p>\n
“Exchange Agent” shall have the meaning set forth in Section
\n ————–
\n2.11(a).<\/p>\n
“Exchange Ratio” shall have the meaning set forth in Section
\n ————–
\n2.7(a).<\/p>\n
“Exchangeable Shares” shall mean the Exchangeable
\n ——————–
\nNon-Voting Shares in the capital of Canadian Sub.<\/p>\n
“Fees and Expenses” shall have the meaning set forth in
\n —————–
\nSection 8.2(c).<\/p>\n
“Fixtures and Equipment” shall mean, with respect to any
\n ———————-
\nPerson, all of the furniture, fixtures, furnishings, machinery and equipment
\nowned, leased or licensed by such Person and located in, at or upon the
\nfacilities of such Person.<\/p>\n
“GAAP” shall mean generally accepted accounting principles in
\n —-
\nthe United States of America, as in effect from time to time, consistently
\napplied.<\/p>\n
“Governmental Approvals” shall have the meaning set forth in
\n ———————-
\nSection 6.5(a).<\/p>\n
“Governmental Entities” shall mean all courts, administrative
\n ———————
\nagencies, commissions or other governmental authorities, bodies or
\ninstrumentalities, federal, state, local, domestic or foreign.<\/p>\n
“Hazardous Materials” shall mean each and every element,
\n ——————-
\ncompound, chemical mixture, contaminant, pollutant, material, waste or other
\nsubstance which is defined, determined or identified as or has the potential to
\nbe hazardous or toxic under Environmental Laws or the release of which is
\nregulated under Environmental Laws. Without limiting the generality of the
\nforegoing, the term includes: “hazardous substances” as defined in CERCLA;
\n“extremely hazardous substances” as defined in EPCRA; “hazardous waste” as
\ndefined in RCRA; “hazardous materials” as defined in HMTA; “chemical substance
\nor mixture” as defined in TSCA; crude oil, petroleum products or any fraction
\nthereof; radioactive materials including source, byproduct or special nuclear
\nmaterials; asbestos or asbestos-containing materials; chlorinated fluorocarbons
\n(“CFCs”); and radon.
\n —-
\n “HSR Act” shall have the meaning set forth in Section 3.6(b).
\n ——-<\/p>\n
“Indemnified Parties” shall have the meaning set forth in
\n ——————-
\nSection 6.7(a).<\/p>\n
“Initial Termination Fee” shall have the meaning set forth in
\n ———————–
\nSection 8.2(b).<\/p>\n
7<\/p>\n
“Joint Proxy Statement\/Prospectus” shall have the meaning set
\n ——————————–
\nforth in Section 3.19.<\/p>\n
“Lease and Operational Documents” shall have the meaning set
\n ——————————-
\nforth in Section 3.13(c).<\/p>\n
“LTIP” shall mean the Company’s Long-Term Equity Incentive
\n —-
\nPlan, restated as of August 31, 1998.<\/p>\n
“Material Adverse Effect” shall mean, with respect to either
\n ———————–
\nof the Company or Acquiror, as the context requires, a material adverse change
\nin, or effect on, the business, results of operations or financial condition of
\nsuch Person and its Subsidiaries taken as a whole or any change which materially
\nimpairs or materially delays the ability of such Person to consummate the
\ntransactions contemplated by this Agreement; provided, however, that none of the
\nfollowing shall be deemed by itself or by themselves, either alone or in
\ncombination, to constitute a Material Adverse Effect: (i) with respect to the
\nCompany, a failure by the Company to meet the revenue or earnings predictions of
\nequity analysts as reflected in the First Call consensus estimate, or any other
\nrevenue or earnings predictions or expectations, for any period ending on or
\nafter the date of this Agreement, or, in the case of the Acquiror, a failure by
\nthe Acquiror to meet the revenue or earnings predictions of equity analysts as
\nreflected in the First Call consensus estimate, or any other revenue or earnings
\npredictions or expectations, for any period ending on or after the date of this
\nAgreement, (ii) in the case of the Company, conditions affecting the educational
\nand\/or productivity software industries as a whole, or, in the case of the
\nAcquiror, conditions affecting the toy and edutainment industries as whole,
\n(iii) any effect arising primarily out of or resulting primarily from actions
\ncontemplated by the parties in connections with, or which is attributable to,
\nthe announcement of this Agreement and the transactions contemplated hereby.<\/p>\n
“Material Intellectual Property Rights” shall have the
\n ————————————-
\nmeaning set forth in Section 3.16(c).<\/p>\n
“Material Licenses” shall have the meaning set forth in
\n —————–
\nSection 3.16(b).<\/p>\n
“Merger” shall have the meaning set forth in the Recitals.
\n ——<\/p>\n
“Merger Consideration” shall have the meaning set forth in
\n ——————–
\nSection 2.11(a).<\/p>\n
“Multiemployer Plan” shall mean, with respect to any Person,
\n ——————
\nany “multiemployer plan,” as defined in Section 4001(a)(3) of ERISA, under which
\nsuch Person or any ERISA Affiliate has or may have any liability (accrued,
\ncontingent or otherwise).<\/p>\n
“New Stock Rights” shall have the meaning set forth in
\n —————-
\nSection 2.8(a).<\/p>\n
“Non-Employee Director Plans” shall mean the Company’s 1994
\n —————————
\nNon-Employee Director Stock Option Plan, as amended and restated effective
\nFebruary 5, 1996 and the Company’s 1996 Non-Employee Director Stock Option Plan.<\/p>\n
8<\/p>\n
“Notifying Party” shall have the meaning set forth in Section
\n —————
\n6.5(a).<\/p>\n
“NYSE” shall mean the New York Stock Exchange.
\n —- <\/p>\n
“Old Support Agreement” shall mean that certain support
\n ———————
\nagreement made as of February 4, 1994 between the Company (under its previous
\nname, “SoftKey International, Inc.”) and Canadian Sub.<\/p>\n
“Old Voting and Exchange Trust Agreement” shall mean that
\n —————————————
\ncertain voting and exchange trust agreement made as of February 4, 1994 between
\nthe Company (under its previous corporate name, “SoftKey International, Inc.”),
\nCanadian Sub and CIBC Mellon Trust Company (under its previous corporate name,
\n“The R-M Trust Company”).<\/p>\n
“Pension Plan” shall mean, with respect to any Person, any
\n ————
\n“employee pension benefit plan” as defined in Section 3(2) of ERISA (other than
\na Multiemployer Plan) which such Person contributed to or was required to
\ncontribute to, or under which such Person or any ERISA Affiliate has or may have
\nany liability (accrued, contingent or otherwise).<\/p>\n
“Permitted Encumbrances” shall mean any Encumbrances resulting
\n ———————-
\nfrom (i) all statutory or other liens for Taxes or assessments which are not yet
\ndue or delinquent or the validity of which are being contested in good faith by
\nappropriate proceedings for which adequate reserves are being maintained in
\naccordance with GAAP; (ii) all cashiers’, landlords’, workers’ and repairers’
\nliens, and other similar liens imposed by law, incurred in the ordinary course
\nof business; (iii) all laws and governmental rules, regulations, ordinances and
\nrestrictions; (iv) all leases, subleases, licenses, concessions or service
\ncontracts to which any Person or any of its Subsidiaries is a party; (v)
\nEncumbrances identified on title policies or preliminary title reports or other
\ndocuments or writing delivered or made available for inspection to any Person
\nprior to the date hereof or included in the Public Records; and (vi) all other
\nliens and mortgages, covenants, imperfections in title, charges, easements,
\nrestrictions and other Encumbrances which, in the case of any such Encumbrances
\npursuant to clause (i) through (vi), do not materially detract from or
\nmaterially interfere with the present use of the asset subject thereto or
\naffected thereby.<\/p>\n
“Person” shall mean any individual, corporation, partnership,
\n ——
\nlimited liability company, joint venture, governmental agency or
\ninstrumentality, or any other entity.<\/p>\n
“Preferred Merger Consideration” shall have the meaning set
\n ——————————
\nforth in Section 2.7(b).<\/p>\n
“Proceeding” shall have the meaning set forth in Section
\n ———-
\n6.7(a).<\/p>\n
“Registration Statement” shall have the meaning set forth in
\n ———————-
\nSection 3.19.<\/p>\n
“Representative” shall have the meaning set forth in Section
\n ————–
\n6.3(b).<\/p>\n
“Rule 145” shall have the meaning set forth in Section 6.9.
\n ——– <\/p>\n
9<\/p>\n
“SEC” shall mean the Securities Exchange Commission.
\n — <\/p>\n
“Securities Act” shall mean the Securities Act of 1933, as
\n ————–
\namended, and the rules and regulations promulgated thereunder.<\/p>\n
“Special Voting Stock Merger Consideration” shall have the
\n —————————————–
\nmeaning set forth in Section 2.7(c).<\/p>\n
“Stock Option Agreement” shall have the meaning set forth in
\n ———————-
\nthe Recitals.<\/p>\n
“Stock Option Plan” shall mean the Company’s 1996 Stock Option
\n —————–
\nPlan, restated as of March 5, 1998.<\/p>\n
“Stockholder Support Agreement” shall have the meaning set
\n —————————–
\nforth in the Recitals.<\/p>\n
“Subsidiary” shall mean, with respect to any Person, any
\n ———-
\ncorporation, entity or other organization, whether incorporated or
\nunincorporated, of which (i) such Person directly or indirectly owns or controls
\nat least a majority of the securities or other interests having by their terms
\nordinary voting power to elect a majority of the board of directors or others
\nperforming similar functions; or (ii) such Person is a general partner, manager
\nor managing member.<\/p>\n
“Superior Proposal” shall have the meaning set forth in
\n —————–
\nSection 6.3(b).<\/p>\n
“Support Agreement Amendment” shall mean an agreement to be
\n —————————
\nmade as of the Effective Time between Acquiror, the Company and Canadian Sub, as
\nrequired by Section 2.9 thereof, for the purpose of amending the Old Support
\nAgreement, and providing for, among other things, the Merger.<\/p>\n
“Surviving Corporation” shall have the meaning set forth in
\n ———————
\nSection 2.1.<\/p>\n
“Tax” or “Taxes” shall mean all federal, state, local, foreign
\n — —–
\nand other taxes, levies, imposts, assessments, impositions or other similar
\ngovernment charges, including, without limitation, income, estimated income,
\nbusiness, occupation, franchise, real property, payroll, personal property,
\nsales, transfer, stamp, use, employment, commercial rent or withholding,
\noccupancy, premium, gross receipts, profits, windfall profits, deemed profits,
\nlicense, lease, severance, capital, production, corporation, ad valorem, excise,
\nduty or other taxes, including interest, penalties and additions (to the extent
\napplicable) thereto whether disputed or not.<\/p>\n
“Tax Return” shall mean any report, return, document,
\n ———-
\ndeclaration or other information or filing required to be supplied to any taxing
\nauthority or jurisdiction (foreign or domestic) with respect to Taxes,
\nincluding, without limitation, information returns, any documents with respect
\nto or accompanying payments of estimated Taxes, or with respect to or
\naccompanying requests for the extension of time in which to file any such
\nreport, return, document, declaration or other information.<\/p>\n
10<\/p>\n
“Termination Time” shall have the meaning set forth in
\n —————-
\nSection 8.1(b).<\/p>\n
“Third Party” shall have the meaning set forth in Section
\n ———–
\n6.3(b).<\/p>\n
“Voting and Exchange Trust Supplement” shall mean an agreement
\n ————————————
\nto be made as of the Effective Time between Acquiror, the Company, Canadian Sub
\nand a trustee for the holders of the Exchangeable Shares, to the extent required
\nby Section 11.1 and Section 12.4 of the Old Voting and Exchange Trust Agreement,
\nproviding for the assumption by Acquiror of the obligations of the Company under
\nthe Old Voting and Exchange Trust Agreement and the other matters specified
\ntherein.<\/p>\n
“Voting Debt” shall have the meaning set forth in Section
\n ———–
\n3.3(b).<\/p>\n
“Welfare Plan” shall mean, with respect to any Person, any
\n ————
\n“employee welfare benefit plan” as defined in Section 3(1) of ERISA under which
\nsuch Person has or may have any liability (accrued, contingent or otherwise).<\/p>\n
ARTICLE II.
\n THE MERGER<\/p>\n
SECTION 2.1. THE MERGER. Upon the terms and subject to the conditions
\nof this Agreement and in accordance with the DGCL, at the Effective Time, the
\nCompany shall be merged with and into Acquiror. As a result of the Merger, the
\nseparate corporate existence of the Company shall cease and Acquiror shall
\ncontinue as the surviving corporation (the “Surviving Corporation”) and shall
\n ———————
\nsucceed to and assume all of the rights and obligations of the Company in
\naccordance with the DGCL. The name of Acquiror, as the Surviving Corporation,
\nshall remain “Mattel, Inc.”<\/p>\n
SECTION 2.2. CLOSING AND CLOSING DATE. Unless this Agreement shall
\nhave been terminated and the transactions herein contemplated shall have been
\nabandoned pursuant to the provisions of Section 8.1, the closing (the “Closing”)
\n ——-
\nof the Merger shall take place (a) at 9:00 a.m., New York City time, on the
\nsecond Business Day after all of the conditions to the respective obligations of
\nthe parties set forth in Article VII hereof shall have been satisfied or waived
\nor (b) at such other time and date as Acquiror and the Company shall agree (such
\ndate and time on and at which the Closing occurs being referred to herein as the
\n“Closing Date”). The Closing shall take place at the offices of Latham & Watkins
\n ————
\nlocated at 633 West Fifth Street, Sixth Floor, Los Angeles, California 90071. At
\nthe Closing the documents, certificates, opinions and instruments referred to in
\nArticle VII shall be executed and delivered.<\/p>\n
SECTION 2.3. EFFECTIVE TIME. The parties hereto shall cause the Merger
\nto be consummated by filing a certificate of merger (the “Certificate of
\n ————–
\nMerger”) on the Closing Date with the Secretary of State of the State of
\n——
\nDelaware, in such form as required by and executed in accordance with the
\nrelevant provisions of the DGCL (the date and time of the filing of the
\nCertificate of Merger with the Secretary of State of the State of Delaware or at
\nsuch later time or date after such filing as may be specified in the Certificate
\nof Merger being the “Effective Time”).
\n ————–<\/p>\n
11<\/p>\n
SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects
\nset forth in the applicable provisions of the DGCL. Without limiting the
\ngenerality of the foregoing, and subject thereto, at the Effective Time all the
\nproperty, rights, privileges, immunities, powers and franchises of the Company
\nand Acquiror shall vest in the Surviving Corporation, and all debts, liabilities
\nand duties of the Company and Acquiror shall become the debts, liabilities and
\nduties of the Surviving Corporation.<\/p>\n
SECTION 2.5. CERTIFICATE OF INCORPORATION; BYLAWS.<\/p>\n
(a) At the Effective Time and without any further action on the part of
\nthe Company and Acquiror, the Certificate of Incorporation (the “Certificate of
\n ————–
\nIncorporation”) of Acquiror shall be the Certificate of Incorporation of the
\n————-
\nSurviving Corporation.<\/p>\n
(b) At the Effective Time and without any further action on the part of
\nthe Company and Acquiror, the bylaws (the “Bylaws”) of Acquiror as in effect
\n ——
\nimmediately prior to the Effective Time shall be the Bylaws of the Surviving
\nCorporation until duly amended as provided for therein and under the DGCL.<\/p>\n
SECTION 2.6. DIRECTORS AND OFFICERS. The directors of Acquiror
\nimmediately prior to the Effective Time shall continue as the directors of the
\nSurviving Corporation, each to hold office in accordance with the Certificate of
\nIncorporation and Bylaws of the Surviving Corporation, and the officers of
\nAcquiror immediately prior to the Effective Time shall continue as the officers
\nof the Surviving Corporation, in each case until their respective successors are
\nduly elected or appointed (as the case may be) and qualified.<\/p>\n
SECTION 2.7. CONVERSION OF SECURITIES. At the Effective Time, by
\nvirtue of the Merger and without any action on the part of Acquiror, the Company
\nor the holders of any of the following securities:<\/p>\n
(a) Subject to Section 2.10, each share of Common Stock, par value $.01
\nper share, of the Company (the “Company Common Stock”), issued and outstanding
\n ——————–
\nimmediately prior to the Effective Time (other than shares of Company Common
\nStock to be canceled in accordance with Section 2.7(d) hereof) shall be changed
\nand converted into and represent the right to receive a number (rounded to the
\nnearest hundred thousandth of a share) (adjusted as set forth in subsection (f),
\nthe “Exchange Ratio”) of fully paid and nonassessable shares of Acquiror Common
\n ————–
\nStock equal to the number determined by dividing $33.00 by the Average Acquiror
\nPrice; provided, however, that (i) if the number determined by dividing $33.00
\nby the Average Acquiror Price is less than or equal to 1.0, the Exchange Ratio
\nshall be 1.0, and (ii) if the number determined by dividing $33.00 by the
\nAverage Acquiror Price is 1.2 or higher, the Exchange Ratio shall be 1.2 (the
\n“Common Merger Consideration”). As of the Effective Time, all such shares of
\n —————————
\nCompany Common Stock shall no longer be outstanding and shall automatically be
\ncanceled and retired and shall cease to exist, and each holder of a certificate
\nwhich, prior to the Effective Time, represented any such shares of Company
\nCommon Stock shall cease to have any rights with respect thereto, except the
\nright to receive (i) the Common Merger Consideration, (ii) any cash in lieu of
\nfractional shares of Acquiror Common Stock to be issued or paid in <\/p>\n
12<\/p>\n
consideration therefor upon surrender of such certificate in accordance with
\nSection 2.10 and (iii) any dividends and distributions in accordance with
\nSection 2.11(e), in each case without interest.<\/p>\n
(b) Subject to Section 2.10, each share of Series A Convertible
\nParticipating Preferred Stock, par value $.01 per share, of the Company (the
\n“Company Preferred Stock”), issued and outstanding immediately prior to the
\n ———————–
\nEffective Time (other than shares of Company Preferred Stock to be canceled in
\naccordance with Section 2.7(d) hereof) shall be changed and converted into and
\nrepresent the right to receive a number of fully paid and nonassessable shares
\nof Acquiror Common Stock equal to the product of (i) the Exchange Ratio and (ii)
\nthe number of shares of Company Common Stock issuable upon conversion of such
\nshare of Company Preferred Stock immediately prior to the Effective Time (the
\n“Preferred Merger Consideration”). As of the Effective Time, all such shares of
\n ——————————
\nCompany Preferred Stock shall no longer be outstanding and shall automatically
\nbe canceled and retired and shall cease to exist, and each holder of a
\ncertificate which, prior to the Effective Time, represented any such shares of
\nCompany Preferred Stock shall cease to have any rights with respect thereto,
\nexcept the right to receive (i) the Preferred Merger Consideration, (ii) any
\ncash in lieu of fractional shares of Acquiror Common Stock to be issued or paid
\nin consideration therefor upon surrender of such certificate in accordance with
\nSection 2.10 and (iii) any dividends and distributions in accordance with
\nSection 2.11(e), in each case without interest.<\/p>\n
(c) As of the Effective Time, each outstanding share of special voting
\nstock, par value $1.00 per share, of the Company (“Company Special Voting
\n ———————-
\nStock”) shall be changed and converted into and represent the right to receive
\n—–
\none Acquiror Special Voting Share (the “Special Voting Stock Merger
\n —————————
\nConsideration”). As of the Effective Time, all such shares of Company Special
\n————-
\nVoting Stock shall no longer be outstanding and shall automatically be canceled
\nand retired and shall cease to exist, and each holder of a certificate which,
\nprior to the Effective Time, represented any such shares of Company Special
\nVoting Stock shall cease to have any rights with respect thereto, except the
\nright to receive the Special Voting Stock Merger Consideration.<\/p>\n
(d) Each share of Company Common Stock and Company Preferred Stock that
\nis (i) held in the treasury of the Company or (ii) owned by Acquiror or any
\ndirect or indirect Subsidiary of Acquiror or the Company, in each case
\nimmediately prior to the Effective Time, shall be canceled and retired without
\nany conversion thereof and no payment or distribution shall be made with respect
\nthereto.<\/p>\n
(e) Each share of common, preferred or other capital stock of Acquiror
\nissued and outstanding immediately prior to the Effective Time shall remain
\noutstanding and shall be unchanged after the Merger.<\/p>\n
(f) The Exchange Ratio shall be adjusted to reflect fully the effect of
\nany stock split, reverse split, stock dividend (including any dividend or
\ndistribution of securities convertible into Acquiror Common Stock),
\nreorganization, recapitalization, reclassification or other like change with
\nrespect to Acquiror Common Stock occurring after the date hereof and prior to
\nthe Effective Time.<\/p>\n
13<\/p>\n
SECTION 2.8. TREATMENT OF EMPLOYEE OPTIONS AND OTHER COMPANY STOCK
\nRIGHTS.<\/p>\n
(a) Prior to the Effective Time, the Board of Directors of the Company
\n(the “Company Board”) (or, if appropriate, any Committee thereof) and the Board
\n ————-
\nof Directors of Acquiror (the “Acquiror Board”) shall adopt appropriate
\n ————–
\nresolutions and take all other actions necessary to provide that effective at
\nthe Effective Time, all outstanding Company Stock Rights heretofore granted
\nunder the Company Stock Plans, whether vested or unvested, shall be assumed by
\nAcquiror and converted automatically into options to purchase shares of Acquiror
\nCommon Stock (collectively, “New Stock Rights”) in an amount and, if applicable,
\n —————-
\nat an exercise price determined as provided below:<\/p>\n
(i) The number of shares of Acquiror Common Stock to be
\n subject to the New Stock Rights shall be equal to the product of (x)
\n the number of shares of Company Common Stock remaining subject (as of
\n immediately prior to the Effective Time) to the original Company Stock
\n Right multiplied by (y) the Exchange Ratio, provided that any
\n fractional shares of Acquiror Common Stock resulting from such
\n multiplication shall be rounded down to the nearest share.<\/p>\n
(ii) The exercise price per share of Acquiror Common Stock
\n under the New Stock Right shall be equal to the exercise price per
\n share of the Company Common Stock under the original Company Stock
\n Right divided by the Exchange Ratio, provided that such exercise price
\n shall be rounded up to the nearest tenth of a cent.<\/p>\n
The adjustment provided herein with respect to any options which are “incentive
\nstock options” (as defined in Section 422 of the Code) shall be, and is intended
\nto be, effected in a manner which is consistent with Section 424(a) of the Code.
