UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment
No. )
Check the appropriate box:
x Preliminary
Information Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
o Definitive
Information Statement
POLYMER GROUP, INC.
(Name of Registrant as Specified in
Its Charter)
Payment of Filing Fee (Check the appropriate box):
o
No fee required.
x
Fee computed below per Exchange Act
Rules 14c-5(g)
and 0-11.
(1)
Title of each class of securities to which transaction applies:
Class A Common Stock, par value $0.01 per share
Class B Common Stock, par value $0.01 per share
Class C Common Stock, par value $0.01 per share
(2)
Aggregate number of securities to which transaction applies:
21,433,175 shares of Company Common Stock (which includes
21,326,939 outstanding shares of Class A common stock
(including 565,541 restricted shares), 81,917 outstanding shares
of Class B common stock and 24,319 outstanding shares of
Class C common stock), 55,485 shares of Class A
common stock issuable upon the exercise of outstanding stock
options, 281,058 shares of Class A common stock
subject to restricted stock units (assuming, in the case of
performance-based
restricted stock units, attainment of the target levels of
performance applicable to such restricted stock units) and
393,675 shares of Company Common Stock issuable upon
exercise of the Call Option (as defined in the Merger Agreement).
(3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
The filing fee was determined based upon the sum of
(A) 21,433,175 shares of Company Common Stock
multiplied by $18.16 per share; and (B) 55,485 shares
of Class A common stock issuable upon the exercise of
outstanding stock options multiplied by $12.16 (which is the
difference between $18.16 and $6.00, the exercise price of each
outstanding option); and (C) 281,058 shares of
Class A common stock subject to restricted stock units
multiplied by $18.16 per share; and (D) 393,675 shares
of Company Common Stock issuable upon exercise of the Call
Option multiplied by $18.16 per share. In accordance with
Section 14(g) of the Securities Exchange Act of 1934, as
amended, the filing fee was determined by multiplying 0.00007130
by the sum of the preceding sentence.
(4)
Proposed maximum aggregate value of transaction:
$402,154,307
(5)
Total fee paid:
$28,673.61
o Fee
paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
NOTICE OF WRITTEN CONSENT AND
APPRAISAL RIGHTS
AND
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
To our Stockholders:
This notice of written consent and appraisal rights and
information statement is being furnished to the holders of
shares of common stock of Polymer Group, Inc., which we refer to
as “PGI” or the “Company”, in connection
with the Agreement and Plan of Merger, dated as of
October 4, 2010 (the “merger agreement”), among
PGI, Scorpio Acquisition Corporation (“Parent”), a
Delaware corporation that was formed by Blackstone Capital
Partners V L.P., Scorpio Merger Sub Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent
(“Merger Subsidiary”), and MatlinPatterson Global
Opportunities Partners L.P., a Delaware limited partnership, as
the Stockholder Representative (the “Stockholder
Representative”), pursuant to which Merger Subsidiary will
merge with and into PGI, with PGI continuing as the surviving
corporation and a wholly owned subsidiary of Parent (the
“merger”). A copy of the merger agreement is attached
as Annex A to this information statement.
If the merger is completed, each of your shares of PGI
Class A common stock, PGI Class B common stock and PGI
Class C common stock (collectively, “Company Common
Stock”), other than (i) shares owned by Parent, Merger
Subsidiary, PGI or any subsidiary of PGI and (ii) shares in
respect of which appraisal rights have been properly exercised
under Section 262 of the General Corporation Law of the
State of Delaware (the “DGCL”), will be converted into
the right to receive up to $18.16 in cash, subject to the escrow
arrangement described in this information statement. In
addition, if the merger is completed after December 31,2010, the amount of consideration paid in respect of each such
share will increase by an amount equal to the product of
(a) the number of calendar days within the period beginning
on January 1, 2011 and ending on the calendar day
immediately prior to the closing date of the merger and
(b) a fraction, the numerator of which is $53,571.42 and
the denominator of which is the total number of shares of
Company Common Stock outstanding at the effective time of the
merger, determined on a fully diluted basis (the
“Additional Per Share Consideration”).
At the effective time of the merger, a portion of the aggregate
merger consideration totaling $64.5 million, or
approximately $2.91 per share (calculated on a fully diluted
basis), will be deposited in an escrow fund to cover
liabilities, costs and expenses related to the potential
application of the “personal holding company” rules of
the Internal Revenue Code of 1986, as amended, to the Company
and its subsidiaries. As a result of such amount being deposited
in an escrow fund, each outstanding share of Company Common
Stock (other than those shares described in clauses (i) and
(ii) of the preceding paragraph) will be converted into the
right to receive, at the effective time of the merger,
approximately $15.25 per share (plus, if the merger is completed
after December 31, 2010, the Additional Per Share
Consideration), and the holders of such shares at the effective
of the merger will thereafter be entitled to receive amounts if
and when released from the escrow fund in accordance with the
merger agreement and as described in this information statement.
The right to receive amounts released from the escrow fund will
not be evidenced by any certificate, will be allocated to the
Company stockholders of record (and holders of stock option and
restricted stock units) as of the effective time of the merger
and will not be transferable, except by operation of law or by
intestacy.
PGI’s board of directors (the “Board of
Directors”), acting in part upon the unanimous
recommendation of a special committee comprised solely of
independent members of the Board of Directors, unanimously
(i) approved and declared advisable the merger agreement,
(ii) declared that it was in the best interests of the
stockholders of the Company that the Company enter into the
merger agreement and consummate the transactions contemplated by
the merger agreement on the terms and subject to the conditions
set forth in the merger agreement, (iii) declared that the
terms of the merger were fair to the Company and the
stockholders of the Company, (iv) approved the submission
of the Merger Agreement for adoption by the irrevocable written
consent of MatlinPatterson Global Opportunities Partners L.P.
and certain of its affiliates (“MatlinPatterson”) and
(v) recommended that the stockholders of the Company adopt
and approve the Merger Agreement.
The adoption of the merger agreement by PGI’s stockholders
required the affirmative vote or written consent of the holders
of a majority of the outstanding shares of Company Common Stock.
On October 4, 2010, following execution of the merger
agreement by the parties thereto, MatlinPatterson, which on such
date owned shares of Company Common Stock representing
approximately 63.4% of the outstanding shares of Company Common
Stock entitled to vote on the adoption of the merger agreement,
delivered a written consent adopting and approving in all
respects the merger agreement and the transactions and
agreements contemplated thereby. As a result, no further action
by any other stockholder of PGI is required to adopt the merger
agreement and PGI has not solicited, and will not be soliciting,
your adoption of the merger agreement and does not intend to
call a stockholders’ meeting for purposes of voting on the
adoption of the merger agreement. This notice and the
accompanying information statement shall constitute notice to
you from PGI of the action by written consent taken by
MatlinPatterson contemplated by Section 228 of the DGCL.
Under Section 262 of the DGCL, if the merger is completed,
subject to compliance with the requirements of Section 262
of the DGCL, holders of shares of Company Common Stock, other
than MatlinPatterson, will have the right to seek an appraisal
for, and be paid the “fair value” of, their shares of
Company Common Stock (as determined by the Court of Chancery of
the State of Delaware) instead of receiving the consideration to
be paid pursuant to the merger agreement. In order to exercise
your appraisal rights, you must submit a written demand for an
appraisal no later than 20 days after the mailing of this
information statement, or [•], 2010, and comply with other
procedures set forth in Section 262 of the DGCL, which are
summarized in the accompanying information statement. A copy of
Section 262 of the DGCL is attached to the accompanying
information statement as Annex B. This notice and the
accompanying information statement shall constitute notice to
you from PGI of the availability of appraisal rights under
Section 262 of the DGCL.
We urge you to read this entire information statement carefully.
Please do not send in your stock certificates at this time. If
the merger is completed, you will receive instructions regarding
the surrender of your stock certificates and payment for your
shares of Company Common Stock.
By Order of the Board of Directors of the Company.
Sincerely,
Veronica M. Hagen
Chief Executive Officer
Neither the U.S. Securities and Exchange Commission (the
“SEC”) nor any state securities regulatory agency has
approved or disapproved the merger, passed upon the merits or
fairness of the merger or passed upon the adequacy or accuracy
of the disclosures in this notice or the accompanying
information statement. Any representation to the contrary is a
criminal offense.
This information statement is dated [•], 2010 and is first
being mailed to stockholders on or about [•], 2010.
The following summary highlights selected information from this
information statement and may not contain all of the information
that is important to you. Accordingly, we encourage you to read
carefully this entire information statement, its annexes and the
documents referred to in this information statement. Each item
in this summary includes a page reference directing you to a
more complete description of that item in this information
statement. You may obtain the information incorporated by
reference into this information statement by following the
instructions under “Where to Find More Information”
beginning on page [•].
Polymer Group, Inc. PGI, a Delaware
corporation, is one of the world’s leading producers of
nonwovens and a global, technology-driven developer, producer
and marketer of engineered materials. With the broadest range of
process technologies in the nonwovens industry, PGI is a global
supplier to leading consumer and industrial product
manufacturers. PGI operates 14 manufacturing and converting
facilities in nine countries throughout the world.
Scorpio Acquisition Corporation. Parent is a
newly formed Delaware corporation that was formed by Blackstone
Capital Partners V L.P., which we refer to as “BCP”.
Parent has not carried on any activities to date, except for
activities incidental to its formation, in connection with the
financing of the merger and as otherwise contemplated by the
merger agreement. Upon completion of the merger, the Company
will be a wholly owned subsidiary of Parent.
Scorpio Merger Sub Corporation. Merger
Subsidiary, a newly formed Delaware corporation, is a wholly
owned subsidiary of Parent and has not conducted any business
operations except for activities incidental to its formation and
as contemplated by the merger agreement.
The Stockholder Representative. In order to
efficiently administer certain actions to be taken by or on
behalf of the Company’s stockholders under the merger
agreement and the escrow agreement to be entered into in
connection therewith, MatlinPatterson Global Opportunities
Partners L.P. has been designated, pursuant to the terms of the
merger agreement, as the Stockholder Representative.
On October 4, 2010, the Company entered into a merger
agreement with Parent, Merger Subsidiary and the Stockholder
Representative (the “merger agreement”). Upon the
terms and subject to the conditions of the merger agreement, at
the effective time of the merger, Merger Subsidiary will merge
with and into the Company, with the Company continuing as the
surviving corporation and a wholly owned subsidiary of Parent
(the “merger”). The merger agreement is attached as
Annex A to this information statement, and we encourage you
to read it carefully and in its entirety because it is the legal
document that governs the merger.
If the merger is completed, you will be entitled to receive, for
each share of the Company’s Class A common stock,
Class B common stock and Class C common stock
(together, the “Company Common Stock”) that you own,
up to $18.16 in cash (subject to the escrow arrangement
described in this information statement). In addition, if the
merger is completed after December 31, 2010, the amount of
consideration paid in respect of each such share will increase
by an amount, which we refer to in this information statement as
the “Additional Per Share Consideration”, equal to the
product of (a) the number of calendar days within the
period beginning on January 1, 2011 and ending on the
calendar day immediately prior to the closing date of the merger
and (b) a fraction, the numerator of which is $53,571.42
and the denominator of which is the total number of shares of
Company Common Stock outstanding at the effective time of the
merger, determined on a fully diluted basis.
Of the $18.16 per share, approximately $15.25 will be payable
upon the closing of the merger, and approximately $2.91 (the per
share portion of $64.5 million, calculated on a fully
diluted basis) will be placed into an escrow fund to cover
liabilities, costs and expenses related to the potential
application of the “personal
holding company” rules of the Internal Revenue Code of
1986, as amended (the “Code”), to the Company and its
subsidiaries, to be distributed ratably to stockholders as of
the effective time of the merger if and when released from the
escrow fund in accordance with the terms of the merger agreement
and the escrow agreement to be entered into in connection
therewith (substantially in the form attached as Exhibit D
to the merger agreement, the “escrow agreement”). We
refer in this information statement to the amount to be paid in
respect of each share of Company Common Stock at closing as the
“Per Share Closing Payment”, and to the amounts
released from the escrow fund in respect of each share of
Company Common Stock, if any, as the “Per Share Escrow
Payments”. The right to receive the Per Share Escrow
Payments will not be evidenced by any certificate, will be
allocated to the Company stockholders of record (and holders of
stock options and restricted stock units) as of the effective
time of the merger and will not be transferable, except by
operation of law or intestacy.
The calculation of the estimated Per Share Closing Payment of
approximately $15.25 and the approximately $2.91 per share
portion of the escrow amount assumes, (1) there will have
been no change in the total number of outstanding shares of
Company Common Stock, determined on a fully diluted basis,
between October 1, 2010 and the effective date of the
merger and (2) there are no shares of Company Common Stock
in respect of which appraisal rights have been properly
exercised. The calculation of fully diluted shares for purposes
of these calculations excludes any shares of Company Common
Stock in respect of which appraisal rights have been properly
exercised.
Company Stock Options. At the effective time
of the merger, each outstanding stock option to acquire shares
of Company Common Stock will be canceled and converted into the
right to receive, in full satisfaction of the rights of such
holder with respect thereto, (i) upon the effective time of
the merger, an amount in cash equal to the number of shares of
Company Common Stock subject to such stock option multiplied by
the excess of the Per Share Closing Payment over the exercise
price for such stock option, which is in all cases $6.00 per
share, and (ii) on each date on which amounts are released
from the escrow fund to the Company’s stockholders (each,
an “escrow release date”), an amount in cash equal to
the number of shares of Company Common Stock subject to such
stock option multiplied by the Per Share Escrow Payment, in each
case, less any applicable withholding taxes.
Company Restricted Shares. At the effective
time of the merger, each outstanding Company restricted share
will be converted into the right to receive (i) upon the
effective time of the merger, an amount in cash equal to the Per
Share Closing Payment and (ii) on each escrow release date,
an amount in cash equal to the Per Share Escrow Payment, in each
case, less any applicable withholding taxes.
Company Restricted Stock Units. At the
effective time of the merger, each outstanding Company
restricted stock unit will be converted into the right to
receive, in full satisfaction of the rights of such holder with
respect thereto, (i) upon the effective time of the merger,
an amount in cash equal to the number of shares of Company
Common Stock issuable pursuant to such restricted stock unit
multiplied by the Per Share Closing Payment and (ii) on
each escrow release date, an amount in cash equal to the number
of shares of Company Common Stock issuable pursuant to such
restricted stock unit multiplied by the Per Share Escrow
Payment, in each case, less any applicable withholding taxes.
Company Performance Restricted Stock Units. At
the effective time of the merger, each outstanding Company
restricted stock unit subject to performance goals will be
converted into the right to receive, in full satisfaction of the
rights of such holder with respect thereto, (i) upon the
effective time of the merger, an amount in cash equal to the
number of shares of Company Common Stock issuable pursuant to
such performance-based restricted stock unit, assuming
attainment of the target level of performance applicable to such
restricted stock unit, multiplied by the Per Share Closing
Payment, and (ii) on each escrow release date, an amount in
cash equal to the number of shares of Company Common Stock
issuable pursuant to such performance-based restricted stock
unit, assuming attainment of the target level of performance
applicable to such restricted stock unit, multiplied by the Per
Share Escrow Payment, in each case, less any applicable
withholding taxes.
The Board of Directors of the Company (the “Board of
Directors”) created a special committee (the “Special
Committee”), comprised solely of independent members of the
Board of Directors, to evaluate and make recommendations with
respect to strategic alternatives available to the Company.
After careful consideration, the Special Committee deemed it
advisable and in the best interests of the Company and its
stockholders that the Company enter into the merger agreement,
determined that the terms of the merger were fair to the Company
and its stockholders (other than MatlinPatterson Global
Opportunities Partners L.P. and its affiliates, which we refer
to collectively as “MatlinPatterson”), approved the
merger agreement and the transactions contemplated thereby and
recommended that the Board of Directors approve the merger
agreement.
After careful consideration, the Board of Directors, acting in
part on the unanimous recommendation of a special committee of
the Special Committee, unanimously (i) approved and
declared advisable the merger agreement, (ii) declared that
it was in the best interests of the stockholders of the Company
that the Company enter into the merger agreement and consummate
the transactions contemplated by the merger agreement on the
terms and subject to the conditions set forth in the merger
agreement, (iii) declared that the terms of the merger were
fair to the Company and the stockholders of the Company,
(iv) approved the submission of the merger agreement for
adoption by the irrevocable written consent of MatlinPatterson
and (v) recommended that the stockholders of the Company
adopt and approve the merger agreement.
For a discussion of the material factors considered by the
Special Committee and the Board of Directors in reaching their
respective conclusions, please see the section titled “TheMerger − Reasons for the Merger” beginning on
page [•].
The merger requires the adoption of the merger agreement by the
holders of a majority of the outstanding shares of Company
Common Stock voting or consenting together as a single class. On
October 4, 2010, following execution of the merger
agreement by the parties thereto, MatlinPatterson, the holder of
approximately 63.4% of the voting power of the outstanding
shares of Company Common Stock on that date, delivered a written
consent adopting and approving in all respects the merger
agreement and the transactions and agreements contemplated
thereby. As a result, no further approval of the stockholders of
the Company is required to approve and adopt the merger
agreement and the transactions contemplated thereby.
Janney Montgomery Scott LLC (“Janney”), the Special
Committee’s financial advisor, delivered its opinion to the
Special Committee and the Board of Directors that, as of
September 24, 2010, and based upon and subject to the
factors and assumptions set forth therein, the $18.16 per share,
to be paid to holders of shares of Company Common Stock (other
than MatlinPatterson) was fair, from a financial point of view,
to such holders. The full text of the written opinion of Janney,
dated September 24, 2010, which sets forth the assumptions
made, procedures followed, matters considered and limitations on
the review undertaken in connection therewith, is attached as
Annex C to this information statement. Janney provided its
opinion for the information and assistance of the Special
Committee and the Board of Directors in connection with their
consideration of the proposed merger. Janney’s opinion does
not address any other aspects of the merger and does not
constitute a recommendation to any stockholder of the Company as
to how such stockholder should act with respect to the merger or
any matter related thereto.
Parent has obtained debt and equity financing commitments, each
dated as of October 4, 2010, to fund the merger and the
other transactions contemplated by the merger agreement.
The debt financing commitments, obtained from Citigroup Global
Markets Inc., Morgan Stanley Senior Funding, Inc., Barclays Bank
PLC, Barclays Capital, Royal Bank of Canada and RBC Capital
Markets, provide for (1) a senior secured revolving
asset-based facility in an aggregate principal amount of
$50 million and (2) $545 million of either
(i) senior secured notes issued in a public offering or in
a Rule 144A or other private placement
and/or
(ii) senior secured increasing rate loans under a senior
secured credit facility, provided that such $545 million
will be reduced on a
dollar-for-dollar
basis in the amount (not to exceed $50 million) by which
certain existing indebtedness of the Company or its subsidiaries
is rolled over in connection with the merger. The equity
financing and debt financing are each subject to the
satisfaction of the conditions set forth in the commitment
letter pursuant to which such financing will be provided.
For a description of certain covenants in the merger agreement
pertaining to the debt financing commitments, please see the
section titled “The Merger Agreement – Financing
Covenant” beginning on page [•].
The equity financing commitment was obtained from Blackstone
Capital Partners V L.P. in the amount up to $260 million.
The Company is a third party beneficiary under the equity
financing commitment and has the ability to specifically enforce
the equity financing if (i) Parent and Merger Subsidiary
are required to consummate the merger on account of the closing
conditions having been satisfied and (ii) the debt
financing (or alternative financing if the debt financing
becomes unavailable on the agreed upon terms and conditions) has
been funded or will be funded at the closing if the equity
financing is funded at the closing, in each case as described in
the section titled “The Merger Agreement –
Termination Fees and Remedies” beginning on
page [•].
The obligations of Parent and Merger Subsidiary to close the
merger are not conditioned upon the consummation of the
financing. A failure of Parent and Merger Subsidiary to close
the merger resulting from a failure or inability to consummate
the financing would constitute a breach for purposes of the
merger agreement, the remedies for which would include
(i) the right to receive the Parent Termination Fee and
(ii) under the circumstances set forth in the previous
paragraph, the right to specifically enforce the equity
financing, in each case as described in the section titled
“The Merger Agreement – Termination Fees and
Remedies” beginning on page [•].
You should be aware that certain of our directors and officers
have interests in the merger that may be different from, or in
addition to, your interests as a stockholder and that may
present actual or potential conflicts of interest. These
interests include the following:
•
the cancelation and cash-out of all outstanding stock options,
restricted stock and restricted stock units, in each case
whether vested or unvested, held by our officers and directors;
•
the vesting of awards under our annual incentive plan;
•
Parent’s entering into an employment agreement with the
Company’s Chief Executive Officer, the effectiveness of
which is contingent on the consummation of the merger, and which
provides for, among other things, certain investment
opportunities in Parent; and
•
Parent’s agreement to indemnify the Company’s
directors and officers against certain claims and liabilities
and, for six years after the effective time of the merger, to
provide officers’ and directors’ liability insurance
with respect to acts or omissions occurring prior to the
effective time of the merger.
Our Special Committee and Board of Directors were aware of these
interests and considered that these interests may be different
from, or in addition to, the interests of our stockholders
generally, among other matters, in making their respective
determinations regarding the merger agreement. For further
information regarding the interests of the Company’s
directors and officers, please see the section titled “TheMerger – Interests of the Company’s Directors and
Officers in the Merger” beginning on page [•].
The merger agreement prohibits the Board of Directors from
soliciting, initiating or knowingly encouraging any takeover
proposal. Prior to the receipt of MatlinPatterson’s written
consent adopting the merger agreement, however, the Board of
Directors was permitted under the terms of the merger agreement
to furnish information to (pursuant to a customary
confidentiality agreement no less restrictive than the
confidentiality agreement between Blackstone Management Partners
L.L.C. and an affiliate of MatlinPatterson Global Opportunities
Partners L.P. entered into in connection with the sale process),
and participate in discussions with, any third party that made a
bona fide written takeover proposal, if the Company had
otherwise complied with the provisions of the merger agreement
described in this section and the Board of Directors determined
in good faith (after consultation with outside counsel and a
financial advisor of nationally recognized reputation) that such
proposal constituted, or could have reasonably been expected to
lead to, a superior proposal. No such proposal was received by
the Company.
In addition, the merger agreement prohibits the Board of
Directors from changing or withdrawing its approval or
recommendation of the merger agreement or the merger, from
recommending, adopting or approving any takeover proposal and
from entering into any acquisition agreement constituting or
related to, or that is intended to or would reasonably be
expected to lead to, any takeover proposal. Prior to the receipt
of MatlinPatterson’s written consent adopting the merger
agreement, however, the Board of Directors, if it determined in
good faith (after consultation with outside counsel) that a
failure to do so would be inconsistent with its fiduciary duties
to the Company’s stockholders, was permitted under the
terms of the merger agreement to (x) change its
recommendation of the merger agreement or recommend a takeover
proposal or (y) provided that the Company had otherwise
complied in all material respects with the provisions of the
merger agreement described in this section, enter into an
acquisition agreement with respect to a superior proposal,
terminate the merger agreement in accordance with its terms and
pay the Company Termination Fee (as described in the section
titled “The Merger Agreement – Termination Fees
and Remedies” beginning on page [•]).
The merger is subject to the requirements of the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR
Act”), and the rules promulgated by the Federal Trade
Commission (the “FTC”), which prevent transactions
such as the merger from being completed until (i) certain
information and materials are furnished to the Department of
Justice (the “DOJ”) and the FTC and (ii) the
applicable waiting period is terminated or expires. On
October 12, 2010, Parent filed the requisite notification
and report forms under the HSR Act. On October 22, 2010,
the FTC advised the parties that early termination of the HSR
waiting period had been granted. Notwithstanding the foregoing,
at any time before or after the completion of the merger, the
DOJ, the FTC or any state may still challenge the merger on
antitrust grounds. Private parties and
non-U.S. governmental
authorities may also institute legal actions under the antitrust
laws under some circumstances.
Under the merger agreement, consummation of the merger is also
conditional upon the filings and receipt, termination or
expiration, as applicable, of the approvals, consents or waiting
periods as may be required under the competition, merger
control, antitrust or similar applicable laws of certain foreign
jurisdictions.
There can be no guarantee if and when any of the consents or
approvals described above, or any other regulatory consents or
approvals that might be required to consummate the merger, will
be obtained or as to the conditions that such consents and
approvals may contain.
The obligations of each of Parent’s, Merger
Subsidiary’s and the Company’s obligations to complete
the merger are subject to the satisfaction or waiver of the
following conditions:
•
the adoption of the merger agreement by the affirmative vote or
written consent of the holders of a majority of the then
outstanding shares of Company Common Stock (the
“stockholder approval”, which was obtained on
October 4, 2010);
•
20 days having elapsed since the mailing of this
information statement to the Company’s stockholders;
•
the expiration or termination of the waiting period under the
HSR Act and the receipt of consents required under the
competition, merger control, antitrust or similar applicable
laws of certain foreign jurisdictions (the “foreign merger
control laws”); and
•
no applicable law or injunction enacted, entered, promulgated,
enforced or issued by any governmental entity preventing
consummation of the merger shall be in effect.
In addition, the obligations of Parent and Merger Subsidiary to
complete the merger are subject to the following conditions:
•
the Company’s representations and warranties in the merger
agreement must be true and correct to the extent described in
the section titled “The Merger Agreement –
Conditions to the Merger” beginning on page [•];
•
the Company must have performed in all material respects all the
obligations, and complied in all material respects with the
agreements and covenants, required to be performed by it under
the merger agreement at or prior to the closing date of the
merger;
•
the Company must have delivered to Parent a certificate, dated
as of the closing date of the merger and signed on behalf of the
Company by the chief executive officer of the Company,
certifying that the two immediately preceding conditions have
been satisfied;
•
there must not have been a material adverse effect on the
Company since January 2, 2010;
•
consolidated EBITDA of the Company for the 12 month period
ending October 4, 2010 must not be less than
$111 million; and
•
the “Closing Phase II”, as defined in the Asset
Transfer Agreement between the Company, PGI Spain, Tesalca-99,
S.A., Texnovo, S.A. and Grupo Corinpa, S.L. dated
October 30, 2009 and as amended on November 30, 2009,
must have occurred or occur simultaneously with the closing of
the merger.
In addition, the Company’s obligation to complete the
merger is subject to the following conditions:
•
the representations and warranties of Parent and Merger
Subsidiary must be true and correct to the extent described in
the section titled “The Merger Agreement –
Conditions to the Merger” beginning on page [•];
•
Parent and Merger Subsidiary must have performed in all material
respects all the obligations, and complied in all material
respects with the agreements and covenants, required to be
performed by them under the merger agreement at or prior to the
closing date of the merger; and
•
Parent must have delivered to the Company a certificate, dated
as of the closing date of the merger and signed on behalf of
Parent by a duly authorized officer of Parent, certifying that
the two immediately preceding conditions have been satisfied.
At any time prior to the effective time of the merger, in
addition to termination by the mutual consent of the Company,
Parent and Merger Subsidiary, either the Company or Parent may
terminate the merger agreement if:
•
the merger is not consummated prior to February 8, 2011
(the “outside date”) (provided that (a) the right
to terminate the merger agreement will not be available to any
party whose actions have been the principal cause of, or
directly resulted in, the failure of the effective time of the
merger to occur prior to such date and (b) if all closing
conditions other than the mutual condition relating to the HSR
Act and foreign merger control laws have been satisfied by
February 8, 2011, Parent will seek a three month extension
of the debt financing commitments (on terms no less favorable,
in the aggregate, than the current commitments) which, if
obtained, will permit each of Parent and the Company, in its
sole discretion, to postpone the outside date to May 6,2011); or
•
a final and nonappealable injunction or applicable law
preventing consummation of the Merger is in effect.
In addition, Parent is or was permitted, as the case may be, to
terminate the merger agreement prior to the effective time of
the merger if:
•
the stockholder approval had not been obtained by
11:59 p.m., New York City time, on the date of the merger
agreement (which approval was timely obtained, as described in
this information statement); or
•
the Company breaches or fails to perform any of its
representations, warranties, covenants or agreements under the
merger agreement, if such breach or failure to perform
(A) would rise to the level at which Parent and Merger
Subsidiary would not be required to effect the merger and
(B) is incapable of being cured by the Company by the
outside date, or, if capable of being cured by the Company by
the outside date, is not cured by the Company within 45 calendar
days following receipt of written notice of such breach or
failure to perform from Parent, provided that neither Parent nor
Merger Subsidiary is in breach of any representations,
warranties, covenants or agreements that would rise to the level
at which the Company would not be required to effect the merger.
In addition, the Company is or was permitted, as the case may
be, to terminate the merger agreement prior to the effective
time of the merger if:
•
Parent or Merger Subsidiary breaches or fails to perform any of
its representations, warranties, covenants or agreements under
the merger agreement, if such breach of failure to perform
(A) would rise to the level at which the Company would not
be required to effect the merger and (B) is incapable of
being cured by Parent or Merger Subsidiary by the outside date,
or, if capable of being cured by Parent or Merger Subsidiary by
the outside date, is not cured by Parent or Merger Subsidiary
within 45 calendar days following receipt of written notice of
such breach or failure to perform from the Company, provided
that the Company is not then in breach of any representations,
warranties, covenants or agreements that would rise to the level
at which Parent and Merger Subsidiary would not be required to
effect the merger;
•
prior to obtaining the stockholder approval (which approval was
timely obtained, as described in this information statement),
the Company had entered into an acquisition agreement or similar
agreement relating to a superior proposal, terminated the merger
agreement in accordance with the terms thereof and paid the
Company Termination Fee (as described in the section titled
“The Merger Agreement – Termination Fees and
Remedies” beginning on page [•]); or
•
Parent breaches its obligation to timely consummate the closing
of the merger, despite the relevant closing conditions having
been satisfied or waived.
If the merger agreement is terminated, (a) in certain
circumstances the Company would have been required to pay Parent
a termination fee of $8 million (the “Company
Termination Fee”) and (b) in certain circumstances
Parent may be required to pay the Company a termination fee of
either $15 million or $30 million (the “Parent
Termination Fee”), in each case as described in the section
titled “The Merger Agreement – Termination Fees
and Remedies” beginning on page [•].
Specific
Performance
The parties will be entitled to an injunction or injunctions to
prevent breaches of the merger agreement and to specifically
enforce the terms of the merger agreement without proof of
actual damages. However, the Company may specifically enforce
Parent’s right to cause the equity financing to be funded
and to consummate the merger only if:
•
Parent and Merger Subsidiary are required to consummate the
merger on account of the closing conditions having been
satisfied;
•
the debt financing (or alternative financing if the debt
financing becomes unavailable on the agreed upon terms and
conditions) has been funded or will be funded at the closing if
the equity financing is funded at the closing;
•
Parent and Merger Subsidiary fail to consummate the closing of
the merger despite being required to do so; and
•
the Company has irrevocably confirmed that the closing of the
merger will occur if specific performance is granted and the
equity financing and debt financing are funded.
If, for any reason, Parent and Merger Subsidiary fail to close
the merger when required or otherwise breach or fail to perform
under the merger agreement, then, except for an order of
specific performance as and to the extent permitted under the
merger agreement, the Company’s only remedies against
Parent, Merger Subsidiary, BCP, the financing sources and the
related parties for any breach, loss or damage will be:
•
to terminate the merger agreement and receive payment of the
Parent Termination Fee, as described in the section titled
“The Merger Agreement – Termination Fees and
Remedies” beginning on page [•]; or
•
to terminate the merger agreement pursuant to Parent’s or
Merger Subsidiary’s breach or failure to perform any of its
representations, warranties, covenants and agreements and seek
to recover monetary damages from Parent in an amount up to
$15 million in the aggregate.
The merger agreement prohibits the Company from receiving both a
grant of specific performance and payment of the Parent
Termination Fee.
Concurrently with the execution of the merger agreement, BCP
(the “Guarantor”) executed and delivered a limited
guarantee in favor of the Company, pursuant to which the
Guarantor absolutely, irrevocably and unconditionally guarantees
the due and punctual payment when due of the Parent Termination
Fee (as described in the section titled “The Merger
Agreement – Termination Fees and Remedies”
beginning on page [•]) and any other amounts payable
by Parent to the Company under the merger agreement, subject to
a cap of $15 million, provided that such cap shall be
$30 million under those circumstances where the Parent
Termination Fee is equal to $30 million.