\nSubject to Sections 2.8(b) and 2.8(c), after the Effective Time, each New Stock
\nRight shall be exercisable and shall vest upon the same terms and conditions as
\nwere applicable to the related Company Stock Right immediately prior to the
\nEffective Time (except that with regard to such New Stock Right, any references
\nto the Company shall be deemed, as appropriate, to include Acquiror), it being
\nunderstood that the vesting of the Company Stock Rights shall accelerate in
\naccordance with their respective terms, or the terms of separate agreements
\nbetween the Company and the holders thereof, as a result of the Merger. Acquiror
\nagrees that it shall take all action necessary, on or prior to the Effective
\nTime, to authorize and reserve a number of shares of Acquiror Common Stock
\nsufficient for issuance upon exercise of New Stock Rights as contemplated by
\nthis Section 2.8. As soon as practicable after the Effective Time, Acquiror
\nshall file a registration statement on Form S-8 (or any successor or other
\nappropriate form) with respect to the shares of Acquiror Common Stock subject to
\nthe Company Stock Rights assumed pursuant to this Section 2.8 and shall use its
\nreasonable best efforts to maintain the effectiveness of such registration
\nstatement or statements (and maintain the current status of the prospectus or
\nprospectuses contained therein) for as long as the New Stock Rights remain
\noutstanding.<\/p>\n
(b) Prior to the Effective Time, the Company will take all actions
\nnecessary (i) to shorten the offering period under the Company’s Employee Stock
\nPurchase Plan in which the <\/p>\n
14<\/p>\n
Effective Time occurs so that such offering period terminates on the day prior
\nto the Effective Time and (ii) to terminate the Employee Stock Purchase Plan
\neffective as of the Effective Time.<\/p>\n
(c) The Company will use its best efforts so that, as of the Effective
\nTime, none of its Subsidiaries is or will be bound by any Company Stock Rights,
\nother options, warrants, rights or agreements which would entitle any person,
\nother than Acquiror or its affiliates, to own any capital stock of any of its
\nSubsidiaries or to receive any payment in respect thereof.<\/p>\n
SECTION 2.9. TREATMENT OF EXCHANGEABLE SHARES.<\/p>\n
(a) Prior to the Effective Time, the Company Board, the Acquiror Board
\nand the Board of Directors of Canadian Sub (the “Canadian Sub Board”), or any of
\n ——————
\ntheir respective appropriate committees, shall adopt appropriate resolutions
\nand, along with the Company, Acquiror and Canadian Sub, shall take all other
\nactions required under the Old Support Agreement and the Old Voting and Exchange
\nTrust Agreement to provide that at and after the Effective Time each outstanding
\nExchangeable Share shall thereafter be exchangeable for that number of shares of
\nAcquiror Common Stock equal to the Exchange Ratio.<\/p>\n
(b) Without limiting the generality of Section 2.9(a), the parties
\nagree as follows:<\/p>\n
(i) at or before the Effective Time, the Company and Canadian
\n Sub (including its Board of Directors) shall comply with their
\n respective obligations under the provisions attaching to the
\n Exchangeable Shares, the Old Support Agreement and the Old Voting and
\n Exchange Trust Agreement;<\/p>\n
(ii) at or before the Effective Time, Acquiror, the Company
\n and Canadian Sub shall execute and deliver the Support Agreement
\n Amendment and Acquiror, Canadian Sub, the Company and a trustee for the
\n holders of the Exchangeable Shares shall execute and deliver the Voting
\n and Exchange Trust Supplement;<\/p>\n
(iii) at or before the Effective Time, Acquiror shall have
\n authorized the Acquiror Special Voting Share and at the Effective Time,
\n Acquiror shall deliver to the trustee for the holders of the
\n Exchangeable Shares a new certificate evidencing the Acquiror Special
\n Voting Share, to the extent required by the Voting and Exchange Trust
\n Supplement;<\/p>\n
(iv) at or before the Effective Time, Acquiror, Company and
\n Canadian Sub shall take all such actions as may reasonably be required
\n to permit the continued unrestricted tradeability in Canada of the
\n Exchangeable Shares and the issuance and first resale in Canada and the
\n United States of America of the shares of Acquiror Common Stock issued
\n upon exchange of the Exchangeable Shares from time to time (but only to
\n the extent that such unrestricted tradeability is available to holders
\n of Exchangeable Shares in a particular jurisdiction on the date
\n hereof), in each case without requiring the holder of the relevant
\n share, in connection with any such trade or resale, to qualify with,
\n file any document or take any proceeding with, or obtain any further
\n order, ruling or consent from, any Governmental Entity or regulatory
\n authority under any Canadian or <\/p>\n
15<\/p>\n
United States federal, provincial, state or territorial securities or
\n other laws or pursuant to the rules and regulations of any regulatory
\n authority administering such laws, or the fulfillment of any other
\n legal requirement in any such jurisdiction (other than, with respect to
\n such first resales, any restrictions on transfer by reason of, among
\n other things, a holder being a “control person” of Acquiror for
\n purposes of Canadian federal, provincial or territorial securities
\n laws). Without limiting the generality of the foregoing, such actions
\n shall include the confirmation of the continued effectiveness,
\n following the Merger, of all existing Canadian securities regulatory
\n orders and rulings, or the granting of new such orders and rulings,
\n respecting such unrestricted tradeability of the Exchangeable Shares
\n and such unrestricted issuance and first resale of the shares of
\n Acquiror Common Stock issuable upon exchange of the Exchangeable Shares
\n from time to time, and respecting the satisfaction of Canadian Sub’s
\n Canadian securities law continuous and timely disclosure obligations
\n through the filing and provision of information relating to Acquiror;
\n and<\/p>\n
(v) at or before the Effective Time, Acquiror shall take all
\n action necessary to authorize and reserve that number of shares of
\n Acquiror Common Stock sufficient for issuance upon all exchanges of the
\n outstanding Exchangeable Shares (other than Exchangeable Shares held by
\n Acquiror, its Subsidiaries and Affiliates) from time to time after the
\n Effective Time.<\/p>\n
(c) Acquiror agrees that at the Effective Time, the holder(s) of each
\nExchangeable Share shall receive a number of Acquiror Rights equal to the number
\nof shares of Acquiror Common Stock issuable upon exchange of such Exchangeable
\nShare, or similar rights having economically equivalent value to such Acquiror
\nRights.<\/p>\n
SECTION 2.10. FRACTIONAL INTERESTS. No certificates or scrip
\nrepresenting fractional shares of Acquiror Common Stock shall be issued in
\nconnection with the Merger or any exchange of an Exchangeable Share at any time
\nafter the Effective Time, and such fractional interests will not entitle the
\nowner thereof to any rights of a stockholder of Acquiror. In lieu of any such
\nfractional interests, each holder of shares of Company Common Stock exchanged
\npursuant to Section 2.7(a), Company Preferred Stock exchanged pursuant to
\nSection 2.7(b) or Exchangeable Shares exchanged pursuant to the provisions
\nthereof who would otherwise have been entitled to receive a fraction of a share
\nof Acquiror Common Stock (after taking into account all shares of Acquiror
\nCommon Stock to which such holder is entitled pursuant to Sections 2.7(a) and
\n2.7(b) and the provisions of the Exchangeable Shares) shall be entitled to
\nreceive cash (without interest) in an amount equal to the product of such
\nfractional part of Acquiror Common Stock multiplied by the Average Acquiror
\nPrice.<\/p>\n
SECTION 2.11. SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK
\nTRANSFER BOOKS.<\/p>\n
(a) Prior to the Closing Date, Acquiror shall designate a bank or trust
\ncompany reasonably acceptable to the Company to act as agent for the holders of
\nshares of Company Common Stock and Company Preferred Stock (collectively,
\n“Company Stock”) in connection
\n ————-<\/p>\n
16<\/p>\n
with the Merger (the “Exchange Agent”) to receive the Common Merger
\n ————–
\nConsideration and the Preferred Merger Consideration (collectively, the “Merger
\n ——
\nConsideration”) to which holders of shares of Company Stock shall become
\n————-
\nentitled to receive pursuant to Sections 2.7(a) and (b) and Section 2.10. Prior
\nto the filing of the Certificate of Merger with the Secretary of State of the
\nState of Delaware, Acquiror will make available to the Exchange Agent sufficient
\nshares of Acquiror Common Stock to make all exchanges pursuant to Section
\n2.11(b). The Exchange Agent shall cause the shares of Acquiror Common Stock
\ndeposited by Acquiror to be (i) held for the benefit of the holders of the
\nCompany Stock and (ii) promptly applied to making the exchanges and payments
\nprovided for in Section 2.11(b). Such shares of Acquiror Common Stock shall not
\nbe used for any purpose that is not provided for herein.<\/p>\n
(b) Promptly after the Effective Time, Acquiror shall cause to be
\nmailed to each record holder, as of the Effective Time, of an outstanding
\ncertificate or certificates which immediately prior to the Effective Time
\nrepresented shares of Company Common Stock or Company Preferred Stock
\n(collectively, the “Certificates”), a form of letter of transmittal (which shall
\n ————
\nspecify that delivery shall be effected, and risk of loss and title to the
\nCertificates shall pass, only upon proper delivery of the Certificates to the
\nExchange Agent) and instructions for use in effecting the surrender of the
\nCertificates in exchange for the Merger Consideration. Upon surrender to the
\nExchange Agent of a Certificate, together with such letter of transmittal, duly
\ncompleted and validly executed in accordance with the instructions thereto, and
\nsuch other documents as may be reasonably required pursuant to such
\ninstructions, the holder of such Certificate shall be entitled to receive in
\nexchange therefor, (i) a certificate representing that number of whole shares of
\nAcquiror Common Stock which such holder has the right to receive pursuant to the
\nprovisions of Sections 2.7(a) and (b), (ii) cash in lieu of any fractional
\nshares of Acquiror Common Stock to which such holder is entitled pursuant to
\nSection 2.10, after giving effect to any required tax withholdings, and (iii)
\nany dividends or distributions to which such holder is entitled pursuant to
\nSection 2.11(e), and the Certificate so surrendered shall forthwith be canceled.
\nUntil so surrendered and exchanged, each Certificate, subject to Section 2.7(d),
\nshall represent solely the right to receive the consideration payable in respect
\nthereto pursuant to Sections 2.7(a) and (b) and Section 2.10. If the exchange of
\ncertificates representing shares of Acquiror Common Stock is to be made to a
\nperson other than the person in whose name the surrendered Certificate is
\nregistered, it shall be a condition of exchange that the Certificate so
\nsurrendered shall be properly endorsed or shall be otherwise in proper form for
\ntransfer and that the person requesting such exchange shall have paid any
\ntransfer and other taxes required by reason of the exchange of certificates
\nrepresenting shares of Acquiror Common Stock to a person other than the
\nregistered holder of the Certificate surrendered or shall have established to
\nthe satisfaction of the Surviving Corporation that such tax either has been paid
\nor is not applicable.<\/p>\n
(c) At any time after the one-year anniversary of the Effective Time,
\nAcquiror shall be entitled to require the Exchange Agent to deliver to Acquiror
\nall cash and any other instruments (including shares of Acquiror Common Stock)
\nin its possession relating to the transactions contemplated by this Agreement
\nwhich had been made available to the Exchange Agent and which have not been
\ndistributed to holders of Certificates. Thereafter, each holder of a
\nCertificate, subject to Section 2.7(d), may surrender such Certificate to the
\nSurviving Corporation and (subject to applicable abandoned property, escheat or
\nother similar laws) receive <\/p>\n
17<\/p>\n
in exchange therefor the consideration payable in respect thereof pursuant to
\nSections 2.7(a) and (b) and Section 2.10, without interest, but shall have no
\ngreater rights against the Surviving Corporation than may be accorded to general
\ncreditors of the Surviving Corporation under the DGCL. Notwithstanding the
\nforegoing, none of Acquiror, the Surviving Corporation or the Exchange Agent
\nshall be liable to any holder of a Certificate for shares of Acquiror Common
\nStock (and any cash payable in lieu of any fractional shares of Acquiror Common
\nStock) delivered to a public official pursuant to any applicable abandoned
\nproperty, escheat or similar law.<\/p>\n
(d) At the Effective Time, the stock transfer books of the Company
\nshall be closed and thereafter there shall be no further registration of
\ntransfers of shares of Company Stock on the records of the Company. From and
\nafter the Effective Time, the holders of Certificates evidencing ownership of
\nshares of Company Stock outstanding immediately prior to the Effective Time
\nshall cease to have any rights with respect to such shares of Company Stock
\nexcept as otherwise provided for herein or by applicable law.<\/p>\n
(e) No dividends or other distributions declared or made after the
\nEffective Time with respect to shares of Acquiror Common Stock shall be paid to
\nthe holder of any unsurrendered Certificate with respect to the shares of
\nAcquiror Common Stock it is entitled to receive and no cash payment in lieu of
\nfractional interests shall be paid pursuant to Section 2.10 until the holder of
\nsuch Certificate shall surrender such Certificate in accordance with the
\nprovisions of this Agreement. Upon such surrender, Acquiror shall cause to be
\npaid to the person in whose name the certificates representing such shares of
\nAcquiror Common Stock shall be issued, any dividends or distributions with
\nrespect to such shares of Acquiror Common Stock which have a record date after
\nthe Effective Time and shall have become payable between the Effective Time and
\nthe time of such surrender. In no event shall the person entitled to receive
\nsuch dividends, distributions or cash in lieu of fractional interests be
\nentitled to receive interest thereon.<\/p>\n
(f) If, at any time after the Effective Time, the Surviving Corporation
\nshall consider or be advised that any deeds, bills of sale, assignments,
\nassurances or any other actions or things are necessary or desirable to vest,
\nperfect or confirm of record or otherwise in the Surviving Corporation its
\nright, title or interest in, to or under any of the rights, properties or assets
\nof the Company acquired or to be acquired by the Surviving Corporation as a
\nresult of, or in connection with, the Merger or otherwise to carry out this
\nAgreement, the officers of the Surviving Corporation shall be authorized to
\nexecute and deliver, in the name and on behalf of the Company or otherwise, all
\nsuch deeds, bills of sale, assignments and assurances and to take and do, in
\nsuch names and on such behalves or otherwise, all such other actions and things
\nas may be necessary or desirable to vest, perfect or confirm any and all right,
\ntitle and interest in, to and under such rights, properties or assets in the
\nSurviving Corporation or otherwise to carry out the purposes of this Agreement.<\/p>\n
SECTION 2.12. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
\nCertificates shall have been lost, stolen or destroyed, the Exchange Agent shall
\nissue in exchange for such lost, stolen or destroyed Certificates, upon the
\nmaking of an affidavit of that fact by the holder thereof, such shares of
\nAcquiror Common Stock (and cash in lieu of any <\/p>\n
18<\/p>\n
fractional shares of Acquiror Common Stock and dividends or distributions, if
\nany, in respect thereof) as may be required pursuant to Sections 2.7(a) and (b);
\nprovided, however, that Acquiror may, in its discretion and as a condition
\nprecedent to the issuance thereof, require the owner of such lost, stolen or
\ndestroyed Certificates to deliver a bond in such sum as it may reasonably direct
\nas indemnity against any claim that may be made against Acquiror or the Exchange
\nAgent with respect to the Certificates alleged to have been lost, stolen or
\ndestroyed.<\/p>\n
SECTION 2.13. TAX CONSEQUENCES. It is intended by the parties hereto
\nthat the Merger shall constitute a reorganization within the meaning of Section
\n368(a) of the Code. The parties hereto hereby adopt this Agreement as a “plan of
\nreorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
\nUnited States Treasury Regulations.<\/p>\n
SECTION 2.14. WITHHOLDING RIGHTS. Acquiror or the Exchange Agent shall
\nbe entitled to deduct and withhold from the Merger Consideration otherwise
\npayable pursuant to this Agreement to any holder of Certificates which prior to
\nthe Effective Time represented shares of Company Stock such amounts as Acquiror
\nor the Exchange Agent is required to deduct and withhold with respect to the
\nmaking of such payment under the Code or any provision of state, local, or
\nforeign tax law. To the extent that amounts are so withheld by Acquiror or the
\nExchange Agent, such withheld amounts shall be treated for all purposes of this
\nAgreement as having been paid to the holder of the shares of Company Stock in
\nrespect of which such deduction and withholding was made by the Company or the
\nExchange Agent.<\/p>\n
SECTION 2.15. AFFILIATES. Notwithstanding anything herein to the
\ncontrary, Certificates surrendered for exchange by any Company Affiliate (as
\ndefined in Section 6.9) shall not be exchanged until the later of (i) the date
\nAcquiror has received a signed agreement (an “Affiliate Agreement”) from such
\n ——————-
\nCompany Affiliate (the form of which is attached hereto as Exhibit C) as
\nprovided in Section 6.9 or (ii) the date such shares of Acquiror Common Stock
\nare transferable pursuant to the Affiliate Agreement regardless of whether such
\nagreement was executed by the Company Affiliate.<\/p>\n
ARTICLE III.
\n REPRESENTATIONS AND WARRANTIES OF THE COMPANY<\/p>\n
The Company represents and warrants to Acquiror that the statements
\ncontained in this Article III are true and correct except as set forth in the
\ndisclosure schedule delivered by the Company to Acquiror on or before the date
\nof this Agreement (the “Company Disclosure Schedule”). The Company Disclosure
\n —————————
\nSchedule shall be arranged in paragraphs corresponding to the numbered and
\nlettered paragraphs contained in this Article III and the disclosure in any
\nparagraph shall qualify other paragraphs in this Article III only to the extent
\nthat it is readily apparent from a reading of such disclosure that it also
\nqualifies or applies to such other paragraphs.<\/p>\n
SECTION 3.1. ORGANIZATION AND QUALIFICATION. The Company and each of
\nits Subsidiaries is duly organized, validly existing and in good standing under
\nthe laws of the jurisdiction of its organization, with the corporate power and
\nauthority to own and operate its <\/p>\n
19<\/p>\n
business as presently conducted, except for any failure of any Subsidiaries to
\nbe in good standing that would not have a Material Adverse Effect. The Company
\nand each of its Subsidiaries is duly qualified as a foreign corporation or other
\nentity to do business and is in good standing in each jurisdiction where the
\ncharacter of its properties owned or held under lease or the nature of its
\nactivities makes such qualification necessary, except for such failures of the
\nCompany and any of its Subsidiaries to be so qualified as would not,
\nindividually or in the aggregate, have a Material Adverse Effect. The Company
\nhas previously made available to Acquiror true and correct copies of (i) its
\ncertificate of incorporation and bylaws, (ii) the charter and bylaws of SoftKey
\nHoldings Corporation, SoftKey Software Products Inc. and SoftKey Products
\nInternational Inc., and (iii) the charter documents and bylaws or other
\norganizational documents of each of its non-corporate Subsidiaries and each of
\nits non-wholly owned Subsidiaries, as currently in effect.<\/p>\n
SECTION 3.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT. The
\nCompany has the requisite corporate power and authority to execute, deliver and
\nperform its obligations under this Agreement and to consummate the transactions
\ncontemplated hereby. The execution and delivery of this Agreement by the Company
\nand the performance by the Company of its obligations hereunder and the
\nconsummation of the transactions contemplated hereby have been duly authorized
\nby the Company Board and all other necessary corporate action on the part of the
\nCompany, other than the adoption and approval of this Agreement by the holders
\nof the Company Common Stock, the Company Preferred Stock and the Company Special
\nVoting Stock and no other corporate proceedings on the part of the Company are
\nnecessary to authorize this Agreement and the transactions contemplated hereby.
\nThis Agreement has been duly and validly executed and delivered by the Company
\nand constitutes a legal, valid and binding obligation of the Company,
\nenforceable against it in accordance with its terms, subject to the effects of
\nbankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
\nother similar laws relating to or affecting creditors’ rights generally, general
\nequitable principles (whether considered in a proceeding in equity or at law)
\nand an implied covenant of good faith and fair dealing.<\/p>\n
SECTION 3.3. CAPITALIZATION.<\/p>\n
(a) The authorized capital stock of the Company consists of (i)
\n200,000,000 shares of Company Common Stock, (ii) 5,000,000 shares of Preferred
\nStock, par value $.01 per share, of which 750,000 shares have been designated as
\nCompany Preferred Stock, and (iii) one share of Company Special Voting Stock.
\nThe Special Voting Stock entitles the holder thereof to vote, together with the
\nholders of Company Common Stock, on all matters submitted for the vote of the
\nholders of Company Common Stock. The number of votes represented by the Special
\nVoting Stock is equal to the number of outstanding Exchangeable Shares (other
\nthan Exchangeable Shares held by the Company, its Subsidiaries and its
\nAffiliates). As of December 7, 1998, there were issued and outstanding (i)
\n87,073,106 shares of Company Common Stock, (ii) 750,000 shares of Company
\nPreferred Stock, currently convertible into 15,000,000 shares of Company Common
\nStock, and (iii) 12,580,133 Exchangeable Shares (of which 7,374,942 are held
\ndirectly or indirectly by the Company). Section 3.3(a) of the Company Disclosure
\nSchedule sets forth the number of shares of capital stock of the Company
\n(including Exchangeable Shares) held in <\/p>\n
20<\/p>\n
treasury and the number of shares of Company Common Stock reserved for future
\nissuance upon (i) exercise of any unexpired and unexercised outstanding option,
\nwhether or not vested or exercisable in accordance with its terms, to purchase
\nshares of Company Common Stock (“Company Options”) granted and outstanding as of
\n —————
\nthe date hereof under any Company Stock Plans and (ii) exchange of the
\noutstanding Exchangeable Shares. As of the date of this Agreement, the Company
\nand its Subsidiaries have not granted any stock appreciation rights or any other
\ncontractual rights the value of which is derived from the financial performance
\nof the Company or any Subsidiary or the value of shares of Company Common Stock.
\nExcept as disclosed in Section 3.3(a) of the Company Disclosure Schedule, there
\nare no obligations, contingent or otherwise, of the Company or any of its
\nSubsidiaries to repurchase, redeem or otherwise acquire any shares of Company
\nCommon Stock or the capital stock or ownership interests of any Subsidiary or to
\nprovide funds to or make any material investment (in the form of a loan, capital
\ncontribution or otherwise) in any such Subsidiary or any other entity other than
\nguarantees of bank obligations or indebtedness for borrowed money of
\nSubsidiaries entered into in the ordinary course of business. All of the
\noutstanding shares of capital stock (including shares which may be issued upon
\nexercise of outstanding options) or other ownership interests of each of the
\nCompany’s Subsidiaries are duly authorized, validly issued, fully paid and
\nnonassessable and, except as disclosed in Section 3.3(a) of the Company
\nDisclosure Schedule, all such shares (other than directors’ qualifying shares)
\nare owned by the Company or another Subsidiary of the Company free and clear of
\nall security interests, liens, claims, pledges, agreements, limitations on the
\nCompany’s voting rights, charges or other encumbrances or restrictions on
\ntransfer of any nature (other than restrictions imposed by law).<\/p>\n
(b) There are no bonds, debentures, notes or other indebtedness having
\nvoting rights (or convertible into securities having such rights) (“Voting
\n ——
\nDebt”) of the Company or any of its Subsidiaries issued and outstanding. Except
\n—-
\nas set forth in Section 3.3(b) of the Company Disclosure Schedule or as reserved
\nfor future grants of options under the Company Stock Plans as of the date hereof
\nand for future exchanges of Exchangeable Shares, (i) there are no shares of
\ncapital stock of any class of, or any security exchangeable into or exercisable
\nfor such equity securities, issued, reserved for issuance or outstanding; (ii)
\nthere are no options, warrants, equity securities, calls, rights, commitments or
\nagreements of any character to which the Company or any of its Subsidiaries is a
\nparty or by which it is bound obligating the Company or any of its Subsidiaries
\nto issue, deliver or sell, or cause to be issued, delivered or sold, additional
\nshares of capital stock or other ownership interests (including Voting Debt) of
\nthe Company or any of its Subsidiaries or obligating the Company or any of its
\nSubsidiaries to grant, extend, accelerate the vesting of or enter into any such
\noption, warrant, equity security, call, right, commitment or agreement; and
\n(iii) there are no voting trusts, proxies or other voting agreements or
\nunderstandings with respect to the shares of capital stock of the Company to
\nwhich the Company or any of its Subsidiaries is a party. All shares of Company
\nCommon Stock subject to issuance as specified in this Section 3.3(b) are duly
\nauthorized and, upon issuance on the terms and conditions specified in the
\ninstruments pursuant to which they are issuable, shall be validly issued, fully
\npaid and nonassessable.<\/p>\n
SECTION 3.4. SUBSIDIARIES. The only Subsidiaries of the Company are
\nthose set forth in Section 3.4 of the Company Disclosure Schedule. There are no
\nexisting options, <\/p>\n
21<\/p>\n
warrants, calls, subscriptions, convertible securities or other securities,
\nagreements, commitments or obligations of any character relating to the
\noutstanding capital stock or other securities of any Subsidiary of the Company
\nor which would require any Subsidiary of the Company to issue or sell any shares
\nof its capital stock, ownership interests or securities convertible into or
\nexchangeable for shares of its capital stock or ownership interests.<\/p>\n
SECTION 3.5. OTHER INTERESTS. Except as set forth in Section 3.5 of
\nthe Company Disclosure Schedule, neither the Company nor any of the Company’s
\nSubsidiaries owns, directly or indirectly, any interest or investment in
\n(whether equity or debt) any corporation, partnership, limited liability
\ncompany, joint venture, business, trust or other Person (other than the
\nCompany’s Subsidiaries).<\/p>\n
SECTION 3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Except as set forth in Section 3.6 of the Company Disclosure
\nSchedule, neither the execution and delivery of this Agreement nor the
\nperformance by the Company of its obligations hereunder, nor the consummation of
\nthe transactions contemplated hereby, will: (i) conflict with the Company’s
\ncertificate of incorporation or bylaws or the comparable charter or
\norganizational documents of any of its material Subsidiaries; (ii) assuming
\nsatisfaction of the requirements set forth in Section 3.6(b) below, violate any
\nstatute, law, ordinance, rule or regulation, applicable to the Company or any of
\nits Subsidiaries or any of their properties or assets; or (iii) violate, breach,
\nbe in conflict with or constitute a default (or an event which, with notice or
\nlapse of time or both, would constitute a default) under, or permit the
\ntermination of any provision of, or result in the termination of, the
\nacceleration of the maturity of, or the acceleration of the performance of any
\nobligation of the Company or any of its Subsidiaries under, or result in the
\ncreation or imposition of any lien upon any properties, assets or business of
\nthe Company or any of its Subsidiaries under, any note, bond, indenture,
\nmortgage, deed of trust, lease, franchise, permit, authorization, license,
\ncontract (including, without limitation, Company Contracts), instrument or other
\nagreement or commitment or any order, judgment or decree to which the Company or
\nany of its Subsidiaries is a party or by which the Company or any of its
\nSubsidiaries or any of their respective assets or properties is bound or
\nencumbered, or give any Person the right to require the Company or any of its
\nSubsidiaries to purchase or repurchase any notes, bonds or instruments of any
\nkind except, in the case of clauses (ii) and (iii), for such violations,
\nbreaches, conflicts, defaults or other occurrences which, individually or in the
\naggregate, are not reasonably likely to have a Material Adverse Effect.<\/p>\n
(b) Except (i) for applicable requirements, if any, of the Exchange
\nAct, the Securities Act, and state securities or “blue sky” laws (“Blue Sky
\n ——–
\nLaws”), (ii) for the pre-merger notification requirements of the
\n—-
\nHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
\nand regulations thereunder (the “HSR Act”), (iii) for the filing of the
\n ——-
\nCertificate of Merger pursuant to the DGCL, (iv) for other governmental
\napprovals and filings required under the applicable laws of any foreign
\njurisdiction, and (v) with respect to matters set forth in Sections 3.6(a) or
\n3.6(b) of the Company Disclosure Schedule, no consent, approval or authorization
\nof, permit from, or declaration, filing or registration with, any governmental
\nor regulatory authority, or any other Person is required to be made or obtained
\nby the Company or <\/p>\n
22<\/p>\n
its Subsidiaries in connection with the execution, delivery and performance of
\nthis Agreement and the consummation of the transactions contemplated hereby,
\nexcept where the failure to obtain such consent, approval, authorization, permit
\nor declaration or to make such filing or registration would not, individually or
\nin the aggregate, have a Material Adverse Effect.<\/p>\n
SECTION 3.7. COMPLIANCE. The Company and each of its Subsidiaries are
\nin compliance with all foreign, federal, state and local laws and regulations
\napplicable to its operations or with respect to which compliance is a condition
\nof engaging in the business thereof, except to the extent that failure to comply
\nwould not, individually or in the aggregate, have a Material Adverse Effect. To
\nthe knowledge of the Company, neither the Company nor any of its Subsidiaries
\nhas received any notice asserting a failure, or possible failure, to comply with
\nany such law or regulation, the subject of which notice has not been resolved as
\nrequired thereby or otherwise to the satisfaction of the party sending the
\nnotice, except for such failure as would not, individually or in the aggregate,
\nhave a Material Adverse Effect. The Company and its Subsidiaries hold all
\npermits, licenses and franchises from Governmental Entities required to conduct
\ntheir respective businesses as they are now being conducted, except for such
\nfailures to have such permits, licenses and franchises that would not,
\nindividually or in the aggregate, have a Material Adverse Effect.<\/p>\n
SECTION 3.8. SEC DOCUMENTS.<\/p>\n
(a) The Company has filed and made available to Acquiror true and
\ncomplete copies of each registration statement, proxy or information statement,
\nform, report and other document required to be filed by the Company or any of
\nits Subsidiaries with the SEC or any securities regulatory authority in Canada
\nsince January 1, 1995 (collectively, the “Company SEC Reports”). As of their
\n ——————-
\nrespective dates, the Company SEC Reports (i) complied, or, with respect to
\nthose not yet filed, will comply, in all material respects with the applicable
\nrequirements of the Securities Act and the Exchange Act or any applicable
\nCanadian law, rule or regulation, and (ii) did not, or, with respect to those
\nnot yet filed, will not, contain any untrue statement of a material fact or omit
\nto state a material fact required to be stated therein or necessary to make the
\nstatements made therein, in the light of the circumstances under which they were
\nmade, not misleading. The Company has filed each registration statement, proxy
\nor information statement, form, report and other documents required to be filed
\nby the Company or any of its subsidiaries with any foreign governmental agency
\nequivalent to, or of like purpose as, the SEC, except as would not have a
\nMaterial Adverse Effect.<\/p>\n
(b) Each of the consolidated balance sheets of the Company included in
\nor incorporated by reference into the Company SEC Reports (including the related
\nnotes and schedules) presents fairly, in all material respects, the consolidated
\nfinancial position of the Company and its consolidated Subsidiaries as of its
\ndate, and each of the consolidated statements of income, retained earnings and
\ncash flows of the Company included in or incorporated by reference into the
\nCompany SEC Reports (including any related notes and schedules) presents fairly,
\nin all material respects, the results of operations, retained earnings or cash
\nflows, as the case may be, of the Company and its Subsidiaries for the periods
\nset forth therein (subject, in the <\/p>\n
23<\/p>\n
case of unaudited statements, to normal year-end audit adjustments), in each
\ncase in accordance with GAAP consistently applied during the periods involved,
\nexcept as may be noted therein.<\/p>\n
(c) Except as set forth in Section 3.8(c) of the Company Disclosure
\nSchedule and except as set forth in the Company SEC Reports, neither the Company
\nnor any of its Subsidiaries has any liabilities or obligations of any nature
\n(whether accrued, absolute, contingent or otherwise) that would be required to
\nbe reflected on, or reserved against in, a balance sheet of the Company or in
\nthe notes thereto, prepared in accordance with GAAP consistently applied, except
\nfor (i) liabilities or obligations that were so reserved on, or reflected in
\n(including the notes to), the consolidated balance sheet of the Company as of
\nOctober 3, 1998, (ii) liabilities or obligations arising in the ordinary course
\nof business (including trade indebtedness) since October 3, 1998 and (iii)
\nliabilities or obligations which would not, individually or in the aggregate,
\nhave a Material Adverse Effect.<\/p>\n
SECTION 3.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in
\nSection 3.9 of the Company Disclosure Schedule or the Company SEC Reports, and
\nexcept for the transactions expressly contemplated hereby, since October 3,
\n1998, the Company and its Subsidiaries have conducted their respective
\nbusinesses only in the ordinary and usual course consistent with past practices
\nand there has not been any change in the Company’s business, operations,
\ncondition (financial or otherwise), results of operations, assets or
\nliabilities, except for changes contemplated hereby or changes which have not,
\nindividually or in the aggregate, had or are reasonably likely to have a
\nMaterial Adverse Effect. Except as set forth in Section 3.9 of the Company
\nDisclosure Schedule, from October 3, 1998 through the date of this Agreement,
\nneither the Company nor any of its Subsidiaries has taken any of the actions
\nprohibited by Section 5.1 hereof.<\/p>\n
SECTION 3.10. LITIGATION. Except as set forth in Section 3.10 of the
\nCompany Disclosure Schedule and except as set forth in the Company SEC Reports,
\nthere is no Action instituted, pending or, to the knowledge of the Company,
\nthreatened, in each case against the Company or any of its Subsidiaries, which,
\nindividually or in the aggregate, directly or indirectly, could reasonably be
\nexpected to have a Material Adverse Effect, nor is there any outstanding
\njudgment, decree or injunction, in each case against the Company or any of its
\nSubsidiaries, or any statute, rule or order of any domestic or foreign court,
\ngovernmental department, commission or agency applicable to the Company or any
\nof its Subsidiaries which has or could reasonably be expected to have,
\nindividually or in the aggregate, any Material Adverse Effect.<\/p>\n
SECTION 3.11. TAXES. Except as set forth in Section 3.11 of the
\nCompany Disclosure Schedule:<\/p>\n
(a) The Company and its Subsidiaries have (A) duly filed (or there have
\nbeen filed on their behalf) with the appropriate governmental authorities all
\nTax Returns required to be filed by them and such Tax Returns are true, correct
\nand complete in all respects, except for any such filings which are not
\nreasonably likely, individually or in the aggregate, to have a Material Adverse
\nEffect, and (B) duly paid in full all Taxes, whether or not shown to be due on
\nsuch Tax <\/p>\n
24<\/p>\n
Returns, except for which the failure to pay would not, individually or in the
\naggregate, be reasonably likely to have a Material Adverse Effect;<\/p>\n
(b) No claim has ever been made by an authority in a jurisdiction where
\nany of the Company and its Subsidiaries does not file Tax Returns that it is or
\nmay be subject to taxation by that jurisdiction which is reasonably likely to
\nhave a Material Adverse Effect;<\/p>\n
(c) Each of the Company and its Subsidiaries has withheld and paid all
\nTaxes required to have been withheld and paid in connection with amounts paid or
\nowing to any employee, independent contractor, creditor, stockholder, or other
\nthird party, except for amounts which are not reasonably likely, individually or
\nin the aggregate, to have a Material Adverse Effect;<\/p>\n
(d) No federal income Tax Returns of the Company have ever been
\naudited, and no federal or state, local or foreign audits or other
\nadministrative proceedings or court proceedings are presently being conducted
\nwith regard to any Taxes or Tax Returns of the Company or its Subsidiaries and
\nneither the Company nor its Subsidiaries has received a written notice of any
\npending audits with respect to Taxes or Tax Returns of the Company, and neither
\nthe Company nor any of its Subsidiaries has waived any statute of limitations
\nwith respect to Taxes or agreed to any extension of time with respect to a Tax
\nassessment or deficiency, except with respect to Taxes which are not reasonably
\nlikely, individually or in the aggregate, to have a Material Adverse Effect;<\/p>\n
(e) Neither the Internal Revenue Service nor any other taxing authority
\n(whether domestic or foreign) has asserted against the Company or any of its
\nSubsidiaries any material deficiency or material claim for Taxes not reserved
\nunder the Company’s most recent balance sheet as set forth in its most recent
\nQuarterly Report on Form 10-Q;<\/p>\n
(f) There are no liens for Taxes upon any Assets of the Company or any
\nSubsidiary thereof, except for liens for Taxes not yet due and payable and liens
\nfor Taxes that are being contested in good faith by appropriate proceedings,
\nexcept for liens which would not be reasonably likely, individually or in the
\naggregate, to have a Material Adverse Effect, and no written power of attorney
\nthat has been granted by the Company or its Subsidiaries (other than to the
\nCompany or a Subsidiary) currently is in force with respect to any matter
\nrelating to Taxes except with respect to Taxes which are not reasonably likely,
\nindividually or in the aggregate, to have a Material Adverse Effect;<\/p>\n
(g) Neither the Company nor any of its Subsidiaries has, with regard to
\nany assets or property held by any of them, agreed to have Section 341(f)(2) of
\nthe Code apply to any disposition of a subsection (f) asset (as such term is
\ndefined in Section 341(f)(4) of the Code) owned by the Company or any of its
\nSubsidiaries;<\/p>\n
(h) None of the Company and its Subsidiaries has made any payments, is
\nobligated to make any payments, or is a party to any agreement that under
\ncertain circumstances could obligate it to make any payments that will not be
\ndeductible under Section 280G of the Code;<\/p>\n
25<\/p>\n
(i) None of the Company and its Subsidiaries has been a United States
\nreal property holding corporation within the meaning of Section 897(c)(2) of the
\nCode during the applicable period specified in Section 897(c)(1)(A)(ii) of the
\nCode;<\/p>\n
(j) None of the Company and its Subsidiaries is a party to any Tax
\nallocation or sharing agreement; and<\/p>\n
(k) None of the Company and its Subsidiaries (A) has been a member of
\nan affiliated group filing a consolidated federal income Tax Return (other than
\na group the common Parent of which was the Company) or (B) has any Liability for
\nthe Taxes of any Person (other than any of the Company and its Subsidiaries)
\nunder Treasury Regulation Section 1.1502-6 (or any similar provision of state,
\nlocal, or foreign law), as a transferee or successor, by contract, or otherwise,
\nother than such Taxes which are not reasonably likely, individually or in the
\naggregate, to have a Material Adverse Effect.<\/p>\n
SECTION 3.12. EMPLOYEE BENEFIT PLANS.<\/p>\n
(a) Section 3.12 of the Company Disclosure Schedule contains a complete
\nlist of all Company Pension Plans, Welfare Plans and material Benefit
\nArrangements (other than those maintained outside the United States) as of the
\ndate hereof. To the extent in the Company’s or its Subsidiaries’ possession,
\ntrue and complete copies or descriptions of the Pension Plans, Welfare Plans and
\nmaterial Benefit Arrangements (other than those maintained outside the United
\nStates), including, without limitation, trust instruments, if any, that form a
\npart thereof, and all amendments thereto have been furnished or made available
\nto Acquiror and its counsel.<\/p>\n
(b) Except as described in Section 3.12 of the Company Disclosure
\nSchedule, each of the Company Employee Plans (other than any Multiemployer Plan)
\nhas been administered and is in material compliance with the terms of such
\nCompany Employee Plan and all applicable laws, rules and regulations.<\/p>\n
(c) No material “reportable event” (as such term is used in Section
\n4043 of ERISA) for which the notice requirements to the Pension Benefit Guaranty
\nCorporation have not been waived, “prohibited transaction” (as such term is used
\nin Section 406 of ERISA or Section 4975 of the Code) for which no exemption
\nexists, or material “accumulated funding deficiency” (as such term is used in
\nSection 412 or 4971 of the Code) has heretofore occurred with respect to any
\nPension Plan (other than any Multiemployer Plan) of the Company or its
\nSubsidiaries.<\/p>\n
(d) There is no material action, order, writ, injunction, judgment or
\ndecree outstanding or claim, suit litigation, proceeding, arbitral action,
\ngovernmental audit or investigation relating to or seeking benefits under any
\nCompany Employee Plan that is pending or, to the Company’s knowledge, threatened
\nagainst the Company, any of its ERISA Affiliates, or any Company Employee Plan,
\nother than routine claims for benefits or which are not reasonably likely to
\nresult in a material liability.<\/p>\n
26<\/p>\n
(e) Except as set forth in Section 3.12 of the Company Disclosure
\nSchedule, none of the Company, its Subsidiaries or ERISA Affiliates have
\nincurred any withdrawal liability with respect to any Multiemployer Plan under
\nTitle IV of ERISA which remains unsatisfied.<\/p>\n
(f) Except as set forth in Section 3.12 of the Company Disclosure
\nSchedule, any termination of, or withdrawal from, any Pension Plans or
\nMultiemployer Plan of the Company any Subsidiaries or any ERISA Affiliate, on or
\nprior to the Closing Date, will not subject the Company to any liability under
\nTitle IV of ERISA.<\/p>\n
(g) Except as set forth in Section 3.12 of the Company Disclosure
\nSchedule, neither the execution and delivery of this Agreement or the
\nconsummation of the transactions contemplated hereby will result in the
\nacceleration or creation of any rights of any current or former employee of the
\nCompany or any of its Subsidiaries to benefits under any Company Employee Plan
\n(including, without limitation, the acceleration of the vesting or
\nexercisability of any stock options, the acceleration of the vesting of any
\nrestricted stock, the acceleration of the accrual or vesting of any benefits
\nunder any Pension Plan or the acceleration or creation of any rights under any
\nseverance, parachute or change in control agreement).<\/p>\n
(h) With respect to the Company Employee Plans, individually and in the
\naggregate, there are no funded benefit material obligations for which material
\ncontributions have not been made or properly accrued and there are no unfunded
\nmaterial benefit obligations which have not been accounted for by reserves, or
\notherwise properly footnoted in accordance with generally accepted accounting
\nprinciples, on the financial statements of the Company.<\/p>\n
SECTION 3.13. ASSETS.<\/p>\n
(a) Section 3.13(a) of the Company Disclosure Schedule identifies all
\nreal property owned by the Company and its Subsidiaries (the “Company Owned
\n ————-
\nProperty”) and all real property leased or operated by the Company and its
\n——–
\nSubsidiaries and providing for occupancy of more than 20,000 square feet (the
\n“Company Leased Property” and, together with the Company Owned Property, the
\n ———————–
\n“Company Real Property”).
\n ———————<\/p>\n
(b) The Company and its Subsidiaries have good and marketable fee
\nsimple title to the Company Owned Property, and a valid leasehold interest in
\nthe Company Leased Property, sufficient to allow each of the Company and its
\nSubsidiaries to conduct, and to continue to conduct, its business as and where
\ncurrently conducted, except for such matters that, individually or in the
\naggregate, are not reasonably likely to have a Material Adverse Effect. Such
\ntitle and leasehold interest is free and clear of any and all Encumbrances,
\nexcept for the exceptions described in the Company SEC Reports filed prior to
\nthe date of this Agreement or in Section 3.13(b) of the Company Disclosure
\nSchedule and such other Encumbrances that would not, individually or in the
\naggregate, result in a Material Adverse Effect. Prior to the date hereof, the
\nCompany has delivered to Acquiror true and correct copies of all title reports
\nand surveys for each parcel of Company Real Property.<\/p>\n
(c) True and correct copies of all of the principal documents under
\nwhich the Company Owned Property and the Company Leased Property is leased or
\noperated (the “Lease
\n —–<\/p>\n
27<\/p>\n
and Operational Documents”) have been delivered or made available for review to
\n————————-
\nAcquiror. The Lease and Operational Documents are unmodified and in full force
\nand effect. None of the Company, its Subsidiaries or any other party is in
\nmaterial default under the Lease and Operational Documents, and, to the best
\nknowledge of the Company, no defaults (whether or not subsequently cured) by the
\nCompany, its Subsidiaries or any other party have been alleged thereunder,
\nexcept for such defaults that, individually, or in the aggregate, are not
\nreasonably likely to have a Material Adverse Effect.<\/p>\n
(d) To the best knowledge of the Company, the Company and each of its
\nSubsidiaries has sufficiently good and valid title to, or an adequate leasehold
\ninterest in, its material tangible personal properties and assets in order to
\nallow it to conduct, and continue to conduct, its business as and where
\ncurrently conducted. Such material tangible personal assets and properties are
\nsufficiently free of Encumbrances to allow each of the Company and its
\nSubsidiaries to conduct, and continue to conduct, its business as currently
\nconducted and, to the best knowledge of the Company, the consummation of the
\ntransactions contemplated by this Agreement will not alter or impair such
\nability in any respect which, individually or in the aggregate, would be
\nreasonably likely to have a Material Adverse Effect. There are no defects in the
\nphysical condition or operability of such material tangible personal assets and
\nproperties which would impair the use of such assets and properties as such
\nassets and properties are currently used, except for such defects which,
\nindividually or in the aggregate, would not be reasonably likely to have a
\nMaterial Adverse Effect.<\/p>\n
SECTION 3.14. CONTRACTS.<\/p>\n
(a) Section 3.14(a) of the Company Disclosure Schedule contains a
\ncomplete and accurate list of all contracts (written or oral), plans,
\nundertakings, commitments or agreements (“Contracts”) of the following
\ncategories to which the Company or any of its Subsidiaries is a party or by
\nwhich any of them is bound as of the date of this Agreement:<\/p>\n
(i) (A) with respect to officers with annual base compensation
\n equal to or in excess of $100,000: all employment contracts, severance,
\n change in control or similar arrangements that will result in any
\n obligation (absolute or contingent) of the Company or any of its
\n Subsidiaries to make any payment to the foregoing following either the
\n consummation of the transactions contemplated hereby, termination of
\n employment, or both and (B) all other contracts (that are not available
\n to officers, directors, employees or agents generally) with any
\n officer, director, employee or agent that provides for compensation
\n based on operating results or other financial performance of the
\n Company;<\/p>\n
(ii) contracts with labor unions;<\/p>\n
(iii) material exclusive distribution agreements not
\n terminable by the Company without penalty upon 90 days or less notice;<\/p>\n
(iv) promissory notes, loans, agreements, indentures,
\n evidences of indebtedness or other instruments relating to the lending
\n of money, whether as borrower, lender or guarantor, in excess of
\n $5,000,000;<\/p>\n
28<\/p>\n
(v) Contracts containing covenants limiting the freedom of
\n the Company or any of its Subsidiaries to engage in any line of
\n business or compete with any Person or operate at any location which
\n are not terminable by the Company without penalty upon 90 days or less
\n notice;<\/p>\n
(vi) any material Contract with any federal, state or local
\n government other than such Contracts relating to the sales of goods in
\n the ordinary course of business;<\/p>\n
(vii) other than license agreements and distribution
\n agreements, Contracts involving annual expenditures or liabilities in
\n excess of $10,000,000 which are not terminable by the Company without
\n penalty upon 90 days or less notice;<\/p>\n
(viii) the principal documents (excluding escrow agreements,
\n affiliate agreements and other ancillary documents) relating to any
\n merger, consolidation, business combination, share exchange, business
\n acquisition, or for the purchase, acquisition, sale or disposition of
\n any material assets of the Company or any of its Subsidiaries outside
\n the ordinary course of business which (A)(1) involves consideration to
\n any party in excess of $20,000,000, and (2) were entered into after
\n January 1, 1995, or (B) under which the Company remains obligated to
\n make “earnout” payments or other conditional payments of cash or stock
\n based on the operating results or other financial performance of the
\n Company or a portion of its business; and<\/p>\n
(ix) other than as set forth in Section 3.12 of the Company
\n Disclosure Schedule, any other Contract to be performed after the date
\n hereof which would be a material contract (as defined in Item
\n 601(b)(10) of Regulation S-K of the SEC).<\/p>\n
True copies of the written Contracts identified in Section
\n3.14(a) of the Company Disclosure Schedule (collectively with the Material
\nLicenses, the “Company Contracts”) have been delivered or made available to
\n —————–
\nAcquiror.<\/p>\n
(b) Except as disclosed in Schedule 3.14(a) of the Company Disclosure
\nSchedule, as of the date of this Agreement, (i) each of the Company Contracts is
\nvalid and binding upon the Company or any of its Subsidiaries (and, to the
\nCompany’s best knowledge, on all other parties thereto) in accordance with its
\nterms and is in full force and effect, (ii) there is no material breach or
\nviolation of or default by the Company or any of its Subsidiaries under any of
\nthe Company Contracts, whether or not such breach, violation or default has been
\nwaived, and (iii) no event has occurred with respect to the Company or any of
\nits Subsidiaries which, with notice or lapse of time or both, would constitute a
\nmaterial breach, violation or default, or give rise to a right of termination,
\nmodification, cancellation, foreclosure, imposition of a lien, prepayment or
\nacceleration under any of the Company Contracts, which breach, violation or
\ndefault referred to in clauses (ii) or (iii), alone or in the aggregate with
\nother such breaches, violations or defaults referred to in clauses (ii) or
\n(iii), would be reasonably likely to have a Material Adverse Effect.<\/p>\n
SECTION 3.15. LABOR RELATIONS. Except as disclosed in Schedule 3.15 of
\nthe Company Disclosure Schedule or as would not be reasonably likely to have a
\nMaterial Adverse Effect, (i) to the knowledge of the Company, there are no
\nactivities or proceedings of any labor <\/p>\n
29<\/p>\n
union to organize any non-unionized employees; (ii) neither the Company nor any
\nof its Subsidiaries has breached or otherwise failed to comply with any
\nprovision of any collective bargaining agreement or contract and there are no
\ngrievances outstanding against the Company or any of its Subsidiaries under any
\nsuch agreement or contract; (iii) there are no unfair labor practice charges
\nand\/or complaints pending against the Company or any of its Subsidiaries before
\nthe National Labor Relations Board, or any similar foreign labor relations
\ngovernmental bodies, or any current union representation questions involving
\nemployees of the Company or any of its Subsidiaries; and (iv) there is no
\nstrike, slowdown, work stoppage or lockout, or, to the knowledge of the Company,
\nthreat thereof, by or with respect to any employees of the Company or any of its
\nSubsidiaries. The Company and its Subsidiaries are not parties to any collective
\nbargaining agreements, except for collective bargaining agreements disclosed in
\nSchedule 3.15 of the Company Disclosure Schedule. To the knowledge of the
\nCompany, there are no controversies pending or threatened between the Company or
\nany of its Subsidiaries and any of their respective employees, except for such
\ncontroversies that would not be reasonably likely to have a Material Adverse
\nEffect.<\/p>\n
SECTION 3.16. INTELLECTUAL PROPERTY.<\/p>\n
(a) The Company and its Subsidiaries own, or are licensed or otherwise
\npossess, legally enforceable rights to use, all patents, trademarks, trade
\nnames, service marks and copyrights, any applications for and registrations of
\nsuch patents, trademarks, trade names, service marks and copyrights, and all
\nprocesses, formulae, methods, schematics, technology, know-how, computer
\nsoftware programs or applications, tangible or intangible proprietary
\ninformation or material, waivers or licenses of publicity or privacy rights or
\nany other third party licenses that are necessary to conduct the business of
\nCompany and its Subsidiaries as currently conducted, the absence of which would
\nbe reasonably likely to have a Material Adverse Effect (the “Company
\n ——-
\nIntellectual Property Rights”).