Shares of the Company’s Class A common stock and
Class B common stock currently trade on the OTC
Bulletin Board under the stock symbols “POLGA”
and “POLGB”, respectively. Upon completion of the
merger, all shares of the Company’s Class A common
stock and Class B common stock will cease to be listed for
trading on the OTC Bulletin Board and will be deregistered
under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).
You will be sent a letter of transmittal by the paying agent
with related instructions promptly after the completion of the
merger describing how you may exchange your shares of Company
Common Stock for the consideration to be paid pursuant to the
merger agreement. If your shares of Company Common Stock are
held in “street name” by your bank, brokerage firm or
other nominee, you will receive instructions from your bank,
brokerage firm or other nominee as to how to effect the
surrender of your “street name” shares of Company
Common Stock in exchange for the consideration to be paid
pursuant to the merger agreement. You should not return your
certificates to the paying agent without a letter of
transmittal, and you should not return your certificates to the
Company.
The merger will be a taxable transaction to our stockholders who
are U.S. Holders (as defined in “TheMerger – Certain U.S. Federal Income Tax
Consequences of the Merger to Our Stockholders” beginning
on page [•]) for U.S. federal income tax
purposes. In general, under the Fair Market Value Method (as
described in “The Merger – Certain
U.S. Federal Income Tax Consequences of the Merger to Our
Stockholders” beginning on page [•]), a
U.S. Holder holding shares of Company Common Stock will
recognize capital gain or loss in an amount equal to the
difference, if any, between the trading price of the Company
Common Stock immediately before the merger and the
U.S. Holder’s adjusted tax basis in such shares.
However, the law is not entirely clear, and alternative results
are possible. Some of those alternative results may be more
favorable to the U.S. Holder and others may be less
favorable. In addition, backup withholding tax may apply with
respect to cash a holder receives in the merger, unless such
holder provides proof of an applicable exemption or a correct
taxpayer identification number and otherwise complies with the
applicable requirements of the backup withholding rules. For
further information, please see the section titled “TheMerger – Certain U.S. Federal Income Tax
Consequences of the Merger to Our Stockholders” beginning
on page [•]). You should consult your own tax advisor
for a full understanding of the particular tax consequences of
the merger to you, including the tax consequences under state,
local, foreign and other tax laws.
The Company’s Class A common stock and Class B
common stock are listed on the OTC Bulletin Board under the
stock symbols “POLGA” and “POLGB”,
respectively. The closing sale prices of our Class A common
stock and Class B common stock on October 1, 2010, the
last trading day before the announcement of the execution of the
merger agreement, were $22.50 and $18.50 per share,
respectively. The closing sale prices of our Class A common
stock and Class B common stock on April 6, 2010, the
last trading day before the Company announced that the Board of
Directors was conducting a review of strategic alternatives,
were $17.25 and $16.00 per share, respectively.
The holders of shares of Company Common Stock, other than
MatlinPatterson, may elect to pursue appraisal rights to
receive, in lieu of the consideration to be paid pursuant to the
merger agreement, the judicially determined “fair
value” of their shares, which could be more or less than,
or the same as, the consideration to be paid pursuant to the
merger agreement. Stockholders of the Company electing to
exercise appraisal rights must comply with the strict procedures
set forth in Section 262 of the General Corporation
Law of the State of Delaware (the “DGCL”), the full
text of which appears as Annex B to this information
statement, in order to demand and perfect their rights. Failure
to so comply may result in termination or waiver of such
stockholder’s appraisal rights. For a summary of the
material provisions of Section 262 of the DGCL required to
be followed by dissenting stockholders of the Company wishing to
demand and perfect their appraisal rights, please see the
section titled “Appraisal Rights” beginning on
page [•].
The Company, the Company’s Board of Directors and The
Blackstone Group LP are named as defendants in a purported class
action lawsuit brought by a minority stockholder of the Company.
The stockholder action alleges, among other things, that the
Company’s Board of Directors breached its fiduciary duties
owed to the Company’s public stockholders and seeks, among
other things, to enjoin the defendants from completing the
merger on the agreed upon terms. The defendants believe the
claims are without merit and intend to defend against them
vigorously.
Set forth below are commonly asked questions and answers
regarding the merger and the merger agreement. These questions
and answers may not address all questions that may be important
to you as a Company stockholder. For a more complete description
of the legal and other terms of the merger and the merger
agreement, please read carefully this entire information
statement, including the merger agreement attached as
Annex A to this information statement and the documents
incorporated by reference herein. You may obtain a list of the
documents incorporated by reference into this information
statement in the section titled “Where to Find More
Information” beginning on page [•].
Q:
Why am I receiving this document?
A:
As a result of entering into the merger agreement, applicable
laws and regulations require us to provide you with notice of
the written consent delivered on October 4, 2010 by
MatlinPatterson, the holder of approximately 63.4% of the voting
power of the outstanding shares of Company Common Stock on that
date, adopting and approving in all respects the merger
agreement and the transactions and agreements contemplated
thereby. As a result, your vote is not required and is not being
sought. We are not asking you for a proxy and you are requested
not to send us a proxy.
Q:
What is the proposed transaction?
A:
In the merger, upon the terms and subject to the satisfaction or
waiver of the conditions in the merger agreement, Merger
Subsidiary, a wholly owned subsidiary of Parent, will merge with
and into the Company, with the Company continuing as the
surviving corporation and a wholly owned subsidiary of Parent.
For further information, please see the sections titled
“The Merger” and “The Merger Agreement”
beginning on pages [•] and [•], respectively.
Q:
What will I be entitled to receive as a result of the
merger?
A:
If the merger is completed, you will be entitled to receive, for
each share of Company Common Stock that you own, up to $18.16 in
cash (subject to the escrow arrangement described in this
information statement) plus, if the merger is completed after
December 31, 2010, an amount equal to the product of
(a) the number of calendar days within the period beginning
on January 1, 2011 and ending on the calendar day
immediately prior to the closing date of the merger and
(b) a fraction, the numerator of which is $53,571.42 and
the denominator of which is the total number of shares of
Company Common Stock outstanding at the effective time of the
merger, determined on a fully diluted basis. Of the $18.16,
approximately $15.25 (calculated on a fully diluted basis) will
be payable upon the closing of the merger, and approximately
$2.91 (the per share portion of $64.5 million, calculated
on a fully diluted basis) will be placed into an escrow fund, to
be distributed ratably to stockholders if and when released from
the escrow fund in accordance with the terms of the merger
agreement.
Q:
Why is a portion of the aggregate merger consideration being
held in escrow?
A:
At the effective time of the merger, a portion of the aggregate
merger consideration totaling $64.5 million, or
approximately $2.91 per share (calculated on a fully diluted
basis, and which this information statement refers to as the
“Per Share Escrow Amount”), will be deposited in an
escrow fund to cover liabilities, costs and expenses related to
the potential application of the “personal holding
company” (“PHC”) rules of the Internal Revenue
Code of 1986, as amended (the “PHC Rules”), to the
Company and its subsidiaries. The Company’s most recent
financial statements reflect a liability for uncertain tax
positions associated with potential PHC issues of approximately
$24.5 million. However, the Company has initiated
discussions with the Internal Revenue Service (the
“IRS”) to request a series of rulings related to these
PHC issues, and the actual tax liability related thereto,
whether higher or lower than the amount reflected on the
Company’s financial statements, will be determined based on
the results of such process. For further information, please see
the section titled “The Merger Agreement – Escrow
Fund” beginning on page [•].
When is the merger expected to be completed? What is the
“marketing period”?
A:
Parent and the Company will complete the merger when all the
conditions to completion of the merger in the merger agreement
have been satisfied or waived and the marketing period, as
described below, has ended. Parent and the Company are working
toward satisfying these conditions and completing the merger as
promptly as possible. Parent and the Company currently expect to
complete the merger no later than during the first quarter of
2011. However, because the merger is subject to a number of
conditions, some of which are beyond the control of Parent and
the Company, exact timing for completion of the merger cannot be
predicted with any amount of certainty.
Parent is not obligated to complete the merger until the
expiration of a 20 consecutive business day “marketing
period” that Parent may use to complete its debt financing
in connection with the merger. The marketing period will begin
to run once certain closing conditions are satisfied and the
Company has provided Parent with required financial information
relating to the arrangement of debt financing, and once
commenced, may be terminated before its completion under certain
circumstances. If the marketing period would not end prior to
December 18, 2010, it is not required to commence prior to
January 3, 2011. For further information, please see the
section titled “The Merger Agreement – When the
Merger Becomes Effective” beginning on page [•].
Q:
What happens if the merger is not consummated?
A:
If the merger is not consummated for any reason, stockholders
will not receive any payment for their shares in connection with
the merger. Instead, the Company will remain a publicly owned
company and the Class A common stock and Class B
common stock will continue to be listed and traded on the OTC
Bulletin Board. Under specified circumstances in connection
with the termination of the merger agreement, the Company may be
required to pay to, or receive from, Parent a termination fee,
as described in the section titled “The Merger
Agreement – Termination Fees and Remedies”
beginning on page [•].
Q:
Why am I not being asked to vote on the merger?
A:
Consummation of the merger requires the adoption of the merger
agreement by the holders of a majority of the outstanding shares
of Company Common Stock voting or consenting as a single class.
The requisite stockholder approval was obtained on
October 4, 2010 when, following execution of the merger
agreement by the parties thereto, MatlinPatterson, the holder of
13,596,921 shares of Company Common Stock, constituting
approximately 63.4% of the voting power of the outstanding
shares of Company Common Stock on that date, executed a written
consent adopting and approving in all respects the merger
agreement and the transactions and agreements contemplated
thereby. As a result, no further approval of the stockholders of
the Company is required to approve and adopt the merger
agreement and the transactions contemplated thereby.
Q:
Did our Board of Directors approve and recommend the merger
agreement?
A:
Yes. The Board of Directors, acting in part on the unanimous
recommendation of the Special Committee (comprised solely of
independent members of the Board of Directors), unanimously
voted to approve the merger agreement and the merger and
recommended that the Company’s stockholders adopt the
merger agreement.
Q:
Am I entitled to appraisal rights in connection with the
merger?
A:
Yes. You are entitled to exercise your appraisal rights in
accordance with the procedures specified in the DGCL in
connection with the merger. For further information, please see
“Appraisal Rights” beginning on page [•].
Q:
What are the U.S. federal income tax consequences to the
Company’s stockholders of the merger?
A:
The merger will be a taxable transaction to a U.S. Holder (as
defined in “The Merger – Certain U.S. Federal
Income Tax Consequences of the Merger to Our Stockholders”
beginning on page [•]) for U.S. federal income tax
purposes. In general, under the Fair Market Value Method (as
defined in “The Merger – Certain U.S. Federal
Income Tax Consequences of the Merger to Our Stockholders”
beginning on page [•]), a U.S. Holder holding shares
of Company Common Stock will recognize capital gain or loss
in an amount equal to the difference, if any, between the
trading price of the Company Common Stock immediately before the
merger and the U.S. Holder’s adjusted tax basis in such
shares. However, the law is not entirely clear, and alternative
results are possible. Some of those alternative results may be
more favorable to the U.S. Holder and others may be less
favorable. Backup withholding tax may apply with respect to cash
you receive in the merger, unless you provide proof of an
applicable exemption or a correct taxpayer identification number
and otherwise comply with the applicable requirements of the
backup withholding rules.
Please carefully review the information set forth in the section
titled “The Merger – Certain U.S. Federal Income
Tax Consequences of the Merger to Our Stockholders”
beginning on page [•] for a more complete discussion
of the U.S. federal income tax consequences of the merger to
U.S. Holders. Tax matters can be complicated, and the tax
consequences of the merger to you will depend on your particular
tax situation. We urge you to consult your tax advisor on the
tax consequences of the merger to you.
Q:
What happens if I sell my shares before completion of the
merger?
A:
If you transfer your shares of Company Common Stock before
completion of the merger, you will have transferred the right to
receive the consideration to be paid pursuant to the merger
agreement. In order to receive such consideration, you must hold
your shares through the completion of the merger.
Q:
May I transfer my right to receive amounts released from the
escrow fund?
A:
No. The Per Share Escrow Payments are not assignable or
otherwise transferable, except by operation of law or by
intestacy.
Q:
Should I send in my stock certificates now?
A:
No. You will be sent a letter of transmittal with related
instructions promptly after completion of the merger, describing
how you may exchange your shares of Company Common Stock for the
consideration to be paid pursuant to the merger agreement. If
your shares of Company Common Stock are held in “street
name” by your bank, brokerage firm or other nominee, you
will receive instructions from your bank, brokerage firm or
other nominee as to how to effect the surrender of your
“street name” shares of Company Common Stock in
exchange for the consideration pursuant to the merger agreement.
Q:
Who can help answer my other questions?
A:
If you have more questions about the merger or would like
additional copies of this information statement, please contact
the Company in writing at our principal executive offices at
9335 Harris Corners Parkway, Suite 300, Charlotte, NC28269,
ATTN: Chief Financial Officer, or by telephone at (704) 697-5100.
This information statement, and the documents to which we refer
you in this information statement, contain forward-looking
statements that involve numerous risks and uncertainties which
may be difficult to predict. The statements contained in this
communication that are not purely historical are forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities
Act”), and Section 21E of the Exchange Act, including,
without limitation, statements regarding projections of total
revenue, EBITDA, net income, free cash flow or other financial
items, the expected timing of the closing of the proposed
merger, the management of the Company and the Company’s
expectations, beliefs, strategies, objectives, plans,
intentions, anticipated financial performance, business
prospects, critical accounting policies, technological
developments, new services, consolidation activities, research
and development activities, future challenges and opportunities,
regulatory, market and industry trends and similar matters. All
forward-looking statements included in this communication are
based on information available to the Company on the date
hereof. In some cases, you can identify forward-looking
statements by terminology such as “may,”“can,”“will,”“should,”“could,”“expects,”“plans,”“anticipates,”“intends,”“believes,”“estimates,”“predicts,”“potential,”“targets,”“goals,”“projects,”“outlook,”“continue,”“preliminary,”“guidance,” or variations of
such words, similar expressions, or the negative of these terms
or other comparable terminology.
Forward-looking statement involve a number of risks and
uncertainties, and actual results or events may differ
materially from those projected or implied in those statements.
Important factors that could cause such differences include, but
are not limited to:
•
the outcome of settlement discussions with the IRS regarding the
final amount of the potential tax liabilities and payments
relating to the application of the PHC Rules to the Company and
its subsidiaries;
•
general economic factors including, but not limited to, changes
in interest rates, foreign currency translation rates, consumer
confidence, trends in disposable income, changes in consumer
demand for goods produced, and cyclical or other downturns;
•
the cost and availability of raw materials, labor and natural
and other resources and the inability to pass raw material costs
increases along to customers;
•
changes to selling prices to customers which are based, by
contract, on an underlying raw material index;
•
substantial debt levels and the potential inability to maintain
sufficient liquidity to finance the Company’s operations
and make necessary capital expenditures;
•
the inability to meet existing debt covenants or obtain
necessary waivers;
•
achievement of objectives for strategic acquisitions and
dispositions;
•
the inability to achieve successful or timely
start-up on
new or modified production lines;
•
reliance on major customers and suppliers;
•
domestic and foreign competition;
•
information and technological advances;
•
risks related to operations in foreign jurisdictions;
•
changes in laws or regulations;
•
the failure to obtain, delays in obtaining or adverse conditions
contained in any required regulatory or other approvals in
connection with the merger;
•
the failure to consummate or delay in consummating the merger
for any reason;
•
the outcome of any legal proceedings that have been or may be
instituted against the Company and others related to the merger
agreement;
the failure to obtain the necessary equity or debt financing set
forth in financing commitments received in connection with the
merger; and
•
information contained under the heading “Risk Factors”
and other factors identified in our most recent Annual Report on
Form 10-K
and Quarterly Report on Form
10-Q filed
with the SEC.
We caution against placing undue reliance on forward-looking
statements, which reflect our current beliefs and are based on
information currently available to us as of the date a
forward-looking statement is made. Forward-looking statements
set forth or incorporated by reference herein speak only as of
the date of this information statement or the date of the
document incorporated by reference into this information
statement, as the case may be. We undertake no obligation to
revise forward-looking statements to reflect future events,
changes in circumstances, or changes in beliefs. In the event
that we do update any
forward-looking
statements, no inference should be made that we will make
additional updates with respect to that statement, related
matters, or any other forward-looking statements. Any
corrections or revisions and other important assumptions and
factors that could cause actual results to differ materially
from forward-looking statements may appear in the Company’s
public filings with the SEC, which are accessible at
www.sec.gov, and which you are advised to consult. For
additional information, please see the section titled
“Where To Find More Information” beginning on
page [•].
Polymer Group, Inc., a Delaware corporation, is one of the
world’s leading producers of nonwovens and a global,
technology-driven developer, producer and marketer of engineered
materials. With the broadest range of process technologies in
the nonwovens industry, PGI is a global supplier to leading
consumer and industrial product manufacturers. PGI operates 14
manufacturing and converting facilities in nine countries
throughout the world.
Additional information about PGI and its subsidiaries is
included in documents incorporated by reference into this
information statement. Please see “Where To Find More
Information” on page [•].
Scorpio Acquisition Corporation, which this information
statement refers to as “Parent”, is a newly formed
Delaware corporation that was formed by BCP. Parent has not
carried on any activities to date, except for activities
incidental to its formation, in connection with financing the
merger and as otherwise contemplated by the merger agreement.
Upon completion of the merger the Company will be a wholly owned
subsidiary of Parent.
Scorpio Merger Sub Corporation, which this information statement
refers to as “Merger Subsidiary”, is a newly formed
Delaware corporation. Merger Subsidiary is a wholly owned
subsidiary of Parent and has not conducted any business
operations except for activities incidental to its formation and
as contemplated by the merger agreement. Upon consummation of
the merger, Merger Subsidiary will merge with and into the
Company, Merger Subsidiary will cease to exist and the Company
will continue as the surviving corporation and a wholly owned
subsidiary of Parent.
The Blackstone Group L.P. is one of the world’s leading
investment and advisory firms. Its alternative asset management
businesses include the management of private equity funds, real
estate funds, hedge funds, credit-oriented funds, collateralized
loan obligation vehicles (CLOs) and closed-end mutual funds. The
Blackstone Group also provides various financial advisory
services, including mergers and acquisitions advisory,
restructuring and reorganization advisory and fund placement
services.
The
Stockholder Representative
MatlinPatterson Global Opportunities Partners L.P.
In order to efficiently administer certain actions to be taken
by or on behalf of the Company’s stockholders under the
merger agreement and the escrow agreement, MatlinPatterson
Global Opportunities Partners L.P. has been designated, pursuant
to the terms of the merger agreement, as the Stockholder
Representative.
Over the past several years, the Company has explored strategic
alternatives to maximize value for its stockholders, including a
process launched in 2005 to consider, among other things, a sale
transaction and a recapitalization of the Company, and a
proposed public offering in 2007 of newly issued shares of
Class A common stock, as well as shares of Class A
common stock owned by MatlinPatterson and other stockholders.
In November 2009, at the request of MatlinPatterson, the Company
began preparing information to be made available to potential
buyers of MatlinPatterson’s shares of Company Common Stock.
At a regular meeting of the Board of Directors held in
Charlotte, North Carolina on December 8, 2009,
Mr. Mark Patterson, a director of the Company and the
chairman and co-founder of MatlinPatterson, informed the Board
of Directors that MatlinPatterson had engaged Blackstone
Advisory Partners L.P. (“Blackstone Advisory”) to
provide financial advisory services in connection with
MatlinPatterson’s evaluation of certain strategic
alternatives, including a potential sale of
MatlinPatterson’s shares of Company Common Stock and a sale
of the entire Company. At the time, MatlinPatterson owned
approximately 64.8% of the outstanding shares of Company Common
Stock and the Company’s Class A common stock was
trading at approximately $13.77 per share.
In early January, MatlinPatterson directed Blackstone Advisory
to initiate a private process to solicit offers in connection
with a sale of MatlinPatterson’s shares of Company Common
Stock. Blackstone Advisory performed an extensive screening
process of financial and strategic buyers and provided to
MatlinPatterson a list which included BCP, that was approved by
MatlinPatterson. During the weeks of January 11, 2010 and
January 18, 2010, Blackstone Advisory contacted 36
potential buyers to gauge their interest in participating in the
private process. Twenty-five of those potential buyers received
a confidential information memorandum and executed
confidentiality agreements.
During the weeks of February 1, 2010 and February 8,2010, 10 potential buyers, including BCP, submitted first round
indications of interest based on publicly available information
and the contents of the confidential information memorandum.
Each indication of interest was expressed in a value range that
the potential buyer proposed to pay, which equated to price
ranges from $13.14 to $15.51 per share, on the low end, to
$23.00 to $25.00, on the high end.
On February 10, 2010, the Board of Directors held a special
meeting by telephone conference, in which representatives of
MatlinPatterson and, at MatlinPatterson’s request,
Blackstone Advisory and Whalen LLP, MatlinPatterson’s
outside counsel, participated. During the meeting,
representatives of Blackstone Advisory provided an update to the
Board of Directors regarding the initial indications of interest
received by MatlinPatterson from the potential buyers. Because
certain potential buyers had indicated an interest in acquiring
the entire Company rather than just MatlinPatterson’s
shares, the Board of Directors (with Mr. Patterson and
Mr. Jurriaan Van der Schee, also a director of the Company
and the head of MatlinPatterson’s London office,
abstaining) formed a Special Committee, comprised of James A.
Ovenden (Chairman), Elizabeth A. Fessenden, Keith B. Hall and
William B. Hewitt, to (i) evaluate and negotiate certain
proposals relating to strategic alternatives on behalf of the
Company’s minority stockholders, (ii) review and
evaluate the terms and conditions of documents and agreements
relating to such strategic alternatives, (iii) negotiate,
with the assistance of management, on behalf of the Company,
documents and agreements relating to such strategic
alternatives, (iv) hire, as necessary, legal counsel to
advise the Special Committee and (v) recommend to the Board
of Directors what action, if any, should be taken by the Company
with respect to such strategic alternatives.
On February 12, 2010, the Special Committee engaged
Richards, Layton & Finger, P.A. (“Richards,
Layton”) as its outside counsel. On February 24, 2010,
the Special Committee, after considering seven candidates and
interviewing three candidates, engaged Janney as its financial
advisor based on, among other things, Janney’s
qualifications. Later that week, the Company retained Cravath,
Swaine & Moore LLP (“Cravath”) as outside
counsel in connection with its evaluation of strategic
alternatives.
Throughout late February and early March, presentations were
given by members of our management to seven of the 10 first
round bidders, including BCP.
On March 9, 2010 and March 10, 2010, the Board of
Directors held a regular meeting in Charlotte, North Carolina.
During the meeting, at the request of MatlinPatterson,
representatives of Blackstone Advisory
provided an update on the private process initiated by
MatlinPatterson. Following such update, Ms. Hagen and
Mr. Norman provided feedback on the management
presentations and representatives of Cravath provided an
overview of the fiduciary duties of the Board of Directors in
connection with its evaluation of strategic alternatives. In
addition, the Board of Directors discussed potential issues
relating to MatlinPatterson’s existing engagement of
Blackstone Advisory as financial advisor in light of BCP’s
submission of an indication of interest in the Company. In the
course of such discussion, representatives of Cravath relayed
Blackstone Advisory’s assurances conveyed during a prior
conversation that adequate measures had been taken to address
any issues arising from Blackstone Advisory’s participation
in the process in light of BCP’s indication of interest,
including firewalls that were designed to prevent the exchange
of information between Blackstone Advisory and BCP that would be
inappropriate under the circumstances.
On March 10, 2010, the Special Committee held a meeting in
Charlotte, North Carolina, attended by members of management and
representatives of Richards, Layton, Janney, Cravath and, at the
request of MatlinPatterson, Blackstone Advisory. At that
meeting, Ms. Hagen and Mr. Norman presented their
views regarding the Company’s stand-alone business plan and
financial outlook. Representatives of Janney discussed the
results of their preliminary financial analysis of the Company
and engaged in a discussion regarding the Company’s review
of strategic alternatives in 2005 and consideration of a public
offering in 2007, each of which had been publicly-disclosed and
subsequently discontinued. Representatives of Janney also
summarized the strategic alternatives potentially available to
the Company. Upon conclusion of Janney’s presentation, the
Special Committee considered, among other things, the likelihood
that a sale of MatlinPatterson’s shares, in lieu of a sale
of the entire Company, would detrimentally impact the economic
interests of the Company’s minority stockholders. After
further discussion, the Special Committee unanimously
recommended to the Board of Directors that the Company assume
control of the private process from MatlinPatterson and explore
a sale of the entire Company. The Special Committee further
recommended that the Company seek to solicit interest both from
potential strategic buyers and additional potential financial
buyers. The Special Committee then discussed and considered the
risks and benefits of Blackstone Advisory’s continued
involvement in the process in light of the potential conflict of
interest that might arise from BCP being a potential buyer. The
Special Committee considered the benefits of retaining
Blackstone Advisory, including Blackstone Advisory’s
familiarity with the Company and involvement in the process to
date. The Special Committee noted Janney’s role as its
financial advisor, including Janney’s being able to deliver
a fairness opinion if BCP were the prevailing bidder. The
Special Committee, having considered such risks and benefits and
having discussed on several occasions the adequacy of measures
taken to preserve the integrity of such process in light of
BCP’s role in the auction process, recommended that the
Board of Directors proceed to explore and negotiate a potential
engagement of Blackstone Advisory as financial advisor to the
Company.
The Board of Directors, at a special meeting held by telephone
conference on March 12, 2010 in which representatives of
Cravath participated, duly considered and unanimously approved
the Special Committee’s recommendations.
At a Special Committee meeting held by telephone conference on
March 17, 2010 in which representatives of Richards, Layton
participated, several days after a presentation was given by
members of management to one of the financial buyers that had
submitted a first round indication of interest, Mr. Ovenden
reported that, at the instruction of the Special Committee,
Janney and Blackstone Advisory had identified and contacted five
strategic buyers and two additional financial buyers, which
resulted in a total of 43 potential buyers having been contacted
in connection with the strategic review process. Two of the
strategic buyers and both financial buyers executed
confidentiality agreements and thereafter began conducting
diligence with respect to the Company. Both financial buyers and
one of the strategic buyers declined to make a proposal after
receiving a confidential information memorandum.
At a Special Committee meeting held by telephone conference on
March 29, 2010 in which representatives of Richards, Layton
participated, the Special Committee, after further discussion
regarding the potential engagement of Blackstone Advisory,
authorized management to execute, on behalf of the Company, a
proposed letter agreement engaging Blackstone Advisory as
financial advisor to the Company.
On April 5, 2010, the Company engaged Blackstone Advisory
as its financial advisor in connection with its evaluation of
strategic alternatives. MatlinPatterson and Blackstone Advisory
concurrently executed a letter
agreement providing that Blackstone Advisory would have no
further obligations pursuant to its existing engagement by
MatlinPatterson. On April 6, 2010, at which point there
were six potential buyers remaining (five of which were
financial buyers and one of which was a strategic buyer),
Blackstone Advisory distributed a process letter, along with a
draft merger agreement, to each of the remaining buyers
requesting that each such buyer submit its best and final offer
by April 23, 2010, including a
mark-up of
the draft merger agreement and evidence that it had obtained
commitments for any financing that it may need to complete a
proposed transaction. Two potential buyers thereafter indicated
that they would no longer be participating in the process.
On April 7, 2010, rumors of a possible offer or transaction
to acquire the Company were publicly reported. The trading
prices of our Class A common stock and Class B common
stock on the OTC Bulletin Board closed that day at $19.90
and $20.00, respectively, increases of approximately 15.3% and
25.0%, respectively, over the $17.25 and $16.00 closing prices
of our Class A common stock and Class B common stock,
respectively, on April 6, 2010, the last trading day before
such rumors were publicly reported. Later that day, the Company
issued a press release announcing that our Board of Directors
was evaluating strategic alternatives to enhance stockholder
value and had formed a special committee comprised of
independent directors to evaluate such strategic alternatives.
On April 9, 2010, a presentation was given by members of
management to the remaining strategic buyer, which subsequently
withdrew from the process. The three remaining potential buyers
continued to conduct diligence throughout April. To provide the
potential buyers with sufficient time to conduct diligence, the
Special Committee, at a meeting held by telephone conference on
April 12, 2010 in which representatives of Richards, Layton
participated, extended the deadline for receipt of bids to
April 26, 2010.
On April 26, 2010, Buyer A submitted a second round
bid of $15.50 in cash for each outstanding share of Company
Common Stock, without executed debt financing commitment papers,
and BCP submitted a second round bid of $18.00 in cash for each
outstanding share of Company Common Stock, with executed debt
financing commitment papers. Both second round bids, submitted
after several months of diligence, were lower in value than the
respective first round initial indications of interest of, in
the case of Buyer A, $21.44 to $24.52, and in the case of
BCP, $23.00 to $25.00. The final remaining potential buyer sent
the Company a letter indicating that it would not be submitting
a bid.
Over the next four days, the Special Committee held several
meetings by telephone conference with its financial and legal
advisors to consider the second round bids, evaluate certain
other strategic alternatives and determine how to proceed.
Janney reviewed with the Special Committee the results of the
process to date. After due consideration of each offer, the
Special Committee unanimously determined, at a meeting held by
telephone conference on April 27, 2010, to request that
each bidder increase its offer to $21 per share and agree to the
acceptable resolution of certain contractual terms. At a Special
Committee meeting held by telephone conference on April 29,2010, Mr. Ovenden reported that neither bidder was willing
to increase its offer to $21 per share. After further discussion
at a Special Committee meeting held the next day by telephone
conference, the Special Committee unanimously agreed to request
that each bidder increase its offer to $20 per share and
agree to the acceptable resolution of certain contractual terms.
During the negotiations that ensued in early May, Buyer A
declined to submit a revised proposal and withdrew from the
process, and BCP increased its offer to $18.50 per share in
cash. The Special Committee, at a meeting held by telephone
conference on May 4, 2010 in which representatives of
Richards, Layton participated, discussed the status of the
process and the terms of BCP’s then current offer.
Following such discussion, the Special Committee unanimously
determined that it would not at that time recommend a sale of
the Company at $18.50 per share on the terms then being proposed
by BCP, but instead would continue to negotiate for a higher
price and improved terms.
Between May 4, 2010 and May 17, 2010, certain members
of the Special Committee and representatives of Cravath
continued to negotiate with BCP on behalf of the Company’s
minority stockholders, and the Special Committee held several
meetings by telephone conference to discuss the progress of
those negotiations. In particular, the Special Committee focused
the negotiations on price, protections for the minority
stockholders, including a proposal that consummation of the
merger be conditioned on obtaining the vote of holders of a
majority of the stock held by the minority stockholders, and
provisions with respect to the certainty of closing the proposed
transaction. In addition, the Special Committee attempted to
procure an offer of differential consideration
from BCP that would result in the Company’s minority
stockholders receiving consideration greater than that to be
received by MatlinPatterson and in excess of the price being
offered by BCP at the time. MatlinPatterson indicated that it
would not support a proposal pursuant to which it would receive
less per share consideration than the Company’s minority
stockholders. While BCP remained unwilling to accept a majority
of the minority condition or to raise its bid despite numerous
counteroffers proposed by members of the Special Committee, BCP
revised its proposal to, among other things, incorporate the
Company Termination Fee in the amount proposed by the Special
Committee and permit the Company to specifically enforce the
terms of the merger agreement, including the buyer’s
obligation to close the transaction under certain circumstances.
During Special Committee meetings held by telephone conference
on May 17, 2010 and May 18, 2010 in which
representatives of Richards, Layton participated, the Special
Committee considered the status of the negotiations with BCP, as
well as the potential effects on the Company’s stockholders
of terminating the publicly-disclosed evaluation of strategic
alternatives, in light of similar occurrences having taken place
in 2005 and 2007. After extensive discussion, the Special
Committee unanimously determined that, in light of progress that
had been made as a result of negotiations with BCP, it was in
the best interests of the Company’s minority stockholders
to continue negotiations with BCP. At a regular meeting held on
May 20, 2010 in Charlotte, North Carolina, the Board of
Directors discussed a proposed exclusivity arrangement. Later
that day, pursuant to approval granted by the Board of
Directors, the Company’s management executed, on behalf of
the Company, an exclusivity agreement with BCP with a
termination date of June 11, 2010.