\n—————————-<\/p>\n
(b) (i) The execution and delivery of this Agreement and consummation
\nof the Merger will not result in the breach of, or create on behalf of any third
\nparty the right to terminate or modify, any license, sublicense or other
\nagreement relating to the Company Intellectual Property Rights, or any material
\nlicenses, sublicenses and other agreements as to which Company or any of its
\nSubsidiaries is a party and pursuant to which Company or any of its Subsidiaries
\nis authorized to use any third party patents, trademarks, copyrights, trade
\nsecrets, likeness or other proprietary rights, including software that is used
\nin the manufacture of, incorporated in, or forms a part of any product sold by
\nor expected to be sold by the Company or any of its Subsidiaries (collectively,
\n“Licenses”), the termination, modification (including without limitation any
\n ——–
\nmodification to the scope of any license from the scope as currently granted to
\nand enjoyed by the Company even if such modification is contemplated by the
\nagreement) or breach of which would be reasonably likely to have a Material
\nAdverse Effect.<\/p>\n
(ii) Except as set forth in Section 3.16(b)(i) of the Company
\nDisclosure Schedule, the execution and delivery of this Agreement and
\nconsummation of the Merger will not result in the breach of, or create on behalf
\nof any third party the right to terminate or modify, any License the
\ntermination, modification (including without limitation any modification to the<\/p>\n
30<\/p>\n
scope of any license from the scope as currently granted to and enjoyed by the
\nCompany even if such modification is contemplated by the agreement) or breach of
\nwhich would be reasonably likely to have a material adverse effect on any
\nCompany Material Product. “Company Material Product” means any product of the
\n ————————
\nCompany which accounted for more than $3,000,000 of revenues in the United
\nStates during the nine month fiscal period ending September 30, 1998.<\/p>\n
(iii) Schedule 3.16(b)(iii) sets forth each License relating to
\nCompany Material Products.<\/p>\n
(c) All patents, registered trademarks, service marks and copyrights
\nwhich are held by the Company or any of its Subsidiaries the loss or invalidity
\nof which would cause a Material Adverse Effect or would have a material adverse
\neffect on any Company Material Product (“Material Intellectual Property
\n ——————————
\nRights”), are valid and subsisting. Section 3.16(c) of the Company Disclosure
\n——
\nSchedule sets forth a complete and accurate list of all registered copyrights,
\nregistered tradenames, patents, patent applications and the unregistered
\ntradenames for the twenty-five highest revenue producing products included in
\nthe Material Intellectual Property Rights. Except as would not be reasonably
\nexpected to have a Material Adverse Effect, the Company (i) has not been sued in
\nany suit, action or proceeding, or received in writing any claim or notice,
\nwhich involves a claim of (w) infringement or violation of any patents,
\ntrademarks, service marks, copyrights, trade secrets, right of privacy or
\npublicity or any other proprietary right of any third party or (x) libel or
\ndefamation; and (ii) has no knowledge that the manufacturing, marketing,
\nlicensing or sale of its products infringes or violates any patent, trademark,
\nservice mark, copyright, trade secret, right of privacy or publicity, or other
\nproprietary right of any third party.<\/p>\n
SECTION 3.17. AFFILIATE TRANSACTIONS. Except as set forth in the
\nCompany SEC Reports and as set forth in Section 3.17 of the Company Disclosure
\nSchedule, from January 1, 1998 through the date of this Agreement there have
\nbeen no transactions, agreements, arrangements or understandings between the
\nCompany or any of its Subsidiaries, on the one hand, and any Affiliates (other
\nthan wholly owned Subsidiaries) of the Company or other Persons, on the other
\nhand, that would be required to be disclosed under Item 404 of Regulation S-K
\nunder the Securities Act.<\/p>\n
SECTION 3.18. ENVIRONMENTAL MATTERS. Except as set forth in Section
\n3.18 of the Company Disclosure Schedule or the Company SEC Reports and except
\nfor such matters that, individually or in the aggregate, are not reasonably
\nlikely to have a Material Adverse Effect: the Company and each of its
\nSubsidiaries (i) have obtained all applicable permits, licenses and other
\nauthorizations which are required to be obtained under all applicable
\nEnvironmental Laws by the Company or its Subsidiaries; (ii) are in material
\ncompliance with all terms and conditions of such required permits, licenses and
\nauthorization, and also are in material compliance with all other limitations,
\nrestrictions, conditions, standards, prohibitions, requirements, obligations,
\nschedules and timetables contained in or arising from applicable Environmental
\nLaws; (iii) have not received notice of any past or present violations of
\nEnvironmental Laws, or of any spill, release, event, incident, condition or
\naction or failure to act which is reasonably likely to prevent continued
\ncompliance with such Environmental Laws, or which would give rise to any common<\/p>\n
31<\/p>\n
law environmental liability or liability under Environmental Laws, or which
\nwould otherwise form the basis of any claim, action, suit or proceeding against
\nthe Company or any of its Subsidiaries based on or resulting from the
\nmanufacture, processing, use, treatment, storage, disposal, transport, or
\nhandling, or the emission, discharge or release into the environment, of any
\nHazardous Material by any Person; and (iv) have taken all actions required under
\napplicable Environmental Laws to register any products or materials required to
\nbe registered by the Company or its Subsidiaries thereunder.<\/p>\n
SECTION 3.19. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION
\nSTATEMENT. None of the information supplied by the Company or its Subsidiaries
\nto be included or incorporated by reference in the joint proxy
\nstatement\/prospectus to be sent to the stockholders of Acquiror and the Company
\nin connection with the meeting of the Company’s stockholders (the “Company
\n ——-
\nStockholder Meeting”) and the meeting of Acquiror’s stockholders (the “Acquiror
\n——————- ——–
\nStockholder Meeting”) to consider the Agreement and the Merger (the “Joint Proxy
\n——————- ———–
\nStatement\/Prospectus”) or any amendment thereof or supplement thereto, will, on
\n——————–
\nthe date it becomes effective with the SEC, at the time of the mailing of the
\nJoint Proxy Statement\/Prospectus or any amendment or supplement, at the time of
\nthe Company Stockholder Meeting and the Acquiror Stockholder Meeting and at the
\nEffective Time, contain any untrue statement of a material fact or omit to state
\nany material fact required to be stated therein or necessary in order to make
\nthe statements therein, in light of the circumstances under which they are made,
\nnot misleading. The Joint Proxy Statement\/Prospectus will comply as to form in
\nall material respects with the provisions of the Securities Act and the Exchange
\nAct and the rules and regulations thereunder; provided, however, that the
\nCompany makes no representations with respect to any information supplied or to
\nbe supplied by the Acquiror for inclusion or incorporation by reference from
\nAcquiror SEC Filings in the Joint Proxy Statement\/Prospectus or any amendment
\nthereof or supplement thereto. None of the information supplied by the Company
\nor its Subsidiaries to be included or incorporated by reference from Company SEC
\nfilings in the registration statement on Form S-4 pursuant to which shares of
\nAcquiror Common Stock issued in the Merger will be registered under the
\nSecurities Act (the “Registration Statement”), of which the Joint Proxy
\nStatement\/Prospectus will form a part, will, at the time the Registration
\n ————
\nStatement is declared effective by the SEC, contain any untrue statement of a
\n———
\nmaterial fact or omit to state any material fact required to be stated therein
\nor necessary in order to make the statements therein, in light of the
\ncircumstances under which they are made, not misleading.<\/p>\n
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. The Company has received
\nthe written opinion of Merrill Lynch & Co., Inc. (the “Company Financial
\n —————–
\nAdvisor”), dated the date of this Agreement, to the effect that, as of such date
\n——-
\nand based upon and subject to certain matters stated in such opinion, the
\nExchange Ratio is fair to the holders of Company’s Common Stock (including
\nshares of Common Stock issued upon conversion of the Company’s Preferred Stock)
\nfrom a financial point of view. The Company has been authorized by the Company
\nFinancial Advisor to permit, subject to prior review and consent by such Company
\nFinancial Adviser, the inclusion of such opinion (or a reference thereto) in the
\nJoint Proxy Statement\/Prospectus.<\/p>\n
32<\/p>\n
SECTION 3.21. BROKERS. No broker, finder or investment banker (other than
\nthe Company Financial Adviser) is entitled to any brokerage, finder’s or other
\nfee or commission in connection with the transactions contemplated by this
\nAgreement based upon arrangements made by or on behalf of the Company. The
\nCompany has heretofore furnished to Acquiror a complete and correct copy of all
\nagreements between the Company and the Company Financial Adviser pursuant to
\nwhich such firm would be entitled to any payment relating to the transactions
\ncontemplated hereby.<\/p>\n
SECTION 3.22. VOTE REQUIRED. The approval by a majority of the voting
\npower represented by the outstanding shares of Company Common Stock, Company
\nPreferred Stock and Company Special Voting Stock entitled to vote thereon, and
\nvoting together as a single class, is the only vote of the holders of any class
\nor series of the Company’s capital stock necessary to approve this Agreement,
\nthe Merger and, if necessary for the consummation of the Merger, an amendment to
\nthe Company’s Certificate of Incorporation; provided, however, that if an
\namendment to the certificate of designations relating to the Company Preferred
\nStock is required to consummate the Merger as contemplated in this Agreement,
\nthe approval (i) by the holders of 66 2\/3% of the shares of Company Preferred
\nStock, voting as a single class, and (ii) the approval by a majority of the
\nvoting power represented by the outstanding shares of Company Common Stock,
\nCompany Preferred Stock and Company Special Voting Stock entitled to vote
\nthereon, and voting as a single class, are the only votes of the holders of any
\nclass or series of the Company’s capital stock necessary to approve such
\namendment to such certificate of designations (“Company Stockholder Approval”).
\n —————————-
\nNo separate approval by the holders of the Exchangeable Shares is necessary to
\napprove the Merger, this Agreement or any of the transactions contemplated
\nhereby. The Company Board, at a meeting duly called and held, by unanimous vote
\nof the directors present (i) determined that this Agreement and the Merger are
\nfair to, and in the best interests of, the stockholders of the Company, (ii)
\napproved this Agreement, the Merger, the Stock Option Agreement, the Stockholder
\nSupport Agreement and the Employment Agreements, (iii) declared advisable and
\nresolved to recommend that the holders of the shares of the Company Stock
\napprove this Agreement and the Merger, and (iv) adopted any necessary resolution
\nhaving the effect of causing the Company not to be subject, to the extent
\npermitted by applicable law, to any state takeover law that may purport to be
\napplicable to the Merger and the transactions contemplated by this Agreement.
\nThe Company hereby agrees to the inclusion in the Joint Proxy
\nStatement\/Prospectus of the recommendations of the Company Board described in
\nthis Section 3.22 (subject to the right of the Company Board to withdraw, amend
\nor modify such recommendation in accordance with Section 6.3(d)). The Board of
\nDirectors of Canadian Sub has determined, in accordance with the provisions of
\nSection 2.7(b) of the Old Support Agreement, that the changes to the rights of
\nthe holders of Exchangeable Shares resulting from the Merger are economically
\nequivalent to the changes to the rights of the holders of Company Common Stock
\nresulting from the Merger.<\/p>\n
SECTION 3.23. ACCOUNTING AND TAX MATTERS. To the Company’s knowledge,
\nneither the Company nor any of its Affiliates has taken or agreed to take any
\naction, or knows of any circumstances, that (without regard to any action taken
\nor agreed to be taken by Acquiror or any of its Affiliates) would (i) prevent
\nAcquiror from accounting for the business combination to be effected by the
\nMerger as a “pooling of interests” under GAAP and the <\/p>\n
33<\/p>\n
applicable rules and regulations of the SEC, or (ii) prevent the Merger from
\nqualifying as a reorganization within the meaning of Sections 368(a) of the
\nCode.<\/p>\n
SECTION 3.24. NO OTHER AGREEMENTS TO SELL THE COMPANY OR ITS ASSETS; NO
\nEXISTING DISCUSSIONS . The Company has no legal obligation, absolute or
\ncontingent, to any other Person to sell any material portion of the assets of
\nthe Company, to sell any material portion of the capital stock or other
\nownership interests of the Company or any of its Subsidiaries, or to effect any
\nmerger, consolidation or other reorganization of the Company or any of its
\nSubsidiaries or to enter into any agreement with respect thereto. As of the date
\nhereof, the Company is not engaged, directly or indirectly, in any discussions
\nor negotiations with any other party with respect to an Acquisition Proposal or
\nAcquisition Transaction.<\/p>\n
SECTION 3.25. INSURANCE. The Company has made available to Acquiror
\naccurate and complete copies of all material fire and casualty, general
\nliability, business interruption, product liability, and sprinkler and water
\ndamage insurance policies maintained by the Company or any of its Subsidiaries
\n(collectively, “Company Insurance Policies”). All Company Insurance policies are
\n ————————–
\nwith reputable insurance carries, provide full and adequate coverage for all
\nnormal risks incident to the business of the Company and its Subsidiaries and
\ntheir respective properties and assets, and are in character and amount at least
\nequivalent to that carried by Persons engaged in similar businesses and
\nsubstantially equivalent to that carried by Persons engaged in similar
\nbusinesses and subject to the same or similar perils or hazards.<\/p>\n
SECTION 3.26. TAKEOVER PROVISIONS INAPPLICABLE . As of the date hereof and
\nat all times on or prior to the Effective Time, the restrictions of Section 203
\nof the DGCL are, and shall be, inapplicable to the Merger, this Agreement, the
\nStock Option Agreement, the Stockholder Support Agreement and the transactions
\ncontemplated by this Agreement.<\/p>\n
SECTION 3.27. ACCOUNTS RECEIVABLE. To the Company’s knowledge, as of the
\ndate hereof, the accounts receivable of the Company and its Subsidiaries as
\nreflected in the most recent financial statements contained in the Company SEC
\nReports, to the extent uncollected on the date hereof, and the accounts
\nreceivable reflected the books of the Company and its Subsidiaries as of the
\ndate hereof are valid and existing and represent monies due, and the Company as
\nof the date hereof, has made reserves reasonably considered adequate for
\nreceivables not collectible in the ordinary course of business, and (subject to
\nthe aforesaid reserves) are subject to no refunds or other adjustments and to no
\ndefenses, rights or setoff, assignments, restrictions, encumbrances or
\nconditions enforceable by third parties on or affecting any thereof, except for
\nsuch refunds, adjustments, defenses, rights of setoff, assignments,
\nrestrictions, encumbrances or conditions as would not, individually or in the
\naggregate, have a Material Adverse Effect on the Company.<\/p>\n
SECTION 3.28. INVENTORY. To the Company’s knowledge, as of the date
\nhereof, the inventories of the Company and its Subsidiaries as reflected in the
\nmost recent financial statements contained in the Company SEC Reports, except
\nfor normal year-end adjustments made in accordance with GAAP applied
\nconsistently with prior periods, (i) are carried as provided in the Company SEC
\nReports not in excess of the lower of cost or net realizable value<\/p>\n
34<\/p>\n
and (ii) do not include any inventory which is obsolete, surplus or not usable
\nor saleable in the lawful and ordinary course of business of the Company and its
\nSubsidiaries as heretofore conducted, in each case net of reserves provided
\ntherefor, except in the cases of clauses (i) and (ii) as would not, individually
\nor in the aggregate, have a Material Adverse Effect.<\/p>\n
SECTION 3.29. PRODUCT LIABILITY. The Company is not aware of any claim
\nagainst the Company or any of its Subsidiaries for injury to person or property
\nof employees or any third parties suffered as a result of the sale of any
\nproduct or performance of any service by the Company or any of its Subsidiaries,
\nincluding claims arising out of the defective or unsafe nature of its products
\nor services, which could, individually or in the aggregate, have a Material
\nAdverse Effect on the Company. The Company and its Subsidiaries have, and at the
\nEffective Time will have, full and adequate insurance coverage for potential
\nproduct liability claims against it.<\/p>\n
SECTION 3.30. STANDSTILL AGREEMENT. Except as set forth in Section 3.30 of
\nthe Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
\nis a party to any material standstill agreement.<\/p>\n
ARTICLE IV.
\n REPRESENTATIONS AND WARRANTIES OF ACQUIROR<\/p>\n
Acquiror represents and warrants to the Company that the statements
\ncontained in this Article IV are true and correct except as set forth herein and
\nin the disclosure schedule delivered by the Acquiror to the Company on or before
\nthe date of this Agreement (the “Acquiror Disclosure Schedule”). The Acquiror
\n —————————-
\nDisclosure Schedule shall be arranged in paragraphs corresponding to the
\nnumbered and lettered paragraphs contained in this Article IV and the disclosure
\nin any paragraph shall qualify other paragraphs in this Article IV only to the
\nextent that it is readily apparent from a reading of such disclosure that it
\nalso qualifies or applies to such other paragraphs.<\/p>\n
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Acquiror is duly organized,
\nvalidly existing and in good standing under the laws of the jurisdiction of its
\norganization, with the corporate power and authority to own and operate its
\nbusinesses as presently conducted, except for any failure of any Subsidiaries to
\nbe in good standing that would not have a Material Adverse Effect. Acquiror is
\nduly qualified as a foreign corporation or other entity to do business and is in
\ngood standing in each jurisdiction where the character of its properties owned
\nor held under lease or the nature of its activities makes such qualification
\nnecessary, except for such failures of Acquiror to be so qualified as would not,
\nindividually or in the aggregate, have a Material Adverse Effect. Acquiror has
\npreviously made available to the Company true and correct copies of the
\ncertificate of incorporation and bylaws of Acquiror, as currently in effect.<\/p>\n
SECTION 4.2. AUTHORIZATION; VALIDITY AND EFFECT OF AGREEMENT. Acquiror
\nhas the requisite corporate power and authority to execute, deliver and perform
\nits obligations under this Agreement and to consummate the transactions
\ncontemplated hereby. The <\/p>\n
35<\/p>\n
execution and delivery of this Agreement by Acquiror and the performance by
\nAcquiror of its obligations hereunder and the consummation by them of the
\ntransactions contemplated hereby have been duly authorized by the Acquiror Board
\nand, other than the adoption and approval of this Agreement by the holders of
\nthe Acquiror Common Stock and Acquiror Preferred Stock, voting together as a
\nsingle class, no other corporate proceedings on the part of Acquiror are
\nnecessary to authorize this Agreement and the transactions contemplated hereby.