Negotiations continued throughout late May and early June,
during which time BCP continued its diligence review of the
Company. On June 2, 2010, BCP requested that the
exclusivity period be extended to June 21, 2010 in order to
enable it to conduct additional diligence. At a meeting of the
Special Committee held on June 9, 2010 by telephone
conference, Mr. Ovenden and representatives of Blackstone
Advisory updated the Special Committee on the status of
BCP’s diligence efforts. Representatives of Cravath and
Richards, Layton updated the Special Committee on the status of
negotiations regarding the terms of the merger agreement. After
extensive discussion, the Special Committee unanimously
determined that it was in the best interests of the Company and
its stockholders to extend the exclusivity period to
June 21, 2010.
During BCP’s diligence in June, the Company became aware of
the potential application of the PHC Rules to the Company and
its subsidiaries. The Special Committee held meetings throughout
June and July with members of management and representatives of
Richards, Layton, Janney and PricewaterhouseCoopers, LLP, its
tax advisor, to consider the likelihood and magnitude of
potential liabilities relating to the PHC issue, and the impact
that the PHC issue would have on the merger agreement being
negotiated between BCP and the Company. At a Special Committee
meeting held by telephone conference on July 16, 2010,
Mr. Ovenden reported that, pursuant to the outcome of a
meeting of the Company’s Audit Committee on July 15,2010, the Company expected to file a Current Report on
Form 8-K
announcing its intent to restate certain publicly-filed
financial statements of the Company. During this period, the
Special Committee authorized several extensions of the
exclusivity period to afford BCP additional time to conduct
further diligence.
On July 21, 2010, the Company announced that it had
identified a contingent tax liability resulting from the
potential application of the PHC Rules to the Company and its
subsidiaries, and certain financial statements were thereafter
restated to reflect a liability for uncertain tax positions
associated with the PHC issue of approximately
$24.5 million. In connection with the restatement of such
financial statements, the Company indicated that it would
initiate discussions with the IRS to request a series of rulings
on the PHC issue, and that the actual tax liability related
thereto, whether higher or lower than the amount reflected on
the Company’s restated financial statements, would be
determined based on the results of such IRS process.
In late July, after further diligence of the Company and
consultation with its tax, financial and legal advisors, BCP
proposed that the merger consideration remain $18.50 per share,
but that $88 million of the aggregate merger consideration
be held in an escrow fund to cover liabilities, costs and
expenses associated with the PHC issue. The Special Committee
held meetings by telephone conference with its advisors on
July 26, 2010, July 27, 2010, July 28, 2010,
July 29, 2010, August 1, 2010 and August 2, 2010
to consider the amount and terms of the escrow arrangement and
to discuss the IRS process relating to the PHC issue.
At a Special Committee meeting held on August 15, 2010 in
which representatives of Richards, Layton participated, the
Special Committee unanimously determined, after extensive
discussion and in light of continued
disagreement among the parties on matters pertaining to the
escrow arrangement, to recommend to the Board of Directors that
the Company suspend negotiations with BCP. At a meeting of the
Board of Directors held by telephone conference the next day,
Messrs. Patterson and Van der Schee recommended, however,
that the negotiations continue. Mr. Carlos Cavalle, a
member of the Board of Directors, suggested that rather than
suspend discussions with BCP, MatlinPatterson and Whalen LLP be
afforded two weeks to negotiate the escrow arrangement with BCP
on the Company’s behalf with any modifications to be
subject to the approval of the Special Committee and our Board
of Directors. After extensive discussion, the Board of
Directors, with Messrs. Patterson and Van der Schee
abstaining, agreed with such proposal, and requested that the
Special Committee provide its recommendation based on the
outcome of such negotiations no later than September 9,2010.
Throughout the next week, representatives of MatlinPatterson,
Whalen LLP, Cravath and the Company’s tax advisors
continued negotiations and discussions with BCP and its advisors
regarding matters pertaining to the escrow arrangement. As these
negotiations progressed, Mr. Ovenden also participated in
numerous discussions with representatives of BCP. At a meeting
of the Board of Directors held on August 23, 2010,
Mr. Patterson provided an update to the Board of Directors
on the development in the negotiations with BCP over the course
of the week. At a Special Committee meeting held later that day,
in which representatives of Richards, Layton participated, after
considering the status of the negotiations and
Mr. Patterson’s request that the Special Committee
negotiate on behalf of the Company with respect to the remaining
issues, the Special Committee unanimously determined to continue
discussions with BCP. The Special Committee continued to meet in
late August to discuss the status of negotiations and provide
direction on various points, which focused on the allocation of
certain costs and potential liabilities related to the PHC
issue, the amount and terms of the escrow arrangement and
various considerations regarding the IRS process.
At a Special Committee meeting held on August 30, 2010,
Mr. Ovenden reported that BCP proposed merger consideration
of $18.16 per share with $64.5 million to be held in an
escrow fund, available to pay any taxes relating to the PHC
issue, as well as certain expenses of MatlinPatterson incurred
after the closing of the proposed transaction in its capacity as
Stockholder Representative. Mr. Ovenden indicated that he
supported a transaction on these terms. Representatives of
Richards, Layton advised members of the Special Committee of
their fiduciary duties under Delaware law. After extensive
discussion, the Special Committee authorized its legal and
financial advisors to finalize the terms of a potential
transaction that would be considered by the Special Committee
and brought to the Board of Directors for consideration.
Mr. Hewitt, however, expressed the view that the merger
consideration should be increased in the event the proposed
transaction does not close in 2010, and voted against continuing
discussions with BCP on the terms proposed by BCP at that time.
Throughout the month of September, the Company, BCP,
Mr. Ovenden and representatives of Cravath and Whalen LLP
negotiated the unresolved issues in the draft merger agreement,
including an increase in the purchase price if the merger were
to close in 2011, agreed to by BCP in response to the concerns
raised by Mr. Hewitt.
On the evening of September 24, 2010, the Special Committee
held a meeting by telephone conference to review and discuss the
proposed merger agreement and the transactions contemplated
thereby. Mr. Ovenden summarized material revisions to the
merger agreement that had been agreed upon pursuant to continued
negotiations among the parties since the Special
Committee’s last meeting, including (1) payment of the
Additional Per Share Consideration in the event that the merger
closes in 2011 and (2) the Company’s right to a
bifurcated Parent Termination Fee, which fee would increase from
$15 million to $30 million in the event of
Parent’s failure to effect the closing when required
despite the availability of its debt financing. Representatives
of Cravath then provided the Special Committee with a summary of
the terms of the merger agreement, and thereafter responded to
questions from members of the Special Committee relating to the
information provided. Representatives of Janney presented to the
Special Committee their financial analyses with respect to the
contemplated merger and responded to questions from members of
the Special Committee relating to their presentation and
analyses. Representatives of Janney subsequently delivered
Janney’s opinion that as of such date, the $18.16 to be
paid to the Company’s stockholders pursuant to the merger
agreement, without taking into account the Additional Per Share
Consideration, the effects of the PHC-related liability or the
distribution to the Company’s stockholders of amounts to be
held in escrow was fair, from a financial point of view, to the
Company’s minority stockholders.
After representatives of Richards, Layton discussed with the
Special Committee its fiduciary duties in considering the
proposed merger and merger agreement, the Special Committee
again considered, among other things, the likelihood that a sale
by MatlinPatterson of its shares of Company Common Stock, in
lieu of a sale transaction in which all stockholders of the
Company would be entitled to participate, would detrimentally
impact the economic interests of the Company’s minority
stockholders. After engaging in extensive discussion, the
Special Committee unanimously deemed it advisable and in the
best interest of the Company and its stockholders that the
Company enter into the merger agreement, determined that the
terms of the merger were fair to the Company and its minority
stockholders, approved the merger agreement and the transactions
contemplated thereby and recommended that the Board, among other
things, approve the merger agreement.
The next morning, the Board of Directors held a special meeting
by telephone conference to review and discuss the Special
Committee’s recommendation and the proposed merger and
merger agreement. Following a summary by Mr. Ovenden of
material revisions to the merger agreement since the last
meeting of the Board of Directors, representatives of Cravath
provided a summary of the terms of the merger agreement and an
overview of the fiduciary duties of the directors under Delaware
law, and thereafter responded to questions from the directors
relating to the information provided. Representatives of Janney
provided the Board of Directors with a summary of Janney’s
financial analyses with respect to the contemplated merger and
responded to questions from the directors relating to their
presentation and analyses. Representatives of Janney
subsequently delivered to the Board of Directors the opinion
Janney had previously provided to the Special Committee.
Representatives of Blackstone Advisory then provided the Board
of Directors with an overview of the process by which the
Company conducted its evaluation of strategic alternatives, and
confirmed that no strategic or financial bidder had emerged
following the Company’s public announcement on
April 7, 2010 that such process had commenced. In
connection with the discussion, the Board of Directors
considered a number of matters, including the likelihood of
obtaining a higher price per share from an alternative bidder in
light of the sale process conducted by the Company and the value
that would be obtained by the Company’s stockholders in the
proposed merger as compared to the value that could be obtained
by the Company continuing as a stand-alone entity. The Board of
Directors also considered the likelihood that a failure to
effect a sale of the entire Company would detrimentally impact
the economic interests of the Company’s stockholders.
After engaging in extensive discussion, the Board of Directors
unanimously (i) approved and declared advisable the merger
agreement, (ii) declared that it was in the best interests
of the stockholders of the Company that the Company enter into
the merger agreement and consummate the transactions
contemplated by the merger agreement on the terms and subject to
the conditions set forth in the merger agreement,
(iii) declared that the terms of the merger were fair to
the Company and the stockholders of the Company,
(iv) approved the submission of the merger agreement for
adoption by the irrevocable written consent of MatlinPatterson
and (v) recommended that the stockholders of the Company
adopt and approve the merger agreement.
Following the meeting of the Board of Directors, we provided BCP
with additional diligence materials relating to the
Company’s disclosure schedule to the merger agreement. BCP
requested the opportunity to conduct additional diligence,
including with respect to a fire that occurred in the office
space of our facility in China on the previous day.
The Board of Directors was updated by members of management and
representatives of Cravath throughout the following week. On the
morning of October 4, 2010, Parent, Merger Subsidiary, the
Company and the Stockholder Representative executed the merger
agreement. Following execution of the merger agreement by the
parties thereto, MatlinPatterson executed a written consent
adopting and approving in all respects the merger agreement and
the transactions and agreements contemplated thereby. Later that
day, the Company issued a press release announcing the execution
of a definitive merger agreement.
After careful consideration, the Special Committee deemed it
advisable and in the best interest of the Company and its
stockholders that the Company enter into the merger agreement,
determined that the terms of the merger were fair to the Company
and its stockholders (other than MatlinPatterson), approved the
merger agreement and the transactions contemplated thereby and
recommended that the Board, among other things, approve the
merger agreement.
After careful consideration, the Board of Directors, acting in
part on the unanimous recommendation of the Special Committee,
unanimously (i) approved and declared advisable the merger
agreement, (ii) declared that it was in the best interests
of the stockholders of the Company that the Company enter into
the merger agreement and consummate the transactions
contemplated by the merger agreement on the terms and subject to
the conditions set forth in the merger agreement,
(iii) declared that the terms of the merger were fair to
the Company and the stockholders of the Company,
(iv) approved the submission of the Merger Agreement for
adoption by the irrevocable written consent of MatlinPatterson
and (v) recommended that the stockholders of the Company
adopt and approve the Merger Agreement.
In making their respective determinations, the Special Committee
and the Board of Directors consulted with the Company’s
management, as well as their respective legal and financial
advisors, and considered a variety of factors weighing in favor
of or relevant to the merger agreement and the transactions
contemplated thereby, including, without limitation, those
described below:
•
the Company’s business, results of operations, and
financial condition on a historical and prospective basis,
including the Company’s prospects if it were to remain a
publicly owned corporation, and the risks associated therewith;
•
given MatlinPatterson’s desire to sell its shares of
Company Common Stock, the likelihood that such a sale by
MatlinPatterson, in lieu of a sale transaction in which all PGI
stockholders would be entitled to participate, would
detrimentally impact the economic interests of our minority
stockholders;
•
the fact that consideration to be paid to the Company’s
stockholders under the merger agreement is in the form of cash,
which will provide liquidity and certainty of value to the
Company’s stockholders;
•
the historical market prices of Company Common Stock relative to
the $18.16 per share to which holders of shares of Company
Common Stock may be entitled to receive, including the
Class A common stock and Class B common stock closing
sale prices of $17.25 and $16.00 per share, respectively, on
April 6, 2010, the last trading day before the Company
announced that the Board of Directors was conducting an
evaluation of strategic alternatives;
•
the belief of the Special Committee and the Board of Directors
that the per share consideration to be paid pursuant to the
merger agreement reflects the highest value per share of Company
Common Stock reasonably attainable in light of (i) the sale
process conducted by the Special Committee and the Board of
Directors and (ii) the absence of any additional bidders
following the Company’s public announcement on
April 7, 2010 that it had commenced an evaluation of
strategic alternatives;
•
the financial analyses conducted by Janney, the financial
advisor of the Special Committee, and the opinion rendered by
Janney to the Special Committee and the Board of Directors,
dated as of September 24, 2010, that as of such date, and
based upon and subject to the factors and assumptions set forth
therein, the $18.16 per share to be paid to holders of shares of
Company Common Stock (other than MatlinPatterson) was fair, from
a financial point of view, to such holders;
•
the support of MatlinPatterson, and the fact that
MatlinPatterson will be receiving the same form and amount of
consideration per share of Company Common Stock as will each of
the Company’s other stockholders;
•
the Special Committee being comprised solely of independent
members of the Board of Directors and having hired its own
advisors, as well as the Special Committee’s active
engagement in the consideration of strategic alternatives and in
the sale process;
•
the participation of both strategic and financial bidders in the
sale process, and the Special Committee’s belief, based on
its and its advisors’ active participation in the sale
process, that all bidders were treated fairly and that the Board
of Directors, the Company’s management and MatlinPatterson
worked to maximize value for all of the Company’s
stockholders;
•
the likelihood that the merger would be consummated, in light of
(among other things) the reputation of the Guarantor and
Parent’s agreement in the merger agreement to use its
reasonable best efforts to consummate the merger (subject to the
terms and conditions of the merger agreement);
the anticipated receipt of executed financing commitments from
Parent’s sources of debt and equity financing in amounts
that Parent and Merger Subsidiary represented would be
sufficient to satisfy all of Parent’s obligations under the
merger agreement;
•
the regulatory and other governmental approvals required in
connection with the merger, and the likelihood that such
approvals would be obtained without unacceptable conditions;
•
the fact that the terms of the merger agreement were determined
through negotiations between Parent, with the advice of its
advisors, on the one hand, and the Special Committee and the
Board of Directors, with the advice of their respective
advisors, on the other hand;
•
the terms of the merger agreement, including:
•
Parent’s and Merger Subsidiary’s obligations to
consummate the merger are not subject to a financing condition;
•
Parent is obligated, in the event that any portion of the debt
financing becomes unavailable on the terms and conditions set
forth in the debt financing commitments, to use its reasonable
best efforts to obtain such financing from alternative sources,
on terms not less favorable, taken as a whole, to Parent;
•
the outside date (as such date may be extended) allows for
sufficient time to complete the merger;
•
the Company is permitted, under certain circumstances, to
specifically enforce Parent’s right to cause the equity
financing to be funded and Parent’s obligation to complete
the merger;
•
the Company’s stockholders are entitled to receive the
Additional Per Share Consideration in respect of their shares of
Company Common Stock in the event that the merger closes in 2011;
•
Parent is obligated, under certain circumstances, to pay the
Company a reverse termination fee of $15 million, or, if
the debt financing is or would be available at the closing of
the merger, $30 million, each of which the Special
Committee and Board of Directors considered to be reasonable in
light of, among other things, the aggregate consideration to be
paid pursuant to the merger agreement;
•
the anticipated delivery by the Guarantor of a limited guarantee
in favor of the Company, pursuant to which the Guarantor would
guarantee payment of the Parent Termination Fee and any other
amounts payable by Parent to the Company under the merger
agreement, subject to a cap of $15 million (which would be
increased to $30 million under certain
circumstances); and
•
the availability of appraisal rights to the stockholders of the
Company, other than MatlinPatterson, who comply with the
requirements set forth in Section 262 of the DGCL.
The Special Committee and the Board of Directors also identified
and considered potential risks and potential disadvantages
associated with the merger agreement and the transactions
contemplated thereby, including, without limitation, those
listed below:
•
the possible disruption of the Company’s business that may
result from announcement of the merger and the resulting
distraction of management’s attention from
day-to-day
operations of the business;
•
the risk that the pendency of the merger could materially
adversely effect the Company’s relationships with its
customers, suppliers and any other persons with whom the Company
has business relationships, or pose difficulties in attracting
and retaining key employees;
•
the fact that, following completion of the merger, the Company
will no longer exist as a publicly owned company, and our
existing stockholders will no longer participate in the
potential future economic upside derived from ownership of
Company Common Stock;
•
the risk of incurring substantial expenses related to the merger;
•
the possibility that the consummation of the merger may be
delayed or not occur at all, and the adverse impact such event
would have on the Company and its business;
•
the risk that the financing contemplated by the financing
commitments obtained in connection with the merger might not be
obtained;
the fact that the consideration to be paid in respect of each
share of Company Common Stock represented a discount to the
trading prices of the Class A common stock and Class B
common stock at the times the Board of Directors and the Special
Committee made their respective determinations;
•
the fact that the damages to which the Company may be entitled
from Parent under the terms of the merger agreement for any
breach, loss or damage are capped at $15 million in the
aggregate;
•
under the terms of the merger agreement and applicable law,
following MatlinPatterson’s execution of a written consent
in favor of the merger following the parties’ execution of
the merger agreement, the stockholder approval necessary to
consummate the merger would be obtained and the Board of
Directors would no longer be entitled to change its
recommendation of the proposed transaction to the Company’s
stockholders, each of which could potentially deter other
parties from proposing an alternative transaction that might be
more advantageous to our stockholders;
•
the fact that Parent and Merger Subsidiary are newly-formed
corporations with no assets other than the merger agreement, the
equity financing commitment and the debt financing commitment;
•
the involvement of Blackstone Advisory in the sale process,
given BCP’s participation as a potential buyer, and
ultimately the successful bidder, notwithstanding the adequacy
of the firewalls and other measures taken to preserve the
integrity of such process; and
•
the fact that some of the Company’s directors and executive
officers may have interests in the merger that are different
from, or in addition to, the interests of the Company’s
stockholders generally, including those related to Parent’s
agreement to indemnify the Company’s directors and officers
against certain claims and liabilities.
The above discussion includes the principal information and
factors, both positive and negative, considered by the Board of
Directors and the Special Committee, but is not intended to be
exhaustive and may not include all of the information and
factors considered by the Board of Directors or the Special
Committee. The above factors are not presented in any order of
priority. Neither the Special Committee nor the Board of
Directors quantified or assigned relative or specific weights to
the factors considered in reaching their respective
determinations. Rather, the Board of Directors and the Special
Committee view their respective positions and recommendations as
being based on the totality of the information presented to and
considered by them. In addition, individual members of the Board
of Directors and the Special Committee may have given different
weights to different factors. It should be noted that this
explanation of the reasoning of the Board of Directors and the
Special Committee and certain information presented in this
section is forward-looking in nature and should be read in light
of the factors discussed in the section titled
“Forward-Looking Statements” beginning on
page [•] of this information statement.
The Special Committee retained Janney to act as its financial
advisor and, if requested, to render to the Special Committee
and Board of Directors an opinion as to the fairness to the
holders of shares of Company Common Stock (other than
MatlinPatterson) of the consideration to be paid to such holders
(the “Minority Stockholders”). On September 24,2010, at a meeting of the Special Committee, Janney rendered an
oral opinion, which was confirmed by delivery of a written
opinion dated September 24, 2010, to the effect that, as of
that date and based upon and subject to the various
considerations set forth in its opinion, the consideration of
$18.16 per share (the “Consideration”) to be paid to
the Minority Stockholders pursuant to the merger agreement was
fair, from a financial point of view, to the Minority
Stockholders.
The full text of the written opinion of Janney dated
September 24, 2010 is attached as Annex C to this
information statement. Janney’s opinion sets forth, among
other things, the assumptions made, procedures followed, matters
considered and limitations on the scope of review undertaken by
Janney in rendering its opinion. Janney’s opinion was
directed to our Special Committee and Board of Directors and
addresses only the fairness, from a financial point of view, as
of the date of the opinion of the consideration of $18.16 per
share to be paid to the Minority Stockholders pursuant to the
merger agreement. Janney’s analysis and opinion did not
account for Additional Per Share Consideration, the effects of
the PHC-related liability or any disbursements made from the
portion of the Consideration held in escrow because of their
conditional natures. Janney’s opinion does not address any
other aspects of the merger and does not constitute a
recommendation
to any stockholder as to how such stockholder should vote or act
with respect to the merger or any matter related thereto. The
summary of Janney’s opinion set forth below is qualified in
its entirety by reference to the full text of the opinion.
In arriving at its opinion, Janney, among other things:
•
reviewed the historical financial performance, current financial
position and general prospects of the Company;
•
considered the proposed financial terms of the merger;
•
considered the results of efforts to solicit indications of
interest and definitive proposals from third parties with
respect to a possible acquisition of the Company;
•
reviewed the historical market price ranges and trading activity
performance of the common stock of the Company;
•
reviewed publicly-available information such as annual reports,
quarterly reports and SEC filings;
•
to the extent deemed relevant, analyzed information of certain
other selected public companies and compared the Company from a
financial point of view to these other companies;
•
to the extent deemed relevant, analyzed information of certain
other selected comparable merger and acquisition transactions
and compared the merger from a financial point of view to these
other transactions to the extent information concerning such
transactions was publicly available;
•
discussed with certain members of senior management of the
Company the strategic aspects of the merger, including, but not
limited to, past and current business operations, financial
condition and prospects (including their views on the risks and
uncertainties of achieving the Projections (as defined below));
•
reviewed a draft of the merger agreement dated
September 23, 2010 (3:03 pm);
•
discussed with the Company and its advisors hypothetical
scenarios with respect to personal holding company tax
liabilities; and
•
performed such other analyses and examinations as Janney deemed
necessary.
In Janney’s review and analysis and in rendering its
opinion, Janney relied upon the accuracy and completeness of all
of the financial and other information that was available to
Janney from public sources, that was provided to Janney by the
Company or its respective representatives or that was otherwise
reviewed by Janney and assumed such accuracy and completeness
for purposes of rendering Janney’s opinion. Janney further
relied on the assurances of management of the Company that they
were not aware of any facts or circumstances that would make any
of such information inaccurate or misleading. Janney was not
asked to and did not undertake any independent verification of
any of such information and Janney did not assume any
responsibility or liability for the accuracy or completeness
thereof. Janney did not make an independent evaluation or
appraisal of the specific assets, the collateral securing assets
or the liabilities (contingent or otherwise) of the Company or
BCP or any of their affiliates or subsidiaries, or the ability
to collect any such assets, nor was Janney furnished with any
such evaluations or appraisals.
With respect to the financial projections prepared by the
Company’s management and modified with reference to
financial updates provided by the Company (the
“Projections”) and discussed between Janney and the
Company’s management, which Projections were confirmed by
the Company’s management as reflecting the best currently
available estimates and judgments of such management of the
future financial performance of the Company, Janney assumed that
the future financial performance of the Company reflected
thereby will be achieved for the periods presented. Janney
expressed no opinion as to such Projections or the assumptions
on which they are based. Janney also assumed that there has been
no change in the Company’s or BCP’s assets, financial
condition, results of operations, business or prospects since
the date of the most recent financial statements made available
to Janney. Janney assumed in all respects material to its
analysis that the Company and Parent will remain as going
concerns for all periods relevant to its analysis, that all of
the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that
each party to such agreements will perform all of the covenants
required to be performed by such party under such agreements and
that the conditions precedent to the merger agreement are not
waived. Janney expressed no opinion as to the personal holding
company tax liabilities of the Company.
Janney’s opinion was rendered on the basis of market,
economic and other conditions prevailing as of the date of its
opinion and on the conditions and prospects, financial and
otherwise, of the Company, as they exist and were known to
Janney on the date of its opinion and Janney assumed no
responsibility for updating, revising or reaffirming its opinion
based on circumstances, developments or events occurring after
the date of the opinion. Janney’s opinion is directed to
the Special Committee and to the Board of Directors, in each
case in connection with its consideration of the merger, and
does not constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote on the merger.
Janney’s opinion is directed only to the fairness, from a
financial point of view, as of September 24, 2010, of the
Consideration to the Minority Stockholders and does not address
the fairness of the merger to, or any consideration received in
connection therewith by, stockholders other than the Minority
Stockholders or the amount or nature of any compensation to be
paid or payable to any of the officers, directors or employees
of the Company, whether relative to the consideration or
otherwise. Janney did not express any opinion as to the impact
of the merger on the solvency or viability of the Company, any
of the other parties to the merger agreement or BCP or their
ability to pay their debts when they become due.
Janney’s opinion does not address the relative merits of
the merger as compared to other business strategies or
transactions that might be available to the Company or the
Company’s underlying business decision to effect the
merger. At the Company’s direction, Janney has not been
asked to, nor does it, offer any opinion as to the terms, other
than the Consideration to the extent expressly specified in its
opinion, of the merger agreement or the form of the merger. In
rendering its opinion, Janney assumed, with the Company’s
consent, that (i) the final executed form of the merger
agreement did not differ in any material respect from the draft
dated September 23, 2010 (3:03 pm) that Janney reviewed,
(ii) the Company, Parent and Merger Subsidiary will comply
with all material terms of the merger agreement, and
(iii) the merger will be consummated in accordance with the
terms of the merger agreement without any adverse waiver or
amendment of any material term or condition thereof. Janney has
also assumed that all governmental, regulatory or other
consents, including BCP internal consents and approvals
necessary for the consummation of the merger, will be obtained
without any material adverse effect on the Company, Parent or
Merger Subsidiary or the merger. Janney’s opinion was
approved by a fairness opinion committee of Janney.
The following is a summary of the material financial analyses
delivered by Janney to the Special Committee in connection with
rendering the opinion described above. The following summary,
however, does not purport to be a complete description of the
financial analyses performed by Janney, nor does the order of
analyses described represent relative importance or weight given
to those analyses by Janney. Some of the summaries of the
financial analyses include information presented in tabular
format. The tables must be read together with the full text of
each summary and are alone not a complete description of
Janney’s financial analyses. Except as otherwise noted, the
following quantitative information, to the extent that it is
based on market data, is based on market data as it existed on
or before September 24, 2010 (the date on which Janney
completed its analyses) and is not necessarily indicative of
current market conditions. The following summary assumes the
Company exercises its option to effect the “Closing Phase
II”, as defined in the Asset Transfer Agreement between the
Company, PGI Spain, Tesalca-99, S.A., Texnovo, S.A. and Grupo
Corinpa, S.L. dated October 30, 2009 and as amended on
November 30, 2009, through the issuance of
393,675 shares of stock in the Company to the stockholders
of Texnovo-Tesalca.
Transaction
Premiums
Janney compared for illustrative purposes the Consideration in
relation to the market prices of the Company’s Class A
common stock over selected dates and selected periods. Janney
noted that the stock was thinly traded and highly illiquid with
an average daily trading volume of less than 7,000 shares.
The Consideration represented:
•
A discount of 15.5% to the closing price on September 24,2010, the day the opinion was delivered;
•
A premium of 5.3% to the closing price on April 6, 2010,
the day prior to the Company’s public announcement of
exploring strategic alternatives;
•
A premium of 10.5% to the one month average trading price of
$16.43 prior to April 6, 2010, the day prior to the
Company’s public announcement of exploring strategic
alternatives;
A premium of 10.8% to the three month average trading price of
$16.39 prior to April 6, 2010;
•
A premium of 22.2% to the six month average trading price of
$14.86 prior to April 6, 2010; and
•
A premium of 60.2% to the one year average trading price of
$11.34 prior to April 6, 2010.
Comparable
Public Company Analysis
Janney reviewed and compared certain financial information,
ratios and public market multiples for the Company to
corresponding financial information, ratios and public market
multiples for the following publicly traded corporations in the
nonwoven materials industry and other nonwoven companies:
Nonwoven Materials
Other Nonwoven Companies
• Ahlstrom Oyj
• Buckeye Technologies Inc.
• Avgol Industries 1953 Ltd.
• EI DuPont de Nemours & Co.
• Fiberweb plc
• Lydall Inc.
• Pegas Nonwovens S.A.
• Mitsui Chemicals Inc.
• Cia. Providencia Industria E Comercio.
• PH Glatfelter Co.
• Tredegar Corp.
Although none of the selected companies is directly comparable
to the Company, the companies included were chosen because they
are publicly traded companies with operations that for purposes
of analysis may be considered similar to certain operations of
the Company. Because the nonwoven materials companies are based
in countries outside the United States and trade on
international stock exchanges, Janney also examined
publicly-traded companies on United States stock exchanges that
have certain divisions or product lines in the nonwoven
industry, but whose overall operations are diversified across
industries other than the nonwoven materials companies. Janney
calculated and compared various financial multiples and ratios
based on recent publicly available financial data and Bloomberg
estimates
and/or other
investment firm research. The multiples and ratios of the
Company and the selected companies were calculated using the
closing price of each company’s shares on
September 24, 2010.
With respect to the Company and the selected companies, Janney
calculated the following using publicly available information to
determine:
•
the enterprise value, which is the market value of common equity
plus the book value of debt less cash, as a multiple of the
earnings before interest, taxes, depreciation and amortization,
or EBITDA, for the latest twelve months period;
•
enterprise value as a multiple of EBITDA for estimated calendar
years 2010 and 2011, based on Bloomberg estimates
and/or other
investment firm research;
•
enterprise value as a multiple of EBITDA less capital
expenditures for the latest twelve months period; and
•
the
price-to-earnings
ratios for the latest twelve months period.
The following table presents the results of this analysis:
Comparable
Public Company Multiples-Nonwoven Materials
Comparable
Public Company Multiples-Other Nonwoven Companies
Implied Company
Benchmark
Low
High
Average
Median
Multiple at $18.16
Enterprise Value/LTM EBITDA
4.2x
7.8x
5.9x
5.8x
6.1x
Enterprise Value/2010E EBITDA
5.3x
8.0x
6.1x
5.5x
5.4x
Enterprise Value/2011E EBITDA
4.5x
7.8x
5.4x
4.7x
4.7x
Enterprise Value/LTM EBITDA-Capital Expenditures
4.9x
10.5x
8.8x
9.7x
8.9x
Price/LTM EPS
5.6x
27.7x
15.6x
13.3x
14.4x
Using the low/high reference ranges for the benchmarks set forth
above and financial information contained in the Company’s
Quarterly Report on Form
10-Q for the
quarterly period ended July 3, 2010, Janney determined
implied enterprise values for the Company, and then subtracted
total debt, including Tesalca-Texnovo net debt, subtracted
non-controlling interests and added cash and cash equivalents to
determine implied equity values. In determining the number of
shares outstanding for purposes of calculating implied values
per share of the Company common stock, Janney assumed the
vesting of all stock options, restricted stock and restricted
stock units, in each case assuming “Closing Phase II”
had occurred. These analyses indicated the ranges of implied
values per share of the Company common stock set forth opposite
the relevant benchmarks below, compared, in each case, to the
Consideration.
Nonwoven
Materials
Benchmark
Range
Implied Share Price
Enterprise Value/LTM EBITDA
3.2x to 8.4
x
$
2.53 to $30.94
Enterprise Value/2010E EBITDA
2.6x to 6.9
x
$
1.54 to $27.41
Enterprise Value/2011E EBITDA
2.7x to 6.6
x
$
4.62 to $31.31
Enterprise Value/LTM EBITDA-Capital Expenditures
10.8x to 15.1
x
$
24.97 to $40.61
Price/LTM EPS
7.4x to 16.3
x
$
8.56 to $18.90
Other
Nonwoven Companies
Benchmark
Range
Implied Share Price
Enterprise Value/LTM EBITDA
4.2x to 7.8
x
$
8.00 to $27.38
Enterprise Value/2010E EBITDA
5.3x to 8.0
x
$
17.48 to $34.05
Enterprise Value/2011E EBITDA
4.5x to 7.8
x
$
16.99 to $40.06
Enterprise Value/LTM EBITDA-Capital Expenditures
4.9x to 10.5
x
$
3.62 to $23.76
Price/LTM EPS
5.6x to 27.7
x
$
6.55 to $32.12
Selected
Transactions Analysis
Janney analyzed certain information relating to the following
selected transactions in the nonwoven materials industry that
have been completed since 2005 with transaction equity values
ranging from $7.5 million to $1.2 billion.