\nThis Agreement has been duly and validly executed and delivered by Acquiror and
\nconstitutes a legal, valid and binding obligation of Acquiror, enforceable
\nagainst Acquiror in accordance with its terms, subject to the effects of
\nbankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
\nother similar laws relating to or affecting creditors’ rights generally, general
\nequitable principles (whether considered in a proceeding in equity or at law)
\nand an implied covenant of good faith and fair dealing.<\/p>\n
SECTION 4.3. CAPITALIZATION.<\/p>\n
(a) The authorized capital stock of Acquiror consists of (i)
\n1,000,000,000 shares of Acquiror Common Stock, (ii) 3,000,000 shares of
\nPreferred Stock, par value $1.00 per share, of which 772,800 shares have been
\ndesignated as Series C Mandatorily Convertible Redeemable Preferred Stock
\n(“Acquiror Preferred Stock”) and (iii) 20,000,000 shares of Preference Stock,
\n ————————
\npar value $.01 per share, of which 2,000,000 shares have been designated as
\nSeries E Junior Participating Preference Stock (“Acquiror Series E Preference
\n —————————-
\nStock”). As of December 8, 1998, (i) 286,283,375 shares of Acquiror Common
\n—–
\nStock, (ii) 771,920 shares of Acquiror Preferred Stock (which are represented by
\n19,298,000 Series C Depositary Shares, each representing one twenty-fifth of a
\nshare of Acquiror Preferred Stock) and (iii) no shares of Acquiror Series E
\nPreference Stock, were issued and outstanding. As of the date hereof, 14,098,106
\nshares of Acquiror Common Stock are held in the Acquiror treasury. Schedule
\n4.3(a) of the Acquiror Disclosure Schedule sets forth the number of shares of
\nAcquiror Common Stock reserved for future issuance upon exercise of any
\nunexpired and unexercised outstanding option, whether or not vested or
\nexercisable in accordance with its terms, to purchase shares of Acquiror Common
\nStock (“Acquiror Options”) granted and outstanding as of the date hereof under
\n —————-
\nany Acquiror stock option plan (the “Acquiror Option Plans”). As of the date of
\n ———————
\nthis Agreement, Acquiror has not granted any stock appreciation rights or any
\nother contractual rights the value of which is derived from the financial
\nperformance of Acquiror or the value of shares of Acquiror Common Stock. Except
\nas disclosed in Schedule 4.3(a) of the Acquiror Disclosure Schedule, there are
\nno obligations, contingent or otherwise, of Acquiror or any of its Subsidiaries
\nto repurchase, redeem or otherwise acquire any shares of Acquiror Common Stock
\nor the capital stock or ownership interests of any Subsidiary or to provide
\nfunds to or make any material investment (in the form of a loan, capital
\ncontribution or otherwise) in any such Subsidiary or any other entity other than
\nguarantees of bank obligations or indebtedness for borrowed money of
\nSubsidiaries entered into in the ordinary course of business. All of the
\noutstanding shares of capital stock (including shares which may be issued upon
\nexercise of outstanding options) or other ownership interests of each of the
\nAcquiror’s domestic Subsidiaries are duly authorized, validly issued, fully paid
\nand nonassessable and, except as disclosed in Schedule 4.3(a) of the Acquiror
\nDisclosure Schedule, all such shares (other than director’s qualify shares and
\nsimilar shares in the case of foreign Subsidiaries) are owned by the Acquiror or
\nanother Subsidiary of Acquiror free and clear <\/p>\n
36<\/p>\n
of all security interests, liens, claims, pledges, agreements, limitations on
\nthe Acquiror’s voting rights, charges or other encumbrances or restrictions on
\ntransfer of any nature (other than restrictions imposed by law).<\/p>\n
(b) There is no Voting Debt of Acquiror or any of its Subsidiaries issued
\nand outstanding. Except as set forth in Schedule 4.3(b) of the Acquiror
\nDisclosure Schedule or as reserved for future grants of options under the
\nAcquiror Stock Plans as of the date hereof, (i) there are no shares of capital
\nstock of any class of, or any security exchangeable into or exercisable for such
\ncapital stock, issued, reserved for issuance or outstanding; (ii) there are no
\noptions, warrants, equity securities, calls, rights, commitments or agreements
\nof any character to which Acquiror or any of its Subsidiaries is a party (or by
\nwhich it is bound) obligating Acquiror or any of its Subsidiaries to issue,
\ndeliver or sell, or cause to be issued, delivered or sold, additional shares of
\ncapital stock or other ownership interests (including Voting Debt) of Acquiror
\nor any of its Subsidiaries or obligating Acquiror or any of its Subsidiaries to
\ngrant, extend, accelerate the vesting of or enter into any such option, warrant,
\nequity security, call, right, commitment or agreement; and (iii) there are no
\nvoting trusts, proxies or other voting agreements or understandings with respect
\nto the shares of capital stock of Acquiror to which Acquiror or any of its
\nSubsidiaries is a party. All shares of Acquiror Common Stock subject to issuance
\nas specified in this Section 4.3(b) are duly authorized and, upon issuance on
\nthe terms and conditions specified in the instruments pursuant to which they are
\nissuable, shall be validly issued, fully paid and nonassessable.<\/p>\n
SECTION 4.4. SUBSIDIARIES. The only Subsidiaries of Acquiror are those
\nset forth in Section 4.4 of the Acquiror Disclosure Schedule. There are no
\nexisting options, warrants, calls, subscriptions, convertible securities or
\nother securities, agreements, commitments or obligations of any character
\nrelating to the outstanding capital stock or other securities of any domestic
\nSubsidiary of Acquiror or which would require any domestic Subsidiary of
\nAcquiror to issue or sell any shares of its capital stock, ownership interests
\nor securities convertible into or exchangeable for shares of its capital stock
\nor ownership interests.<\/p>\n
SECTION 4.5. OTHER INTERESTS. Except as set forth in Schedule 4.5 of the
\nAcquiror Disclosure Schedule, neither Acquiror nor any of Acquiror’s
\nSubsidiaries owns, directly or indirectly, any material interest or investment
\nin the equity or debt for borrowed money of any corporation, partnership,
\nlimited liability company, joint venture, business, trust or other Person (other
\nthan Acquiror’s Subsidiaries).<\/p>\n
SECTION 4.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Except as set forth in Section 4.6 of the Acquiror Disclosure
\nSchedule, neither the execution and delivery of this Agreement nor the
\nperformance by Acquiror of Acquiror’s obligations hereunder, nor the
\nconsummation of the transactions contemplated hereby, will: (i) conflict with
\nAcquiror’s certificate of incorporation or bylaws or the comparable charter or
\norganizational documents of any of its material Subsidiaries; (ii) assuming
\nsatisfaction of the requirements set forth in Section 4.6(b) below, violate any
\nstatute, law, ordinance, rule or regulation, applicable to Acquiror or any of
\nits Subsidiaries or any of their properties or assets; or <\/p>\n
37<\/p>\n
(iii) violate, breach, be in conflict with or constitute a default (or an event
\nwhich, with notice or lapse of time or both, would constitute a default) under,
\nor permit the termination of any provision of, or result in the termination of,
\nthe acceleration of the maturity of, or the acceleration of the performance of
\nany obligation of Acquiror or any of its Subsidiaries under, or result in the
\ncreation of imposition of any lien upon any properties, assets or business of
\nAcquiror or any of its Subsidiaries under, any note, bond, indenture, mortgage,
\ndeed of trust, lease, franchise, permit, authorization, license, contract
\n(including, without limitation, Parent Contracts), instrument or other agreement
\nor commitment or any order, judgment or decree to which Acquiror or any of its
\nSubsidiaries is a party or by which Acquiror or any of its Subsidiaries or any
\nof their respective assets or properties is bound or encumbered, or give any
\nPerson the right to require Acquiror or any of its Subsidiaries to purchase or
\nrepurchase any notes, bonds or instruments of any kind except, in the case of
\nclauses (ii) and (iii), for such violations, breaches, conflicts, defaults or
\nother occurrences which, individually or in the aggregate, are not reasonably
\nlikely to have a Material Adverse Effect.<\/p>\n
(b) Except (i) for applicable requirements, if any, of the Exchange Act,
\nthe Securities Act and Blue Sky Laws, (ii) for the pre-merger notification
\nrequirements of the HSR Act, (iii) for the filing of the Certificate of Merger
\npursuant to the DGCL, (iv) for other governmental approvals and filings required
\nunder the applicable laws of any foreign jurisdiction, and (v) with respect to
\nmatters set forth in Section 4.6(a) or 4.6(b) of the Acquiror Disclosure
\nSchedule, no consent, approval or authorization of, permit from, or declaration,
\nfiling or registration with, any governmental or regulatory authority, or any
\nother Person or entity is required to be made or obtained by Acquiror in
\nconnection with the execution, delivery and performance of this Agreement and
\nthe consummation of the transactions contemplated hereby, except where the
\nfailure to obtain such consent, approval, authorization, permit or declaration
\nor to make such filing or registration would not, individually or in the
\naggregate, have a Material Adverse Effect.<\/p>\n
SECTION 4.7. COMPLIANCE. Acquiror and each of its Subsidiaries are in
\ncompliance with all foreign, federal, state and local laws and regulations
\napplicable to its operations or with respect to which compliance is a condition
\nof engaging in the business thereof, except to the extent that failure to comply
\nwould not, individually or in the aggregate, have a Material Adverse Effect. To
\nthe knowledge of Acquiror, neither Acquiror nor any of its Subsidiaries has
\nreceived any notice asserting a failure, or possible failure, to comply with any
\nsuch law or regulation, the subject of which notice has not been resolved as
\nrequired thereby or otherwise to the satisfaction of the party sending the
\nnotice, except for such failure as would not, individually or in the aggregate,
\nhave a Material Adverse Effect. Acquiror and its Subsidiaries hold all permits,
\nlicenses and franchises from governmental agencies required to conduct their
\nrespective businesses as they are now being conducted, except for such failures
\nto have such permits, licenses and franchises that would not, individually or in
\nthe aggregate, have a Material Adverse Effect.<\/p>\n
SECTION 4.8. SEC DOCUMENTS.<\/p>\n
(a) Acquiror has filed and made available to the Company true and complete
\ncopies of each registration statement, proxy or information statement, form,
\nreport and other documents <\/p>\n
38<\/p>\n
required to be filed by it with the SEC since January 1, 1995 (collectively, the
\n“Acquiror SEC Reports”). As of their respective dates, the Acquiror SEC Reports
\n ——————–
\n(i) complied, or, with respect to those not yet filed, will comply, in all
\nmaterial respects with the applicable requirements of the Securities Act and the
\nExchange Act and (ii) did not, or, with respect to those not yet filed, will
\nnot, contain any untrue statement of a material fact or omit to state a material
\nfact required to be stated therein or necessary to make the statements made
\ntherein, in the light of the circumstances under which they were made, not
\nmisleading.<\/p>\n
(b) Each of the consolidated balance sheets included in or incorporated by
\nreference into Acquiror SEC Reports (including the related notes and schedules)
\npresents fairly, in all material respects, the consolidated financial position
\nof Acquiror and its consolidated Subsidiaries as of its date, and each of the
\nconsolidated statements of income, retained earnings and cash flows of Acquiror
\nincluded in or incorporated by reference into Acquiror SEC Reports (including
\nthe related notes and schedules) presents fairly, in all material respects, the
\nresults of operations, retained earnings or cash flows, as the case may be, of
\nAcquiror and its Subsidiaries for the periods set forth therein (subject, in the
\ncase of unaudited statements, to normal year-end audit adjustments), in each
\ncase in accordance with GAAP consistently applied during the periods involved,
\nexcept as may be noted therein.<\/p>\n
(c) Except as set forth in Section 4.8(c) of the Acquiror Disclosure
\nSchedule and except as set forth in the Acquiror SEC Reports, neither Acquiror
\nnor any of its Subsidiaries has any liabilities or obligations of any nature
\n(whether accrued, absolute, contingent or otherwise) that would be required to
\nbe reflected on, or reserved against in, a balance sheet of Acquiror or in the
\nnotes thereto, prepared in accordance with GAAP consistently applied, except for
\n(i) liabilities or obligations that were so reserved on, or reflected in
\n(including the notes to), the consolidated balance sheet of Acquiror as of
\nSeptember 30, 1998, (ii) liabilities or obligations arising in the ordinary
\ncourse of business (including trade indebtedness) since September 30, 1998, and
\n(iii) liabilities or obligations which would not, individually or in the
\naggregate, have a Material Adverse Effect.<\/p>\n
SECTION 4.9. ABSENCE OF CERTAIN CHANGES. Except as set forth in Section
\n4.9 of the Acquiror Disclosure Schedule or the Acquiror SEC Reports, and except
\nfor the transactions expressly contemplated hereby, since September 30, 1998,
\nAcquiror and its Subsidiaries have conducted their respective businesses only in
\nthe ordinary and usual course consistent with past practices and there has not
\nbeen any change in Acquiror’s business, operations, condition (financial or
\notherwise), results of operations, assets or liabilities, except for changes
\ncontemplated hereby or changes which have not, individually or in the aggregate,
\nhad or are reasonably likely to have a Material Adverse Effect. Except as set
\nforth in Section 4.9 of the Acquiror Disclosure Schedule, from September 30,
\n1998 through the date of this Agreement, neither Acquiror nor any of its
\nSubsidiaries has taken any of the actions prohibited by Section 5.2 hereof.<\/p>\n
SECTION 4.10. LITIGATION. Except as set forth in Section 4.10 of the
\nAcquiror Disclosure Schedule or in the Acquiror SEC Reports there is no Action
\ninstituted, pending or, to the knowledge of Acquiror, threatened, in each case
\nagainst Acquiror or any of its Subsidiaries,<\/p>\n
39<\/p>\n
which, individually or in the aggregate, directly or indirectly, could
\nreasonably be expected to have a Material Adverse Effect, nor is there any
\noutstanding judgment, decree or injunction, in each case against Acquiror or any
\nof its Subsidiaries, or any statute, rule or order of any domestic or foreign
\ncourt, governmental department, commission or agency applicable to Acquiror or
\nany of its Subsidiaries which has or could reasonably be expected to have,
\nindividually or in the aggregate, a Material Adverse Effect.<\/p>\n
SECTION 4.11. TAXES. Except as set forth in Section 4.11 of the Acquiror
\nDisclosure Schedule:<\/p>\n
(a) Acquiror and its Subsidiaries have (A) duly filed (or there have been
\nfiled on their behalf) with the appropriate governmental authorities all Tax
\nReturns required to be filed by them and such Tax Returns are true, correct and
\ncomplete in all respects, except for any such filings which are not reasonably
\nlikely, individually or in the aggregate, to have a Material Adverse Effect, and
\n(B) duly paid in full all Taxes, whether or not shown to be due on such Tax
\nReturns, except for which the failure to pay would not, individually or in the
\naggregate, be reasonably likely to have a Material Adverse Effect;<\/p>\n
(b) No claim has ever been made by an authority in a jurisdiction where
\nany of Acquiror and its non-foreign Subsidiaries do not file Tax Returns that it
\nis or may be subject to taxation by that jurisdiction which is reasonably likely
\nto have a Material Adverse Effect;<\/p>\n
(c) Each of Acquiror and its non-foreign Subsidiaries has withheld and
\npaid all Taxes required to have been withheld and paid in connection with
\namounts paid or owing to any employee, independent contractor, creditor,
\nstockholder, or other third party, except for amounts which are not reasonably
\nlikely, individually or in the aggregate, to have a Material Adverse Effect;<\/p>\n
(d) All federal income Tax Returns of Acquiror and its non-foreign
\nSubsidiaries for periods through the taxable year ended in 1991 have been
\naudited, and no federal or state, local or foreign audits or other
\nadministrative proceedings or court proceedings are presently being conducted
\nwith regard to any Taxes or Tax Returns of Acquiror or its Subsidiaries and
\nneither Acquiror nor its Subsidiaries has received a written notice of any
\npending audits with respect to Taxes or Tax Returns of Acquiror, and neither
\nAcquiror nor any of its Subsidiaries has waived any statute of limitations with
\nrespect to Taxes or agreed to any extension of time with respect to a Tax
\nassessment or deficiency, except with respect to Taxes which are not reasonably
\nlikely, individually or in the aggregate, to have a Material Adverse Effect;<\/p>\n
(e) Neither the Internal Revenue Service nor any other taxing authority
\n(whether domestic or foreign) has asserted against Acquiror or any of its
\nSubsidiaries any material deficiency or material claim for Taxes not reserved
\nfor on the most recent balance sheet of the Acquiror as set forth in its most
\nrecent Quarterly Report on Form 10-Q;<\/p>\n
(f) There are no liens for Taxes upon any Assets of Acquiror or any
\nSubsidiary thereof, except for liens for Taxes not yet due and payable and liens
\nfor Taxes that are being contested in good faith by appropriate proceedings,
\nexcept for liens which would not be<\/p>\n
40<\/p>\n
reasonably likely, individually or in the aggregate, to have a Material Adverse
\nEffect, and no written power of attorney that has been granted by Acquiror or
\nits Subsidiaries (other than to Acquiror or a Subsidiary) currently is in force
\nwith respect to any material matter relating to Taxes except with respect to
\nTaxes which are not reasonably likely, individually or in the aggregate, to have
\na Material Adverse Effect;<\/p>\n
(g) Neither Acquiror nor any of its Subsidiaries has, with regard to any
\nassets or property held by any of them, agreed to have Section 341(f)(2) of the
\nCode apply to any disposition of a subsection (f) asset (as such term is defined
\nin Section 341(f)(4) of the Code) owned by Acquiror or any of its Subsidiaries;<\/p>\n
(h) None of Acquiror and its Subsidiaries has made any payments, is
\nobligated to make any payments, or is a party to any agreement that under
\ncertain circumstances could obligate it to make any payments that will not be
\ndeductible under Section 280G of the Code;<\/p>\n
(i) None of Acquiror and its Subsidiaries has been a United States real
\nproperty holding corporation within the meaning of Section 897(c)(2) of the Code
\nduring the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;<\/p>\n
(j) None of Acquiror and its Subsidiaries is a party to any Tax allocation
\nor sharing agreement; and<\/p>\n
(k) None of Acquiror and its Subsidiaries (A) has been a member of an
\naffiliated group filing a consolidated federal income Tax Return (other than a
\ngroup the common parent of which was Acquiror) or (B) has any Liability for the
\nTaxes of any Person (other than any of Acquiror and its Subsidiaries) under
\nTreasury Regulation Section 1.1502-6 (or any similar provision of state, local,
\nor foreign law), as a transferee or successor, by contract, or otherwise, other
\nthan such Taxes which are not reasonably likely, individually or in the
\naggregate, to have a Material Adverse Effect.<\/p>\n
SECTION 4.12. EMPLOYEE BENEFIT PLANS.<\/p>\n
(a) Section 4.12 of the Acquiror Disclosure Schedule contains a complete
\nlist of all Acquiror Pension Plans, Welfare Plans and material Benefit
\nArrangements (other than those maintained outside the United States) as of the
\ndate hereof. To the extent in the Acquiror’s or its Subsidiaries’ possession,
\ntrue and complete copies or descriptions of the Acquiror Pension Plans, Welfare
\nPlans and material Benefit Arrangements (other than those maintained outside the
\nUnited States), including, without limitation, trust instruments, if any, that
\nform a part thereof, and all amendments thereto have been furnished or made
\navailable to the Company and its counsel.<\/p>\n
(b) Except as described in Section 4.12 of the Acquiror Disclosure
\nSchedule, each of the Acquiror Employee Plans (other than any Multiemployer
\nPlan) has been administered and is in compliance with the terms of such Acquiror
\nEmployee Plan and all applicable laws, rules and regulations except for
\nnoncompliance which, individually or in the aggregate, are not reasonably likely
\nto have a Material Adverse Effect.<\/p>\n
41<\/p>\n
(c) No “reportable event” (as such term is used in section 4043 of ERISA)
\nfor which the notice requirements to the Pension Benefit Guaranty Corporation
\nhave not been waived, “prohibited transaction” (as such term is used in section
\n406 of ERISA or section 4975 of the Code) for which no exemption exists, or
\n“accumulated funding deficiency” (as such term is used in section 412 or 4971 of
\nthe Code) has heretofore occurred with respect to any Pension Plan (other than
\nany Multiemployer Plan) of Acquiror or any of its Subsidiaries except for such
\nevents which, individually or in the aggregate, are not reasonably like to have
\na Material Adverse Effect.<\/p>\n
(d) There is no material action, order, writ, injunction, judgment or
\ndecree outstanding or claim, suit litigation, proceeding, arbitral action,
\ngovernmental audit or investigation relating to or seeking benefits under any
\nAcquiror Employee Plan that is pending or, to Acquiror’s knowledge, threatened
\nagainst Acquiror, any of its ERISA Affiliates, or any Acquiror Employee Plans
\n(collectively, “Claims”), other than routine claims for benefits or Claims
\nwhich, individually or in the aggregate, are not reasonably likely to have a
\nMaterial Adverse Effect.<\/p>\n
(e) Except as set forth in Section 4.12 of the Acquiror Disclosure
\nSchedule, Acquiror has not incurred any withdrawal liability with respect to any
\nMultiemployer Plan under Title IV of ERISA which remains unsatisfied, except for
\nsuch liabilities as would not, individually or in the aggregate, have a Material
\nAdverse Effect.<\/p>\n
(f) With respect to the Acquiror Employee Plans, individually and in the
\naggregate, there are no funded benefit obligations for which contributions have
\nnot been made or properly accrued and there are no unfunded benefit obligations
\nwhich have not been accounted for by reserves, or otherwise properly footnoted
\nin accordance with generally accepted accounting principles, on the financial
\nstatements of Acquiror, except for obligations which, individually or in the
\naggregate, are not reasonably likely to have a Material Adverse Effect with
\nrespect to Acquiror.<\/p>\n
SECTION 4.13. TITLE TO ASSETS. The Assets of Acquiror and its
\nSubsidiaries, taken as a whole, are sufficient to permit Acquiror and its
\nSubsidiaries to conduct their business as currently being conducted with only
\nsuch exceptions as would not have a Material Adverse Effect. All of the material
\nAssets owned by Acquiror are owned free and clear of all Encumbrances, except as
\ndescribed in Section 4.13 of the Acquiror Disclosure Schedule or Permitted
\nEncumbrances or when the failure to have such ownership would not have a
\nMaterial Adverse Effect .<\/p>\n
SECTION 4.14. CONTRACTS. Each Acquiror Contract is valid, binding and
\nenforceable and in full force and effect, except where failure to be valid,
\nbinding and enforceable and in full force and effect would not have a Material
\nAdverse Effect, and there are no material defaults thereunder by Acquiror or its
\nSubsidiaries or, to the best knowledge of Acquiror, by any other party thereto
\nwhich could reasonably be expected to have a Material Adverse Effect.<\/p>\n
42<\/p>\n
SECTION 4.15. LABOR RELATIONS. Except as set forth on Section 4.15 of the
\nAcquiror Disclosure Schedule, there is no labor strike, slowdown or work
\nstoppage or lockout against Acquiror or any of its Subsidiaries, there is no
\nunfair labor practice charge or complaint against or pending before the National
\nLabor Relations Board which if decided adversely could reasonably be expected to
\nhave a Material Adverse Effect on Acquiror and its Subsidiaries, taken as a
\nwhole, and there is no representation claim or petition pending before the
\nNational Labor Relations Board and no question concerning representation exists
\nwith respect to the employees of Acquiror or its Subsidiaries.<\/p>\n
SECTION 4.16. INTELLECTUAL PROPERTY.<\/p>\n
(a) Acquiror and its Subsidiaries own, or are licensed or otherwise
\npossess legally enforceable rights to use, all patents, trademarks, trade names,
\nservice marks and copyrights, any applications for and registrations of such
\npatents, trademarks, trade names, service marks and copyrights, and all
\nprocesses, formulae, methods, schematics, technology, know-how, computer
\nsoftware programs or applications, tangible or intangible proprietary
\ninformation or material, waivers or licenses of publicity or privacy rights or
\nany other third party licenses that are necessary to conduct the business of
\nAcquiror and its Subsidiaries as currently conducted, the absence of which would
\nbe reasonably likely to have a Material Adverse Effect (the “Acquiror
\n ——–
\nIntellectual Property Rights”).
\n—————————-<\/p>\n
(b) The execution and delivery of this Agreement and consummation of
\nthe Merger will not result in the breach of, or create on behalf of any third
\nparty the right to terminate or modify, any license, sublicense or other
\nagreement relating to the Acquiror Intellectual Property Rights, or any material
\nlicenses, sublicenses and other agreements as to which Acquiror or any of its
\nSubsidiaries is a party and pursuant to which Acquiror or any of its
\nSubsidiaries is authorized to use any third party patents, trademarks,
\ncopyrights, trade secrets, likeness or other proprietary rights, including
\nsoftware that is used in the manufacture of, incorporated in, or forms a part of
\nany product sold by or expected to be sold by Acquiror or any of its
\nSubsidiaries, the termination, modification (including without limitation any
\nmodification to the scope of any license from the scope as currently granted by
\nAcquiror even if such modification is contemplated by the agreement) or breach
\nof which would be reasonably likely to have a Material Adverse Effect.<\/p>\n
(c) All patents, registered trademarks, service marks and copyrights
\nwhich are held by Acquiror or any of its Subsidiaries the loss or invalidity of
\nwhich would cause a Material Adverse Effect, are valid and subsisting. Except as
\nwould not be reasonably expected to have a Material Adverse Effect, Acquiror (i)
\nhas not been sued in any suit, action or proceeding, or received in writing any
\nclaim or notice, which involves a claim of (w) infringement or violation of any
\npatents, trademarks, service marks, copyrights, trade secrets, right of privacy
\nor publicity or any other proprietary right of any third party or (x) libel or
\ndefamation; and (ii) has no knowledge that the manufacturing, marketing,
\nlicensing or sale of its products infringes or violates any patent, trademark,
\nservice mark, copyright, trade secret, right of privacy or publicity, or other
\nproprietary right of any third party.<\/p>\n
43<\/p>\n
SECTION 4.17. ENVIRONMENTAL MATTERS. Except as set forth in Section 4.17
\nof the Acquiror Disclosure Schedule or the Acquiror SEC Reports and except for
\nsuch matters that, individually or in the aggregate, are not reasonably likely
\nto have a Material Adverse Effect, and except as has not had, and would not
\nreasonably be expected to have, a Material Adverse Effect, Acquiror and each of
\nits Subsidiaries (i) have obtained all applicable permits, licenses and other
\nauthorizations which are required to be obtained under all applicable
\nEnvironmental Laws by Acquiror or its Subsidiaries; (ii) are in material
\ncompliance with all terms and conditions of such required permits, licenses and
\nauthorization, and also are in material compliance with all other limitations,
\nrestrictions, conditions, standards, prohibitions, requirements, obligations,
\nschedules and timetables contained in or arising from applicable Environmental
\nLaws; (iii) have not received notice of any past or present violations of
\nEnvironmental Laws, or of any spill, release, event, incident, condition, action
\nor failure to act which is reasonably likely to prevent continued compliance
\nwith such Environmental Laws, or which would give rise to any common law
\nenvironmental liability or liability under Environmental Laws, or which would
\notherwise form the basis of any claims, action, suit or proceeding against
\nAcquiror or any of its Subsidiaries based on or resulting from the manufacture,
\nprocessing, use, treatment, storage, disposal, transport, or handling, or the
\nemission, discharge or release into the environment, of any Hazardous Material
\nby any Person; and (iv) have taken all actions required under applicable
\nEnvironmental Laws to register any products or materials required to be
\nregistered by Acquiror or its Subsidiaries thereunder.<\/p>\n
SECTION 4.18. JOINT PROXY STATEMENT PROSPECTUS; REGISTRATION STATEMENT.
\nNone of the information supplied by Acquiror to be included or incorporated by
\nreference in the Joint Proxy Statement\/Prospectus or any amendment thereof or
\nsupplement thereto, will, on the date it became effective with the SEC, at the
\ntime of the mailing of the Joint Proxy Statement\/Prospectus or any amendment or
\nsupplement thereto to the stockholders of Acquiror or the Company, at the time
\nof the Acquiror Stockholder Meeting and the Company Stockholder Meeting and at
\nthe Effective Time, contain any untrue statement of a material fact, or omit to
\nstate any material fact required to be stated therein or necessary in order to
\nmake the statements therein, in light of the circumstances under which they are
\nmade, not misleading. The Joint Proxy Statement\/Prospectus will comply as to
\nform in all material respects with the provisions of the Securities Act and the
\nExchange Act and the rules and regulations thereunder; provided, however, that
\nAcquiror makes no representation with respect to any information supplied or to
\nbe supplied by the Company for inclusion or incorporated by reference from
\nCompany SEC filings in the Joint Proxy Statement\/Prospectus or any amendment
\nthereof or supplement thereto. None of the information supplied by Acquiror to
\nbe included or incorporated by reference from Acquiror SEC filings in the
\nRegistration Statement will, at the time the Registration Statement is declared
\neffective by the SEC, contain any untrue statement of a material fact or omit to
\nstate any material fact required to be stated therein or necessary in order to
\nmake the statements therein, in light of the circumstances under which they are
\nmade, not misleading.<\/p>\n
SECTION 4.19. OPINION OF FINANCIAL ADVISOR. Acquiror has received the
\nwritten opinion of Goldman, Sachs & Co., dated the date of this Agreement, to
\nthe effect that the<\/p>\n
44<\/p>\n
consideration to be paid by Acquiror in connection with the Merger is fair to
\nAcquiror from a financial point of view.<\/p>\n
SECTION 4.20. OWNERSHIP OF COMPANY COMMON STOCK. To the best knowledge of
\nAcquiror, neither Acquiror, nor any of its affiliates, beneficially or of
\nrecord, owns any shares of Company Stock or Exchangeable Shares, other than such
\nsecurities, if any, held by or for the account of employees or former employees
\nof Acquiror, or any of its respective affiliates pursuant to any Acquiror
\nEmployee Plan.<\/p>\n
SECTION 4.21. BROKERS. No broker, finder or investment banker (other than
\nGoldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, the fees and
\nexpenses of which shall be paid by Acquiror) is entitled to any brokerage,
\nfinder’s or other fee or commission in connection with the transactions
\ncontemplated by this Agreement based upon arrangements made by or on behalf of
\nAcquiror.<\/p>\n
SECTION 4.22. VOTE REQUIRED. The approval by a majority of the voting
\npower represented by the outstanding shares of Acquiror Common Stock and
\nAcquiror Preferred Stock entitled to vote thereon, voting together as a single
\nclass, is the only vote of the holders of any class or series of Acquiror’s
\ncapital stock necessary to approve this Agreement, the Merger and, if necessary
\nfor the consummation of the Merger, an amendment to Acquiror’s Certificate of
\nIncorporation, (“Acquiror Stockholder Approval”). The Acquiror Board, at a
\n —————————–
\nmeeting duly called and held, by unanimous vote of the directors present (i)
\ndetermined that this Agreement, the Stock Option Agreement, the Stockholder
\nSupport Agreement and the transactions contemplated hereby, including the
\nMerger, are fair to, and in the best interests of, the stockholders of Acquiror,
\n(ii) approved this Agreement and the transactions contemplated hereby, including
\nthe Merger, and (iii) declared advisable and resolved to recommend that the
\nholders of the shares of the Acquiror Common Stock approve this Agreement and
\nthe transactions contemplated hereby, including the Merger.<\/p>\n
SECTION 4.23. TAX AND ACCOUNTING MATTERS. To Acquiror’s knowledge, neither
\nAcquiror nor any of its Affiliates has taken or agreed to take any action, or
\nknows of any circumstances, that (without regard to any action taken or agreed
\nto be taken by the Company or any of its Affiliates) would (i) prevent Acquiror
\nfrom accounting for the business combination to be effected by the Merger as a
\n“pooling of interests” under GAAP and the applicable rules and regulations of
\nthe SEC or (ii) prevent the Merger from qualifying as a reorganization within
\nthe meaning of Sections 368(a) of the Code.<\/p>\n
SECTION 4.24. RIGHTS PLAN. As of the Effective Time, each share of
\nAcquiror Common Stock received by holders of Company Common Stock pursuant to
\nSection 2.7(a), or holders of Company Preferred Stock pursuant to Section
\n2.7(b), shall evidence and entitle the holder thereof to Acquiror Rights under
\nthe Acquiror Rights Agreement.<\/p>\n
45<\/p>\n
ARTICLE V.
\n CONDUCT OF BUSINESS PENDING THE MERGER<\/p>\n
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER.
\nDuring the period from the date of this Agreement and continuing until the
\nearlier of the termination of this Agreement or the Effective Time, the Company
\nagrees as to itself and each of its Subsidiaries (except to the extent that
\nAcquiror shall otherwise consent in writing) to carry on its business in the
\nordinary course in substantially the same manner as previously conducted, to pay
\nits debts and taxes when due, subject to good faith disputes over such debts or
\ntaxes, in the ordinary course in substantially the same manner as previously
\npaid, to pay or perform its other obligations when due in the ordinary course in
\nsubstantially the same manner as previously paid or performed, to maintain
\ninsurance coverages and its books, accounts and records in the usual manner
\nconsistent with past practices, to comply in all material respects with all
\napplicable laws, ordinances and regulations of Governmental Entities, to
\nmaintain and keep its properties and equipment in good repair, working order and
\ncondition (except ordinary wear and tear), and, to the extent consistent with
\nsuch business, use all reasonable efforts consistent with past practices and
\npolicies to preserve intact its present business organization, keep available
\nthe services of its present officers and key employees and preserve its
\nrelationships with customers, suppliers, distributors, and others having
\nbusiness dealings with it. Without limiting the generality of the foregoing and
\nexcept as expressly contemplated by this Agreement, or as specifically disclosed
\nin Section 5.1 of the Company Disclosure Schedule, during the period from the
\ndate of this Agreement and continuing until the earlier of the termination of
\nthis Agreement or the Effective Time, without the written consent of Acquiror
\n(which will not be unreasonably withheld or delayed), the Company shall not and
\nshall not permit any of its Subsidiaries to:<\/p>\n
(a) adopt or propose any amendment to its certificate of
\nincorporation or bylaws or comparable charter or organizational documents except
\nas contemplated by this Agreement;<\/p>\n
(b) (i) issue, pledge or sell, or propose or authorize the issuance,
\npledge or sale of, additional shares of capital stock of any class (other than
\nupon exercise of Company Stock Rights outstanding on the date of this Agreement
\nupon payment of the exercise price thereof or upon any exchange of Exchangeable
\nShares), or securities convertible into capital stock of any class, or any
\nsubscriptions, rights, warrants or options to acquire any convertible securities
\nor capital stock, or any other securities in respect of, in lieu of, or in
\nsubstitution for, shares of Company Stock outstanding on the date hereof, (ii)
\namend, waive or otherwise modify any of the terms of any option, warrant or
\nstock option plan of the Company or any of its Subsidiaries, including without
\nlimitation, the Company Stock Rights and the Company Stock Plans, or authorize
\ncash payments in exchange for any options granted under any of such plans, or
\n(iii) adopt or implement any stockholder rights plan;<\/p>\n
(c) declare, set aside or pay any dividend or other distribution
\n(whether in cash, securities or property or any combination thereof) in respect
\nof any class or series of its capital stock other than between any wholly-owned
\nSubsidiary of the Company (or the Canadian Sub) and the Company or any other
\nwholly-owned Subsidiary of the Company (or the Canadian Sub), <\/p>\n
46<\/p>\n
or purchase or otherwise acquire, directly or indirectly, any shares of its
\ncapital stock (other than the Exchangeable Shares pursuant to the exchange
\nrights thereof);<\/p>\n
(d) split, combine, subdivide, reclassify or redeem, purchase or
\notherwise acquire, or propose to redeem or purchase or otherwise acquire, any
\nshares of its capital stock, or any of its other securities (other than the
\nExchangeable Shares pursuant to the exchange rights thereof);<\/p>\n
(e) increase the compensation or fringe benefits payable or to become
\npayable to its directors, officers or employees (whether from the Company or any
\nof its Subsidiaries), or pay any benefit not required by any existing plan or
\narrangement (including, without limitation, the granting of stock options, stock
\nappreciation rights, shares of restricted stock or performance units) or grant
\nany severance or termination pay to (except pursuant to existing agreements or
\npolicies previously disclosed in writing to Acquiror, which shall be interpreted
\nand implemented in a manner consistent with past practice), or enter into any
\nemployment or severance agreement with, any director, officer or employee of the
\nCompany or any of its Subsidiaries or establish, adopt, enter into, or amend any
\ncollective bargaining, bonus, profit sharing, thrift, compensation, stock
\noption, restricted stock, pension, retirement, savings, welfare, deferred
\ncompensation, employment, termination, severance or other employee benefit plan,
\nagreement, trust, fund, policy or arrangement for the benefit or welfare of any
\ndirectors, officers or current or former employees, including any Benefit
\nArrangement, Pension Plan or Welfare Plan, except (i) to the extent required by
\napplicable law or regulation, (ii) pursuant to any collective bargaining
\nagreements or Company Employee Plan as in effect on the date of this Agreement
\nconsistent with past practices, (iii) for salary and benefit increases in the
\nordinary course of business consistent with past practice to employees other
\nthan executive officers of the Company, (iv) pursuant to Section 2.8 or (v) the
\ngrant of options consistent with past practice to new or promoted employees
\nother than executive officers, which options represent in the aggregate the
\nright to acquire no more than 500,000 shares (net cancellations) of Company
\nCommon Stock;<\/p>\n
(f) (i) sell, pledge, lease, dispose of, grant, encumber, or otherwise
\nauthorize the sale, pledge, disposition, grant or encumbrance of any of the
\nproperties or assets of the Company or any of its Subsidiaries (including stock
\nof Subsidiaries), except for (A) sales of assets in the ordinary course of
\nbusiness, (B) sales of assets aggregating less than $5,000,000, (C) sales of
\naccounts receivable under agreements with Fleet Bank and Sanwa Bank in effect as
\nof the date hereof consistent with past practice, (D) sales of marketable
\nsecurities aggregating less than $20,000,000, and (E) sales of assets under
\nsale\/leaseback arrangements with Fleet Bank in effect as of the date hereof
\nconsistent with past practice, or (ii) acquire (including, without limitation,
\nby merger, consolidation, lease or acquisition of stock or assets) any
\ncorporation, partnership, other business organization or any division thereof
\n(or a substantial portion of the assets thereof) or any other assets, except for
\nacquisitions of assets in the ordinary course of business and except for
\nacquisitions involving an aggregate purchase price not in excess of $10,000,000;<\/p>\n
(g) (i) incur, assume or pre-pay any debt for borrowed money, other
\nthan pursuant to credit agreements, accounts receivable facilities, factoring
\narrangements and sale\/leaseback arrangements in effect as of the date hereof
\nconsistent with past practice, (ii) assume, guarantee, endorse or otherwise
\nbecome liable or responsible (whether directly, contingently or otherwise) <\/p>\n
47<\/p>\n
for the obligations of any other person (other than wholly-owned subsidiaries),
\n(iii) make any loans, advances or capital contributions to, or investments in,
\nany other person (including advances to employees), except for loans, advances,
\ncapital contributions or investments between any wholly-owned Subsidiary of the
\nCompany and the Company or another wholly-owned Subsidiary of the Company or
\nwhich are reasonable, necessary, in the ordinary course and consistent with past
\npractice, or (iv) enter into any “keep well” or other agreement to maintain the
\nfinancial condition of another entity (other than the Company or any of its
\nwholly-owned Subsidiaries);<\/p>\n
(h) authorize, recommend, propose or announce an intention to adopt a
\nplan of complete or partial liquidation or dissolution of the Company or any of
\nits Subsidiaries, other than in connection with the dissolution, merger or
\nliquidation of inactive Subsidiaries;<\/p>\n
(i) make or rescind any material express or deemed election relating to
\nTaxes, settle or compromise any material claim, action, suit, litigation,
\nproceeding, arbitration, investigation, audit or controversy relating to Taxes,
\namend any material Tax Return except in the ordinary course of business
\nconsistent with past practice, or except as may be required by applicable law,
\nmake any change to any of its material methods of reporting income or deductions
\n(including, without limitation, any change to its methods or basis or write-offs
\nof accounts receivable) for federal income tax purposes from those employed in
\nthe preparation of its federal income tax return for the taxable year ending
\nJanuary 3, 1998;<\/p>\n
(j) pay, discharge or satisfy any material claims, liabilities or
\nobligations (absolute, accrued, asserted, unasserted, contingent or otherwise),
\nother than the payment, discharge or satisfaction in the ordinary course of
\nbusiness and consistent with past practice of liabilities reflected or reserved
\nagainst in the consolidated financial statements of the Company;<\/p>\n
(k) other than in the ordinary course of business and consistent with
\npast practice, waive any rights of substantial value or make any payment, direct
\nor indirect, of any material liability of the Company or of any of its
\nSubsidiaries before the same comes due in accordance with its terms;<\/p>\n
(l) fail to maintain its existing insurance coverage of all types in
\neffect or, in the event any such coverage shall be terminated or lapse, to the
\nextent available at reasonable cost, procure substantially similar substitute
\ninsurance policies which in all material respects are in at least such amounts
\nand against such risks as are currently covered by such policies;<\/p>\n
(m) enter into any collective bargaining agreement (other than as
\nrequired by law or extensions of existing agreements in the ordinary course of
\nbusiness);<\/p>\n
(n) change its methods of accounting as in effect on October 3, 1998
\nexcept as required by GAAP, or take any action, other than reasonable and usual
\nactions in the ordinary course of business and consistent with past practice,
\nwith respect to accounting policies or procedures, unless required by GAAP or
\nthe SEC;<\/p>\n
48<\/p>\n
(o) modify, amend or terminate any of the Company Contracts or waive,
\nrelease or assign any material rights or claims, except in the ordinary course
\nof business consistent with past practice;<\/p>\n
(p) take, or agree to commit to take, any action that would cause the
\nrepresentations and warranties of the Company contained herein, individually or
\nin the aggregate, not to be true and correct in all material respects;<\/p>\n
(q) close, shut down, or otherwise eliminate any facility or office
\ncontaining more than 20,000 square feet;<\/p>\n
(r) make or commit to make any capital expenditures that exceed
\n$10,000,000 in the aggregate or, except as required pursuant to commitments
\nexisting on the date hereof or made without violation of this Section 5.1, make
\nany cash disbursement not in the ordinary course of business exceeding
\n$5,000,000 for any single item or related series of items;<\/p>\n
(s) initiate, compromise, or settle any material litigation or
\narbitration proceeding except in connection with the Agreement or the
\ntransactions contemplated hereby;<\/p>\n
(t) enter into an agreement, contract, commitment or arrangement to do any
\nof the foregoing; and<\/p>\n
(u) modify, amend, restate or terminate the Amended and Restated
\nEmployment Agreement, dated as of the date hereof, between the Company and
\nMichael J. Perik or the Amended and Restated Employment Agreement, dated as of
\nthe date hereof, between the Company and Kevin O’Leary, or waive, release or
\nassign any material rights or claims thereunder.<\/p>\n
SECTION 5.2. CONDUCT OF BUSINESS OF ACQUIROR PENDING THE MERGER. During
\nthe period from the date of this Agreement and continuing until the earlier of
\nthe termination of this Agreement or the Effective Time, Acquiror agrees as to
\nitself and each of its Subsidiaries (except to the extent that the Company shall
\notherwise consent in writing) to carry on its business in the ordinary course in
\nsubstantially the same manner as previously conducted, to pay its debts and
\ntaxes when due, subject to good faith disputes over such debts or taxes, in the
\nordinary course in substantially the same manner as previously paid, to pay or
\nperform its other obligations when due in the ordinary course in substantially
\nthe same manner as previously paid or performed, to maintain insurance coverages
\nand its books, accounts and records in the usual manner consistent with past
\npractices, to comply in all material respects with all applicable laws,
\nordinances and regulations of Governmental Entities, to maintain and keep its
\nproperties and equipment in good repair, working order and condition (except
\nordinary wear and tear), and, to the extent consistent with such business, use
\nall reasonable efforts consistent with past practices and policies to preserve
\nintact its present business organization, keep available the services of its
\npresent officers and key employees and preserve its relationships with
\ncustomers, suppliers, distributors, and others having business dealings with it.
\nWithout limiting the generality of the foregoing and except as expressly
\ncontemplated by this Agreement, or as specifically disclosed in Section 5.2 of
\nthe Acquiror Disclosure Schedule, during the period <\/p>\n
49<\/p>\n
from the date of this Agreement and continuing until the earlier of the
\ntermination of this Agreement or the Effective Time, without the written consent
\nof the Company, Acquiror shall not and shall not permit any of its Subsidiaries
\nto:<\/p>\n
(a) adopt or propose any amendment to its certificate of incorporation
\nor bylaws or comparable charter or organizational documents, except as
\ncontemplated by this Agreement;<\/p>\n
(b) split, combine, subdivide, reclassify or redeem, purchase or
\notherwise acquire, or propose to redeem or purchase or otherwise acquire, any
\nshares of its capital stock, or any of its other securities; and<\/p>\n
(c) enter into an agreement, contract, commitment or arrangement to do
\nany of the foregoing.<\/p>\n
ARTICLE VI.
\n ADDITIONAL AGREEMENTS<\/p>\n
SECTION 6.1. PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; STOCKHOLDER
\nMEETING.<\/p>\n
(a) As promptly as practicable after the execution of this Agreement,
\nthe Company and Acquiror shall cooperate, prepare and file with the SEC, the
\nJoint Proxy Statement\/Prospectus and the Registration Statement in which the
\nJoint Proxy Statement\/Prospectus will be included as a prospectus, provided that
\nAcquiror may delay the filing of the Registration Statement until approval of
\nthe Joint Proxy Statement\/Prospectus by the SEC. The Company and Acquiror will
\ncause the Joint Proxy Statement\/Prospectus and the Registration Statement to
\ncomply as to form in all material respects with the applicable provisions of the
\nSecurities Act, the Exchange Act and the rules and regulations thereunder. Each
\nof Acquiror and the Company shall use reasonable best efforts to have or cause
\nthe Joint Proxy Statement\/Prospectus to be cleared by the SEC and to cause the
\nRegistration Statement to become effective as promptly as practicable. Without
\nlimiting the generality of the foregoing, each of the Company and Acquiror
\nshall, and shall cause its respective Representatives to, fully cooperate with
\nthe other party and its respective Representatives in the preparation of the
\nJoint Proxy Statement\/Prospectus and the Registration Statement, and shall, upon
\nrequest, furnish the other party with all information concerning it and its
\naffiliates, directors, officers and stockholders as the other may reasonably
\nrequest in connection with the preparation of the Joint Proxy
\nStatement\/Prospectus and the Registration Statement. The Joint Proxy
\nStatement\/Prospectus with respect to the Merger shall include the determination
\nand recommendation of the Company Board (subject to Section 6.3(d)) and the
\nAcquiror Board that their respective stockholders vote in favor of the approval
\nand adoption of this Agreement and the Merger. The Company and Acquiror shall
\nuse reasonable best efforts to take all actions required under any applicable
\nforeign, federal or state securities or Blue Sky Laws in connection with the
\nissuance of shares of Acquiror Common Stock pursuant to the Merger. As promptly
\nas practicable after the Registration Statement with respect to the Merger shall
\nhave become <\/p>\n
50<\/p>\n
effective, the Company and Acquiror shall cause the Joint Proxy
\nStatement\/Prospectus with respect to the Merger to be mailed to their respective
\nstockholders.<\/p>\n
(b) Without limiting the generality of the foregoing, (i) the Company
\nand Acquiror shall notify each other as promptly as practicable upon becoming
\naware of any event or circumstance which should be described in an amendment of,
\nor supplement to, the Joint Proxy Statement\/Prospectus or the Registration
\nStatement, and (ii) the Company and Acquiror shall each notify the other as
\npromptly as practicable after the receipt by it of any written or oral comments
\nof the SEC on, or of any written or oral request by the SEC for amendments or
\nsupplements to, the Joint Proxy Statement\/Prospectus or the Registration
\nStatement, and shall promptly supply the other with copies of all correspondence
\nbetween it or any of its representatives and the SEC with respect to any of the
\nforegoing filings.<\/p>\n
(c) The Company shall take all action necessary to convene and hold a
\nmeeting of its stockholders as promptly as practical for the purpose of
\nobtaining the Company Stockholder Approval. Subject to Section 6.3, the Company
\nshall, through the Company Board, recommend to its stockholders the adoption of
\nthis Agreement and the transactions contemplated hereby and shall use its best
\nefforts to solicit from its stockholders proxies in favor of adoption of this
\nAgreement and to take all other lawful action necessary to secure the Company
\nStockholder Approval. Without limiting the generality of the foregoing, the
\nCompany agrees that its obligations pursuant to this Section 6.1(c) shall not be
\naffected by the commencement, public proposal or communication to the Company of
\nany Acquisition Proposal, subject to Section 6.3 below.<\/p>\n
(d) Acquiror shall take all action necessary in accordance with
\napplicable law and its certificate of incorporation and bylaws to convene and
\nhold a meeting of its stockholders as promptly as practical for the purpose of
\nobtaining the Acquiror Stockholder Approval. Acquiror shall, through the
\nAcquiror Board, recommend to its stockholders the adoption of this Agreement and
\nthe transactions contemplated hereby and shall use its best efforts to solicit
\nfrom its stockholders proxies in favor of adoption of this Agreement and to take
\nall other lawful action necessary to secure the Acquiror Stockholder Approval.