These transactions (listed by acquirer/target and date of
announcement) were:
For each of the selected transactions, Janney calculated and
compared the enterprise value as a multiple of latest twelve
months EBITDA, using publicly available data, and then
calculated the low and high of these multiple values for all
transactions. While none of the companies that participated in
the selected transactions are directly comparable to the
Company, these companies were chosen because they are publicly
traded companies with operations that, for the purposes of
analysis, may be considered similar to certain of the
Company’s results, market size and product profile.
The following table presents the results of this analysis:
Comparable
Transaction Multiples
Implied Company
Benchmark
Low
High
Average
Median
Multiple at $18.16
Enterprise Value/LTM EBITDA
3.0
x
9.4
x
5.9
x
5.3
x
6.1x
Using the low/high reference ranges for the benchmark set forth
above, Janney determined implied enterprise values for the
Company and calculated implied equity values in the same manner
as with respect to the Comparable Public Company analysis
described above. This analysis yielded an implied value range of
$1.69 to $36.05 per share.
Illustrative
Leverage Buyout and Discounted Cash Flow Analysis
Janney performed an illustrative leveraged buyout analysis and
an illustrative discounted cash flow analysis. Although Janney
performed these analyses for illustrative purposes, Janney
advised the Special Committee and our Board of Directors that it
did not consider these analyses to be meaningful for the reasons
described below. Janney noted that the Projections used in these
analyses only included a 2.5 year projection model and not
a complete five year projection model that is more typical for
completing such analyses. In addition, the projected capital
expenditures for 2012 were incomplete and included estimated
capital expenditures of $15 million for specific projects
which were identified at the time such Projections were
prepared. This amount is lower than historical capital
expenditures which ranged from $34.5 million to
$60.7 million in 2007 to 2009.
For purposes of the illustrative leveraged buyout analysis to
estimate the theoretical purchase price that a financial buyer
could pay in an acquisition of the Company, Janney assumed that
the capital structure of the Company that would result from the
theoretical transaction would be identical to the capital
structure proposed by Parent and that such a financial buyer
would attempt to realize a return on its investment in fiscal
year 2012. Estimated financial data for the Company was based on
the Projections, which covered fiscal years 2010 through 2012.
Estimated exit values for the Company were calculated by
applying an exit value multiple range of 5.5x to 6.5x to fiscal
year 2012 EBITDA, as estimated by Company management. Janney
then derived a range of theoretical purchase prices based on an
assumed required internal rate of return for a financial buyer
of between 22.5% and 27.5%. This analysis implied a value range
of $23.26 per share to $27.37 per share.
With respect to the illustrative discounted cash flow analysis,
Janney calculated indications of the net present value of free
cash flows for the Company for six months of 2010 and the years
2011 through 2012. Janney calculated illustrative value
indications per share of Company Common Stock using the
Projections and illustrative terminal value indications in the
year 2012 based on terminal multiples ranging from 5.5x 2012E
EBITDA to 6.5x 2012E EBITDA and discounting these terminal
values to illustrative present values using discount rates
ranging from 10.0% to 13.0%, reflecting estimates of the
Company’s weighted average cost of capital. This analysis
resulted in a range of illustrative per share value of $29.31 to
$39.20.
Premiums
Paid Analysis
The Company’s stock is thinly traded and highly illiquid.
Furthermore, the stock price reflects the public announcement on
April 7, 2010 that the Company had hired financial advisors
and was exploring strategic alternatives. As a result, Janney
calculated the high and low price premiums paid per share
relative to the market closing price of target companies on
April 6, 2010, the day prior to the Company’s public
announcement of exploring strategic alternatives, for announced
and completed cash transactions involving target companies in
the United States in all industries except financial
institutions since September 24, 2009 with transaction
values between $500 million and $1.5 billion, using
publicly available historical data but
excluding transactions with undisclosed values. Based on this
information, Janney then calculated the high and low of these
implied premiums values for one day, one week and one month
prior to announcement of strategic alternatives.
The following table presents the results of this analysis:
Premiums
Paid Percentages
Time Period Prior to Announcement
Low
High
Implied Share Price
1 Day
–3.9
%
91.2
%
$
16.58
$
32.98
1 Week
–2.0
%
95.0
%
$
16.17
$
32.18
1 Month
2.8
%
139.0
%
$
16.76
$
38.96
Because prices of thinly traded securities tend to be more
volatile than those traded more actively, Janney placed less
relevance on this valuation methodology.
General
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Janney’s opinion. In arriving at its fairness
determination, Janney considered the results of all of its
analyses and did not attribute any particular weight to any
factor or analysis considered by it. Rather, Janney made its
determination as to fairness on the basis of its experience and
professional judgment after considering the results of all of
its analyses.
These analyses do not purport to be appraisals nor do they
necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested
by these analyses. Because these analyses are inherently subject
to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors,
none of the Company, Parent, Janney or any other person assumes
responsibility if future results are materially different from
those forecast.
Janney’s opinion and financial analyses provided to our
Special Committee and our Board of Directors in connection with
their respective evaluations of the Consideration were among
many factors considered by our Special Committee and our Board
of Directors in their respective evaluations of the merger and
should not be viewed as determinative of the views of the
Special Committee, the Board of Directors or management with
respect to the merger or the consideration payable in the
merger. Janney was not requested to, and it did not, recommend
the specific consideration payable in the merger. The type and
amount of consideration payable in the merger was determined
through negotiation between the Company and BCP, and the
decision to enter into the merger agreement was solely that of
our board of directors. Janney, as part of its investment
banking business, is engaged in the valuation of companies and
their securities in connection with mergers and acquisitions.
Janney acted as financial advisor to the Special Committee on a
monthly retainer basis for Janney’s services. Janney also
received a fee for rendering its opinion (which fee is not
contingent on the successful completion of the merger). Janney
will not receive any other significant payment or compensation
contingent upon the successful completion of the merger. The
Company has agreed to reimburse Janney’s reasonable
expenses and to indemnify Janney for certain liabilities arising
out of rendering its opinion. In addition, in the ordinary
course of Janney’s business as a broker-dealer, Janney may,
from time to time, have a long or short position in, and buy or
sell, debt or equity securities of the Company for Janney’s
own account or for the accounts of Janney’s customers.
Parent has obtained debt and equity financing commitments for
the purposes of funding the merger and the other transactions
contemplated by the merger agreement.
Pursuant to the debt financing commitments, dated as of
October 4, 2010, Citigroup Global Markets Inc., Morgan
Stanley Senior Funding, Inc., Barclays Bank PLC, Barclays
Capital, Royal Bank of Canada and RBC Capital Markets have
agreed to lend certain amounts subject to the terms and
conditions set forth therein. The debt financing commitments
provide for (1) a senior secured revolving asset-based
facility in an aggregate principal amount of $50 million
(the “Revolving Facility”) and
(2) $545 million of either (i) senior secured
notes issued in a public offering or in a Rule 144A or
other private placement
and/or
(ii) senior secured increasing rate loans under a senior
secured credit facility (the “Bridge Facility”),
provided that such $545 million will be reduced on a
dollar-for-dollar
basis in the amount (not to exceed $50 million) by which
certain existing indebtedness of the Company or its subsidiaries
is rolled over in connection with the merger. The availability
of funds under the Revolving Facility will be tied to a
borrowing base of the Company’s receivables and inventory.
If the borrowing base is less than $45 million, then at the
option of the borrower under the Revolving Facility and prior to
the commencement of the 20 consecutive business day
“marketing period” to complete the debt financing, the
Bridge Facility may be increased by the shortfall in an amount
up to $20 million.
The debt financing commitments are subject to certain
conditions, including, among others:
•
if the transaction does not close prior to November 1,2010, the consolidated EBITDA of the Company for the four
quarters ending October 4, 2010 not being less than
$111 million;
•
the absence of a material adverse effect (as defined in the
section titled “The Merger Agreement –
Representations and Warranties” beginning on
page [•]) on the Company since January 2, 2010;
•
the accuracy of any representations and warranties of the
Company in the merger agreement, the breach of which would rise
to the level at which Parent and Merger Subsidiary would not be
required to effect the merger;
•
solely with respect to the Bridge Facility, the expiration of 20
consecutive business days following Parent’s delivery of a
high yield offering memorandum and other required marketing
documents, subject to certain restrictions in connection with
the “marketing period” described in the section titled
“The Merger Agreement – When the Merger Becomes
Effective” beginning on page [•];
•
delivery of a certificate of the Company’s chief financial
officer confirming the solvency of the borrower under the
Revolving Facility and its subsidiaries on a consolidated basis
after giving effect to the transactions contemplated by the
merger agreement;
•
delivery of certain historical and pro forma financial
statements of the Company and the borrower under the Revolving
Facility;
•
execution and delivery of definitive documentation in connection
with the debt financing;
•
funding of the equity financing; and
•
simultaneous consummation of the Merger.
For a description of certain covenants in the merger agreement
pertaining to such financing commitments, please see the section
titled “The Merger Agreement – Financing
Covenant” beginning on page [•].
Equity
Financing
Parent has obtained an equity financing commitment, dated as of
October 4, 2010, from BCP in the amount up to
$260 million, subject to the terms and conditions set forth
therein, for the purpose of enabling Parent to fund a portion of
the merger consideration. The Company is a third party
beneficiary under the equity financing commitment and has the
ability to specifically enforce the equity financing if
(i) Parent and Merger Subsidiary are required to consummate
the merger on account of the closing conditions having been
satisfied and (ii) the debt financing (or alternative
financing if the debt financing becomes unavailable on the
agreed upon terms and conditions) has been funded or will be
funded at the closing if the equity financing is funded at the
closing, in each case subject to the conditions and limitations
described in the section titled “The Merger
Agreement – Termination Fees and Remedies”
beginning on page [•].
The obligations of Parent and Merger Subsidiary to close the
merger are not conditioned upon the consummation of the
financing. A failure of Parent and Merger Subsidiary to close
the merger resulting from a failure or inability to consummate
the financing would constitute a breach for purposes of the
merger agreement, the remedies for which would include, as
described in the section titled “The Merger
Agreement – Termination Fees and Remedies”
beginning on page [•], the following:
•
the right to receive the Parent Termination Fee; and
•
the right to specifically enforce the equity financing, in the
event that (i) Parent and Merger Subsidiary are required to
consummate the merger on account of the closing conditions
having been satisfied and (ii) the debt financing (or
alternative financing if the debt financing becomes unavailable
on the agreed upon terms and conditions) has been funded or will
be funded at the closing if the equity financing is funded at
the closing.
Concurrently with the execution of the merger agreement, BCP, in
its capacity as the Guarantor, executed and delivered a limited
guarantee in favor of the Company, pursuant to which the
Guarantor absolutely, irrevocably and unconditionally guarantees
the due and punctual payment when due of the Parent Termination
Fee and any other amounts payable by Parent to the Company under
the merger agreement, subject to a cap of $15 million,
provided that such cap is increased to $30 million solely
under those circumstances where the Parent Termination Fee is
equal to $30 million, as further described in the section
titled “The Merger Agreement – Termination Fees
and Remedies” beginning on page [•].
Promptly after the effective time of the merger, the paying
agent will send to each holder of record of a certificate
previously representing a share of Company Common Stock (each, a
“certificate”) a letter of transmittal describing how
such holder may exchange such certificate for the consideration
to be paid in accordance with the terms of the merger agreement.
You should not return your certificates to the paying agent
without a letter of transmittal, and you should not return your
certificates to the Company.
In the event of a transfer of ownership of Company Common Stock
that is not registered in the records of our transfer agent, the
merger consideration may be paid to a person other than the
person in whose name the certificate so surrendered is
registered if the certificate so surrendered is properly
endorsed or otherwise in proper form for transfer, and the
person requesting the payment will have paid all applicable
taxes relating to the payment of the Per Share Closing Payment
to a person other than the registered holder of the certificate
surrendered, or will have established to the reasonable
satisfaction of Parent that such taxes have been paid or are not
applicable.
If your shares of Company Common Stock are held in “street
name” by your broker, bank or other nominee, you will
receive instructions from your broker, bank or other nominee as
to how to effect the surrender of your “street name”
shares of Company Common Stock in exchange for the merger
consideration.
You should be aware that the Company’s directors and
officers have interests in the merger that are described below
and may be different from or in addition to the interests of our
stockholders generally and that may present a conflict of
interest. Our Special Committee and Board of Directors were
aware of these interests and considered that the interests may
be different from or in additional to the interests of our
stockholders generally in making their respective determinations
and recommendations in connection with the merger agreement and
the transactions contemplated thereby. You should consider these
and other interests of our directors and officers that are
described in this information statement.
Agreement
with Veronica M. Hagen
In connection with the execution of the Merger Agreement,
Ms. Hagen entered into an agreement with Parent (the
“Hagen Agreement”) which will become effective as of
the effective time of the merger and will
supersede the employment agreement she entered into with the
Company dated as of April 23, 2010 (the “Original
Agreement”). When the Hagen Agreement becomes effective,
Ms. Hagen will have no further rights under the Original
Agreement.
Unless earlier terminated pursuant to its terms, the term of the
Hagen Agreement begins as of the effective time of the merger
and ends on the fifth anniversary of such date. Under the Hagen
Agreement, Ms. Hagen’s annual base salary will be
$800,000, subject to annual review and adjustment by the Board
of Directors in its discretion (the “Base Salary”).
Ms. Hagen will be eligible to participate in all of the
Company’s employee benefit programs for which employees of
the Company and its subsidiaries are generally eligible,
including health, life, retirement and disability benefit
programs. Ms. Hagen will also be entitled to the use of an
automobile during the term of the Hagen Agreement, with any
costs associated with this benefit in excess of $17,242 per year
to be borne by Ms. Hagen.
Ms. Hagen will be entitled to receive an annual bonus (an
“Annual Bonus”) pursuant to a short-term cash
incentive bonus plan to the extent that such a plan is
implemented for any given year, in the Board’s discretion.
Ms. Hagen’s target Annual Bonus under such bonus plan
may not exceed 100% of the Base Salary, and the maximum Annual
Bonus payable to her will be 200% of the Base Salary.
Pursuant to the terms of the Hagen Agreement, as soon as
reasonably practicable following the effective time of the
merger, Ms. Hagen will invest in Parent an amount equal to
50% of the after-tax proceeds she receives in respect of the
equity she held in the Company immediately prior to the
effective time of the merger. In addition, on each escrow
release date, Ms. Hagen will make an additional investment
in Parent in an amount equal to 50% of the after-tax proceeds
she receives on each such escrow release date. All shares of
Parent held by Ms. Hagen will be subject to
(a) transfer restrictions and (b) a call right by
Parent if Ms. Hagen’s employment is terminated for any
reason, if Ms. Hagen competes with Parent or the Company
following a voluntary resignation by Ms. Hagen after the
third anniversary of the effective time of the merger or if
Ms. Hagen violates any restrictive covenants included in
the Hagen Agreement. The parties to the Hagen Agreement have
also agreed to create an equity program pursuant to which
Ms. Hagen will be granted stock options in respect of
shares of Parent, although the economic terms for such options
have not been agreed upon at this time.
On April 23, 2013, provided Ms. Hagen is an employee
on such date, the Company will grant to her a one-time award of
shares of Parent having a value equal to $694,000. Such equity
award is subject to earlier payment upon certain terminations of
Ms. Hagen’s employment, as described below.
Parent may terminate the Hagen Agreement immediately upon
Ms. Hagen’s death or disability or with notice of
termination to Ms. Hagen at any time, with or without
“cause” (which term generally includes actions by
Ms. Hagen that constitute a material breach of the terms of
the Hagen Agreement; a breach of the duty of loyalty or any act
of dishonesty or fraud with respect to the Company; commission
of a felony, a crime involving moral turpitude or other act
causing material harm to the Company; use of alcohol in the
workplace or the use of illegal drugs at any time; or any
willful act or omission that aids or abets a competitor to the
material disadvantage or detriment of the Company). In addition,
the Hagen Agreement will terminate upon Ms. Hagen’s
resignation with or without “good reason” (which term
generally includes any reduction in the Base Salary, failure to
pay the Base Salary or Annual Bonus, assignment of duties
materially inconsistent with Ms. Hagen’s position as
in effect at the effective time of the merger, change in
Ms. Hagen’s title as in effect at the effective time
of the merger or removal or failure to re-elect Ms. Hagen
to positions in effect at such time, unfounded termination for
cause or disability, or a change in the Company’s
headquarters by at least 50 miles).
If the Hagen Agreement is terminated by the Company for cause or
Ms. Hagen resigns other than for good reason,
Ms. Hagen will be entitled to receive only her Base Salary
through the date of termination and will not be entitled to
receive any other salary, compensation or benefits from the
Company or its subsidiaries, except as otherwise specifically
provided for under the Company’s employee benefit plans or
as otherwise expressly required by applicable law.
If Ms. Hagen’s employment is terminated by the Company
other than for cause or by her with good reason (each, an
involuntary termination) during the term of the Hagen Agreement,
Ms. Hagen will be entitled to receive certain severance
payments described below and, in the event such involuntary
termination occurs
prior to April 23, 2013, the retention equity award
described above. Such severance payments include (i) 1.5
times the sum of (A) the Base Salary and (B) the
target Annual Bonus for the fiscal year in which the termination
occurs, (ii) the pro rata portion of the Annual Bonus based
on the number of days Ms. Hagen is employed during the
fiscal year in which the termination occurs, determined as
though she had continued to be employed through the end of such
fiscal year, and (iii) any earned but unpaid Annual Bonus
with respect to a previously completed fiscal year. In addition,
Ms. Hagen is entitled to continuation of welfare benefits
for 18 months following such involuntary termination. The
severance payments and benefits described above are conditioned
upon Ms. Hagen signing and not revoking a general release
of claims in favor of the Company and Parent, and complying with
certain restrictive covenants described below.
In the event of Ms. Hagen’s disability or death,
Ms. Hagen or her heirs, as applicable, will be entitled to
receive only her Base Salary through the date of such event and
any earned but unpaid Annual Bonus with respect to a previously
completed fiscal year.
Ms. Hagen must repay to the Company certain cash and equity
awards (including the equity award) if, prior to or within two
years following the termination of Ms. Hagen’s
employment, (i) the Company is required to make a material
restatement of financial results for years during which
Ms. Hagen was an employee and due to actions or inactions
by her or of which she had knowledge, or
(ii) Ms. Hagen is found to have engaged in misconduct
while an employee, which, if discovered at the time would have
justified termination for cause.
The Hagen Agreement also contains a standard confidentiality
provision as well as non-competition, non-solicitation and
non-disparagement restrictions. The confidentiality and
non-disparagement provisions apply during the term of
Ms. Hagen’s employment and following any termination
thereof. The non-solicitation and non-competition provisions
apply during the term of Ms. Hagen’s employment and
for 18 months following any termination thereof.
The Hagen Agreement also provides that, in the event that
Ms. Hagen receives an “excess parachute payment”
as defined in Section 280G(b)(1) of the Code, which
subjects her to an excise tax under Section 4999 of the
Code, her total severance payments and benefits may be reduced
to an amount such that she will not be subject to the excise
tax. Ms. Hagen’s severance payments and benefits will
only be reduced if she would be in a better after-tax position
after the reduction than she would be in without such reduction
taking into consideration payment of the excise tax under
Section 4999 of the Code. In all events, Ms. Hagen is
responsible for any excise tax that may be due on any excess
parachute payments.
Change
in Control Severance Compensation Agreements
The Company has entered into change in control severance
agreements with substantially uniform terms with certain of our
executive officers (other than Ms. Hagen) and other key
officers. As described in more detail below, each change in
control severance agreement provides for, among other things,
severance benefits, including lump sum salary and bonus
payments, continuation of benefits, acceleration of certain
equity awards and payment of legal fees and outplacement
services. The lump sum payment is conditioned upon the officer
signing a general release, and the other severance benefits are
conditioned upon the officer complying with certain
confidentiality, non-competition and non-solicitation clauses.
In the event of a qualifying termination within one year
following a “change in control”, which includes the
merger, the change in control severance agreements generally
entitle executive officers to (a) a lump sum payment equal
to two times the sum of (x) the executive officer’s
annual base salary and (y) the greater of the annual bonus
earned by the executive in respect of the most recently
completed fiscal year or annual target bonus for the year in
which the termination occurs, (b) acceleration of any
unvested shares of Company Restricted Shares and lapse of any
restrictions on such shares on the date that is 90 days
after such termination, (c) continuation of welfare
benefits for one year following termination, (d) payment of
all reasonable legal fees and expenses associated with the
termination and (e) reasonable outplacement services having
a value of up to $15,000. A qualifying termination includes a
termination of employment by the executive officer for
“good reason” (which generally includes any reduction
in base salary, assignment of duties inconsistent with the
executive officer’s position, failure of the Company to
continue to provide any material compensation or welfare or
benefit following the effective date of a change in control,
unfounded
termination for cause or disability, or involuntary relocation
of the executive officer’s principal residence by
100 miles or more) or a termination of the executive
officer’s employment by the Company without
“cause” (which generally includes any action by the
executive which constitutes a breach of the terms of the change
in control agreement; a breach of the executive officer’s
duty of loyalty or an act of dishonesty or fraud with respect to
the Company; commission of a felony, a crime involving moral
turpitude or other actions causing material harm to the Company;
use of alcohol in the workplace or illegal drugs at any time; or
any willful act or omission that aids or abets a competitor to
the material disadvantage or detriment of the Company). Each
change in control severance agreement also provides that in the
event that the executive officer receives an ‘‘excess
parachute payment” as defined in Section 280G(b)(1) of
the Code, which subjects the executive officer to an excise tax
under Section 4999 of the Code, the executive
officer’s total severance payments and benefits may be
reduced to an amount such that the executive officer is not
subject to the excise tax. The executive officer’s
severance payments and benefits will only be reduced if the
executive officer would be in a better after-tax position after
the reduction than he would be in without such reduction taking
into consideration payment of the excise tax under
Section 4999 of the Code. In all events, the executive
officer is responsible for any excise tax that may be due on any
excess parachute payments.
In addition, certain of our officers have entered into letter
agreements with the Company, which generally provide each such
executive with either or both of (i) relocation benefits in
the event of a resignation by the officer for good reason
pursuant to the change in control severance agreement and
(ii) severance benefits in the event of the lapse of the
change in control severance agreement.
Treatment
of PGI Equity Awards
As of the date of this information statement, certain of the
Company’s officers hold (i) options to purchase shares
of Company Common Stock (“Company Stock Options”)
granted pursuant to the Company 2003 Stock Option Plan,
(ii) shares of restricted Company Common Stock
(“Company Restricted Shares”) granted pursuant to the
Company 2005 Employee Restricted Stock Plan and the Amended and
Restated Company 2008 Long-Term Stock Incentive Plan (“2008
Stock Plan”), (iii) restricted stock units that
entitle the holder to a share of Company Common Stock upon the
satisfaction of service-based vesting requirements and in
accordance with the terms and conditions of the applicable
awards (“Company RSUs”) granted pursuant to the 2008
Stock Plan, and (iv) restricted stock units that entitle
the holder to a share of Company Common Stock upon the
satisfaction of performance-based vesting requirements and in
accordance with the terms and conditions of the applicable
awards (“Company Performance RSUs”) granted pursuant
to the 2008 Stock Plan. Generally, immediately prior to the
consummation of a “change in control” (as defined in
the Company’s various equity plans), the various
outstanding equity-based awards vest and all restrictions lapse,
as applicable.
In addition, as of the date of this information statement, our
non-employee directors hold Company Restricted Shares granted
pursuant to the Amended and Restated Company 2004 Restricted
Stock Plan. Directors generally receive 50% of their annual
retainer fees in the form of Company Restricted Shares and may
elect to receive additional Company Restricted Shares in lieu of
cash payments for quarterly directors’ fees. Generally,
immediately prior to the consummation of a “change in
control” (as defined in the 2004 Restricted Stock Plan),
all restrictions on Company Restricted Shares granted pursuant
to this plan lapse.
Company Stock Options. Except as otherwise
agreed to by Parent and the holder of a Company Stock Option, at
the effective time of the merger, each outstanding Company Stock
Option will be canceled and converted into the right to receive,
in full satisfaction of the rights of such holder with respect
thereto, (i) upon the effective time of the merger, an
amount in cash equal to the number of shares of Company Common
Stock subject to such Company Stock Option multiplied by the
excess of the Per Share Closing Payment over the exercise price
for such Company Stock Option, which is in all cases $6.00 per
share, and (ii) on each escrow release date, an amount in
cash equal to the number of shares of Company Common Stock
subject to such Company Stock Option multiplied by the Per Share
Escrow Payment, in each case, less any applicable withholding
taxes.
Company Restricted Shares. Except as otherwise
agreed to by Parent and the holder of a Company Restricted
Share, at the effective time of the merger, each outstanding
Company Restricted Share will be converted into the right to
receive (i) upon the effective time of the merger, an
amount in cash equal to the Per
Share Closing Payment and (ii) on each escrow release date,
an amount in cash equal to the Per Share Escrow Payment, in each
case, less any applicable withholding taxes.
Company RSUs. Except as otherwise agreed to by
Parent and the holder of a Company RSU, at the effective time of
the merger, each outstanding Company RSU will be converted into
the right to receive, in full satisfaction of the rights of such
holder with respect thereto, (i) upon the effective time of
the merger, an amount in cash equal to the number of shares of
Company Common Stock issuable pursuant to such Company RSU
multiplied by the Per Share Closing Payment and (ii) on
each escrow release date, an amount in cash equal to the number
of shares of Company Common Stock issuable pursuant to such
Company RSU multiplied by the Per Share Escrow Payment, in each
case, less any applicable withholding taxes.
Company Performance RSUs. Except as otherwise
agreed to by Parent and the holder of a Company Performance RSU,
at the effective time of the merger, each outstanding Company
Performance RSU will be converted into the right to receive, in
full satisfaction of the rights of such holder with respect
thereto, (i) upon the effective time of the merger, an
amount in cash equal to the number of shares of Company Common
Stock issuable pursuant to such Company Performance RSU assuming
attainment of the target level of performance applicable to such
Company Performance RSU, multiplied by the Per Share Closing
Payment, and (ii) on each escrow release date, an amount in
cash equal to the number of shares of Company Common Stock
issuable pursuant to such Company Performance RSU assuming
attainment of the target level of performance applicable to such
Company Performance RSU, multiplied by the Per Share Escrow
Payment, in each case, less any applicable withholding taxes.
Value
of PGI Equity Awards
The following table sets forth information as of
October 27, 2010 for each of our directors and executive
officers who currently holds Company Stock Options, including
(a) the aggregate number of shares of Company Common Stock
subject to vested Company Stock Options; (b) the value of
such vested Company Stock Options, on a pre-tax basis,
calculated by multiplying (i) the excess, if any, of the
Per Share Closing Payment over the respective per share exercise
prices of those Company Stock Options by (ii) the number of
shares of Company Common Stock subject to those Company Stock
Options; (c) the value of such vested Company Stock
Options, on a pre-tax basis, calculated by multiplying
(i) the Per Share Escrow Amount by (ii) the number of
shares of Company Common Stock subject to those Company Stock
Options; (d) the aggregate number of unvested Company Stock
Options that will vest on the effective time of the merger;
(e) the value of such unvested Company Stock Options on a
pre-tax basis, calculated by multiplying (i) the excess, if
any, of the Per Share Closing Payment over the respective per
share exercise prices of those Company Stock Options by
(ii) the number of shares of Company Common Stock subject
to those Company Stock Options; (f) the value of such
unvested Company Stock Options, on a pre-tax basis, calculated
by multiplying (i) the Per Share Escrow Amount by
(ii) the number of shares of Company Common Stock subject
to those Company Stock Options; (g) the aggregate number of
shares of Company Common Stock subject to vested Company Stock
Options and unvested Company Stock Options that will vest on the
effective time of the merger; (h) the aggregate value of
all such vested Company Stock Options and unvested Company Stock
Options that will vest on the effective time of the merger on a
pre-tax basis, calculated by multiplying (i) the excess, if
any, of the Per Share Closing Payment over the respective per
share exercise prices of those Company Stock Options by
(ii) the number of shares of Company Common Stock subject
to those Company Stock Options; and (i) the aggregate value
of all such vested Company Stock Options and unvested Company
Stock Options that will vest on the effective time of the merger
on a pre-tax basis, calculated by multiplying (i) the Per
Share Escrow Amount by (ii) the number of shares of Company
Common Stock subject to those Company Stock Options. The
information in the table assumes (a) all currently
outstanding Company Stock Options will remain outstanding
immediately prior to the effective time of the merger and
(b) the effective
time of the merger will occur on or prior to December 31,2010 and will increase if the effective time occurs in 2011.
Vested Options
Options that Will Vest as a Result of the Merger
Totals
Value
Escrow
Value
Escrow
Value
Escrow
(Excluding
Fund
(Excluding
Fund
(Excluding
Fund
Escrow
Value
Escrow
Value
Escrow
Value
Name
Shares
Fund) ($)
($)
Shares
Fund) ($)
($)
Shares
Fund) ($)
($)
Executive Officers:
Ms. Hagen
—
—
—
—
—
—
—
—
—
Mr. Hale
—
—
—
—
—
—
—
—
—
Mr. Norman
2,250
34,313
6,548
750
11,437
2,182
3,000
47,750
8,730
The following table sets forth, for each of our directors and
executive officers who currently holds Company Restricted
Shares, all of which are unvested, the aggregate number of
shares of Company Common Stock that, as of October 27,2010, underlie the Company Restricted Shares, the value each
holder of Company Restricted Shares will receive pursuant to the
merger agreement at the effective time and the value with
respect to each Company Restricted Shares that will be deposited
into the escrow fund. The information in the table assumes
(a) all currently outstanding Company Restricted Shares
will remain outstanding immediately prior to the effective time
of the merger and (b) the effective time of the merger will
occur on or prior to December 31, 2010 and will increase if
the effective time occurs in 2011.
Total Value of
Unvested Restricted
Number of
Value of Unvested
Value of Unvested
Shares that will
Unvested
Restricted Shares
Restricted Shares
Vest as a
Restricted
(Excluding Value in
Subject to Escrow
Result of the
Name
Shares
Escrow Fund) ($)
Fund ($)
Merger ($)
Executive Officers:
Ms. Hagen
227,252
$
3,465,593
$
661,303
$
4,126,896
Mr. Hale
38,338
584,655
111,564
696,219
Mr. Norman
7,740
118,035
22,523
140,558
Directors:
Mr. Hewitt
9,212
140,483
26,807
167,290
Mr. Ovenden
7,676
117,059
22,337
139,396
Mr. Hall
6,327
96,487
18,412
114,899
Ms. Fessenden
7,676
117,059
22,337
139,396
The following table sets forth, as of October 27, 2010, for
each of our executive officers who currently holds Company
Performance RSUs or Company RSUs, all of which are unvested, the
(a) aggregate number of shares of Company Common Stock that
underlie the Company Performance RSUs, (b) the value of
such Company Performance RSUs, on a pre-tax basis, calculated by
multiplying (i) the Per Share Closing Payment by
(ii) the number of shares of Company Common Stock issuable
pursuant to those Company Performance RSUs assuming the target
level of performance applicable to such Company Performance RSUs
is attained, (c) the value of such Company Performance
RSUs, on a pre-tax basis, calculated by multiplying (i) the
Per Share Escrow Amount by (ii) the number of shares of
Company Common Stock issuable pursuant to those Company
Performance RSUs assuming the target level of performance
applicable to such Company Performance RSUs is attained,
(d) the aggregate number of shares of Company Common Stock
that underlie the Company RSUs, (e) the value of such
Company RSUs, on a pre-tax basis, calculated by multiplying
(i) the Per Share Closing Payment by (ii) the number
of shares of Company Common Stock issuable pursuant to those
Company RSUs, (f) the value of such Company Performance
RSUs, on a pre-tax basis, calculated by multiplying (i) the
Per Share Escrow Amount by (ii) the number of shares of
Company Common Stock issuable pursuant to those Company RSUs.
The information in the table assumes (a) all currently
outstanding Company Performance RSUs and Company RSUs will
remain outstanding immediately prior to the effective
time of the merger and (b) the effective time of the merger
will occur on or prior to December 31, 2010 and will
increase if the effective time occurs in 2011.