\nNeither the Acquiror Board nor any committee thereof shall withdraw or modify,
\nor propose publicly to withdraw or modify, in a manner adverse to the Company,
\nthe approval or recommendation by the Acquiror Board of this Agreement or the
\ntransactions contemplated hereby.<\/p>\n
(e) The Company and Acquiror shall coordinate and cooperate with each
\nother with respect to the timing of the Company Stockholder Meeting and the
\nAcquiror Stockholder Meeting and shall use their best efforts to hold such
\nmeeting on the same day and as soon as practicable after the date hereof.<\/p>\n
SECTION 6.2. COOPERATION; NOTICE; CURE. Subject to compliance with
\napplicable law, from the date hereof until the Effective Time, each of Acquiror
\nand the Company shall confer on a regular and frequent basis with one or more
\nrepresentatives of the other party to report on the general status of ongoing
\noperations. Each of Acquiror and the Company shall promptly notify the other in
\nwriting of, and will use reasonable best efforts to cure before the <\/p>\n
51<\/p>\n
Closing Date, any event, transaction or circumstance, as soon as practical after
\nit becomes known to such party, that causes or will cause any covenant or
\nagreement of Acquiror or the Company, as the case may be, under this Agreement
\nto be breached in any material respect or that renders or will render untrue in
\nany material respect any representation or warranty of Acquiror or the Company
\ncontained in this Agreement. No notice given pursuant to this paragraph shall
\nhave any effect on the representations, warranties, covenants or agreements
\ncontained in this Agreement for purposes of determining satisfaction of any
\ncondition contained herein.<\/p>\n
SECTION 6.3. NO SOLICITATION.<\/p>\n
(a) The Company shall immediately cease and terminate any existing
\nsolicitation, initiation, encouragement, activity, discussion or negotiation
\nwith any Persons conducted heretofore by the Company, its Subsidiaries or any of
\ntheir respective Representatives with respect to any proposed, potential or
\ncontemplated Acquisition Transaction.<\/p>\n
(b) From and after the date hereof, without the prior written consent
\nof Acquiror, the Company will not authorize or permit any of its Subsidiaries
\nto, and shall use its reasonable best efforts to cause any and all of its or
\ntheir respective officers, directors, employees, financial advisors, agents or
\nrepresentatives (each a “Representative”) not to, directly or indirectly, (i)
\n ————–
\nsolicit, initiate, or encourage any inquiries or proposals that constitute, or
\ncould reasonably be expected to lead to an Acquisition Proposal, or (ii) engage
\nin negotiations or discussions with any person (or group of persons) other than
\nAcquiror or its respective affiliates (a “Third Party”) concerning, provide any
\nnon-public information to any person or entity relating to, an Acquisition
\nProposal, or (iii) enter into any letter of intent, agreement in principle or
\nany acquisition agreement or other similar agreement with respect to any
\nAcquisition Proposal; provided, however, that nothing contained in this Section
\n6.3(b) shall prevent the Company or the Company Board from furnishing non-public
\ninformation to, or entering into discussions or negotiations with, any Third
\nParty in connection with an unsolicited, bona fide written proposal for an
\nAcquisition Proposal by such Third Party, if and only to the extent that (1)
\nsuch Third Party has made a written proposal to the Company Board to consummate
\nan Acquisition Proposal, (2) the Company Board determines in good faith, after
\nconsultation with a financial advisor of nationally recognized reputation, that
\nsuch Acquisition Proposal is reasonably capable of being completed on
\nsubstantially the terms proposed, and would, if consummated, result in a
\ntransaction that would provide greater value to the holders of Company Common
\nStock than the transaction contemplated by this Agreement (a “Superior
\n ——–
\nProposal”), (3) the failure to take such action would, in the reasonable good
\n——–
\nfaith judgment of the Company Board, after consultation with outside legal
\ncounsel, be inconsistent with its fiduciary duties to the Company’s stockholders
\nunder applicable law, and (4) prior to furnishing such non-public information
\nto, or entering into discussions or negotiations with, such person or entity,
\nthe Company Board receives from such person or entity an executed
\nconfidentiality and standstill agreement with material terms no less favorable
\nto the Company than those contained in the Confidentiality Agreement. The
\nCompany agrees not to release any Third Party from, or waive any provision of,
\nany standstill agreement to which it is a party or any confidentiality agreement
\nbetween it and another person who has made, or who may reasonably be considered
\nlikely to make, an Acquisition Proposal, unless the failure to take such action
\nwould, in the reasonable good faith <\/p>\n
52<\/p>\n
judgment of the Company Board, after consultation with outside legal counsel, be
\ninconsistent with its fiduciary duties to the Company’s stockholders under
\napplicable law. For purposes of this Agreement, “Acquisition Proposal” shall
\n ——————–
\nmean, with respect to the Company, any proposal or offer from any Person (other
\nthan Acquiror or any of its Subsidiaries) relating to any (i) direct or indirect
\nacquisition or purchase of a business of the Company or any of its Subsidiaries,
\nthat constitutes 20% or more of the consolidated net revenues, net income or
\nassets of the Company and its Subsidiaries, (ii) direct or indirect acquisition
\nor purchase of 20% or more of any class of equity securities of the Company or
\nany of its Subsidiaries whose business constitutes 20% or more of the
\nconsolidated net revenues, net income or assets of the Company and its
\nSubsidiaries, (iii) tender offer or exchange offer that if consummated would
\nresult in any Person beneficially owning 20% or more of the capital stock of the
\nCompany, or (iv) merger, consolidation, business combination, recapitalization,
\nliquidation, dissolution or similar transaction involving the Company or any of
\nits Subsidiaries whose business constitutes 20% or more of the consolidated net
\nrevenues, net income or assets of the Company and its Subsidiaries. Each of the
\ntransactions referred to in clauses (i) – (iv) of the definition of Acquisition
\nProposal, other than any such transaction to which Acquiror or any of its
\nSubsidiaries is a party, is referred to as an “Acquisition Transaction.”
\n ———————–<\/p>\n
(c) The Company shall notify Acquiror promptly after receipt by the
\nCompany or the Company’s knowledge of the receipt by any of its advisors of any
\nAcquisition Proposal or any request for non-public information in connection
\nwith an Acquisition Proposal or for access to the properties, books or records
\nof the Company by any person or entity that informs such party that it is
\nconsidering making or has made an Acquisition Proposal. Such notice shall be
\nmade orally and in writing and shall indicate the identity of the offeror and
\nthe terms and conditions of such proposal, inquiry or contact. The Company shall
\nkeep Acquiror informed of the status (including any change to the material
\nterms) of any such Acquisition Proposal or request for non-public information.<\/p>\n
(d) The Board of Directors of the Company may not withdraw or modify,
\nor propose to withdraw or modify, in a manner adverse to Acquiror the approval
\nor recommendation by the Company Board of this Agreement or the Merger unless,
\nfollowing the receipt of a Superior Proposal, in the reasonable good faith
\njudgment of the Company Board, after consultation with outside legal counsel,
\nthe failure to do so would be inconsistent with its fiduciary duties to the
\nCompany’s stockholders under applicable law; provided however, that, the Board
\nof Directors of the Company shall submit this Agreement to the Company’s
\nstockholders for approval, whether or not the Board of Directors of the Company
\nat any time subsequent to the date hereof determines that this Agreement is no
\nlonger advisable or recommends that the stockholders of the Company reject it or
\notherwise modifies or withdraws its recommendation. Unless the Board of
\nDirectors of the Company has withdrawn its recommendation of this Agreement in
\ncompliance herewith, the Company shall use its best efforts to solicit from
\nstockholders of the Company proxies in favor of the approval and adoption of
\nthis Agreement and the Merger and to secure the vote or consent of stockholders
\nrequired by the DGCL and its certificate of incorporation and bylaws to approve
\nand adopt this Agreement and the Merger.<\/p>\n
53<\/p>\n
(e) Nothing contained in this Agreement shall prohibit the Company from
\ncomplying with Rule 14e-2 promulgated under the Exchange Act with regard to a
\ntender or exchange offer or from making any other disclosures to its
\nstockholders to the extent required by law.<\/p>\n
SECTION 6.4. ACCESS TO INFORMATION. Upon reasonable notice, each of
\nAcquiror and the Company (and each of their respective Subsidiaries) shall
\nafford to the other party and its Representatives reasonable access, during
\nnormal business hours during the period prior to the Effective Time, to all its
\npersonnel, properties, books, contracts, commitments and records and, during
\nsuch period, each of Acquiror and the Company shall, and shall cause each of its
\nrespective Subsidiaries to, furnish promptly to the other (a) a copy of each
\nreport, schedule, registration statement and other documents filed or received
\nby it during such period pursuant to the requirements of federal or state
\nsecurities laws and (b) all other information concerning its business,
\nproperties and personnel as the other party may reasonably request. Each party
\nmaking such requests will hold any such information furnished to it by the other
\nparty which is nonpublic in confidence in accordance with the Confidentiality
\nAgreement dated as of November 10, 1998, between Acquiror and the Company (the
\n“Confidentiality Agreement”). No information or knowledge obtained in any
\n ————————-
\ninvestigation pursuant to this Section 6.4 shall affect or be deemed to modify
\nany representation or warranty contained in this Agreement or the conditions to
\nthe obligations of the parties to consummate the Merger.<\/p>\n
SECTION 6.5. GOVERNMENTAL APPROVALS.<\/p>\n
(a) The parties hereto shall cooperate with each other and use their
\nreasonable best efforts to promptly prepare and file all necessary
\ndocumentation, to effect all applications, notices, petitions and filings, to
\nobtain as promptly as practicable all permits, registrations, licenses,
\nconsents, variances, exemptions, orders, approvals and authorizations of all
\nthird parties and Governmental Entities which are necessary to consummate the
\ntransactions contemplated by this Agreement, including, without limitation, all
\nfilings required under the HSR Act or any applicable foreign anti-trust law or
\nregulation (“Governmental Approvals”), and to comply with the terms and
\n ———————-
\nconditions of all such Governmental Approvals. Each of the parties hereto shall
\nuse their reasonable best efforts to, and shall use their reasonable best
\nefforts to cause their respective officers, directors and affiliates to, file
\nwithin 30 days after the date hereof, and in all events shall file within 60
\ndays after the date hereof, all required initial applications and documents in
\nconnection with obtaining the Governmental Approvals and shall act reasonably
\nand promptly thereafter in responding to additional requests in connection
\ntherewith. Acquiror and the Company shall have the right to review in advance,
\nand to the extent practicable, each will consult the other on, in each case
\nsubject to applicable laws relating to the exchange of information, all the
\ninformation relating to Acquiror and the Company, as the case may be, and any of
\ntheir respective Subsidiaries, directors, officers and stockholders which appear
\nin any filing made with, or written materials submitted to, any third party or
\nany Governmental Entity in connection with the transactions contemplated by this
\nAgreement. Without limiting the foregoing, each of Acquiror and the Company (the
\n“Notifying Party”) will notify the other promptly of the receipt of comments or
\n —————
\nrequests from Governmental Entities relating to Governmental Approvals, and will
\nsupply the other party with copies of all correspondence <\/p>\n
54<\/p>\n
between the Notifying Party or any of its representatives and Governmental
\nEntities with respect to Governmental Approvals.<\/p>\n
(b) Acquiror and the Company shall promptly advise each other upon
\nreceiving any communication from any Governmental Entity whose consent or
\napproval is required for consummation of the transactions contemplated by this
\nAgreement which causes such party to believe that there is a reasonable
\nlikelihood that any approval needed from a Governmental Entity will not be
\nobtained or that the receipt of any such approval will be materially delayed.
\nAcquiror and the Company shall take any and all actions reasonably necessary to
\nvigorously defend, lift, mitigate and rescind the effect of any litigation or
\nadministrative proceeding adversely affecting this Agreement or the transactions
\ncontemplated hereby or thereby, including, without limitation, promptly
\nappealing any adverse court or administrative order or injunction to the extent
\nreasonably necessary for the foregoing purposes.<\/p>\n
(c) Notwithstanding the foregoing or any other provision of this
\nAgreement, Acquiror shall have no obligation or affirmative duty under this
\nSection 6.5 to cease or refrain from the ownership of any assets or properties,
\nor the association with any person or entity which association is material to
\nthe operations of Acquiror, whether on the date hereof or at any time in the
\nfuture.<\/p>\n
SECTION 6.6. PUBLICITY. Acquiror and the Company shall agree on the
\nform and content of the initial press release regarding the transactions
\ncontemplated hereby and thereafter shall consult with each other before issuing,
\nand use all reasonable efforts to agree upon, any press release or other written
\npublic statement with respect to any of the transactions contemplated hereby and
\nshall not issue any such press release or make any such written public statement
\nor filings prior to such consultation, except as may be required by law.<\/p>\n
SECTION 6.7. INDEMNIFICATION.<\/p>\n
(a) From and after the Effective Time, Acquiror agrees that it will
\nindemnify and hold harmless each present and former director and officer of the
\nCompany and its Subsidiaries (the “Indemnified Parties”), against any costs or
\n ——————-
\nexpenses (including reasonable attorneys’ fees), judgments, fines, losses,
\nclaims, damages, liabilities or amounts paid in settlement incurred in
\nconnection with any claim, action, suit, proceeding or investigation (whether
\ncivil, criminal, administrative or investigative (a “Proceeding”)), arising out
\n ———-
\nof or pertaining to matters existing or occurring at or prior to the Effective
\nTime, whether asserted or claimed prior to, at or after the Effective Time, to
\nthe fullest extent permitted under Delaware law. The obligations of Acquiror
\nunder this Section 6.7(a) shall include the obligation to advance expenses as
\nincurred prior to the final disposition of the Proceeding.<\/p>\n
(b) Acquiror shall, until the fifth anniversary of the Effective Time
\n(or such earlier date as may be mutually agreed upon by Acquiror, and the
\napplicable Indemnified Party) cause to be maintained in effect, to the extent
\navailable, the policies of directors’ and officers’ liability insurance
\nmaintained by the Company and its Subsidiaries as of the date hereof (or
\npolicies of at least the same coverage and amounts containing terms that are not
\nless advantageous to the <\/p>\n
55<\/p>\n
insured parties) with respect to claims arising from facts that occurred on or
\nprior to the Effective Time, including without limitation all claims based upon,
\narising out of, directly or indirectly resulting from, in consequence of, or in
\nany way involving the Merger and any and all related events. In lieu of the
\npurchase of such insurance by the Acquiror, Acquiror may purchase a five year
\nextended reporting period endorsement (“Reporting Tail Coverage”) under the
\nCompany’s existing directors’ and officers’ liability insurance coverage,
\nproviding that such Reporting Tail Coverage shall extend the directors’ and
\nofficers’ liability coverage in force as of the date hereof for a period of at
\nleast five (5) years from the Effective Time for any claim based upon, arising
\nout of, directly or indirectly resulting from, in consequence of, or any way
\ninvolving wrongful acts or omissions occurring or prior to the Effective Time,
\nincluding without limitation all claims based upon, arising out of, directly or
\nindirectly resulting from, in consequence of, or any way involving the Merger or
\nany and all related events. In no event shall the Acquiror be obligated to
\nexpend in order to maintain or procure insurance coverage pursuant to this
\nSection 6.7(b) an amount per year in excess of $727,500 per annum. The Company
\nrepresents and warrants that the current premium on its directors’ and officers’
\nliability insurance for the three year period commencing June, 1997 is
\n$1,091,850.<\/p>\n
(c) The provisions of this Section 6.7 are intended to be an addition
\nto the rights otherwise available to the current officers and directors of the
\nCompany by law, charter, statute, bylaw or agreement, and shall operate for the
\nbenefit of, and shall be enforceable by, each of the Indemnified Parties, their
\nheirs and their representatives.<\/p>\n
SECTION 6.8. EMPLOYEE BENEFITS MATTERS. From the Effective Time until
\nDecember 31, 1999, the Surviving Corporation shall provide the employees of the
\nSurviving Corporation and its Subsidiaries (who were, prior to the Merger,
\nemployees of the Company or its Subsidiaries) Employee Benefits which, in the
\naggregate, are no less favorable to such employees, than the Employee Benefits
\nprovided to the employees of the Company and its Subsidiaries immediately prior
\nto the Effective Time. Acquiror and the Company agree that the Company and the
\nSurviving Corporation shall pay promptly or provide when due all compensation
\nand benefits required to be paid pursuant to the terms of any individual
\nagreement with any employee, former employee, director or former director in
\neffect and disclosed to Acquiror as of the date hereof. For all Employee
\nBenefits (including, without limitation, Employee Plans and other programs of
\nAcquiror and its affiliates after the Effective Time), all service with the
\nCompany or any of its Subsidiaries prior to the Effective Time of employees
\n(excluding employees covered by collective bargaining agreements) shall be
\ntreated as service with Acquiror and its affiliates for purposes of eligibility,
\nvesting, benefits accrued (other than for the purposes of any pension plan) and
\ndetermination of benefit levels to the same extent that such service is taken
\ninto account by the Company and its Subsidiaries as of the date hereof, except
\nto the extent such treatment will result in duplication of benefits. Acquiror
\nwill, or will cause the Surviving Corporation to, (i) waive all limitations as
\nto preexisting conditions, exclusions and waiting periods with respect to
\nparticipation and coverage requirements applicable to the Company’s employees
\nunder any Employee Plans that such employees may be eligible to participate in
\nafter the Effective Time, other than limitations, exclusions or waiting periods
\nthat are already in effect with respect to such employees and that have not been
\nsatisfied as of the Effective Time under any Employee Plan maintained for such
\nemployees immediately <\/p>\n
56<\/p>\n
prior to the Effective Time and (ii) use its reasonable best efforts to provide
\nsuch employees credit for any co-payments and deductibles paid prior to the
\nEffective Time in satisfying any applicable deductible or out of pocket
\nrequirements under any Welfare Plans that such employees are eligible to
\nparticipate in after the Effective Time. “Employee Benefits” shall mean the
\n —————–
\nfollowing benefits: any medical, health, dental, life insurance, long-term
\ndisability, severance, pension, retirement or savings plan, policy or
\narrangement, including those such plans for which coverage is generally limited
\nto officers or a select group of highly compensated employees of the Company or
\nany of its Subsidiaries. Nothing herein shall require the continued employment
\nof any person or prevent the Company and\/or the Surviving Corporation from
\ntaking any action or refraining from taking any action which the Company could
\ntake or refrain from taking prior to or after the Effective Time, including,
\nwithout limitation, any action the Company or the Surviving Corporation could
\ntake to terminate any plan under its terms as in effect as of the date hereof.
\nImmediately at the Effective Time, Acquiror shall and hereby does, assume those
\nemployment agreements, Company Employee Plans and Employee Benefits arrangements
\nas are set forth in Section 6.8 of the Company Disclosure Schedule.<\/p>\n
SECTION 6.9. AFFILIATE AGREEMENTS. Upon the execution of this
\nAgreement, the Company and Acquiror shall provide each other a list identifying,
\nto the Company’s or Acquiror’s respective best knowledge, those persons who are
\n“affiliates” of the Company or Acquiror, respectively, within the meaning of
\nRule 145 (each such person who is an “affiliate” of the Company within the
\nmeaning of Rule 145 is referred to as a “Company Affiliate” and each such person
\n —————–
\nwho is an “affiliate” of the Acquiror is referred to as an “Acquiror Affiliate”)
\n ——————
\npromulgated under the Securities Act (“Rule 145”). The Company and Acquiror
\n ——–
\nshall provide each other such information and documents as each shall reasonably
\nrequest for purposes of reviewing such list and shall notify the other party in
\nwriting regarding any change in the identity of its Affiliates prior to the
\nClosing Date. The Company and Acquiror shall each use their respective
\nreasonable best efforts to deliver or cause to be delivered to each other prior
\nto the Effective Time an executed Affiliate Agreement from each of its
\nAffiliates substantially in the Form attached hereto as Exhibit C (in the case
\nof the Company Affiliates) and Exhibit D (in the case of the Acquiror
\nAffiliates).<\/p>\n
SECTION 6.10. POOLING ACCOUNTING. The parties shall use their
\nreasonable best efforts to cause the Merger to be accounted for as a pooling of
\ninterests under GAAP and the applicable rules and regulations of the SEC.
\nNotwithstanding anything to the contrary in this Agreement, from and after the
\ndate hereof and until the Effective Time, neither the Company nor Acquiror, nor
\nany of their respective Subsidiaries or other Affiliates, shall knowingly take
\nany action, or knowingly fail to take any action, that is reasonably likely to
\njeopardize the treatment of the Merger as a pooling of interests for accounting
\npurposes under GAAP and the applicable rules and regulations of the SEC.
\nAcquiror and the Company shall each provide reasonable cooperation to
\nPricewaterhouseCoopers LLP to enable it to issue the pooling letters referenced
\nin Sections 6.14 and 6.15. As soon as is reasonably practicable but in no event
\nlater than 45 days after the end of the first month ending at least 30 days
\nafter the Effective Time, Acquiror will publish results including at least 30
\ndays of combined operations of Acquiror and the Company as referred to in the
\nwritten agreements provided for by Section 6.9.<\/p>\n
57<\/p>\n
SECTION 6.11. TAX TREATMENT OF REORGANIZATION<\/p>\n
(a) The parties intend the Merger to qualify as a reorganization under
\nSection 368(a) of the Code and shall use their best efforts (and shall cause
\ntheir respective Subsidiaries to use their best efforts) to cause the Merger to
\nso qualify. Neither the Company nor Acquiror, nor any of their respective
\nSubsidiaries or other affiliates, shall take any action, or fail to take any
\naction, that is not specifically provided for by this Agreement that would or
\nwould be reasonably likely to adversely affect the treatment of the Merger as a
\nreorganization under Section 368(a) of the Code. Acquiror and the Company shall,
\nand shall cause their respective Subsidiaries to, take the position for all
\npurposes that the Merger qualifies as a reorganization under that Section of the
\nCode.<\/p>\n
(b) Acquiror and the Company shall cooperate and use their best efforts
\nin obtaining the opinions of Hale and Dorr LLP, counsel to the Company, and
\nLatham & Watkins, counsel to Acquiror, dated as of the Closing Date, to the
\neffect that the Merger will qualify for federal income tax purposes as a
\nreorganization within the meaning of Section 368(a) of the Code.<\/p>\n
SECTION 6.12. FURTHER ASSURANCES AND ACTIONS<\/p>\n
(a) Subject to the terms and conditions herein, each of the parties
\nhereto agrees to use its reasonable best efforts to take, or cause to be taken,
\nall appropriate action, and to do, or cause to be done, all things necessary,
\nproper or advisable under applicable laws and regulations to consummate and make
\neffective the transactions contemplated by this Agreement, including, without
\nlimitation, (i) using their respective reasonable best efforts to obtain all
\nlicenses, permits, consents, approvals, authorizations, qualifications and
\norders of Governmental Entities and parties to contracts with each party hereto
\nas are necessary for consummation of the transactions contemplated by this
\nAgreement, and (ii) to fulfill all conditions precedent applicable to such party
\npursuant to this Agreement.<\/p>\n
(b) In case at any time after the Effective Date any further action is
\nnecessary to carry out the purposes of this Agreement or to vest the Surviving
\nCorporation with full title to all properties, assets, rights, approvals,
\nimmunities, franchises of any of the parties to the Merger, the proper officers
\nand\/or directors of Acquiror and the Company shall take all such necessary
\naction.<\/p>\n
SECTION 6.13. STOCK EXCHANGE LISTING. Acquiror shall use its best
\nefforts to list on the NYSE prior to the Effective Time, subject to official
\nnotice issuance, the shares of Acquiror Common Stock to be issued as Merger
\nConsideration and to be issued from time to time upon exchange of the
\nExchangeable Shares.<\/p>\n
SECTION 6.14. LETTER OF THE COMPANY’S ACCOUNTANTS. The Company
\nshall use all reasonable efforts to cause to be delivered to Acquiror a letter
\nof PricewaterhouseCoopers LLP, the Company’s independent auditors, dated a date
\nwithin two business days before the date on which the Registration Statement
\nshall become effective and addressed to Acquiror, in form reasonably
\nsatisfactory to Acquiror and customary in scope and <\/p>\n
58<\/p>\n
substance for letters delivered by independent public accountants in connection
\nwith registration statements similar to the Registration Statement.<\/p>\n
SECTION 6.15. LETTER OF ACQUIROR’S ACCOUNTANTS. Acquiror shall use all
\nreasonable efforts to cause to be delivered to the Company a letter of
\nPricewaterhouseCoopers LLP, Acquiror’s independent auditors, dated a date within
\ntwo business days before the date on which the Registration Statement shall
\nbecome effective and addressed to the Company, in form reasonably satisfactory
\nto the Company and customary in scope and substance for letters delivered by
\nindependent public accountants in connection with registration statements
\nsimilar to the Registration Statement.<\/p>\n
ARTICLE VII.
\n CONDITIONS OF MERGER<\/p>\n
SECTION 7.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
\nMERGER . The respective obligations of each party to effect the Merger shall be
\nsubject to the satisfaction at or prior to the Closing Date of the following
\nconditions:<\/p>\n
(a) this Agreement and the Merger shall have been approved by the
\nstockholders of the Company and the stockholders of Acquiror in the manner
\nrequired under the DGCL and the certificate of incorporation of the Company and
\nAcquiror, respectively;<\/p>\n
(b) no statute, rule, regulation, executive order, decree, ruling,
\ninjunction or other order (whether temporary, preliminary or permanent) shall
\nhave been enacted, entered, promulgated or enforced by any court or governmental
\nauthority of competent jurisdiction which prohibits, restrains, enjoins or
\nrestricts the consummation of the Merger; provided, however, that the parties
\nshall use their reasonable best efforts to cause any such decree, ruling,
\ninjunction or other order to be vacated or lifted;<\/p>\n
(c) any waiting period applicable to the Merger under the HSR Act shall
\nhave terminated or expired;<\/p>\n
(d) the Registration Statement and any required post-effective
\namendment thereto shall have become effective under the Securities Act and shall
\nnot be the subject of any stop order or proceedings seeking a stop order, and
\nany material Blue Sky Laws applicable to the registration of the Acquiror Common
\nStock to be exchanged for Company Stock shall have been complied with;<\/p>\n
(e) the shares of Acquiror Common Stock issuable to the holders of
\nCompany Stock pursuant to this Agreement, and upon exchange of the Exchangeable
\nShares from time to time, shall have been approved for listing on the NYSE,
\nsubject to official notice of issuance; and<\/p>\n
(f) Acquiror and the Company shall have each received letters from
\nPricewaterhouseCoopers LLP to the effect that the Merger qualifies for “pooling
\nof interests,” accounting treatment if consummated in accordance with this
\nAgreement.<\/p>\n
59<\/p>\n
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
\nMERGER. The obligation of the Company to effect the Merger shall be subject to
\nthe fulfillment at or prior to the Closing Date of the following additional
\nconditions:<\/p>\n
(a) each of the representations and warranties of Acquiror contained in
\nthis Agreement shall be true and correct in all material respects, as of the
\nEffective Time as though made on and as of the Effective Time, except (i) for
\nchanges specifically permitted or required by this Agreement, and (ii) that
\nthose representations and warranties which address matters only as of a
\nparticular date (other than the date of this Agreement) shall remain true and
\ncorrect as of such particular date, and (iii) where the failure to be so true
\nand correct would not, individually or in the aggregate, have or be reasonably
\nlikely to have a Material Adverse Effect on Acquiror;<\/p>\n
(b) Acquiror shall have performed or complied in all material respects
\nwith all agreements and covenants required by this Agreement to be performed or
\ncomplied with by them at or prior to the Effective Time;<\/p>\n
(c) the Company shall have received a certificate executed on behalf of
\nthe Acquiror by the Chief Executive Officer or Chief Financial Officer of the
\nAcquiror to the effect set forth in clauses (a) and (b) of this Section 7.2; and<\/p>\n
(d) the Company shall have received an opinion of Hale and Dorr LLP,
\ndated as of the Closing Date, in form and substance reasonably satisfactory to
\nthe Company, substantially to the effect that, on the basis of facts,
\nrepresentations and assumptions set forth in such opinion that are consistent
\nwith the state of facts existing as of such time, for federal income tax
\npurposes, the Merger will constitute a “reorganization” within the meaning of
\nSection 368(a) of the Code; in rendering such opinion, Hale and Dorr LLP may
\nreceive and rely upon representations including those contained in this
\nAgreement or in certificates of officers of the parties hereto and others.<\/p>\n
SECTION 7.3. CONDITIONS TO OBLIGATIONS OF ACQUIROR TO EFFECT THE
\nMERGER . The obligations of Acquiror to effect the Merger shall be subject to
\nthe fulfillment at or prior to the Closing Date of the following additional
\nconditions:<\/p>\n
(a) each of the representations and warranties of the Company contained
\nin this Agreement shall be true and correct as of the Effective Time as though
\nmade on and as of the Effective, Time, except (i) for changes specifically
\npermitted or required by this Agreement, (ii) that those representations and
\nwarranties which address matters only as of a particular date (other than the
\ndate of this Agreement) shall remain true and correct as of such particular
\ndate, and (iii) where the failure to be so true and correct would not,
\nindividually or in the aggregate, have or be reasonably likely to have a
\nMaterial Adverse Effect;<\/p>\n
(b) the Company shall have performed or complied in all material
\nrespects with all agreements and covenants required by this Agreement to be
\nperformed or complied with by it at or prior to the Effective Time;<\/p>\n
60<\/p>\n
(c) Acquiror shall have received a certificate executed on behalf of
\nthe Company by the Chief Executive Officer or Chief Financial Officer of the
\nCompany to the effect set forth in clauses (a) and (b) of this Section 7.3;<\/p>\n
(d) Acquiror shall have received an opinion of Latham & Watkins, dated
\nas of the Closing Date, in form and substance reasonably satisfactory to
\nAcquiror, substantially to the effect that, on the basis of facts,
\nrepresentations and assumptions set forth in such opinion that are consistent
\nwith the state of facts existing as of such time, for federal income tax
\npurposes, the Merger will constitute a “reorganization” within the meaning of
\nSection 368(a) of the Code. In rendering such opinion, Latham & Watkins may
\nreceive and rely upon representations including those contained in this
\nAgreement or in certificates of officers of the parties or others;<\/p>\n
(e) all consents, appeals, releases or authorizations from, and all
\nfilings and registrations (“Consents”) to or with, any Person, including but not
\n ——–
\nlimited to any Governmental Entity set forth in Section 7.3(e) of the Acquiror
\nDisclosure Schedule shall have been made or obtained;<\/p>\n
(f) Acquiror shall have received an opinion of Davies, Ward & Beck, in
\nform and substance reasonably satisfactory to Acquiror, substantially to the
\neffect that, on the basis of facts, representations and assumptions set forth in
\nsuch opinion that are consistent with the state of facts existing as of such
\ntime, no approval of the holders of the Exchangeable Shares is required by the
\nOld Support Agreement, the Old Voting and Exchange Trust Agreement or the
\nprovisions attaching to the Exchangeable Shares or the Business Corporations Act
\n(Ontario) (being the statute by which Canadian Sub is governed) in order for the
\nCompany to effect the Merger or for Acquiror to enter into the Support Agreement
\nAmendment or the Voting and Exchange Trust Supplement or for either to them to
\nperform their other obligations hereunder and that, on and after the Effective
\nTime, the Exchangeable Shares will be, by their terms, exchangeable for Acquiror
\nCommon Shares rather than Company Common Shares without any approval of the
\nholders of the Exchangeable Shares; and<\/p>\n
(g) No holder of Company Special Voting Stock shall have exercised and
\nnot withdrawn any appraisal rights under the DGCL. The holders of no more than
\n12,500 shares of Company Preferred Stock shall have exercised and not withdrawn
\nany appraisal rights under the DGCL.<\/p>\n
ARTICLE VIII.
\n TERMINATION, AMENDMENT AND WAIVER<\/p>\n
SECTION 8.1. TERMINATION. This Agreement may be terminated at any
\ntime before the Effective Time (except as otherwise provided) as follows:<\/p>\n
(a) by mutual written consent of each of Acquiror and the Company;<\/p>\n
(b) by either the Company or Acquiror, if the Effective Time shall not
\nhave occurred on or before September 30, 1999 (the “Termination Time”); provided
\n —————-
\nhowever, that the right to terminate this Agreement under this Section 8.1(b)
\nshall not be available to any party whose <\/p>\n
61<\/p>\n
failure to fulfill any obligation under this Agreement has been the cause of, or
\nresulted in, the failure of the Effective Time to occur on or before the
\nTermination Date;<\/p>\n
(c) by either the Company or Acquiror, if a Governmental Entity shall
\nhave issued an order, decree or injunction having the effect of making the
\nMerger illegal or permanently prohibiting the consummation of the Merger, and
\nsuch order, decree or injunction shall have become final and nonappealable (but
\nonly if the terminating party shall have used its reasonable best efforts to
\ncause such order, decree or injunction to be lifted or vacated);<\/p>\n
(d) by either the Company or Acquiror, if there shall have been a
\nmaterial breach by the other of any of its (x) representations or warranties
\ncontained in this Agreement, which breach would result in the failure to satisfy
\none or more of the conditions set forth in Section 7.2(a) (in the case of a
\nbreach by Acquiror) or Section 7.3(a) (in the case of a breach by the Company),
\nor (y) covenants or agreements contained in this Agreement, which breach would
\nresult in the failure to satisfy one or more of the conditions set forth in
\nSection 7.2(b) (in the case of a breach by Acquiror) or Section 7.3(b) (in the
\ncase of a breach by the Company), and in any such case such breach shall be
\nincapable of being cured or, if capable of being cured, shall not have been
\ncured within 30 days after written notice thereof shall have been received by
\nthe party alleged to be in breach;<\/p>\n
(e) by either the Company or Acquiror, if the required approvals of the
\nstockholders of the Company or Acquiror shall not have been obtained at a duly
\nheld stockholders’ meeting, including any adjournments or postponements; or<\/p>\n
(f) by Acquiror (i) if the Board of Directors of the Company fails to
\nrecommend approval and adoption of this Agreement and the Merger by the
\nstockholders of the Company or withdraws or modifies (or publicly announces an
\nintention to withdraw or modify) in any adverse manner its approval or
\nrecommendation of this Agreement or the Merger; (ii) if the Board of Directors
\nof the Company makes any public recommendation with respect to any Acquisition
\nProposal other than a recommendation to reject such Acquisition Proposal or as
\nmay be required to comply with Rule 14e-2 under the Exchange Act; (iii) if the
\nCompany engages in a solicitation of an Acquisition Proposal prohibited by
\nSection 6.3; or (iv) if the Board of Directors of the Company resolves to take
\nany of the actions specified above.<\/p>\n
SECTION 8.2. EFFECT OF TERMINATION.<\/p>\n
(a) In the event of termination of this Agreement pursuant to this
\nArticle VIII, this Agreement (other than as set forth in Section 9.1) shall
\nbecome void and of no effect with no liability on the part of any party hereto
\n(or of any of its Representatives); provided, however, no such termination shall
\nrelieve any party hereto from (x) any liability for damages resulting from any
\nwillful or intentional breach of this Agreement (whether or not any fees
\ncontemplated by this Section 8.2 are payable) or (y) any obligation to pay the
\ntermination fees provided for below or Fees and Expenses (as defined) pursuant
\nto this Section 8.2.<\/p>\n
(b) In the event that (i) this Agreement is terminated by Acquiror
\npursuant to Section 8.1(f) or (ii) prior to the meeting of the Company’s
\nstockholders duly convened and held <\/p>\n
62<\/p>\n
to vote in respect of this Agreement and the Merger, a bona fide Acquisition
\nProposal shall have been made to the Company and made known to its stockholders
\ngenerally or shall have been made directly to its stockholders generally, or any
\nPerson shall have publicly announced an intention (whether or not conditional)
\nto make a bona fide Acquisition Proposal (whether or not such proposal shall
\nhave been rejected or shall have been withdrawn), and thereafter (x) this
\nAgreement is terminated pursuant to Section 8.1(e) by reason of the failure of
\nthe stockholders of the Company to approve this Agreement or the Merger at such
\nmeeting or (y) this Agreement is terminated by Acquiror pursuant to 8.1(d)(y) by
\nreason of a breach by the Company of its covenants or agreements hereunder,
\nthen, in the case of either clause (i) or clause (ii), the Company shall,
\nsimultaneously with such termination, pay to Acquiror a fee equal to $35,000,000
\n(the “Initial Termination Fee”). In addition, in the event that this Agreement
\n ———————–
\nis terminated under circumstances in which the Initial Termination Fee becomes
\npayable, and within twelve months of such termination, the Company enters into
\nan agreement with any Person with respect to an Acquisition Proposal or an
\nAcquisition Proposal is consummated, then, upon the signing of such agreement,
\nor if no agreement is signed, then at the closing (and as a condition to the
\nclosing, which condition may not be waived without the express written consent
\nof Acquiror) of such Acquisition Proposal, the Company shall pay to Acquiror an
\nadditional termination fee equal to $75,000,000 (the “Additional Termination
\n ———————-
\nFee”).
\n—<\/p>\n
(c) In the event that this Agreement is terminated by Acquiror pursuant
\nto Section 8.1(f) or pursuant to Section 8.1(e) by reason of the failure of the
\nCompany’s stockholders to approve this Agreement or the Merger at the Company
\nStockholder Meeting, or pursuant to Section 8.1(d), the Company shall promptly
\nupon such termination (following receipt of a statement therefor) reimburse
\nAcquiror for all fees and expenses (including, without limitation, fees and
\nexpenses of counsel, financial advisors, accountants, consultants and other
\nadvisors and Representatives) (“Fees and Expenses”), up to a maximum of
\n —————–
\n$3,000,000, incurred and paid by Acquiror in connection with this Agreement and
\nthe Merger. In the event that this Agreement is terminated by the Company
\npursuant to Section 8.1(e) by reason of the failure of Acquiror’s stockholders
\nto approve this Agreement or the Merger at the Acquiror Stockholder Meeting, or
\npursuant to Section 8.1(d), Acquiror shall promptly upon such termination
\n(following receipt of a statement therefor) reimburse the Company for all Fees
\nand Expenses, up to a maximum of $3,000,000, incurred by the Company in
\nconnection with this Agreement and the Merger.<\/p>\n
(d) Reimbursements of Fees and Expenses hereunder and any Initial
\nTermination Fee or Additional Termination Fee payable hereunder shall be payable
\nby wire transfer of immediately available funds.<\/p>\n
(e) The parties acknowledge that the agreements contained in this
\nSection 8.2 are an integral part of the transactions contemplated by this
\nAgreement, and that, without these agreements, the parties would not enter into
\nthis Section 8.2, and, if in order to obtain such payment, Acquiror commences a
\nsuit which results in a judgment against the Company for such amount (or any
\nportion thereof), the Company shall pay the costs and expenses (including
\nattorneys’ fees) of Acquiror in connection with such suit, together with
\ninterest on such amount <\/p>\n
63<\/p>\n
in respect of the period from the date such amount became due until the date
\nsuch amount is paid at the prime rate of The Chase Manhattan Bank in effect from
\ntime to time during such period.<\/p>\n
SECTION 8.3. EXPENSES. The Surviving Corporation shall pay all
\ncharges and expenses, including those of the Exchange Agent, in connection with
\nthe transactions contemplated in Article II. Except as otherwise specifically
\nprovided herein, each party shall bear its own expenses in connection with this
\nAgreement and the transactions contemplated hereby.<\/p>\n
SECTION 8.4. AMENDMENT. This Agreement may be amended by the parties
\nhereto by action taken by or on behalf of their respective Boards of Directors
\nat any time before or after any required approval of matters presented in
\nconnection with the Merger by the stockholders of the Company; provided,
\nhowever, that after any such approval, there shall be made no amendment that by
\nlaw requires further approval by such stockholders without the further approval
\nof such stockholders. This Agreement may not be amended except by an instrument
\nin writing signed by the parties hereto.<\/p>\n
SECTION 8.5. WAIVER. At any time prior to the Closing Date, any party
\nhereto may (a) extend the time for the performance of any of the obligations or
\nother acts of the other parties hereto, (b) waive any inaccuracies in the
\nrepresentations and warranties contained herein or in any document delivered
\npursuant hereto and (c) waive compliance with any of the agreements or
\nconditions contained herein. Any such extension or waiver shall be valid if set
\nforth in an instrument in writing signed by the party or parties to be bound
\nthereby. The failure of any party to this Agreement to assert any of its rights
\nunder this Agreement or otherwise shall not constitute a waiver of such rights.<\/p>\n
ARTICLE IX.
\n GENERAL PROVISIONS<\/p>\n
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
\nAGREEMENTS. The representations, warranties and agreements in this Agreement
\nshall terminate at the Effective Time or upon the termination of this Agreement
\npursuant to Section 8.1, as the case may be, except that (a) the agreements set
\nforth in Sections 2.10, 2.11(b), 2.11(c), 2.11(e), 2.11(f), 2.13, 2.14, 6.7,
\n6.8, 6.12 and 9.6 shall survive the Effective Time and (b) the agreements set
\nforth in the Confidentiality Agreement and in Sections 8.2 and 9.6 shall survive
\ntermination indefinitely.<\/p>\n
SECTION 9.2. NOTICES. All notices, requests, claims, demands and
\nother communications hereunder shall be in writing and shall be given (and shall
\nbe deemed to have been duly given upon receipt) by delivery in person, by cable,
\ntelecopy, telegram or telex, by registered or certified mail (postage prepaid,
\nreturn receipt requested), or by overnight courier, to the respective parties at
\nthe following addresses (or at such other address for a party as shall be
\nspecified by like notice):<\/p>\n
64<\/p>\n
if to Acquiror:<\/p>\n
333 Continental Boulevard
\n El Segundo, CA 90245-5012
\n Attention: Ned Mansour, Esq.
\n Fax: (310) 252-3671<\/p>\n
with an additional copy to:<\/p>\n
Latham & Watkins
\n 633 West Fifth Street, Suite 4000
\n Los Angeles, California 90071
\n Attention: Thomas C. Sadler, Esq.
\n Fax: (213) 891-8763<\/p>\n
if to the Company:<\/p>\n
One Athenaeum
\n Cambridge, MA 02142
\n Attention: Neal Winneg, Esq.
\n Fax: (617) 494-5660<\/p>\n
with a copy to:<\/p>\n
Hale and Dorr LLP
\n 60 State Street
\n Boston, MA 02109
\n Attention: Mark G. Borden, Esq.
\n Fax: (617) 526-5000<\/p>\n
SECTION 9.3. SEVERABILITY. If any term or other provision of this
\nagreement is invalid, illegal or incapable of being enforced by any rule of law
\nor public policy, all other conditions and provisions of this Agreement shall
\nnevertheless remain in full force and effect so long as the economic or legal
\nsubstance of the transactions contemplated hereby is not affected in any manner
\nadverse to any party. Upon such determination that any term or other provision
\nis invalid, illegal or incapable of being enforced, the parties hereto shall
\nnegotiate in good faith to modify this Agreement so as to effect the original
\nintent of the parties as closely as possible in an acceptable manner to the end
\nthat the transactions contemplated hereby are fulfilled to the fullest extent
\npossible.<\/p>\n
SECTION 9.4. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
\nthe Company Disclosure Schedule and the Acquiror Disclosure Schedule), together
\nwith the Confidentiality Agreement and the Stock Option Agreement, constitutes
\nthe entire agreement among the parties with respect to the subject matter hereof
\nand supersedes all prior agreements and undertakings, both written and oral,
\namong the parties, or any of them, with respect to the<\/p>\n
65<\/p>\n
subject matter hereof. This Agreement shall not be assigned by any party by
\noperation of law or otherwise without the express written consent of each of the
\nother parties.<\/p>\n
SECTION 9.5. PARTIES IN INTEREST. This Agreement shall be binding
\nupon and inure solely to the benefit of each party hereto, and, except for
\nSection 6.7, nothing in this Agreement, express or implied, is intended to or
\nshall confer upon any other person any rights, benefits or remedies of any
\nnature whatsoever under or by reason of this Agreement.<\/p>\n
SECTION 9.6. GOVERNING LAW. This Agreement shall be governed by, and
\nconstrued in accordance with, the laws of the State of Delaware, without
\nreference to the conflict of laws principles thereof.<\/p>\n
SECTION 9.7. HEADINGS. The descriptive headings contained in this
\nAgreement are included for convenience of reference only and shall not affect in
\nany way the meaning or interpretation of this Agreement.<\/p>\n
SECTION 9.8. SPECIFIC PERFORMANCE. Each of the parties hereto
\nacknowledges and agrees that the other parties hereto would be irreparably
\ndamaged in the event any of the provisions of this Agreement were not performed
\nin accordance with their specific terms or were otherwise breached. Accordingly,
\neach of the parties hereto agrees that they each shall be entitled to an
\ninjunction or injunctions to prevent breaches of the provisions of this
\nAgreement and to enforce specifically this Agreement and the terms and
\nconditions hereof in any action instituted in any court of the United States or
\nany state having competent jurisdiction, in addition to any other remedy to
\nwhich such party may be entitled, at law or in equity.<\/p>\n
SECTION 9.9. ALTERNATIVE TRANSACTION STRUCTURE. At the request of
\nAcquiror, the transactions contemplated by this Agreement may be restructured in
\nthe form of a “butterfly” reorganization or similar structure, or such other
\nform as Acquiror may determine to be appropriate, provided that any such
\nalternative transaction structure does not (i) delay the consummation of the
\nMerger in any material respect, or (ii) result in any adverse consequences (tax
\nor otherwise) to the Company or its shareholders.<\/p>\n
SECTION 9.10. COUNTERPARTS. This Agreement may be executed in two or
\nmore counterparts, and by the different parties hereto in separate counterparts,
\neach of which when executed shall be deemed to be an original but all of which
\ntaken together shall constitute one and the same agreement.<\/p>\n
[Signature page follows.]<\/p>\n
66<\/p>\n
IN WITNESS WHEREOF, Acquiror and the Company have caused this
\nAgreement to be executed as of the date first written above by their respective
\nofficers thereunto duly authorized.<\/p>\n
MATTEL, INC.<\/p>\n
By:__________________________
\n Name:
\n Title:<\/p>\n
THE LEARNING COMPANY, INC.<\/p>\n
By:__________________________
\n Name:
\n Title:<\/p>\n
By:__________________________
\n Name:
\n Title:<\/p>\n
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