Unvested Company
Performance RSUs
Unvested Company RSUs
Totals
Value
Escrow
Value
Escrow
Value
Escrow
(Excluding
Fund
(Excluding
Fund
(Excluding
Fund
Escrow
Value
Escrow
Value
Escrow
Value
Name
Shares
Fund) ($)
($)
Shares
Fund) ($)
($)
Shares
Fund) ($)
($)
Executive Officers:
Ms. Hagen
49,526
$
755,272
$
144,121
—
$
—
$
—
49,526
$
755,272
$
144,121
Mr. Hale
21,208
323,422
61,715
—
—
21,208
323,422
61,715
Mr. Norman
16,502
251,656
48,021
—
—
16,502
251,656
48,021
Offer
Letters
The Company has entered into offer letter agreements with
substantially uniform terms with certain of our officers. The
offer letters provide for, among other things, a severance
benefit equal to six months of the officer’s then-current
base salary in the event that, within two years of the officer
beginning employment with the Company, the officer’s
employment is involuntarily terminated as a result of a change
in control of the Company, which includes the merger.
Short-Term
Incentive Compensation Plan
The Company maintains a short-term incentive compensation plan
for our key employees, including our executive officers. For
2010, this plan provides target bonus percentages of 100% of
base salary for Ms. Hagen and 55% for our other executive
officers, with a maximum potential payout of 200% of target. In
the event of a “change in control” (as defined in this
plan), which includes the Merger, all outstanding awards under
this plan become vested nonforfeitable, each in an amount
determined on the basis of the assumption that the applicable
performance targets have been achieved, and will be paid on the
normal payment date, which is expected to be in April 2011. In
the event an officer is terminated by the Company without
“cause” (as defined in this plan) following a change
in control, the officer is entitled to receive a pro-rated award
based on the number of full months the officer worked in the
year in which the change in control occurred.
Separation
Agreement with Robert J. Kocourek
Effective November 16, 2009, Mr. Kocourek resigned as
the chief financial officer of the Company, and on
October 15, 2009, we entered into a separation agreement
with Mr. Kocourek. Mr. Kocourek remained an employee
of the Company until April 16, 2010. Under the separation
agreement, Mr. Kocourek became entitled to receive
(a) continued payment of his base salary through
October 16, 2010 and, thereafter, until the earlier of
April 16, 2011 and the date on which he obtains alternate
employment and (b) an additional payment in respect of his
unused vacation days and paid time off days. In addition, the
Company continued to pay the employer portion of premiums for
group medical, dental and hospitalization insurance until
October 16, 2010. Mr. Kocourek also retained the
vested portion of his restricted stock awards and stock options.
In connection with the execution of the separation agreement,
Mr. Kocourek executed a general release of claims and will
remain subject to confidentiality, non-solicitation and
non-competition restrictions through April 16, 2011.
Other
Agreements
Except as disclosed in this information statement, there is no
present or proposed material agreement, arrangement,
understanding or relationship between Parent, Merger Subsidiary
or any of their respective executive officers, directors,
controlling persons or subsidiaries, on the one hand, and the
Company or any of its executive officers, directors, controlling
persons or subsidiaries, on the other hand.
Parent anticipates that certain executive officers and key
employees of the Company will be offered the opportunity to
invest a portion of the proceeds they receive in the merger with
respect to their currently owned equity (including Company Stock
Options, Company Restricted Shares, Company RSUs and Company
Performance RSUs) of the Company in shares of Parent common
stock. Parent has not made any such
arrangements with any executive officers or key employees of the
Company, other than Ms. Hagen, which is discussed above in
“– Agreement with Veronica M. Hagen.” Any
equity interests held after the merger by Ms. Hagen, the
other executive officers or key employees of the Company are
expected to be subject to the terms of a management
stockholders’ agreement or other similar agreement that
will contain customary transfer restrictions, tag-along rights
and drag-along rights, as well as repurchase rights that are
applicable in certain circumstances.
Following the execution of the merger agreement, Parent has
engaged in discussions with Ms. Hagen and certain executive
officers and key employees regarding the anticipated structure
of the equity incentives that are expected to be made available
by Parent following the completion of the merger. Pursuant to
these discussions, executive officers and certain key employees
of the Company are expected to be eligible to receive options
and/or other equity-based awards under an equity incentive plan
established by Parent after the closing of the merger. It is
currently anticipated that a portion of such options and other
equity-based awards will be subject to time-based vesting and
the remainder will be subject to performance-based vesting.
Indemnification
of Directors and Executive Officers; Directors’ and
Officers’ Insurance
Parent and the Company have agreed in the merger agreement that
all rights to indemnification, advancement of expenses and
exculpation existing on the date of the merger agreement in
favor of present or former directors, officers, employees and
agents pursuant to the amended and restated certificate of
incorporation and amended and restated bylaws of the Company (in
each case, as in effect immediately prior to the effective time
of the merger) are contract rights and have agreed to cause the
surviving corporation to honor such rights in accordance with
their terms, and that such rights to indemnification,
advancement of expenses and exculpation may not be modified or
amended in any way as to adversely affect the rights of any
covered person.
For six years from the effective time of the merger, Parent will
cause the Company or the surviving corporation to provide
officers’ and directors’ liability insurance covering
each person who was, on the date of the merger agreement, or
will be, on the closing date of the merger, covered under the
existing officers’ and directors’ liability insurance
policies of the Company or any of its subsidiaries with respect
to acts or omissions occurring prior to the effective time of
the merger.
The following discussion summarizes certain U.S. federal
income tax consequences of the merger that are generally
applicable to U.S. Holders (as defined below) of shares of
Company Common Stock. For purposes of this summary, a
“U.S. Holder” means a beneficial owner of shares
of Company Common Stock that is, for U.S. federal income
tax purposes: (a) an individual who is a citizen or
resident of the United States; (b) a corporation created or
organized in the United States or under the laws of the United
States or any political subdivision thereof; (c) an estate
the income of which is subject to U.S. federal income
taxation regardless of the source; or (d) a trust that
(i) is subject to the primary supervision of a court within
the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person. This summary does not deal with all
U.S. federal income tax considerations that may be relevant
to particular classes of holders in light of their special
circumstances, such as holders who are dealers in securities,
tax-exempt entities, banks or other financial institutions,
insurance companies, U.S. expatriates, regulated investment
companies, foreign persons, persons who hold their shares of
Company Common Stock as part of a hedging, integrated or
conversion transaction, a constructive sale or a straddle,
persons who acquired their shares of Company Common Stock upon
exercise of stock options or in other compensatory transactions,
persons whose functional currency is not the U.S. dollar,
holders who are subject to the alternative minimum tax
provisions of the Internal Revenue Code of 1986, as amended
(“the Code”) and holders who do not hold their shares
of Company Common Stock as “capital assets” within the
meaning of Section 1221 of the Code. Furthermore, no state,
local or foreign tax considerations are addressed herein.
This discussion is for general information purposes only and
does not address the tax consequences of transactions
effectuated prior to or after the merger (whether or not such
transactions occur in connection with the merger). The
discussion is based on U.S. federal income tax law in
effect as of the date hereof, which is subject to change at any
time (possibly with retroactive effect). No opinions of counsel
or rulings from the Internal Revenue Service (“IRS”)
have been requested or obtained regarding the tax consequences
described below. As a result, the IRS could disagree with
portions of this discussion.
If a partner in a partnership (or entity treated as a
partnership for U.S. federal income tax purposes) is a
holder, the tax treatment of such partner will generally depend
upon the status of the partner and upon the activities of the
partnership. Accordingly, partnerships (and entities treated as
partnerships for U.S. federal income tax purposes) and
partners of such partnerships should consult their own tax
advisors.
ALL HOLDERS OF SHARES OF COMPANY COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER.
The merger will constitute a fully taxable transaction (rather
than a tax-free reorganization) for U.S. federal income tax
purposes. Any taxable gain or loss to the U.S. Holder will
be a capital gain or loss and will be a long-term capital gain
or loss if the U.S. Holder’s holding period for the
shares of Company Common Stock surrendered in the merger is more
than one year. Long-term capital gain recognized by a
non-corporate U.S. Holder that is a U.S. citizen or
resident is eligible for preferential tax rates and is presently
taxed at a maximum rate of 15%, which rate is presently
scheduled to increase to 20% for taxable years beginning after
December 31, 2010.
In general, a U.S. Holder will have taxable gain or loss on
the merger equal to the difference between the amount realized
on the merger and the holder’s tax basis in the shares of
Company Common Stock. However, the treatment of the
holder’s interest in the escrow fund in determining the
holder’s amount realized is uncertain. Consequently, the
gain or loss to a U.S. Holder in the taxable year of the
merger is uncertain.
Although the matter is not free from doubt, a U.S. Holder
of shares of Company Common Stock likely will have an amount
realized on the merger equal to (1) the amount of cash
consideration such holder actually receives in exchange for such
shares (determined before the deduction of any applicable
withholding taxes) plus (2) the fair market value of such
holder’s interest in the escrow fund at the time of the
merger (this method of reporting, the “Fair Market Value
Method”). Under this method, the amount realized with
respect to any share of Company Common Stock generally will be
the trading price of such stock immediately before the Closing
Date.
In addition, under this method, a portion of each payment to the
U.S. Holder from the escrow fund will be imputed interest
taxable as ordinary income. The remaining amounts received from
the escrow fund will be taxable as capital gain to the extent
such amounts, when added to the cash received on the merger,
exceed the amount realized on the merger. The U.S. Holder
will be entitled to a capital loss if the total amount received
upon the merger and from the escrow fund (other than imputed
interest) is less than the amount realized on the merger.
Tax information provided to a U.S. Holder and the IRS on
Form 1099-B
for the year of the merger may reflect only the cash amounts
paid to the U.S. Holder on the merger and not the fair
market value of the U.S. Holder’s interest in the
escrow fund. Accordingly, a U.S. Holder reporting under the
Fair Market Value Method may receive a
Form 1099-B
reporting an amount received that is less than the amount such
holder will realize in the year of the merger. In addition, any
Form 1099-B
a U.S. Holder receives with respect to amounts paid from
the escrow fund in future years may reflect the entire amount
paid to the U.S. Holder (except imputed interest) and
therefore may not take into account the fact that the
U.S. Holder already included the value of its interest in
the escrow fund in such holder’s amount realized in the
year of the merger. As a result, U.S. Holders reporting
under this method should not rely on the amounts reported to
them on
Forms 1099-B
with respect to the merger. U.S. Holders are urged to
consult their own tax advisors regarding how to accurately
report their income under the Fair Market Value Method.
Under U.S. Treasury regulations, in rare and extraordinary
circumstances, deferred payments such as distributions from the
escrow fund may be so contingent and speculative so as to make
the value of the
contingent payments not reasonably ascertainable. In that case,
the U.S. Holder may report the sale under the “open
transaction” doctrine (this method of reporting, the
“Open Transaction Method”). The Open Transaction
Method does not take into account future payments from the
escrow until they are made, for purposes of determining the
U.S. Holder’s taxable gain on the merger. The Open
Transaction Method would not be available to U.S. Holders
if the public trading price of the Company Common Stock
immediately before the merger, reduced by the fixed cash payable
per share on the merger, was determined to be a reasonable
measure of the expected value of the future payments from the
escrow fund. A U.S. Holder should consult its tax advisor
if it wishes to report on the Open Transaction Method. No
assurance can be given that the Open Transaction Method will be
available.
Alternatively, the IRS may take the position that the full
amount of the escrowed funds should be treated as if it were
transferred to the holders on the Closing Date, subject to the
contingent obligation of holders to return all or a portion of
those funds to the Parent. If the IRS were to successfully
assert this position, a U.S. Holder would recognize gain or
loss in the year of the merger in an amount equal to the
difference, if any, between (1) the cash consideration
actually received plus the U.S. Holder’s ratable
portion of the escrowed funds and (2) such holder’s
adjusted tax basis in the surrendered shares of Company Common
Stock. A loss would then be allowed for payments from the escrow
fund to the Parent. In addition, under this approach,
U.S. Holders may be taxed annually on their ratable share
of the periodic earnings on the amounts deposited in the escrow
fund, whether or not such holders receive any cash with respect
to such earnings.
Because PGI Class C common stock is not publicly traded, it
is possible that U.S. Holders of this stock are eligible to
report gain on the merger under the installment method. A
U.S. Holder that is eligible to report under the
installment method must do so unless the U.S. Holder
affirmatively elects not to use the installment method.
U.S. Holders of PGI Class C common stock should
consult their tax advisors as to whether they wish to elect out
of installment sale treatment.
The taxation of the escrow arrangements is complex and
uncertain. Each U.S. Holder is urged to consult its tax
advisor regarding the tax consequences of the escrow fund.
Backup Withholding. A holder (other
than certain exempt holders, including certain foreign persons
and entities) may be subject to backup withholding unless such
holder provides its correct taxpayer identification number
(“TIN”), or certifies that it is awaiting a TIN, and
certifies as to no loss of exemption from backup withholding and
otherwise complies with the applicable requirements of the
backup withholding rules. A holder who fails to furnish a TIN
may be subject to tax penalties, and the gross proceeds of the
merger payable to such holder may be subject to backup
withholding (currently at a 28% rate which rate is presently
scheduled to increase to 31% for amounts paid after
December 31, 2010). Backup withholding is not an additional
tax. Rather, the amount of the backup withholding can be
credited against the U.S. federal income tax liability of
such holder, and a refund generally can be obtained by the
holder if backup withholding results in an overpayment of tax
and the holder timely furnishes the applicable information to
the IRS. A holder may also be subject to certain information
reporting requirements.
The following is a summary of the material regulatory
requirements for completion of the merger. There can be no
guarantee if and when any of the consents or approvals described
below, or any other regulatory consents or approvals that might
be required to consummate the merger, will be obtained, or as to
the conditions that such consents and approvals may contain.
The merger is subject to the requirements of the HSR Act and the
rules promulgated by the FTC, which prevent transactions such as
the merger from being completed until (i) certain
information and materials are furnished to the DOJ and the FTC
and (ii) the applicable waiting period is terminated or
expires. On October 12, 2010, Parent filed the requisite
notification and report forms under the HSR Act. On
October 22, 2010, the FTC advised the parties that early
termination of the HSR waiting period had been granted.
Notwithstanding the foregoing, at any time before or after the
completion of the merger, the DOJ, the FTC or any state may
still challenge the merger on antitrust grounds. Accordingly, at
any time before or after the completion of the merger, any of
the DOJ, the FTC or any state may take action under the
antitrust laws as it deems necessary or desirable in the public
interest, including, without limitation, seeking to enjoin the
completion of the merger, permitting completion subject to
regulatory concessions or conditions or seeking divestiture of
the business acquired as a result of the merger. Private parties
and
non-U.S. governmental
authorities may also institute legal actions under the antitrust
laws under some circumstances. There can be no assurance that a
challenge to the merger under the antitrust laws will not be
made, or, if such a challenge is made, that it will not succeed.
Under the merger agreement, consummation of the merger is also
conditional upon the filings and receipt, termination or
expiration, as applicable, of the approvals, consents or waiting
periods as may be required under the applicable competition,
merger control, antitrust or similar applicable law of certain
foreign jurisdictions. In addition, the Company is required to
use its reasonable best efforts to make any submissions,
certifications or agreements necessary to comply with any
applicable requirements of the New Jersey Industrial Site
Recovery Act or similar real property transfer law.
Shares of PGI Class A common stock and PGI Class B
common stock currently trade on the OTC Bulletin Board
under the stock symbols “POLGA” and “POLGB”,
respectively. Upon completion of the merger, all shares of PGI
Class A common stock and PGI Class B common stock will
cease to be listed for trading on the OTC Bulletin Board
and will be deregistered under the Exchange Act.
A purported class action lawsuit has been filed by a minority
stockholder of the Company challenging the proposed transaction
and naming as defendants the Company, the Company’s Board
of Directors and The Blackstone Group LP. Such stockholder
action was filed in Mecklenburg County, North Carolina (John
B. Dugdale vs. Polymer Group, Inc, et. Al.,
No. 10-CVS-20527).
The stockholder action alleges (1) that the Company’s
Board of Directors breached its fiduciary duties to the
Company’s minority stockholders by authorizing the merger
with Parent for inadequate consideration and pursuant to an
inadequate process and (2) that the Company and The
Blackstone Group LP aided and abetted the other defendants’
alleged breaches of their fiduciary duties. The stockholder
action seeks, among other things, an order enjoining the
defendants from completing the merger on the agreed upon terms,
rescinding the merger agreement, implementing a constructive
trust in favor of plaintiffs upon any benefits received by the
defendants as a result of the allegedly wrongful conduct and
awarding attorneys’ and experts’ fees. The defendants
believe the claims are without merit and intend to defend
against them vigorously.
The following is a summary of the material provisions of the
merger agreement and is qualified in its entirety by reference
to the complete text of the merger agreement, which is attached
as Annex A to this information statement and is
incorporated into this information statement by reference. This
summary does not purport to be complete and may not contain all
the information about the merger agreement that is important to
you. We urge you to read the merger agreement carefully and in
its entirety because it, and not this information statement, is
the legal document that governs the merger.
The merger agreement has been included to provide our
stockholders with information regarding its terms. It is not
intended to provide to any person not a party thereto any other
factual information about the Company. The merger agreement
contains representations and warranties of the Company, Merger
Subsidiary and Parent, negotiated between the parties and made
as of specific dates solely for purposes of the merger
agreement, including setting forth the respective rights of the
parties with respect to their obligations to complete the
merger. This description of the representations and warranties
is not intended to provide any other factual information about
the Company. The representations, warranties and covenants
contained in the merger agreement were made only for purposes of
such agreement and as of specific dates, were solely for the
benefit of the parties to such agreement and may be subject to
limitations agreed upon by the contracting parties, including
being qualified by confidential disclosures exchanged between
the parties in connection with the execution of the merger
agreement. The representations and warranties may have been made
for the purposes of allocating contractual risk between the
parties to the agreement instead of establishing these matters
as facts, and may be subject to standards of materiality
applicable to the contracting parties that differ from those
applicable to investors. Moreover, information concerning the
subject matter of the representations and warranties may change
after the date of the merger agreement, which subsequent
information may or may not be fully reflected in the
Company’s public disclosures. As a result, no person should
rely on the representations, warranties, covenants and
agreements or any descriptions thereof as characterizations of
the actual state of facts or condition of the Company, Parent or
Merger Subsidiary or any of their respective subsidiaries or
affiliates.
The
Merger
At the effective time of the merger, upon the terms and subject
to the satisfaction or waiver of the conditions of the merger
agreement and in accordance with the DGCL, Merger Subsidiary
will merge with and into the Company, the separate corporate
existence of Merger Subsidiary will cease and the Company will
survive as a wholly owned subsidiary of Parent. In addition, the
certificate of incorporation of the surviving corporation will
be amended and restated to read in its entirety as set forth in
Exhibit A to the merger agreement, and the bylaws of the
surviving corporation will be amended and restated to read in
their entirety as set forth in Exhibit B to the merger
agreement.
The directors of Merger Subsidiary immediately prior to the
effective time of the merger will be the initial directors of
the surviving corporation and will hold office in accordance
with the certificate of incorporation and bylaws of the
surviving corporation. The officers of Merger Subsidiary
immediately prior to the effective time of the merger will be
the initial officers of the surviving corporation, until their
respective successors are duly elected or appointed and
qualified or until the earlier of their death, resignation or
removal.
The merger will close on the second business day following the
satisfaction or waiver of the conditions to the closing of the
merger described under “The Merger Agreement –
Conditions to the Merger” beginning on page [•]
of this information statement. However, if the marketing period,
as described below, has not ended at
the time of the satisfaction or waiver of such conditions, the
merger will occur on the date following the satisfaction or
waiver of such conditions that is the earlier to occur of
(x) a date during the marketing period to be specified by
Merger Subsidiary on no less than two business days’ notice
to the Company or (y) the third business day after the
final day of the marketing period. The merger will be effective
at the time the Company and Merger Subsidiary file, on the day
the merger closes, a certificate of merger with the Secretary of
State of the State of Delaware, or at such later time as may be
agreed by each of the parties to the merger agreement and
specified in the certificate of merger filed with the Secretary
of State of the State of Delaware.
For purposes of the merger agreement, “marketing
period” means the first period of 20 consecutive business
days after the date of the merger agreement throughout which:
•
Parent and Merger Subsidiary have received the information
required to be provided by the Company under the merger
agreement in connection with the arrangement of debt
financing; and
•
the mutual closing conditions are satisfied and nothing has
occurred and no condition exists that would cause any of the
closing conditions of Parent and Merger Subsidiary to fail to be
satisfied were the closing to occur at any time during such 20
consecutive business day period.
Under the merger agreement, if the marketing period would not
end prior to November 1, 2010, it is not required to
commence prior to the filing of the Company’s Quarterly
Report on
Form 10-Q
for the fiscal quarter ending October 4, 2010. The days
from and including November 22, 2010 through
November 26, 2010 will not be included in determining the
marketing period. If the marketing period would not end prior to
December 18, 2010, it is not required to commence prior to
January 3, 2011.
The marketing period will not be deemed to have commenced if,
following the commencement of, but prior to the completion of,
the marketing period, (A) Grant Thornton LLP withdraws its
audit opinion with respect to any financial statements contained
in the audited financial statements set forth in the
Company’s filings with the SEC since December 29,2007, (B) the financial statements included in the required
information provided by the Company to Parent in connection with
the arrangement of debt financing would be required to be
updated under applicable securities laws and regulations,
(C) the Company issues a public statement indicating its
intent to restate any historical financial statements of the
Company or that any such restatement is under consideration or
may be a possibility or (D) the Company is delinquent in
filing any
Form 10-K
or
Form 10-Q
or any other material filing with the SEC.
At the effective time of the merger, each share of Company
Common Stock issued and outstanding immediately prior to the
effective time of the merger (other than (i) shares of
Company Common Stock owned by Parent, Merger Subsidiary, the
Company or any subsidiary of the Company and (ii) shares in
respect of which appraisal rights have been properly exercised)
will be canceled and converted automatically into the right to
receive:
•
the Per Share Closing Payment; and
•
the Per Share Escrow Payments, from time to time if and when
amounts are released to the Company’s stockholders from the
escrow fund as described in this information statement.
The “Per Share Closing Payment” means an amount equal
to $18.16 in cash minus the “Per Share Escrow
Amount”. The “Per Share Escrow Amount” means an
amount equal to the per share portion, calculated on a
“fully diluted basis” (as defined below), of the
$64.5 million to be deposited in the escrow fund to cover
liabilities, costs and expenses related to the potential
application of the PHC Rules to the Company and its
subsidiaries. In addition, if the merger is completed after
December 31, 2010, the Per Share Closing Payment will
increase by the Additional Per Share Consideration, which is an
amount equal to the product of (a) the number of calendar
days within the period beginning on January 1, 2011 and
ending on the calendar day immediately prior to the closing date
of the merger and (b) a fraction, the numerator of which is
$53,571.42 and the denominator of which is the total number of
shares of Company Common Stock outstanding as of the effective
time of the merger, determined on a fully diluted basis.
Each “Per Share Escrow Payment” means, upon any
release of amounts from the escrow fund to the Company’s
stockholders in accordance with the terms of the merger
agreement and the escrow agreement, an amount equal to
(a) the aggregate amount distributable to the
Company’s stockholders pursuant to such release divided by
(b) the total number of shares of Company Common Stock
outstanding as of the effective time of the merger, determined
on a fully diluted basis.
Per share amounts that are described in this information
statement as determined on a “fully diluted basis”
will be calculated assuming a total number of shares equal to
the sum of: (a) the number of shares of Company Common
Stock outstanding as of the effective time of the merger,
(b) the number of shares of Class A common stock
issuable upon the exercise of all unexercised Company Stock
Options outstanding as of the effective time of the merger,
(c) the number of Company Restricted Shares outstanding as
of the effective time of the merger, (d) the number of
shares of Class A common stock issuable pursuant to the
Company Performance RSUs outstanding as of the effective time of
the merger assuming attainment of the target level of
performance applicable to such Company Performance RSUs,
(e) the number of shares of Class A common stock
issuable pursuant to the Company RSUs outstanding as of the
effective time of the merger and (f) the number of shares
of Company Common Stock issuable upon exercise of the Call
Option (as defined in the Merger Agreement), excluding, in the
case of clauses (a), (c) and (f), shares in respect of
which appraisal rights have been properly exercised.
The calculation of the estimated Per Share Closing Payment of
approximately $15.25 and the approximately $2.91 per share
portion of the escrow amount assumes, (1) there will have
been no change in the total number of outstanding shares of
Company Common Stock, determined on a fully diluted basis,
between October 1, 2010 and the effective date of the
merger and (2) there are no shares of Company Common Stock
in respect of which appraisal rights have been properly
exercised.
No interest will be paid or will accrue on any of the
consideration to be paid pursuant to the merger agreement and
the escrow agreement, and the amounts of any such consideration
paid to the Company’s stockholders may be reduced by any
applicable withholding taxes as required by law.
On July 21, 2010, the Company announced that it identified
a contingent tax liability resulting from the potential
application of the PHC Rules to the Company and its subsidiaries
and, as a result, certain financial statements were thereafter
restated to reflect a liability for uncertain tax positions
associated with the PHC issue of approximately
$24.5 million. The PHC Rules are commonly understood by tax
professionals to be focused on penalizing individuals who use
holding companies to hold personal investments when the
individual tax rates exceed corporate tax rates, and are
therefore not typically applicable to public companies, such as
the Company, whose primary source of income is from operating
activities. However, the Company and its subsidiaries maintain a
series of complex intercompany loans and intellectual property
agreements that generate royalties, dividends,
and/or
interest income between such entities. As a result, certain of
the Company’s U.S. subsidiaries have income from
affiliates within the consolidated Company group that could be
classified as PHC income as defined in Section 543 of the
Code. Additionally, the Company has determined that it may have
met certain ownership requirements outlined in Section 542
of the Code and have earned income that may be classified as
undistributed PHC income as defined in Section 545 of the
Code that may subject it to the tax described in
Section 541 of the Code. Although over 51% of the
Company’s common stock has been held by two partnerships
(rather than individuals), under Section 544 of the Code,
each of the individual partners in a partnership could be deemed
to own, for purposes of the PHC ownership test, all of the stock
of the Company owned by that partnership. Based on the above,
the Company could be considered to have met the PHC ownership
requirement since March of 2003.
Despite the contingent liability recognized in the financial
statements, the Company believes the PHC Rules were not intended
to apply to its situation and intends to request one or more
rulings from, or to pursue one or more closing agreements with,
the IRS to reach a determination as to some or all of the issues
relating to the amount, if any, of the PHC-related liability
(such rulings
and/or
agreements, collectively, the “PHC Rulings”), which
ruling or closing agreement requests will be prepared by the
Company and PricewaterhouseCoopers, LLP, at
the direction of the Stockholder Representative. However, the
Company cannot be certain of the outcome of discussions with the
IRS, and the amount of any taxes, interest or penalties that may
be required to be paid, until a determination or ruling is
received. If the Company is required to pay any amount in
respect of a PHC-related liability to any tax authority, then
such taxes will be paid using amounts contained in the escrow
fund.
Pursuant to the terms of the merger agreement, the Stockholder
Representative will control the PHC Ruling process (including
all conferences with the IRS) and the preparation of any amended
tax returns relating to the potential qualification of the
Company and its subsidiaries as “personal holding
companies”. Parent will, however, have certain limited
rights in connection with the PHC Ruling process, including the
right to review all submissions to the IRS relating to the PHC
Rulings for at least five business days prior to the submission
thereof, the right to receive copies of all written
correspondence received from the IRS relating to the PHC Rulings
and the right to have up to two representatives observe, but not
participate in, any conference with the IRS. Amended tax returns
of the Company that the Stockholder Representative proposes to
file in connection with the resolution of PHC-related matters
will not change any position on a previously filed tax return
that does not relate solely to the Company’s status as a
PHC or to the computation of the PHC-related tax.
Subject to the reimbursement of the Stockholder
Representatives’ fees as described below, the release of
amounts from the escrow fund to holders of Company Common Stock,
Company Stock Options, Company Restricted Shares, Company
Performance RSUs and Company RSUs with respect to any
PHC-related issue may occur periodically upon the occurrence
(alone or in combination) of (1) the receipt of a favorable
PHC Ruling, (2) the resolution of an applicable IRS audit
of the Company or (3) the expiration of an applicable
statute of limitation. Each disbursement from the escrow fund to
the Company’s stockholders will be in an amount equal to
(x) the amount remaining in the escrow fund at the time of
such distribution, less (y) the PHC-related liability
calculated by the Stockholder Representative upon the occurrence
of the event triggering the release (the “Interim PHC
Liability”), less (z) the reasonable costs, expenses
and disbursements of the Stockholder Representative that have
not been reimbursed prior to such time and for which it is
entitled to be reimbursed, provided that any disbursements in
respect of Company Stock Options and Company RSUs will be made
no later than the fifth anniversary of the effective time of the
merger, at which time a payment will be made to the holders of
such equity awards in an amount to be agreed by the Stockholder
Representative and the Company based upon their reasonable
estimates of the PHC-related liability.
Under certain circumstances, Parent may submit to the
Stockholder Representative a “notice of disagreement”
relating to (i) positions taken on an amendment to a
previously filed tax return, (ii) the ability of the
Company to rely on a PHC Ruling or (iii) the calculation of
the Interim PHC Liability. Any such dispute, if not resolved in
writing by Parent and the Stockholder Representative within two
business days following Parent’s delivery of a “notice
of disagreement”, will be subject to the expedited and
binding determination of KPMG LLP (or an alternative nationally
recognized accounting firm or law firm with the relevant tax
expertise agreed to in writing by the Company, Parent and the
Stockholder Representative).
The Stockholder Representative will be entitled to recover from
the escrow fund up to $500,000 in reasonable
out-of-pocket
costs, expenses and disbursements incurred after the closing
date of the merger (including the reasonable fees of its
advisors and counsel) related to the PHC Rulings. Additionally,
upon the first release of amounts from the escrow fund for the
benefit of the stockholders (and any subsequent release, if
necessary), $500,000 (the “Additional Expense Reimbursement
Amount”) will be deducted from such release and retained in
the escrow fund to cover all
out-of-pocket
fees and expenses reasonably incurred by the Stockholder
Representative after the closing date in performing its duties
under the merger agreement and the escrow agreement. The
Additional Expense Reimbursement Amount will not be available
until the Stockholder Representative has exhausted its rights to
reimbursement under the escrow fund. Any portion of such
Additional Expense Reimbursement Amount not used for the payment
of such fees and expenses will be distributed to stockholders
upon the final resolution of the PHC issue, and on such earlier
dates and in such amounts as the Stockholder Representative
determines in good faith is fair and equitable.
Company Stock Options. Except as otherwise
agreed to by Parent and the holder of a Company Stock Option, at
the effective time of the merger, each outstanding Company Stock
Option will be canceled and converted into the right to receive,
in full satisfaction of the rights of such holder with respect
thereto, (i) upon the effective time of the merger, an
amount in cash equal to the number of shares of Company Common
Stock subject to such Company Stock Option multiplied by the
excess of the Per Share Closing Payment over the exercise price
for such Company Stock Option, which is in all cases $6.00 per
share, and (ii) on each escrow release date, an amount in
cash equal to the number of shares of Company Common Stock
subject to such Company Stock Option multiplied by the Per Share
Escrow Payment, in each case, less any applicable withholding
taxes.
Company Restricted Shares. Except as otherwise
agreed to by Parent and the holder of a Company Restricted
Share, at the effective time of the merger, each outstanding
Company Restricted Share will be converted into the right to
receive (i) upon the effective time of the merger, an
amount in cash equal to the Per Share Closing Payment and
(ii) on each escrow release date, an amount in cash equal
to the Per Share Escrow Payment, in each case, less any
applicable withholding taxes.
Company RSUs. Except as otherwise agreed to by
Parent and the holder of a Company RSU, at the effective time of
the merger, each outstanding Company RSU will be converted into
the right to receive, in full satisfaction of the rights of such
holder with respect thereto, (i) upon the effective time of
the merger, an amount in cash equal to the number of shares of
Company Common Stock issuable pursuant to such Company RSU
multiplied by the Per Share Closing Payment and (ii) on
each escrow release date, an amount in cash equal to the number
of shares of Company Common Stock issuable pursuant to such
Company RSU multiplied by the Per Share Escrow Payment, in each
case, less any applicable withholding taxes.
Company Performance RSUs. Except as otherwise
agreed to by Parent and the holder of a Company Performance RSU,
at the effective time of the merger, each outstanding Company
Performance RSU will be converted into the right to receive, in
full satisfaction of the rights of such holder with respect
thereto, (i) upon the effective time of the merger, an
amount in cash equal to the number of shares of Company Common
Stock issuable pursuant to such Company Performance RSU assuming
attainment of the target level of performance applicable to such
Company Performance RSU, multiplied by the Per Share Closing
Payment, and (ii) on each escrow release date, an amount in
cash equal to the number of shares of Company Common Stock
issuable pursuant to such Company Performance RSU assuming
attainment of the target level of performance applicable to such
Company Performance RSU, multiplied by the Per Share Escrow
Payment, in each case, less any applicable withholding taxes.
Not less than 10 business days prior to the effective time of
the merger, the Company will appoint a paying agent reasonably
acceptable to Parent to make payment of the Per Share Closing
Payments as contemplated by the merger agreement. At or prior to
the effective time of the merger, Parent will deposit with the
paying agent cash in an amount sufficient to pay (i) the
aggregate Per Share Closing Payment to which holders of shares
of Company Common Stock and Company Restricted Shares will be
entitled and (ii) the amounts to which holders of Company
Stock Options and Company RSUs will be entitled (in each case,
other than the Per Share Escrow Payments, if any).
In addition, not less than 10 business days prior to the
effective time of the merger, Parent will appoint a bank or
trust company reasonably acceptable to the Company to act as
escrow agent (the “escrow agent”), and will enter into
an escrow agreement with the escrow agent, the Company and the
Stockholder Representative, substantially in the form attached
as Exhibit D to the merger agreement. At or prior to the
effective time of the merger, Parent will contribute
$64.5 million to an escrow fund held by the escrow agent,
to be released as described in the section titled “Merger
Agreement – Escrow Fund” beginning on
page [•].
As promptly as practicable after the effective time of the
merger, Parent will cause the paying agent to mail to each
holder of record of a certificate previously representing shares
of Company Common Stock a
letter of transmittal and instructions advising you how to
surrender your certificates in exchange for the Per Share
Closing Payment. If your shares of Company Common Stock are held
in “street name” by your bank, brokerage firm or other
nominee, you will receive instructions from your bank, brokerage
firm or other nominee as to how to effect the surrender of your
“street name” shares of Company Common Stock in
exchange for the consideration to be paid pursuant to the merger
agreement. The Per Share Closing Payment for each share of
Company Common Stock will be payable upon surrendering to the
paying agent your certificate previously representing such
share, together with such letter of transmittal, duly completed
and validly executed. In addition, you will be entitled to
receive, in exchange for your certificate, the Per Share Escrow
Payments with respect to those shares represented by such
certificate, in accordance with the terms of the merger
agreement, from time to time as such amounts are released from
the escrow fund to the Company’s stockholders. No interest
will be paid or will accrue on any of the consideration to be
paid pursuant to the merger agreement and the escrow agreement,
and the amounts of any such consideration paid to you may be
reduced by any applicable withholding taxes as required by law.
YOU SHOULD NOT RETURN YOUR CERTIFICATES TO THE PAYING AGENT
WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR
CERTIFICATES TO THE COMPANY.
If payment is to be made to a person other than the person in
whose name the surrendered certificate is registered, it will be
a condition of payment that the certificate so surrendered will
be properly endorsed or otherwise in proper form for transfer
and the person requesting the payment will have paid all
applicable taxes relating to the payment of the Per Share
Closing Payment to a person other than the registered holder of
the certificate surrendered, or will have established to the
reasonable satisfaction of Parent that such taxes have been paid
or are not applicable.
Any portion of the merger consideration that remains unclaimed
by the stockholders of the Company one year after the effective
time of the merger or, in the case of the escrow fund, one year
after the final date on which amounts are to be released from
the escrow fund, will, upon demand, be delivered to Parent, and
any holder of shares of Company Common Stock who has yet to
properly claim the merger consideration to which such
stockholder is entitled may look only to Parent for, and Parent
will remain liable for, payment of the Per Share Closing Payment
and the Per Share Escrow Payments, without interest, in respect
of each such share. Any Per Share Closing Payment and any
portion of the escrow fund remaining unclaimed immediately prior
to such time as such amounts would otherwise escheat to or
become the property of any governmental entity will, to the
extent permitted by applicable law, become the property of
Parent free and clear of any claims or interest.
If any certificate is lost, stolen or destroyed, the paying
agent will, upon the receipt of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed
and the delivery (if reasonably requested by Parent or the
surviving corporation) of an agreement of indemnification or
bond reasonably satisfactory to Parent, issue the Per Share
Closing Payment and direct the escrow agent to release any
applicable Per Share Escrow Payments to be paid in respect of
the shares of Company Common Stock represented by such
certificate.
From and after the effective time of the merger, holders of
certificates will cease to have any rights with respect to the
shares of Company Common Stock previously represented by such
certificates, except the right to receive the Per Share Closing
Payment and the Per Share Escrow Payments to which such holder
is entitled or as provided by applicable law.
the absence of conflicts with or defaults under organizational
documents, contracts and applicable laws and judgments;
•
required consents or registrations, declarations or filings with
any governmental entity in connection with the merger agreement
or the consummation of the merger;
•
brokers’, finders’ and other similar fees in
connection with the merger; and
•
the accuracy of information supplied for inclusion in this
information statement.
In the merger agreement, Parent and Merger Subsidiary also make
representations and warranties relating to, among other things:
•
litigation;
•
Parent’s ownership of the capital stock of Merger
Subsidiary; and
•
the availability of funds to consummate the merger and the other
transactions contemplated by the merger agreement.
In the merger agreement, the Company also makes representations
and warranties relating to, among other things:
•
capital structure;
•
the accuracy of documents filed with the SEC and the absence of
undisclosed liabilities;
•
real property matters;
•
intellectual property matters;
•
insurance matters;
•
tax matters;
•
litigation and other proceedings;
•
benefit plans and labor and employment matters;
•
the conduct of business in the ordinary course and the absence
of a material adverse effect, in each case from January 2,2010 to the date of the merger agreement;
•
compliance with applicable laws;
•
environmental matters;
•
the stockholder vote required to adopt the merger agreement;
•
the receipt by the Special Committee and the Board of Director
of a fairness opinion from Janney;
•
the inapplicability of takeover laws and regulations of any
governmental entity or contained in the Company’s amended
and restated certificate of incorporation;
the identify of and relationships with top customers and
suppliers.
Certain representations and warranties made by each of the
parties are qualified by a “material adverse effect”
clause. The merger agreement provides that a “material
adverse effect” means any change, effect, event,
occurrence, state of facts or development (each, an
“effect”) that, individually or in the aggregate,
(i) has, or is reasonably likely to have, a material
adverse effect on the business, assets, liabilities, condition
(financial or otherwise) or results of operations of the Company
and its subsidiaries, taken as a whole, or
(ii) prevents or materially delays beyond the outside date
the consummation by the Company of the merger. The term
“material adverse effect” shall not include any effect
arising from:
•
domestic or foreign economic conditions, except to the extent
the conditions have a disproportionate effect on the Company and
its subsidiaries, taken as a whole, as compared with other
participants in the industries in which the Company and its
subsidiaries operate (a “disproportionate effect on the
Company”);
•
changes in the capital markets, including changes in interest
rates, except to the extent the changes have a disproportionate
effect on the Company;
•
changes in applicable laws or in United States generally
accepted accounting principles, in each case, except to the
extent the changes have a disproportionate effect on the Company;
•
natural disasters, except to the extent such natural disasters
have a disproportionate effect on the Company;
•
the execution and announcement of the merger agreement or the
consummation of the merger, including any loss of a material
customer, supplier, employee or executive that results therefrom
(except that this exclusion shall not apply to any portion of
any representation or warranty that addresses the consequences
of such execution, announcement or consummation);
•
changes in the nonwoven or oriented polymers manufacturing
industries, except to the extent the changes have a
disproportionate effect on the Company;
•
military conflicts or acts of terrorism, except to the extent
such military conflicts or acts of terrorism have a
disproportionate effect on the Company;
•
any actions taken by the Company that are required by the terms
of the merger agreement, other than actions in compliance with
certain operating covenants; and
The Company has agreed in the merger agreement that, until the
effective time of the merger, except as permitted or required by
the terms of the merger agreement or as required by applicable
law, the Company will, and will cause each of its subsidiaries
to, conduct its business in the ordinary course of business
consistent with past practice, use reasonable best efforts to
keep intact its business, keep available the services of its
current employees and preserve its relationships with customers,
suppliers, licensors, licensees, distributors and others with
whom it deals. The Company has also agreed that, until the
effective time of the merger, except as permitted or required by
the terms of the merger agreement or as required by applicable
law, it will not, and will not permit any of its subsidiaries
to, do any of the following (among other things) without the
prior written consent of Parent, which consent may not be
unreasonably withheld, delayed or conditioned:
•
amend its organizational documents;
•
issue, purchase, redeem or otherwise acquire any capital stock
or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of
capital stock;
•
declare, establish a record date for, authorize, set aside or
pay any dividends or make any distribution with respect to its
outstanding shares of capital stock or other equity interests;
•
split, combine or reclassify any of its capital stock or other
equity interests or issue, authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution of shares of its capital stock;
•
make changes to benefit plans or benefit agreements that would
materially increase the costs of any such plan or agreement, or
enter into, adopt, extend (beyond the closing date of the
merger), renew or
amend any collective bargaining agreement or other contract with
any labor organization, union or association;
•
increase the compensation or benefits of any director or
executive officer or employee whose total annual compensation is
expected to exceed $175,000;
•
increase the funding obligations or contribution rate of any
benefit plan or benefit agreement other than in the ordinary
course consistent with past practice or as required by
applicable law;
•
incur or assume, guarantee or become obligated with respect to
any liabilities, obligations or indebtedness, or assume,
guarantee or endorse or otherwise become responsible for,
whether directly, contingently or otherwise, any such
liabilities, obligation or indebtedness of any person;
•
permit, allow or suffer any of its assets to become subject to
certain liens;
•
cancel any indebtedness owed to the Company or any subsidiary of
the Company or waive any claims or rights of substantial value
other than in the ordinary course of business;
•
pay, loan or advance any amount to, or sell, license, transfer
or lease any of its assets, rights or properties to, or enter
into any agreement or arrangement with, the stockholders of any
of their affiliates;
•
take certain tax- or accounting-related actions, including, for
example, making any material tax election other than in the
ordinary course of business or making a voluntary material
change in accounting method;
•
acquire by merging or consolidating with, or by any other
manner, any business or any corporation, partnership,
association or other business organization or division thereof
or otherwise acquire any assets, other than purchases of assets
in the ordinary course of business consistent with past practice;
•
sell, lease, license or otherwise dispose of any of its assets,
rights or properties (including intellectual property) having a
value in excess of $2.5 million in the aggregate;
•
settle or compromise any investigation, audit, litigation, claim
or proceeding against the Company or any of its subsidiaries,
where the amount paid exceeds $1 million in the aggregate
or which imposes material restrictions on the business or
operations of the Company or any of its subsidiaries;
•
make or commit to capital expenditures, capital additions or
capital improvements in excess of certain agreed upon amounts,
plus $3 million;
•
enter into any lease of real property, except any renewals or
expansions of existing leases in the ordinary course of business
consistent with past practice;
•
enter into any new line of business;
•
cancel, materially modify, terminate, or enter into any material
contract; or
•
authorize any of, or commit or agree to take, whether in writing
or otherwise, any of the foregoing actions.
The merger agreement requires each party to use its reasonable
best efforts (1) to consummate the merger, (2) to
cause the closing of the merger to occur on or prior to the
outside date and (3) solely in the case of the Company, to
obtain all consents from third parties necessary or appropriate
to permit the consummation of the merger. The merger agreement
prohibits each party from taking any actions that would, or
would reasonably be expected to, result in any of the conditions
to closing not being satisfied.
In addition, the merger agreement requires each party to use its
reasonable best efforts to obtain any clearance required under
the HSR Act and foreign merger control laws for the consummation
of the transactions contemplated by the merger agreement,
provided that the “reasonable best efforts” of Parent
will
include promptly opposing any motion or action for a temporary,
preliminary or permanent injunction against the merger, but
under no circumstances will Parent, the Company or any of their
affiliates be required to commit and effect, by undertaking,
consent decree, hold separate order or otherwise, to the sale,
divestiture, license or disposition of any assets or businesses
of Parent, the Company or any of their affiliates, or otherwise
to take any action or agree to any other remedy as a condition
to obtaining any clearance required under the HSR Act or any
foreign merger control law. The merger agreement prohibits
Parent and its subsidiaries from taking, directly or indirectly,
any action that would reasonably be expected to delay or prevent
clearance under the HSR Act or any other applicable foreign
merger control law for the consummation of the transactions
contemplated by the merger agreement.
The merger agreement contains a financing covenant that requires
Parent to, among other things:
•
use its reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things
necessary, proper or advisable to obtain the financing on the
terms and conditions described in the financing commitments,
including using its reasonable best efforts to
(i) negotiate and enter into the definitive agreements with
respect thereto on the terms and conditions contained in the
financing commitments, (ii) satisfy on a timely basis all
conditions applicable to Parent set forth in the financing
commitments and (iii) subject to the terms and conditions
contemplated by the financing commitments, consummate the
financing at the closing of the merger;
•
in the event that any portion of the debt financing becomes
unavailable on the terms and conditions set forth in the debt
financing commitments, other than due to the Company’s
breach of a representation, warranty or covenant or failure to
satisfy a condition, promptly notify the Company and use its
reasonable best efforts to obtain any such portion from
alternative sources, on terms not less favorable, taken as a
whole, to Parent, that will enable Parent to consummate the
transactions contemplated by the merger agreement, as promptly
as practicable following the occurrence of such event; and
•
refrain from taking, directly or indirectly, any action that
would reasonably be expected to result in a failure of any of
the conditions contained in the financing commitments or in any
definitive agreement related to the financing.
The financing covenant prohibits Parent from agreeing to or
permitting any amendment, supplement or other modification of,
or waiving any of its rights under, any financing commitments or
the definitive agreements relating to the financing, if such
amendment, supplement, modification or waiver reduces the
aggregate amount of financing or would reasonably be likely to
delay or prevent the closing of the merger or make any portion
of the financing less likely to occur.
The Company has agreed to provide such reasonable cooperation in
connection with the arrangement of the debt financing (including
any alternative financing described above) as may be reasonably
requested by Parent, including, among other things:
•
participation in meetings, presentations, drafting sessions and
due diligence with prospective lenders, investors and rating
agencies in connection with the financing;
•
furnishing Parent and its financing sources with financial,
business and other pertinent information regarding the Company
and its subsidiaries as may be reasonably requested by Parent to
consummate the debt financing; and
•
providing to the financing sources a certificate of the chief
financial officer of the Company and its subsidiaries with
respect to solvency matters as of the closing of the merger on a
pro forma basis.
The Company agreed in the merger agreement to, promptly
following the execution and delivery of the merger agreement and
in accordance with the DGCL and the Company’s amended and
restated bylaws, take all action necessary to seek and obtain,
as promptly as practicable, adoption of the merger agreement by
the
affirmative vote or written consent of the holders of a majority
of the then outstanding shares of Company Common Stock by the
irrevocable written consent of MatlinPatterson in the form
attached as Exhibit C to the merger agreement. The Company
has also agreed to deliver this information statement to the
Company’s stockholders as required pursuant to the Exchange
Act, to give prompt notice of the taking of
MatlinPatterson’s adoption of the merger agreement in
accordance with Section 228 of the DGCL to all holders of
Company Common Stock not executing the merger consent and to
make any disclosures with respect to appraisal rights required
by Delaware law (including a description of the appraisal rights
of holders of Company Common Stock available under
Section 262 of the DGCL).
On October 4, 2010, following execution of the merger
agreement by the parties thereto, MatlinPatterson, the holder of
13,596,921 shares of Company Common Stock, constituting
approximately 63.4% of the voting power of the outstanding
shares of Company Common Stock on such date, executed a written
consent adopting and approving in all respects the merger
agreement and the transactions and agreements contemplated
thereby, and agreeing to forego participation and recovery as a
plaintiff or member of a class in any action with respect to any
claim, based on its status as a stockholder of the Company,
relating to the merger. No further approval of the stockholders
of the Company is required to approve and adopt the merger
agreement and the transactions contemplated thereby.
The merger agreement provides that the Company may not, nor may
it authorize or permit any of its subsidiaries to, or authorize
or permit any of their respective representatives to:
•
solicit, initiate or knowingly encourage (including by way of
furnishing non-public information regarding the Company), or
take any other action designed to facilitate, any takeover
proposal (as defined below); or
•
engage, enter into, continue or otherwise participate in any
discussions or negotiations regarding, or furnish to any person
any information with respect to, or otherwise cooperate with any
person in any way relating to, or which would reasonably be
likely to lead to, any takeover proposal.
The Company was permitted, however, prior to the receipt of the
stockholder approval, in response to a bona fide written
takeover proposal made after the date of the merger agreement
under circumstances not otherwise involving a breach of the
merger agreement, and which proposal the Board of Directors had
determined in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) constituted or could reasonably be expected to lead
to a superior proposal (as defined below) by such party, to:
•
furnish information with respect to the Company and its
subsidiaries to the person making such takeover proposal (and
its representatives) pursuant to a customary confidentiality
agreement no less restrictive than the confidentiality agreement
between Blackstone Management Partners L.L.C. and an affiliate
of MatlinPatterson Global Opportunities Partners L.P. entered
into in connection with the sale process; and
•
participate in discussions or negotiations with the person
making such takeover proposal (and its representatives)
regarding such takeover proposal.
In addition, the Company has agreed that neither the Board of
Directors nor any committee of the Board of Directors may:
•
change, qualify, withdraw or modify in a manner adverse to
Parent or Merger Subsidiary, or publicly propose to change,
qualify, withdraw or modify in a manner adverse to Parent or
Merger Subsidiary, its approval, recommendation or declaration
of advisability of the merger agreement, the merger or the other
transactions contemplated by the merger agreement;
•
recommend, adopt or approve, or propose publicly to recommend,
adopt or approve, any takeover proposal; or
adopt, approve or recommend, or propose to adopt, approve or
recommend, or allow the Company or any of its affiliates to
execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement,
acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement
constituting or related to, or that is intended to or would
reasonably be expected to lead to, any takeover proposal (other
than a confidentiality agreement referred to above).
However, prior to the receipt of the stockholder approval, the
Board of Directors was permitted, if it determined in good faith
(after consultation with outside counsel) that failure to do so
would be inconsistent with its fiduciary duties to the
stockholders of the Company under applicable law, to:
•
change, qualify, withdraw or modify its approval, recommendation
or declaration of advisability of the merger agreement and the
transactions contemplated by the merger agreement, or recommend,
adopt or approve any takeover proposal; or
•
if the Company had otherwise complied in all material respects
with the provisions of the merger agreement described in this
section, allow the Company or any of its subsidiaries to enter
into an acquisition agreement with respect to a superior
proposal, provided that the Company concurrently terminated the
merger agreement and paid the Company Termination Fee as
described under “The Merger Agreement –
Termination Fees and Remedies” beginning on
page [•] of this information statement.
In addition, the Company has agreed to immediately cease and
cause to be terminated all existing discussions or negotiations
with any person conducted prior to the date of the merger
agreement with respect to any takeover proposal, and to promptly
(within 24 hours after receipt) advise Parent both orally
and in writing of the receipt of any takeover proposal and any
inquiry or request for information from, or any negotiations
sought to be initiated or continued with, the Company or its
representatives concerning a takeover proposal. In addition, the
Company has agreed to keep Parent informed of the status and
material terms and conditions or developments of any such
takeover proposal, inquiry or request and any discussions and
negotiations concerning the material terms and conditions
thereof.
The merger agreement defines “takeover proposal” and
“superior proposal” as follows:
•
“takeover proposal” means any proposal or offer from
any person (other than Parent and its subsidiaries) relating to,
or that would reasonably be expected to lead to, in one
transaction or a series of transactions, (a) an acquisition
of the assets or businesses that constitute 15% or more of the
revenues, net income or assets of the Company and its
subsidiaries, taken as a whole, or 15% or more of the total
equity securities of the Company, (b) a tender offer or
exchange offer that if consummated would result in any person
owning 15% or more of the total equity securities of the Company
or (c) any merger, consolidation or other similar
transaction pursuant to which any person would own 15% or more
of the total equity securities of the Company or businesses or
assets that constitute 15% or more of the revenues, net income
or assets of the Company and its subsidiaries, taken as a
whole; and
•
“superior proposal” means any bona fide written
takeover proposal (a) that would result in any person
owning all or substantially all of the shares of Company Common
Stock or all or substantially all of the assets of the Company
and (b) which the Board determines in good faith, after
consultation with outside counsel and a financial advisor, to be
more favorable to the Company’s stockholders from a
financial point of view than is the merger and to be reasonably
capable of being completed.
Because the stockholder approval was obtained on October 4,2010, the Company may not terminate the merger agreement
pursuant to receipt of a takeover proposal or superior proposal.
Conditions to Each Party’s Obligation to Effect
the Merger. Each party’s obligation to
complete the merger is subject to the satisfaction or waiver of
the following conditions:
•
receipt of the stockholder approval, which occurred when
MatlinPatterson delivered a written consent on October 4,2010, as described under “The Merger Agreement –
Stockholder Action by Written Consent” beginning on
page [•];
•
20 days having elapsed since the mailing of this
information statement to the Company’s stockholders;
•
the expiration or termination of the waiting period under the
HSR Act and the receipt of consents required under the
competition, merger control, antitrust or similar applicable
laws of certain foreign jurisdictions; and
•
no applicable law or injunction enacted, entered, promulgated,
enforced or issued by any governmental entity preventing
consummation of the merger shall be in effect.
Conditions to Obligations of Parent and Merger Subsidiary to
Effect the Merger. The respective obligations of
Parent and Merger Subsidiary to effect the merger are subject to
the fulfillment or waiver of the following conditions:
•
the representations and warranties of the Company relating to
(among other things) organization, standing, capitalization,
authority and brokers’ fees must be true and correct in all
material respects as of the date of the merger agreement and as
of the effective time of the merger (or, if given as of some
other time, as of such other time);
•
the representations and warranties of the Company (made without
giving effect to any limitation as to “materiality” or
“material adverse effect”), other than those set forth
in the immediately preceding condition, must be true and correct
as of the date of the merger agreement and as of the effective
time of the merger (or, if given as of some other time, as of
such time), except where the failure of such representations and
warranties to be so true and correct does not have a material
adverse effect;
•
the Company must have performed in all material respects all the
obligations, and complied in all material respects with the
agreements and covenants, required to be performed by it under
the merger agreement at or prior to the closing date of the
merger;
•
the Company must have delivered to Parent a certificate, dated
as of the closing date of the merger and signed on behalf of the
Company by the chief executive officer of the Company,
certifying that each of the three preceding conditions has been
satisfied;
consolidated EBITDA of the Company for the 12 month period
ending October 4, 2010 must not be less than
$111 million; and
•
the “Closing Phase II”, as defined in the Asset
Transfer Agreement between the Company, PGI Spain, Tesalca-99,
S.A., Texnovo, S.A. and Grupo Corinpa, S.L. dated
October 30, 2009 and as amended on November 30, 2009,
must have occurred or occur simultaneously with the closing of
the merger.
Conditions to Obligations of the Company to Effect the
Merger. The obligation of the Company to effect
the merger is subject to the satisfaction or waiver of the
following conditions:
•
the representations and warranties of each of Parent and Merger
Subsidiary relating to the availability of funds to consummate
the merger and the other transactions contemplated by the merger
agreement must be true and correct in all material respects as
of the date of the merger agreement and as of the effective time
of the merger (or, if given as of some other time, as of such
other time);
•
the representations and warranties of each of Parent and Merger
Subsidiary (made without giving effect to any limitation as to
“materiality” or “material adverse effect”),
other than those relating to the availability of funds to
consummate the merger and the other transactions contemplated by
the merger
agreement, must be true and correct as of the date of the merger
agreement and as of the effective time of the merger (or, if
given as of some other time, as of such time), except where the
failure of such representations and warranties to be so true and
correct does not materially and adversely affect the ability of
Parent or Merger Subsidiary to consummate the merger and the
other transactions contemplated by the merger agreement;
•
Parent and Merger Subsidiary must have performed in all material
respects all the obligations, and complied in all material
respects with the agreements and covenants, required to be
performed by them under the merger agreement at or prior to the
closing date of the merger; and
•
Parent must have delivered to the Company a certificate, dated
as of the closing date of the merger and signed on behalf of
Parent by a duly authorized officer of Parent, certifying that
each of the above conditions has been satisfied.
At any time prior to the effective time of the merger, in
addition to termination by the mutual consent of the Company,
Parent and Merger Subsidiary, either the Company or Parent may
terminate the merger agreement if:
•
the merger is not consummated prior to the outside date of
February 8, 2011, provided that (a) the right to
terminate the merger agreement will not be available to any
party whose actions have been the principal cause of, or
directly resulted in, the failure of the effective time of the
merger to occur prior to such date and (b) if all closing
conditions other than the condition relating to the HSR Act and
the foreign merger control laws have been satisfied by
February 8, 2011, Parent has agreed that it will seek a
three month extension of the debt financing commitments (on
terms no less favorable, in the aggregate, than the current
commitments) which, if obtained, will permit each of Parent and
the Company, in its sole discretion, to postpone the outside
date to May 6, 2011; or
•
a final and nonappealable injunction or applicable law
preventing consummation of the merger is in effect.
In addition, Parent is or was permitted, as the case may be, to
terminate the merger agreement at any time prior to the
effective time of the merger if:
•
the stockholder approval had not been obtained by 11:59 pm, New
York City time, on the date of the merger agreement (which
approval has been obtained); or
•
the Company breaches or fails to perform any of its
representations, warranties, covenants or agreements under the
merger agreement, if such breach or failure to perform
(A) would rise to the level at which Parent and Merger
Subsidiary would not be required to effect the merger and
(B) is incapable of being cured by the Company by the
outside date, or, if capable of being cured by the Company by
the outside date, is not cured by the Company within 45 calendar
days following receipt of written notice of such breach or
failure to perform from Parent, provided that neither Parent nor
Merger Subsidiary is in breach of any representations,
warranties, covenants or agreements that would rise to the level
at which the Company would not be required to effect the merger.
In addition, the Company is or was permitted, as the case may
be, to terminate the merger agreement at any time prior to the
effective time of the merger if:
•
Parent or Merger Subsidiary breaches or fails to perform any of
its representations, warranties, covenants or agreements under
the merger agreement, if such breach or failure to perform
(A) would rise to the level that the Company would not be
required to effect the merger and (B) is incapable of being
cured by Parent or Merger Subsidiary by the outside date, or, if
capable of being cured by Parent or Merger Subsidiary by the
outside date, is not cured by Parent or Merger Subsidiary within
45 calendar days following receipt of written notice of such
breach or failure to perform from the Company, provided that the
Company is not then in breach of any representations,
warranties,
covenants or agreements that that would rise to the level that
Parent and Merger Subsidiary would not be required to effect the
merger;
•
prior to receipt of the stockholder approval, the Company had
entered into an acquisition proposal or similar agreement
relating to a superior proposal, terminated the merger agreement
in accordance with the terms thereof and paid the Company
Termination Fee; or
•
Parent breaches its obligation to timely consummate the closing,
despite the relevant closing conditions having been satisfied or
waived.
The Company would have been required to pay Parent the Company
Termination Fee of $8 million if, prior to obtaining the
stockholder approval, the Company had terminated the merger
agreement and entered into an acquisition agreement or similar
agreement relating to a superior proposal, as described above.
In addition, the Company would have been be required to pay the
Company Termination Fee if all of the following events had
occurred:
•
prior to the termination of the merger agreement, a takeover
proposal had been made directly to the stockholders of the
Company generally or had become publicly known, or any person
had publicly announced an intention to make a takeover proposal;
•
the merger agreement had been subsequently terminated by either
Parent or the Company as a result of the merger having not been
consummated prior to the outside date; and
•
within 12 months after such termination, the Company had
entered into a definitive agreement to consummate, or had
consummated, any takeover proposal, provided that, solely for
purposes of this description, references to “15%” in
the term “takeover proposal” were deemed to be
references to “50%”.
In the event Parent had been entitled to receive the Company
Termination Fee, its right to receive such amount would have
constituted its sole and exclusive remedy for the termination of
the merger agreement, regardless of the circumstances giving
rise to such termination.
Termination
Fee Payable by Parent
The Parent Termination Fee of $15 million will be payable
by Parent to the Company if the Company terminates the merger
agreement upon Parent’s failure to consummate the closing
of the merger, despite the relevant closing conditions having
been satisfied or waived. Such Parent Termination Fee will
instead be $30 million if, in addition to satisfaction of
the requirement set forth in the preceding sentence, the debt
financing has been funded or will be funded at the closing of
the merger if the equity financing is funded at the closing of
the merger.
However, if a court of competent jurisdiction has ordered Parent
to pay the Parent Termination Fee, the Company may not enforce
such order if Parent delivers, within five business days
following the issuance of such order, a notice electing to
consummate the closing and the closing occurs within 10 business
days following the delivery of such notice.
Specific
Performance
The parties will be entitled to an injunction or injunctions to
prevent breaches of the merger agreement and to specifically
enforce the performance of the terms and provisions of the
merger agreement without proof of actual damages. However, the
Company may seek specific performance of Parent’s right to
cause the equity financing to be funded and to consummate the
merger only in the event that:
•
Parent and Merger Subsidiary are required to effect the closing
of the merger on account of the closing conditions having been
satisfied;
the debt financing has been funded or will be funded at the
closing if the equity financing is funded at the closing;
•
Parent and Merger Subsidiary fail to complete the closing of the
merger despite being required to do so; and
•
the Company has irrevocably confirmed that if specific
performance is granted and the equity financing and debt
financing are funded, then the closing would occur. The merger
agreement prohibits the Company from receiving both a grant of
specific performance and payment of the Parent Termination Fee.
If Parent and Merger Subsidiary fail to effect the closing of
the merger, despite being required to do so, for any reason or
otherwise breach the merger agreement, then, except for an order
of specific performance, the Company’s and its
affiliates’ only remedies against Parent, Merger
Subsidiary, the Guarantor, and their respective former, current
and future direct or indirect equityholders, controlling
persons, stockholders, directors, officers, employees, agents,
affiliates, members, managers, general or limited partners,
financing sources or assignees (and the related parties of such
parties) for any breach, loss or damage will be:
•
to terminate the merger agreement under the circumstances set
forth above and receive payment of the Parent Termination
Fee; or
•
to terminate the Agreement pursuant to Parent’s or Merger
Subsidiary’s breach or failure to perform any of its
representations, warranties, covenants and agreements and seek
to recover monetary damages from Parent in an amount up to
$15 million, in the aggregate.
Until the first anniversary of the effective time, Parent will,
or will cause the Company to, provide, for those employees of
the Company and its subsidiaries who are employed by the Company
or any of its subsidiaries immediately prior to the effective
time and continue as employees of the Company or any of its
subsidiaries during that one-year period, compensation and
benefits that are substantially comparable, in the aggregate, to
those provided immediately prior to the date of the merger
agreement (taking into account any changes to compensation and
benefits that are permitted by the operating covenants of the
merger agreement and that occur after the date of the merger
agreement and prior to the effective time). Notwithstanding the
foregoing, Parent will, or will cause the Company to, provide,
for those employees of the Company and its subsidiaries who are
represented for collective bargaining by a labor organization,
terms and conditions of employment as are required by the terms
of the existing collective bargaining agreements.
In addition, Parent will, or will cause the Company to,
(i) honor all Company benefit plans and benefit agreements
in accordance with their terms and (ii) pay annual bonuses
that become payable to those employees of the Company and its
subsidiaries who are employed by the Company or any of its
subsidiaries immediately prior to the effective time with
respect to the fiscal year in which the effective time occurs
and all bonuses accrued before the effective time under the
Company’s annual bonus plans, including unpaid bonuses
accrued in the fiscal year prior to the effective time. For
purposes of any Company benefit plan or benefit agreement that
contains a definition of change in control or change of control,
the merger, when effected, will be deemed to constitute a change
in control or change of control.
The merger agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties to the merger
agreement. By an instrument in writing, Parent, on the one hand,
and the Company, on the other hand, may waive compliance by the
other with any term or provision of the merger agreement that
such other party was or is obligated to comply with or perform.
The discussion of the provisions set forth below is not a
complete summary regarding your appraisal rights under Delaware
law and is qualified in its entirety by reference to
Section 262 of the DGCL which is attached to this
information statement as Annex B. Stockholders intending to
exercise appraisal rights should carefully review Annex B
in its entirety. Failure to follow precisely any of the
statutory procedures set forth in Section 262 of the DGCL
may result in a termination or waiver of these rights.
If you comply with the applicable statutory procedures of
Section 262 of the DGCL, you may be entitled to appraisal
rights under Section 262 of the DGCL. In order to exercise
and perfect appraisal rights, a record holder of our Company
Common Stock must follow the statutory procedures pursuant to
Section 262 of the DGCL required to be followed by a
stockholder in order to perfect appraisal rights.
Section 262 of the DGCL is reprinted in its entirety as
Annex B to this information statement. Set forth below is a
summary description of Section 262 of the DGCL. The
following is intended as a brief summary of the material
provisions of the statutory procedures pursuant to
Section 262 of the DGCL required to be followed by a
stockholder in order to perfect appraisal rights. This summary,
however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to
the full text of Section 262 of the DGCL, which appears in
Annex B to this information statement. All references in
Section 262 and this summary to “stockholder” are
to the record holder of the shares of our Company Common Stock
immediately prior to the effective time of the merger as to
which appraisal rights are asserted. Failure to comply strictly
with the procedures set forth in Section 262 of the DGCL
will result in the loss of appraisal rights.
Under the DGCL, holders of our Company Common Stock who follow
the procedures set forth in Section 262 of the DGCL will be
entitled to have their shares appraised by the Court of Chancery
of the State of Delaware, or the Delaware Court, and to receive
payment in cash of the “fair value” of those shares,
exclusive of any element of value arising from the
accomplishment or expectation of the merger.
Under Section 262 of the DGCL, where a merger agreement
relating to a proposed merger is adopted by stockholders acting
by written consent in lieu of a meeting of the stockholders, the
corporation must notify each of its stockholders who was a
stockholder on the record date for such action by consent with
respect to such shares for which appraisal rights are available,
that appraisal rights are so available, and must include in each
such notice a copy of Section 262 of the DGCL. This
information statement constitutes such notice to the holders of
our Common Stock and Section 262 of the DGCL is attached to
this information statement as Annex B. Any stockholder who
wishes to exercise such appraisal rights or who wishes to
preserve such stockholder’s right to do so should review
the following discussion and Annex B carefully, because
failure to timely and properly comply with the procedures
specified will result in the loss of appraisal rights under the
DGCL.
Holders of shares of our Company Common Stock who desire to
exercise their appraisal rights must deliver to PGI a written
demand for appraisal of their shares of Company Common Stock
within 20 days after the date of mailing of the information
statement, or [•], 2010. A demand for appraisal will be
sufficient if it reasonably informs the Company of the identity
of the stockholder and that such stockholder intends thereby to
demand appraisal of such stockholder’s shares of Company
Common Stock. If you wish to exercise your appraisal rights you
must be the record holder of such shares of Company Common Stock
on the date the written demand for appraisal is made and you
must continue to hold such shares through the effective time of
the merger. Accordingly, a stockholder who is the record holder
of shares of Company Common Stock on the date the written demand
for appraisal is made, but who thereafter transfers such shares
prior to the effective time of the merger, will lose any right
to appraisal in respect of such shares.
Only a holder of record of shares of Company Common Stock is
entitled to assert appraisal rights for such shares of Company
Common Stock registered in that holder’s name. A demand for
appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as the holder’s name appears
on the stock certificates and must state that such person
intends thereby to demand appraisal of such stockholder’s
shares. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution
of the demand
for appraisal should be made in that capacity, and if the shares
are owned of record by more than one person, as in a joint
tenancy or tenancy in common, the demand should be executed by
or on behalf of all joint owners. An authorized agent, including
one for two or more joint owners, may execute the demand for
appraisal on behalf of a holder of record; however, the agent
must identify the record owner or owners and expressly disclose
the fact that, in executing the demand, he or she is acting as
agent for such owner or owners.
A record holder such as a broker who holds shares as nominee for
several beneficial owners may exercise appraisal rights with
respect to the shares of Company Common Stock held for one or
more beneficial owners while not exercising such rights with
respect to the shares held for other beneficial owners; in such
case, the written demand should set forth the number of shares
as to which appraisal is sought. Where the number of shares of
Company Common Stock is not expressly stated, the demand will be
presumed to cover all shares held in the name of the record
owner. If you hold your shares in brokerage accounts or other
nominee forms and wish to exercise your appraisal rights, you
are urged to consult with your broker to determine the
appropriate procedures for the making of a demand for appraisal.
All written demands for appraisal of shares must be mailed or
delivered to: Polymer Group, Inc., 9335 Harris Corners
Parkway, Suite 300, Charlotte, North Carolina28269,
Attention: Daniel L. Rikard, General Counsel and Secretary.
Within 10 days after the effective time of the merger, the
surviving corporation will notify each stockholder who properly
asserted appraisal rights under Section 262 of the DGCL of
the effective time of the merger. Within 120 days after the
effective time of the merger, but not thereafter, we or any
stockholder who has complied with the statutory requirements
summarized above may commence an appraisal proceeding by filing
a petition in the Delaware Court demanding a determination of
the fair value of the shares held by such stockholder. If no
such petition is filed, appraisal rights will be lost for all
stockholders who had previously demanded appraisal of their
shares. We are not under any obligation, and we have no present
intention, to file a petition with respect to appraisal of the
value of the shares. Accordingly, if you wish to exercise your
appraisal rights, you should regard it as your obligation to
take all steps necessary to perfect your appraisal rights in the
manner prescribed in Section 262 of the DGCL.
Within 120 days after the effective time of the merger, any
stockholder who has complied with the provisions of
Section 262 of the DGCL will be entitled, upon written
request, to receive from us a statement setting forth the
aggregate number of shares of Company Common Stock not voted in
favor of adoption of the merger agreement and with respect to
which demands for appraisal were received by us, and the
aggregate number of holders of such shares. Such statement must
be mailed within 10 days after the written request therefor
has been received by us or within 10 days after expiration
of the period for delivery of appraisal demands, whichever is
later. A person who is the beneficial owner of shares of such
stock held either in a voting trust or by a nominee on behalf of
such person may, in such person’s own name, file an
appraisal petition or request from us the statement described in
this paragraph.
If a petition for an appraisal is timely filed and a copy
thereof served upon us, we will then be obligated, within
20 days, to file with the Delaware Register in Chancery a
duly verified list containing the names and addresses of the
stockholders who have demanded appraisal of their shares and
with whom agreements as to the value of their shares have not
been reached. After notice to the stockholders (if such notice
is required by the Delaware Court), the Delaware Court is
empowered to conduct a hearing on such petition to determine
those stockholders who have complied with Section 262 of
the DGCL and who have become entitled to appraisal rights
thereunder. The Delaware Court may require the stockholders who
demanded appraisal rights of shares of Company Common Stock to
submit their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceeding,
and if any stockholder fails to comply with such direction, the
Delaware Court may dismiss the proceedings as to such
stockholder.
After the Delaware Court determines which stockholders are
entitled to appraisal of their shares of Company Common Stock,
the appraisal proceeding shall be conducted in accordance with
the rules of the Delaware Court, including any rules
specifically governing appraisal proceedings. Through such
proceeding the Delaware Court shall determine the “fair
value” of their shares of Company Common Stock exclusive of
any element of value arising from the accomplishment or
expectation of the merger, together with interest, if
any, to be paid upon the amount determined to be the fair value.
In determining such fair value, the Delaware Court shall take
into account all relevant factors. Unless the Delaware Court in
its discretion determines otherwise for good cause shown,
interest from the effective date of the merger through the date
of payment of the judgment shall be compounded quarterly and
shall accrue at 5% over the Federal Reserve discount rate
(including any surcharge) as established from time to time
during the period between the effective date of the merger and
the date of payment of the judgment. If you are considering
seeking appraisal, you should be aware that the fair value of
your shares as determined under Section 262 of the DGCL
could be more than, the same as or less than the consideration
you are entitled to receive pursuant to the merger agreement if
you did not seek appraisal of your shares and that investment
banking opinion as to the fairness from a financial point of
view of the consideration payable in a merger are not
necessarily opinions as to fair value under Section 262 of
the DGCL. In determining “fair value” of shares, the
Delaware Court will take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court
stated that such factors include “market value, asset
value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could
be ascertained as of the date of the merger which throw any
light on future prospects of the merged corporation.” In
Weinberger, the Delaware Supreme Court stated that
“proof of value by any techniques or methods generally
considered acceptable in the financial community and otherwise
admissible in court” should be considered in an appraisal
proceeding.
The Delaware Court will direct the payment of the fair value of
the shares of Company Common Stock who have perfected appraisal
rights, together with interest, if any, by the surviving
corporation to the stockholders entitled thereto. The Delaware
Court will determine the amount of interest, if any, to be paid
on the amounts to be received by persons whose shares of Company
Common Stock have been appraised. The costs of the action (which
do not include attorneys’ or experts’ fees or
expenses) may be determined by the Delaware Court and taxed upon
the parties as the Delaware Court deems equitable. The Delaware
Court may also order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys’ fees
and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all
of the shares of our Common Stock entitled to appraisal. In the
absence of such determination or assessment, each party bears
its own expenses.
Any stockholder who has duly demanded and perfected an appraisal
in compliance with Section 262 of the DGCL will not, after
the effective time of the merger, be entitled to vote his or her
shares for any purpose or be entitled to the payment of
dividends or other distributions thereon, except dividends or
other distributions payable to holders of record of shares of
Company Common Stock as of a date prior to the effective time of
the merger.
At any time within 60 days after the effective time of the
merger, any stockholder will have the right to withdraw such
stockholder’s demand for appraisal and to accept the cash
payment of the consideration to be paid pursuant to the merger
agreement for such stockholder’s shares pursuant to the
merger agreement. After this period, a stockholder may withdraw
such stockholder’s demand for appraisal only with the
written approval of the surviving corporation. If no petition
for appraisal is filed with the Delaware Court within
120 days after the effective time of the merger, a
stockholder’s right to appraisal will cease and such
stockholder will be entitled to receive the cash payment of the
consideration to be paid pursuant to the merger agreement for
such stockholder’s shares pursuant to the merger agreement,
as if such stockholder had not demanded appraisal of such
stockholder’s shares. No petition timely filed in the
Delaware Court demanding appraisal will be dismissed as to any
stockholder without the approval of the Delaware Court, and such
approval may be conditioned on such terms as the Delaware Court
deems just; provided, however, that any stockholder who has not
commenced an appraisal proceeding or joined that proceeding as a
named party may withdraw such stockholder’s demand for
appraisal and accept the consideration to be paid pursuant to
the merger agreement within 60 days after the effective
date of the merger.
If you properly demand appraisal of your shares of Company
Common Stock under Section 262 of the DGCL but you fail to
perfect, or effectively withdraw or lose, your right to
appraisal, as provided in Section 262 of the DGCL, your
shares of Company Common Stock will be converted into the right
to receive the consideration to be paid pursuant to the merger
agreement. You will fail to perfect, or effectively lose or
withdraw, your right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after
the effective time of the merger, or if you deliver to us a
written withdrawal of your demand for appraisal. Any such
attempt to withdraw an appraisal demand more than 60 days
after the effective time of the merger will require our written
approval.
If you desire to exercise your appraisal rights, you must
strictly comply with the procedures set forth in
Section 262 of the DGCL. Failure to take any required step
in connection with the exercise of appraisal rights will result
in the termination or waiver of such rights. In view of the
complexity of Section 262 of the DGCL, stockholders who may
wish to pursue appraisal rights should consult their legal
advisors.
As of [•], 2010, there were [•] shares of
Class A common stock outstanding, held by approximately
[•] stockholders of record, [•] shares of
Class B common stock outstanding, held by approximately
[•] stockholders of record, and [•] shares of
Class C common stock outstanding, held by approximately
[•] stockholders of record. Our Class A common stock
and Class B common stock are listed for trading on the OTC
Bulletin Board under the stock symbols “POLGA”
and “POLGB”, respectively. There is no established
public trading market for our Class C common stock. The
following tables set forth, for the indicated fiscal periods,
the reported high and low closing prices of our Class A
common stock and Class B common stock, as reported on the
OTC Bulletin Board.
The closing sale prices of our Class A common stock and
Class B common stock on October 1, 2010, the last
trading day before the announcement of the execution of the
merger agreement, were $22.50 and $18.50 per share,
respectively. The closing sale prices of our Class A common
stock and Class B common stock on April 6, 2010, the
last trading day before the Company announced that the Board of
Directors was conducting a review of strategic alternatives,
were $17.25 and $16.00 per share, respectively. On [•],
2010, the most recent practicable date prior to the date of this
information statement, the closing sale prices of our
Class A common stock and Class B common stock were
$[•] and $[•] per share, respectively.
The Company has not paid any dividends on our Class A
common stock, Class B common stock and Class C common
stock during the fiscal periods indicated in the table above.
The following table sets forth certain information as of
October 26, 2010 with respect to shares of our Class A
common stock, Class B common stock and Class C common
stock beneficially owned by each of our directors and the Named
Executive Officers, all of our directors and executive officers
as a group and each person we believe to be the beneficial owner
of more than 5% of the outstanding shares of any class of
Company Common Stock as of such date. Except as indicated in the
footnotes to the table, each of the stockholders listed below
has sole voting and investment power with respect to shares
owned by such stockholder.
Amount and
Nature of Beneficial
Percent of
Title of Class
Name and Address of Beneficial Owner(1)
Ownership(2)
Class
Class A Common Stock
MatlinPatterson Global Opportunities Partners, L.P.
520 Madison Avenue New York, New York10022
All directors and executive officers as a group
(10 Persons)
—
*
Class C Common Stock
Carlos P. Cavallé
—
*
Elizabeth A. Fessenden
—
*
Veronica M. Hagen
—
*
Michael W. Hale
—
*
Keith B. Hall
—
*
William B. Hewitt
—
*
Dennis E. Norman
—
*
James A. Ovenden
—
*
Mark R. Patterson
—
*
Jurriaan van der Schee
—
*
All directors and executive officers as a group
(10 Persons)
—
*
*
Percentages less than one percent are denoted by an asterisk.
(1)
Unless otherwise indicated, the address for the beneficial
owners included in the table is as follows:
c/o Polymer
Group, Inc., 9335 Harris Corners Parkway, Suite 300,
Charlotte, NC28269.
(2)
Each holder has sole voting and investment power with respect to
the shares listed unless otherwise indicated. Shares of Company
Common Stock subject to options exercisable within 60 days
of October 26, 2010 include, for our CFO, Mr. Norman,
3,000 exercisable options.
(3)
This information is based solely on a Form 13D/A filed by
MatlinPatterson Global Opportunities Partners, L.P. (for
purposes of this footnote, “MatlinPatterson”) and
certain of its affiliates on October 4, 2010.
MatlinPatterson and certain of its affiliates share both voting
and dispositive power over the shares. MatlinPatterson is a
party to (1) the shareholders agreement entered into among
PGI and certain other stockholders dated as of March 5,2003, and as amended on December 20, 2004 (collectively,
the “2003 Shareholders Agreement”), and
(2) the shareholders agreement entered into among PGI,
MatlinPatterson, Tesalca-99, S.A. and Texnovo, S.A. as part of
the Company’s acquisition of what is now PGI Spain, S.L.
(the “2009 Shareholders Agreement”). Each of these
shareholder agreements provides for certain voting agreements
regarding election of directors. MatlinPatterson disclaims
beneficial ownership of shares of Company Common Stock owned by
the other parties to the 2003 Shareholders Agreement and
the 2009 Shareholders Agreement.
(4)
Mr. Patterson is Chairman of MatlinPatterson Global
Advisers LLC and Mr. Van der Schee is a Principle in Matlin
Patterson Advisors (Europe) LLP and may be deemed to
beneficially own the shares owned by MatlinPatterson and certain
of its affiliates.
(5)
This information is based solely on a Form 13G/A filed
January 27, 2010 by James D. Bennett and certain associated
entities.
The Company files annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and
copy any such document at the SEC’s public reference room
located at 100 F Street, N.E., Washington, D.C.,
20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. The
Company’s filings are also available to the public at the
SEC’s website at www.sec.gov or at the Company’s
website at www.polymergroupinc.com. Our website address is being
provided as an inactive textual reference only. The information
provided on our website, other than the copies of the documents
listed or referenced below that have been or will be filed with
the SEC, is not part of this information statement, and
therefore is not incorporated herein by reference.
The SEC allows the Company to incorporate by reference into this
information statement documents it has filed with the SEC. This
means that the Company can disclose important information to you
by referring you to those documents. The information filed by
the Company and incorporated by reference herein is considered
to be part of this information statement, and later information
that the Company files with the SEC will update and supersede
that information. Statements contained in this information
statement, or in any document incorporated in this information
statement by reference, regarding the contents of any contract
or other document are not necessarily complete and each
statement is qualified in its entirety by reference to such
other contract or other document filed as an exhibit with the
SEC. The Company incorporates by reference the documents listed
below and any documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
after the date of this information statement and before the
effective time of the merger:
•
Annual Report on
Form 10-K
for the fiscal year ended January 2, 2010;
•
Amendment to the Annual Report on
Form 10-K
for the fiscal year ended January 2, 2010;
•
Quarterly Report on
Form 10-Q
for the quarterly period ended April 3, 2010;
•
Amendment to the Quarterly Report on
Form 10-Q
for the quarterly period ended April 3, 2010;
•
Quarterly Report on
Form 10-Q
for the quarterly period ended July 3, 2010; and
Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
into this information statement.
Parent and Merger Subsidiary have supplied, and the Company has
not independently verified, the information in this information
statement relating to Parent and Merger Subsidiary.
Some banks, brokers and other nominee record holders may be
participating in the practice of “householding”
information statements and annual reports. This means that only
one copy of this information statement may have been sent to
multiple stockholders in your household. We will promptly
deliver a separate copy of this document to you upon written or
oral request to [•], telephone [•]. If you want to
receive separate copies of the Company’s communications to
stockholders in the future, or if you are receiving multiple
copies and would like to receive only one copy per household,
you should contact your bank, broker or other nominee record
holder, or you may contact us at the above address and telephone
number.
AGREEMENT
AND PLAN OF MERGER
among
POLYMER GROUP, INC.,
SCORPIO ACQUISITION CORPORATION,
SCORPIO MERGER SUB CORPORATION
and
MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P.
Dated as of October 4, 2010
AGREEMENT AND PLAN OF MERGER dated as of October 4, 2010,
among POLYMER GROUP, INC., a Delaware corporation (the
“Company”), SCORPIO ACQUISITION CORPORATION, a
Delaware corporation (“Parent”), SCORPIO MERGER
SUB CORPORATION, a Delaware corporation (“Merger
Subsidiary”), and, solely for purposes of
Sections 1.01(b), 3.02, 3.07, 3.08, 10.03 and 10.09,
MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P., a Delaware
limited partnership (the “Stockholder
Representative”).
WHEREAS it is proposed that, on the terms and subject to the
conditions set forth in this Agreement, Merger Subsidiary shall,
in accordance with the Delaware General Corporation Law (the
‘‘DGCL”), merge with and into the Company
(the “Merger”), pursuant to which each share of
Company Common Stock (as defined herein), other than
(i) shares of Company Common Stock directly owned by
Parent, Merger Subsidiary, the Company or any Company Subsidiary
(as defined herein) and (ii) the Appraisal Shares (as
defined herein), will be converted into the right to receive the
Per Share Closing Payment (as defined herein) and the Per Share
Escrow Payments (as defined herein);
WHEREAS the Board of Directors, acting upon the recommendation
of the Special Committee (as defined herein) (i) has
determined that the Merger is advisable and fair to and in the
best interest of the Company and its stockholders, (ii) has
approved this Agreement and the Merger upon the terms and
subject to the conditions set forth in this Agreement and
(iii) is recommending that the Company’s stockholders
adopt this Agreement;
WHEREAS, subject to the terms and conditions herein, immediately
following execution of this Agreement, the Company and its Board
of Directors will seek authorization and adoption of this
Agreement by the MP Stockholder (as defined herein), the holder
collectively of 13,596,921 shares of Company Common
Stock; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness
of the Company to enter into this Agreement, Blackstone Capital
Partners V, L.P., a Delaware limited partnership (the
“Guarantor”), executed and delivered a limited
guarantee in favor of the Company (collectively, the
“Limited Guarantee”) pursuant to which the
Guarantor is guaranteeing certain obligations of Parent and
Merger Subsidiary in connection with this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this
Agreement, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Interpretation;
Definitions. (a) The headings contained in
this Agreement, any Exhibit hereto, the Company Disclosure
Schedule (as defined herein) and in the table of contents to
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. All Exhibits and Schedules annexed hereto or referred
to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms
used in any Exhibit or the Company Disclosure Schedule but not
otherwise defined therein shall have the meanings as defined in
this Agreement. When a reference is made in this Agreement to an
Article, a Section or an Exhibit, such reference shall be to an
Article or a Section of, or an Exhibit to, this Agreement unless
otherwise indicated. The words “hereof”,
“herein” and “hereunder”, and words of
similar import, when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms. Any matter set forth in any provision, subprovision,
section or subsection of any Schedule referred to herein shall,
unless the context otherwise manifestly requires, be deemed set
forth for all purposes of such Schedule. Whenever the words
“include”, “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation”.
“Additional Consideration Period” means the
period beginning on January 1, 2011 and ending on the
calendar day immediately prior to the Closing Date.
“Additional Expense Reimbursement Amount” means
$500,000, which shall be in addition to amounts payable to the
Stockholder Representative pursuant to Section 3.07(f).
“Additional Per Share Consideration” means an
amount, rounded to the nearest penny, equal to the product of
(i) the number of calendar days within the Additional
Consideration Period multiplied by (ii) a fraction,
the numerator of which is $53,571.43 and the denominator of
which is the Total Share Number.
“Affiliate” of any Person means another Person
that, directly or indirectly, through one or more
intermediaries, Controls, is Controlled by, or is under common
Control with, such first Person.
“Agreement” means this Agreement and Plan of
Merger dated as of October 4, 2010, among the Company,
Parent, Merger Subsidiary and the Stockholder Representative
(including the Exhibits and Schedules hereto), as amended,
modified or supplemented from time to time.
“Board of Directors” means the board of
directors of the Company.
“Business Day” means any day that is not a
Saturday, a Sunday or other day on which banks are required or
authorized by law to be closed in The City of New York.
“Call Option” means the Acquirer’s Call
Option over the Phase II Assets and the Intellectual
Property Rights (as such terms are defined in the Spain
Agreement) pursuant to Section 3.1 of the Spain Agreement.
“Certificate” means any certificate evidencing
shares of Company Common Stock.
“Code” means the Internal Revenue Code of 1986,
as amended.
“Company Advisor” means PricewaterhouseCoopers,
LLP or any successor advisor.
“Company Benefit Agreement” means each
employment, consulting, incentive or deferred compensation,
equity-based compensation, severance, change in control,
retention or other Contract between the Company or any Company
Subsidiary, on the one hand, and any current or former officer,
director, consultant, or employee of the Company or any Company
Subsidiary, on the other hand.
“Company Benefit Plan” means each
“employee benefit plan” (as defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”)) that is not a
Company Benefit Agreement, including each (i) pension plan
(as defined in Section 3(2) of ERISA) or post-retirement or
employment health, medical, life insurance or other benefit
plan, program, policy or arrangement, (ii) bonus, incentive
or deferred compensation, stock purchase, stock option, or other
equity-based
compensation plan, program, policy, agreement or arrangement,
(iii) employment, severance, change in control or retention
plan, program, policy, agreement or arrangement or
(iv) other fringe benefit compensation, benefit or employee
loan plan, program, policy, agreement or arrangement, in each
case, either (x) sponsored, maintained, contributed to or
required to be maintained or contributed to by the Company or
any Company Subsidiary for the benefit of any current or former
officer, director, employee, or consultant of the Company or any
Company Subsidiary (a “Company Employee”), or
(y) under which the Company or any Company Subsidiary has
had or could have any present or future liability but other than
any “multiemployer plan” (as defined in
Section 3(37) of ERISA).
“Company Performance RSU” means any restricted
stock unit with respect to shares of Class A Common Stock
held by any current or former officer, director, employee or
advisor of the Company or any Company Subsidiary that is subject
to performance-based vesting or delivery requirements.
“Company Restricted Shares” means shares of
Class A Common Stock held by any current or former officer,
director, employee or advisor of the Company or any Company
Subsidiary that are subject to vesting (whether
performance-based or service-based) or forfeiture provisions.
“Company RSU” means any restricted stock unit
with respect to shares of Class A Common Stock held by any
current or former officer, director, employee or advisor of the
Company or any Company Subsidiary that is subject to
service-based vesting or delivery requirements.
“Company Significant Subsidiary” means any
operating Subsidiary of the Company or material Subsidiary of
the Company.
“Company Stock Options” means options to
purchase shares of Class A Common Stock issuable pursuant
to any agreement between the Company and any current or former
officer, director, employee or advisor of the Company or any
Company Subsidiary or any third party.
“Company Stock Plans” means those plans listed
on Section 1.01 of the Company Disclosure Schedule.
“Company Subsidiary” means any direct or
indirect Subsidiary of the Company.
“Control” (including the terms “Controlled
by” and “under common Control with”), with
respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, of the
power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting
securities, by contract or otherwise.
“Controlled Group Liability” means any and all
liabilities (i) under Title IV of ERISA,
(ii) under Section 302 or 4068(a) of ERISA,
(iii) under Section 412(n) or 4971 of the Code and
(iv) for violation of the continuation coverage
requirements of Sections 601 et seq. of ERISA and
Section 4980B of the Code or the group health requirements
of Sections 701 et seq. of ERISA and Sections 9801 et
seq. of the Code, in the case of each of the foregoing
clauses (i) through (iv), with respect to any entity (other
than the Company or any of the CompanySubsidiaries) that,
together with the Company or any of the CompanySubsidiaries, is
or was (at a relevant time) treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
“Credit Agreement” means the Credit Agreement
dated as of November 22, 2005, among the Company, as
Borrower, Citicorp North America, Inc., as administrative agent,
documentation agent, collateral agent and syndication agent, and
the lenders from time to time party thereto, as amended by
Amendment No. 1 to the 2005 Credit Agreement, dated as of
December 8, 2006, and Amendment No. 2 to the 2005
Credit Agreement, dated as of September 17, 2009.
“Environmental Laws” means any and all
Applicable Laws and Judgments issued, promulgated or entered
into by or with any Governmental Entity relating to the
protection of the environment or, as it relates to exposure to
hazardous or toxic substances, human health or safety or to the
preservation or reclamation of natural resources.
“Escrow Payments” means the payments made to
the Stockholders pursuant to Sections 3.02(d), 3.03(a)(ii),
3.03(b)(ii) and 3.03(c)(ii).
“Financing Sources” means the entities that
have committed to provide or otherwise entered into agreements
in connection with the Financing or other financings in
connection with the transactions contemplated hereby, including
the parties to the Debt Financing Commitments, each together
with their respective Affiliates and permitted successors and
assigns.
“GAAP” means United States generally accepted
accounting principles.
“Hazardous Materials” means petroleum and
petroleum distillates, polychlorinated biphenyls, asbestos or
asbestos-containing materials, hazardous or toxic chemicals and
all other substances or materials that in relevant form and
concentration are regulated as wastes, pollutants, contaminants,
hazardous or toxic or any other term of similar import, or that
otherwise would reasonably be expected to result in liability
pursuant to any Environmental Law.
“Indebtedness” means, with respect to any
Person, (i) any indebtedness or other liability or
obligation for borrowed money (including accrued but unpaid
interest); (ii) any indebtedness or other liability or
obligation for the deferred and unpaid purchase price of
property or services (excluding current trade payables in the
ordinary course of business and payable in accordance with
customary practices); (iii) any other indebtedness
or other liability or obligation that is evidenced by a note,
bond, debenture or similar debt instrument; (iv) any
indebtedness or other liability or obligation under capital
leases (as defined under GAAP); (v) any indebtedness or
other liability or obligation of any other Person secured by a
Lien on any property of the Company or the CompanySubsidiaries;
(vi) all liabilities under any sale and leaseback
transaction, any synthetic lease or tax ownership operating
lease transaction and all obligations arising with respect to
any transaction which is the functional equivalent of borrowing
but which does not constitute a liability on a consolidated
balance sheet of the Company and the CompanySubsidiaries
prepared in accordance with GAAP, (vii) any currency,
interest rate or other swap or hedge agreement or any other
hedging arrangement or (viii) any indebtedness or other
liability or obligation that would otherwise be classified as
“debt” on a consolidated balance sheet of the Company
and the CompanySubsidiaries prepared in accordance with GAAP.
“Intellectual Property” means all worldwide
rights in any patent (including all reissues, divisions and
continuations thereof), patent application, trademark, trademark
registration, trademark application, servicemark, logo, trade
name, brand name, domain name and other source identifiers,
copyright, copyright registration, design, design registration,
trade secrets, know-how, technology, software (including source
and object code), websites or other confidential or proprietary
rights or information.
“Knowledge” means (i) with respect to
Parent, the actual knowledge of the executive officers of Parent
and (ii) with respect to the Company, the actual knowledge
of Veronica Hagen, Dennis Norman, Mike Hale, Daniel Rikard,
Daniel Guerrero, Rolando Dominguez, Wuling Zhang, Scott Tracey,
Richard Gillespie, Mary Tomasello and Valerie Calloway.
“Marketing Period” means the first period of 20
consecutive Business Days after the date hereof throughout
which: (i) Parent and Merger Subsidiary shall have the
Required Information that the Company is required to provide to
Parent pursuant to Section 6.12(b)(ii) and (ii) the
conditions set forth in Section 8.01 shall be satisfied and
nothing has occurred and no condition exists that would cause
any of the conditions set forth in Section 8.02 to fail to
be satisfied assuming the Closing were scheduled for any time
during such 20 consecutive Business Day period; provided,
that (A) if the Marketing Period would not end prior
November 1, 2010, the Marketing Period shall not commence
prior to the filing of the Company’s Quarterly Report on
Form 10-Q
for the quarter ending October 4, 2010, (B) the days
from and including November 22, 2010 through
November 26, 2010 shall not be included in determining the
Marketing Period and (C) if the Marketing Period would not
end prior to December 18, 2010, the Marketing Period shall
commence no earlier than January 3, 2011; providedfurther, that the Marketing Period shall not be deemed to
have commenced if, following the commencement of, but prior to
the completion of, the Marketing Period, (A) Grant Thornton
LLP shall have withdrawn its audit opinion with respect to any
financial statements contained in the audited financial
statements set forth in the SEC Documents; (B) the
financial statements included in the Required Information that
are available to Parent on the first day of any such 20
consecutive Business Day period would be required to be updated
under
Rule 3-12
of
Regulation S-X
in order to be sufficiently current on any day during such 20
consecutive Business Day period to permit a registration
statement including such financial statements to be declared
effective by the SEC on the last day of such period, in which
case the Marketing Period shall not be deemed to commence unless
and until the receipt by Parent of updated Required Information
that would be required under
Rule 3-12
of
Regulation S-X
to permit a registration statement using such financial
statements to be declared effective by the SEC on the last day
of such period; (C) the Company issues a public statement
indicating its intent to restate any historical financial
statements of the Company or that any such restatement is under
consideration or may be a possibility, in which case the
Marketing Period shall not be deemed to commence unless and
until such restatement has been completed and the relevant
financial statements have been amended or the Company has
announced that it has concluded that no restatement shall be
required in accordance with GAAP; or (D) the Company shall
have been delinquent in filing any
Form 10-K
or
Form 10-Q
or any other material SEC Filing, in which case the Marketing
Period shall not be deemed to commence unless and until all such
delinquencies have been cured.
“Material Adverse Effect” means any change,
effect, event, occurrence, state of facts, or development (each,
an “Effect”) that, individually or in the
aggregate, (i) has, or is reasonably likely to have, a
material adverse effect on the business, assets, liabilities,
condition (financial or otherwise) or results of operations of
the Company and the CompanySubsidiaries, taken as a whole;
provided that the term “Material Adverse
Effect”
shall not include any Effect arising from (A) the United
States or foreign economic, financial or geopolitical conditions
or events in general, including the continued weakness in
general economic conditions, (B) changes in the capital
markets, including changes in interest rates, (C) changes
in Applicable Law or GAAP, (D) natural disasters,
(E) the execution and announcement of the Agreement or the
consummation of the transactions contemplated hereby, including
any loss of a material customer, supplier, employee or executive
that results therefrom (provided that the exceptions in
this clause (E) shall not apply to that portion of any
representation or warranty contained in this Agreement to the
extent that the purpose of such portion of such representation
or warranty is to address the consequences resulting from the
execution or announcement of this Agreement or the performance
of obligations or satisfaction of conditions under this
Agreement), (F) changes in the nonwovens or oriented
polymers manufacturing industries, (G) military conflicts
or acts of foreign or domestic terrorism, (H) any actions
taken by the Company that are required by the terms of this
Agreement (other than in compliance with Section 6.01) and
(I) the application of the “personal holding
company” rules of the Code to the Company and the CompanySubsidiaries (including any U.S. Federal income Taxes),
except in the case of clauses (A), (B), (C), (D), (F) and
(G), to the extent that the Company and the CompanySubsidiaries, taken as a whole, are disproportionately affected
thereby as compared with other participants in the industries in
which the Company and the CompanySubsidiaries operate (in which
case the incremental disproportionate impact or impacts may be
taken into account in determining whether there has been, or is
reasonably likely to be, a Material Adverse Effect) or
(ii) prevents or materially delays beyond the Outside Date
the consummation by the Company of the Merger.
“MP Stockholder” means MatlinPatterson Global
Opportunities Partners L.P., a Delaware limited partnership,
together with any of its Affiliates that own any shares of
Company Common Stock.
“Parent Advisor” means Deloitte LLP or any
successor advisor.
“Per Share Closing Payment” means the Total Per
Share Amount minus the Per Share Escrow Amount.
“Per Share Escrow Amount” means the Escrow
Amount divided by the Total Share Number.
“Per Share Escrow Payment” means the aggregate
amount distributable to the Stockholders on any Escrow Release
Date divided by the Total Share Number.
“Person” means any individual, firm,
corporation, partnership, limited liability company, trust,
joint venture, Governmental Entity or other entity.
“PGI Group” means the U.S. Federal
consolidated income tax group of which the Company is the common
parent.
“PGI Spain” means PGI Spain S.L., formerly
known as Parametro Tecnologico, S.L.U.
“PHC Issue” means (i) the status of the
Company or any of the CompanySubsidiaries as a “personal
holding company” under Section 542 of the Code prior
to the Closing, (ii) the ability of any member of the PGI
Group to make a “consent dividend” election for any
taxable year ending on or before January 3, 2009,
(iii) the ability of any member of the PGI Group to take a
Federal Tax deduction in computing “undistributed personal
holding company income” based on such member’s Federal
Tax liability calculated as if such member were a stand-alone
taxpayer, including if the sum of such hypothetical Tax
liabilities exceeds the actual Federal Tax liability of the
group as a whole, (iv) whether the excess of the amount of
“consent dividends” reported on amended Tax Returns
over the amount of reported “undistributed personal holding
company income” of the member deemed to pay such consent
dividend, will give rise to a valid dividends paid deduction to
such member to the extent such member’s “undistributed
personal holding company income” as reported is ultimately
determined to be understated, and (v) whether the Company
can elect to calculate the earnings and profits of each member
of the PGI Group by taking a deduction in computing
“undistributed personal holding company income” in an
amount equal to such member’s Federal Tax liability
calculated as if such member were a stand-alone taxpayer and
which election would also permit the amount of such Federal
income Taxes as so computed to be deducted by such member for
purposes of determining such member’s “undistributed
personal holding company income,” including if the sum of
such hypothetical Tax liabilities exceeds the actual Federal Tax
liability of the group as a whole.
“PHC Liability” means (i) any additional
liability of the Company or any of the CompanySubsidiaries for
Taxes arising directly as a result of the status of the Company
or any of the CompanySubsidiaries as a “personal holding
company” under Section 542 of the Code prior to the
Closing (determined by comparing the actual aggregate Tax
liability of the Company and the Subsidiaries taking such status
into account with the Tax liability that would have arisen in
the absence of such status) and (ii) any state and local
Taxes attributable to the inclusion of amounts in respect of
consent dividends in income; provided that (x) the
PHC Liability shall be determined based on the applicable items
as reflected on the Tax Returns as filed by the Company and the
Company Subsidiaries prior to the Closing Date for regular
income Tax purposes on a separate company basis as adjusted for
purposes of determining the status of the Company or any of the
Company Subsidiaries as a “personal holding company”
under Section 542 of the Code or the personal holding
company Tax liability of the Company or any of the CompanySubsidiaries under Section 541 of the Code, (y) the
PHC Liability shall be calculated based on the assumption that
any PHC Issue would be decided adversely to the Company unless
the Company has received a Positive PHC Ruling with respect to
such PHC Issue and (z) in the event one or more Positive
PHC Rulings are received as specified in Section 3.07(a) of
the Company Disclosure Letter, the PHC Liability shall be
determined based on the amounts set forth within the applicable
scenario which amounts shall be adjusted as required by
Section 3.07(d).
“Positive PHC Ruling” means any PHC Ruling with
respect to which (i) the Stockholder Representative
prepares a determination of Interim PHC Liability that is based
on such PHC Ruling and with respect to which Parent does not
provide a Notice of Disagreement in accordance with
Section 3.07(h) or (ii) Parent and the Stockholder
Representative agree that, or the Expert determines pursuant to
Section 3.07(h) that it would be in a position to, if
requested, provide a “should” level opinion that, the
Company can rely on such PHC Ruling, but such an opinion shall
not be required to be provided.
“Release” means any spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching, dumping, pouring, emanation or migration into or
through the indoor or outdoor environment (including ambient
air, surface water, ground water, land surface or subsurface
strata).
“Spain Agreement” means the Asset Transfer
Agreement between the Company, PGI Spain,
Tesalca-99,
S.A., Texnovo, S.A. and Grupo Corinpa, S.L. dated
October 30, 2009, as amended on November 30, 2009.
“Stockholder Representative’s Advisor”
shall mean Ernst & Young LLP or any successor advisor.
“Stockholder Approval” means the affirmative
vote or written consent of the holders of a majority of the then
outstanding shares of Company Common Stock, voting or consenting
together as a single class, in favor of the adoption of this
Agreement.
“Subsidiary” of any Person means another
Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient
to elect at least a majority of its board of directors or other
governing body, or, if there are no such voting interests, more
than 50% of the equity interests of which is owned directly or
indirectly by such first Person or by another Subsidiary of such
first Person.
“Tax” or “Taxes” means all
Federal, state, county, local, municipal, domestic, national,
foreign and other taxes, assessments, levies, duties or similar
charges of any kind whatsoever, including income, gross
receipts, ad valorem, premium, value-added, excise, real
property, personal property, sales, use, services, transfer,
withholding, employment, payroll and franchise taxes, and any
interest, penalties and additions imposed with respect thereto.
“Taxing Authority” means any Federal, state,
county, local, municipal, domestic, national, foreign or other
government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body exercising Tax
regulatory authority.
“Tax Return” or “Tax Returns”
means all returns, declarations of estimated Tax payments,
reports, estimates, information returns and statements, filed or
to be filed with any Taxing Authority in connection with the
determination, assessment, collection or administration of any
Taxes.
“Total Per Share Amount” shall be an amount in
cash equal to $18.16 plus the Additional Per Share
Consideration, if any, without interest.
“Total Share Number” is the sum of (a) the
number of shares of Company Common Stock outstanding as of the
Effective Time, (b) the number of shares of Class A
Common Stock issuable upon the exercise of all unexercised Stock
Options (whether vested or unvested) outstanding as of the
Effective Time, (c) the number of Company Restricted Shares
outstanding as of the Effective Time (whether vested or
unvested), (d) the number of shares of Class A Common
Stock issuable pursuant to the Company Performance RSUs
outstanding as of the Effective Time assuming attainment of the
target level of performance applicable to such Company
Performance RSUs, (e) the number of shares of Class A
Common Stock issuable pursuant to the Company RSUs outstanding
as of the Effective Time and (f) the number of shares of
Company Common Stock issuable upon exercise of the Call Option,
in the case of clauses (a), (c) and (f), other than
Appraisal Shares.
ARTICLE II
The
Merger
SECTION 2.01. The
Merger. (a) On the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, the
Company and Merger Subsidiary shall cause the Merger to be
consummated by filing a certificate of merger (the
“Certificate of Merger”) with the Secretary of
State of the State of Delaware, in such form as is required by,
and executed in accordance with, the relevant provisions of the
DGCL (the date and time of such filing of the Certificate of
Merger (or such later time as may be agreed by each of the
parties hereto and specified in the Certificate of Merger) being
the “Effective Time”).
(b) On the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Merger Subsidiary shall
be merged with and into the Company in accordance with the
requirements of the DGCL, whereupon the separate existence of
Merger Subsidiary shall cease. The Company shall be the
surviving corporation in the Merger (the “Surviving
Corporation”) and shall succeed to and assume all the
rights and obligations of Merger Subsidiary in accordance with
the DGCL.
(c) Effects of the Merger. At the
Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger and the applicable
provisions of the DGCL.
(d) Certificate of Incorporation. At the
Effective Time, the amended and restated certificate of
incorporation of the Company shall be amended to read in its
entirety as set forth in Exhibit A, and as so
amended shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided
therein or by Applicable Law.
(e) Bylaws. At the Effective Time, the
amended and restated bylaws of the Company shall be amended to
read in their entirety as set forth in Exhibit B,
and as so amended shall be the bylaws of the Surviving
Corporation until thereafter amended as provided therein, by the
certificate of incorporation of the Surviving Corporation or by
Applicable Law.
(f) Directors and Officers. Except as
otherwise determined by Parent, the directors of Merger
Subsidiary immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation, and the officers of Merger
Subsidiary immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified or until the earlier of their death, resignation
or removal.
SECTION 2.02. Closing. The
closing of the Merger (the “Closing”) shall
take place (a) at the offices of Cravath,
Swaine & Moore LLP, 825 Eighth Avenue, New York, NewYork10019, at 10:00 a.m., New York City time, on the
second Business Day following the satisfaction or, to the extent
permitted, the waiver of the conditions set forth in
Article VIII (other than those conditions that by their
terms are to be satisfied at the Closing, but subject to the
satisfaction or, to the extent permitted, the waiver of such
conditions at the Closing); provided, however,
that if the Marketing Period has not ended at the time of the
satisfaction or, to the extent permitted, waiver of conditions
set forth in Article VIII (other than those conditions that
by their terms are to be satisfied at the Closing, but subject
to the satisfaction or, to the extent permitted, waiver of such
conditions at the Closing), the Closing shall occur on the date
following the satisfaction or waiver of
such conditions that is the earliest to occur of (x) a date
during the Marketing Period to be specified by Merger Subsidiary
on no less than two Business Days’ notice to the Company
(it being understood that such date may be conditioned upon the
simultaneous completion of the Debt Financing) or (y) the
third Business Day after the final day of the Marketing Period
or (b) at such other place, time and date as shall be
agreed by the parties hereto. The date on which the Closing
occurs is referred to in this Agreement as the “Closing
Date”.
ARTICLE III
Conversion
of Securities
SECTION 3.01. Conversion of Shares of Company
Common Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger
Subsidiary, the Company or the holders of any of the following
securities:
(a) subject to the provisions of Section 3.04, each
share of the Company’s (i) Class A common stock,
par value $0.01 per share (the “Class A Common
Stock”), (ii) Class B common stock, par value
$0.01 per share (the “Class B Common
Stock”) and (iii) Class C common stock, par
value $0.01 per share (the “Class C Common
Stock” and, together with the Class A Common Stock
and the Class B Common Stock, the “Company Common
Stock”) issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to
be cancelled in accordance with Section 3.01(b), shares of
Company Common Stock to remain outstanding pursuant to
Section 3.01(c), any Restricted Shares and any Appraisal
Shares) shall be cancelled and shall be converted automatically
into the right to receive the Per Share Closing Payment and,
subject to Section 3.02(b) and Section 3.02(d), the
Per Share Escrow Payments;
(b) each share of Company Common Stock held in the treasury
of the Company or by Parent or Merger Subsidiary immediately
prior to the Effective Time shall be cancelled without any
conversion thereof and no payment or distribution shall be made
with respect thereto;
(c) each share of Company Common Stock held by any Company
Subsidiary shall remain outstanding; and
(d) each share of common stock, par value $0.01 per share,
of Merger Subsidiary issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
SECTION 3.02. Exchange Fund and Escrow
Fund. (a) Paying Agent. Not less than 10
Business Days prior to the Effective Time, the Company shall
appoint a bank or trust company (which bank or trust company
will be reasonably acceptable to Parent) to act as paying agent
(the “Paying Agent”) and enter into a paying
agent agreement with such Paying Agent, in form and substance
reasonably acceptable to Parent) for the purpose of stockholders
exchanging Certificates and agreements evidencing Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs for the Per Share Closing Payment, and, on any
Escrow Release Date, any applicable Per Share Escrow Payment. At
or prior to the Effective Time, Parent shall deposit, or cause
to be deposited, with the Paying Agent, for the benefit of the
holders of shares of Company Common Stock, Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs, by wire transfer of immediately available funds,
cash in an amount sufficient to pay the aggregate Per Share
Closing Payment which such holders of shares of Company Common
Stock and Company Restricted Shares shall be entitled to receive
pursuant to this Article III plus cash in an amount
sufficient to pay for Company Stock Options, Company Performance
RSUs and Company RSUs pursuant to Section 3.03(a)(i) and
Section 3.03(c)(i), as the case may be (such cash being
hereinafter referred to as the “Exchange
Fund”). The Exchange Fund shall be used solely to make
the payments specified in the immediately preceding sentence.
Nothing contained herein and no investment losses resulting from
investment of the Exchange Fund shall diminish the rights of any
Stockholder to receive the Per Share Closing Payment as provided
herein.
(b) Escrow Fund. Not less than 10
Business Days prior to the Effective Time, Parent shall appoint
a bank or trust company (which bank or trust company will be
reasonably acceptable to the Company) to act as escrow agent
(the “Escrow Agent”) and enter into an escrow
agreement with the Escrow Agent, the Company and the Stockholder
Representative as the representative of holders of Company
Common Stock (other than Appraisal Shares), Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs (collectively, the
‘‘Stockholders”), such escrow agreement to
be substantially in the form attached hereto as
Exhibit D (the “Escrow Agreement”).
At or prior to the Effective Time, Parent shall deposit, or
cause to be deposited with the Escrow Agent, for the benefit of
the Stockholders and the Company, as applicable, an amount of
cash equal to $64,500,000 (the “Escrow
Amount”), subject to reduction pursuant to
Section 3.07(l), such deposit to constitute the escrow fund
(the “Escrow Fund”). The Escrow Fund shall be
governed by the terms of the Escrow Agreement and this
Agreement. The Escrow Fund shall be held in escrow and shall be
released in accordance with this Article III and the Escrow
Agreement. Upon the release of any amounts from the Escrow Fund,
the Escrow Agent shall remit such amounts to the Paying Agent
for payment in accordance with the terms of this
Article III.
(c) Certificate Exchange Procedures. As
promptly as practicable after the Effective Time, Parent shall
cause the Paying Agent to mail to each holder of record of a
Certificate whose shares of Company Common Stock were converted
into the right to receive the Per Share Closing Payment
(i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates held by such Person shall pass, only upon
proper delivery of the Certificates to the Paying Agent and
which shall be in customary form and have such other provisions
as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange
for the Per Share Closing Payment. Each holder of record of a
Certificate shall, upon surrender to the Paying Agent of such
Certificate, together with such letter of transmittal, duly
completed and validly executed, and such other documents as may
reasonably be required by the Paying Agent, be entitled to
receive in exchange therefor the amount of cash which the number
of shares of Company Common Stock previously represented by such
Certificate shall have been converted into the right to receive
pursuant to Section 3.01(a), and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, payment of
the Per Share Closing Payment may be made to a Person other than
the Person in whose name the Certificate so surrendered is
registered if, upon presentation to the Paying Agent, such
Certificate is properly endorsed or otherwise in proper form for
transfer and the Person requesting such payment pays any
transfer or other taxes required by reason of the payment of the
Per Share Closing Payment to a Person other than the registered
holder of such Certificate or establishes to the reasonable
satisfaction of Parent that such taxes have been paid or are not
applicable. Until surrendered as contemplated by this
Section 3.02(c), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive upon such surrender the Per Share Closing Payment and
the Per Share Escrow Payments which the holder thereof has the
right to receive in respect of such Certificate pursuant to this
Article III. No interest shall be paid or will accrue on
any cash payable to holders of Certificates pursuant to the
provisions of this Article III.
(d) Escrow Payments. On each Escrow
Release Date, each holder of record of a Certificate as of the
Effective Time (other than Certificates representing Appraisal
Shares), and subject to the requirements for receiving the Per
Share Closing Payment pursuant to Section 3.02(c), shall be
entitled to receive in exchange therefor the amount of cash
equal to the product of (i) the number of shares of Company
Common Stock previously represented by such Certificate and
(ii) the Per Share Escrow Payment, which shall not be
assignable or otherwise transferable except by operation of law
or by intestacy.
SECTION 3.03. Company Stock Options;
Restricted Securities. (a) Company Stock
Options. At the Effective Time and without any
further action on the part of Parent, Merger Subsidiary, the
Company or any holder of Company Stock Options, each Company
Stock Option, granted under the Company Stock Plans or
otherwise, that is outstanding and unexercised as of the
Effective Time (whether vested or unvested) shall, unless
otherwise agreed to in writing by Parent and the holder of such
Company Stock Option prior to the
Effective Time, be canceled and converted into the right to
receive, in full satisfaction of the rights of such holder with
respect thereto:
(i) an amount in cash, without interest, equal to the
product of (x) the number of shares of Class A Common
Stock subject to such Company Stock Option and (y) the
excess, if any, of (I) the Per Share Closing Payment over
(II) the exercise price per share of Class A Common
Stock subject to such Company Stock Option; and
(ii) on each Escrow Release Date, an amount in cash,
without interest, equal to the product of (A) the number of
shares of Class A Common Stock subject to such Company
Stock Option and (B) the Per Share Escrow Payment, which
shall not be assignable or otherwise transferable except by
operation of law or by intestacy.
(b) Company Restricted Shares. At the
Effective Time, and without any further action on the part of
Parent, Merger Subsidiary, the Company or any holder of Company
Restricted Shares, each Company Restricted Share granted under
the Company Stock Plans or otherwise that is outstanding as of
the Effective Time (whether vested or unvested) shall, unless
otherwise agreed to in writing by Parent and the holder of such
Company Restricted Share, be converted into the right to receive:
(i) an amount in cash, without interest, equal to the Per
Share Closing Payment pursuant to Section 3.01(a); and
(ii) on each Escrow Release Date, an amount in cash,
without interest, equal to the Per Share Escrow Payment, which
shall not be assignable or otherwise transferable except by
operation of law or by intestacy.
(c) Company Performance RSUs and Company
RSUs. At the Effective Time, and without any
further action on the part of Parent, Merger Subsidiary, the
Company or any holder of Company Performance RSUs or Company
RSUs outstanding immediately prior to the Effective Time, each
Company Performance RSU and Company RSU granted under the
Company Stock Plans or otherwise (in each case, whether vested
or unvested) shall, unless otherwise agreed to in writing by
Parent and the holder of such Company Performance RSU or Company
RSU, be converted into the right to receive:
(i) (A) in the case of each Company Performance RSU,
an amount in cash, without interest, equal to (x) the Per
Share Closing Payment multiplied by (y) the number of
shares of Class A Common Stock issuable pursuant to such
Company Performance RSU assuming attainment of the target level
of performance applicable to such Company Performance RSU and
(B) in the case of each Company RSU, an amount in cash,
without interest, equal to (x) the Per Share Closing
Payment multiplied by (y) the number of shares of
Class A Common Stock issuable pursuant to such Company
RSU; and
(ii) on each Escrow Release Date, (A) in the case of
each Company Performance RSU, an amount in cash, without
interest, equal to (x) the Per Share Escrow Payment
multiplied by (y) the number of shares of Class A
Common Stock issuable pursuant to such Company Performance RSU
assuming attainment of the target level of performance
applicable to such Company Performance RSU and (B) in the
case of each Company RSU, an amount in cash, without interest,
equal to (x) the Per Share Escrow Payment multiplied by
(y) the number of shares of Class A Common Stock
issuable pursuant to such Company RSU, which, in each case shall
not be assignable or otherwise transferable except by operation
of law or by intestacy.
(d) Payment. (i) Parent shall, or
shall cause the Surviving Corporation to, provide the Paying
Agent and the Escrow Agent with a list of all holders of Company
Stock Options, Company Restricted Shares, Company Performance
RSUs and Company RSUs certified by an officer of the Company or
the Company’s transfer agent. As promptly as practicable
after the Effective Time, Parent shall cause the Paying Agent to
mail to the holder of each Company Stock Option, Company
Restricted Share, Company Performance RSU and Company RSU a
letter of transmittal (in a form reasonably acceptable to the
Surviving Corporation) and instructions for use in obtaining the
value of such Company Stock Option, Company Restricted Share,
Company Performance RSU or Company RSU, as contemplated by
Section 3.03(a)(i), Section 3.03(b)(i) and
Section 3.03(c)(i), as the
case may be. All such payments with respect to canceled Company
Stock Options, Company Restricted Shares, Company Performance
RSUs and Company RSUs shall be made by the Paying Agent (and
Parent shall cause the Paying Agent to make such payments) as
promptly as practicable after the Effective Time but in no event
later than December 31 of the calendar year in which the
Effective Time occurs, from funds deposited by or at the
direction of Parent (in order to pay such amounts) in accordance
with Section 3.02(a).
(ii) Notwithstanding Section 3.03(d)(i) and, at
Parent’s election, in lieu of the procedures outlined in
Section 3.03(d)(i), Parent shall, or shall cause one of its
Affiliates (including the Surviving Corporation following the
Effective Time) to, make payments with respect to canceled
Company Stock Options, Company Restricted Shares, Company
Performance RSUs and Company RSUs, as contemplated by
Section 3.03(a)(i), Section 3.03(b)(i) and
Section 3.03(c)(i), as the case may be, to the holders
thereof as promptly as practicable following the Effective Time,
but in no event later than December 31 of the calendar year in
which the Effective Time occurs. Parent may elect to use this
procedure for all or a portion of the Company Stock Options,
Company Restricted Shares, Company Performance RSUs and Company
RSUs.
(iii) Prior to the Effective Time, the Company shall obtain
all consents and take all actions necessary to give effect to
the provisions of Section 3.03(a), Section 3.03(b) and
Section 3.03(c).
(e) No Further Rights. From and after the
Effective Time, holders of Certificates representing shares of
Company Common Stock (other than Appraisal Shares) and holders
of Company Stock Options, Company Restricted Shares, Company
Performance RSUs and Company RSUs, respectively, shall cease to
have any rights with respect to the shares of Company Common
Stock represented by such Certificates or Company Stock Options,
Company Restricted Shares, Company Performance RSUs or Company
RSUs, respectively, except the right to receive the portion of
the Per Share Closing Payment and the Per Share Escrow Payments
to which such holder is entitled or as provided by Applicable
Law.
(f) Unclaimed Consideration. Any portion
of the Exchange Fund or the Escrow Fund that remains unclaimed
by the holders of shares of Company Common Stock, Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs one year after the Effective Time or, in the case
of the Escrow Fund, one year after the Final PHC Liability
Release Date, shall, upon demand, be delivered to Parent, and
any holders of shares of Company Common Stock, Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs who have not theretofore complied with this
Article III shall thereafter look only to Parent for, and
Parent shall remain liable for, payment of their portion of the
Per Share Closing Payment and the Per Share Escrow Payments,
without any interest thereon. Any Per Share Closing Payment and
any portion of the Escrow Fund unclaimed by holders of shares of
Company Common Stock, Company Stock Options, Company Restricted
Shares, Company Performance RSUs and Company RSUs as of a date
which is immediately prior to such time as such amounts would
otherwise escheat to or become the property of any Governmental
Entity shall, to the extent permitted by Applicable Law, become
the property of Parent free and clear of any claims or interest
of any Person previously entitled thereto.
SECTION 3.04. Withholding
Rights. Parent, Merger Subsidiary, the Surviving
Corporation or the Paying Agent shall be entitled to deduct and
withhold (or cause to be deducted or withheld) from the amounts
otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock, Company Stock Options, Company
Restricted Shares, Company Performance RSUs and Company RSUs
such amounts as Parent, Merger Subsidiary, the Surviving
Corporation or the Paying Agent, as applicable, is required
under the Code, or any provision of state, local or foreign Tax
law, to deduct and withhold with respect to the making of such
payment; provided that Parent, Merger Subsidiary, the
Surviving Corporation or the Paying Agent, as applicable, must
pay over such amounts to the relevant Taxing Authority in
accordance with Applicable Law. To the extent that amounts are
so deducted, withheld and paid over by Parent, Merger
Subsidiary, the Surviving Corporation or the Paying Agent to the
appropriate Taxing Authority, such amounts shall be treated for
all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock, Company Stock Options,
Company Restricted Shares, Company Performance RSUs and
Company RSUs in respect of which such deduction and withholding
was made by Parent, Merger Subsidiary, the Surviving Corporation
or the Paying Agent.
SECTION 3.05. Lost
Certificates. If any Certificate, or any
agreement evidencing any Company Stock Options, Company
Restricted Shares, Company Performance RSUs and Company RSUs,
shall have been lost, stolen or destroyed, upon the receipt of
an affidavit of that fact by the Person claiming the Certificate
or agreement evidencing Company Stock Options, Company
Restricted Shares, Company Performance RSUs and Company RSUs to
be lost, stolen or destroyed and, if reasonably required by
Parent or the Surviving Corporation, the delivery of an
agreement of indemnification or bond reasonably satisfactory to
Parent, against any claim that may be made against it with
respect to such Certificate or agreement evidencing Company
Stock Options, Company Restricted Shares, Company Performance
RSUs and Company RSUs, the Paying Agent shall issue, in exchange
for such lost, stolen or destroyed Certificate or agreement, the
Per Share Closing Payment and direct the Escrow Agent to release
any applicable Per Share Escrow Payments to be paid in respect
of the shares of Company Common Stock represented by such
Certificate, or such agreement evidencing such Company Stock
Options, Company Restricted Shares, Company Performance RSUs and
Company RSUs as contemplated by this Article III.
SECTION 3.06. Appraisal
Rights. (a) Notwithstanding any provision of
this Agreement to the contrary and to the extent available under
the DGCL, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and that are held by any
holder who shall not have consented in writing or voted in favor
of the Merger and who is entitled to, and shall have demanded
properly in writing, appraisal for such shares of Company Common
Stock in accordance with Section 262 of the DGCL
(collectively, the “Appraisal Shares”, and each
holder of Appraisal Shares, an “Appraisal
Stockholder”) shall not be converted into, or represent
the right to receive, the Per Share Closing Payment or any
Escrow Payments. Such Appraisal Stockholders shall be entitled
to receive payment of the appraised value of such Appraisal
Shares held by them in accordance with the provisions of such
Section 262 of the DGCL, except that all Appraisal Shares
held by Appraisal Stockholders who shall have failed to perfect
or who effectively have withdrawn or lost their rights to
appraisal of such Appraisal Shares under such Section 262
of the DGCL shall thereupon be deemed to have been converted
into, and to have become exchangeable for, as of the Effective
Time, the right to receive the Per Share Closing Payment and the
Per Share Escrow Payments in the manner provided in this
Article III, without interest.
(b) The Company shall provide Parent with (i) prompt
notice after receipt by the Company of any demands for
appraisal, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the
Company, and (ii) the opportunity to participate at its own
expense in all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, make any
payments with respect to any demands for appraisal or offer to
settle or settle any such demands.
SECTION 3.07. Tax
Matters. (a) As of the date hereof, the
Company intends to request one or more rulings from, or to
pursue one or more closing agreements with, the IRS to reach a
determination as to some or all of the issues relating to the
amount of the PHC Liability (the “PHC
Rulings”), which ruling or closing agreement requests
shall be prepared by the Company and the Company Advisor at the
direction of the Stockholder Representative. In connection with
PHC Rulings and the procedures set out in this
Section 3.07, the Stockholder Representative shall
(i) provide Parent and the Parent Advisor at least five
Business Days (or such longer period as is reasonably requested
by Parent in light of the circumstances relating to the due date
and the complexity of the submissions) to review all submissions
to the IRS relating to the PHC Rulings prior to making such
submissions and to ask the Company, the Company Advisor and the
Stockholder Representative questions about the submissions to
the IRS relating to the PHC Rulings or other matters covered by
this Section 3.07, (ii) provide to Parent and the
Parent Advisor, no later than three Business Days after receipt,
copies of all written correspondence received from the IRS in
relation to the PHC Rulings or the matters governed by this
Section 3.07 and (iii) provide to Parent and the
Parent Advisor, as soon as practicable after the date hereof,
copies of all written correspondence received on or prior to the
date hereof from the IRS in relation to the PHC Rulings or the
matters governed by this Section 3.07.
As soon as practicable after the date hereof, the Company shall
provide to the Stockholder Representative and Parent copies of
Tax Returns of the Company or any of the CompanySubsidiaries
filed for the taxable year ending January 2, 2010. For any
such Tax Returns that have not been filed prior to the date
hereof, the Company will prepare and file such Tax Returns, as
applicable, taking tax positions therein for which the Company
has a reasonable basis (in accordance with the Code and the
United States Treasury Regulations promulgated thereunder). The
Company shall promptly notify the Stockholder Representative and
Parent if any such Tax Returns will require the Company or any
of the CompanySubsidiaries to pay any Taxes as a result of the
status of the Company or any of the CompanySubsidiaries as a
“personal holding company” under Section 542 of
the Code or the application of Section 541 of the Code.
Without the consent of Parent (which consent shall not be
unreasonably withheld, delayed or conditioned), the Company
shall not file any such Tax Returns showing any liability for
Taxes as a result of the status of the Company or any of the
Company Subsidiaries as a “personal holding company”
under Section 542 of the Code or the application of
Section 541 of the Code.
Prior to the Final PHC Liability Release Date, within five
Business Days of the receipt of notice of any IRS audit with
respect to any taxable year that (i) ended after
January 3, 2004 and (ii) ends on or prior to the
Closing Date or includes the Closing Date, the Company shall
deliver a complete and correct copy of such notice and any
related documentation to the Stockholder Representative and
Parent to the extent related to PHC Liability. The Stockholder
Representative and its representatives shall direct the
Company’s discussions with and submissions to the IRS
relating to the PHC Liability in connection with such audit;
provided that (i) for the avoidance of doubt, the
rights of the Stockholder Representative and its representatives
shall only apply to the portions of any such audit that relate
to the PHC Liability and (ii) to the extent it is
reasonably expected that, as a result of such audit, the Company
could be liable for a material amount of PHC Liability that
would not be recoverable from the Escrow Fund (taking into
account amounts expected to be released from the Escrow Fund
prior to the resolution of such audit), Parent and the
Stockholder Representative shall jointly direct the
Company’s discussions with and submissions to the IRS
relating to the PHC Liability in connection with such audit and
neither Parent nor the Stockholder Representative shall enter
into any settlement with respect to such audit without the
other’s consent.
The Company may not agree to any extension of statutes of
limitations with respect to the Company’s Tax Returns for
any taxable year that (i) ended after January 3, 2004
and (ii) ends on or prior to the Closing Date or includes
the Closing Date, without the consent of the Stockholder
Representative (which consent shall not be unreasonably
withheld, delayed or conditioned); provided that such
consent shall not be required (i) in the case of an
extension resulting from the Company filing an amended Tax
Return with respect to items that do not relate to PHC Liability
that it reasonably believes is required by the Code or the
United States Treasury Regulations promulgated thereunder,
(ii) if the IRS requests the extension or (iii) if the
Company reasonably determines that not agreeing to such
extension would have a material adverse impact (other than with
respect to PHC Liability) on the Company. The Company shall, at
the direction of the Stockholder Representative, agree to any
extension of statutes of limitations with respect to the
Company’s Tax Returns for any taxable year that
(x) ended after January 3, 2004 and (y) ends on
or prior to the Closing Date or includes the Closing Date, to
the extent such extension would not have a material adverse
impact on the Company.
(b) Parent shall be entitled to make comments on proposed
submissions to the IRS, and the Stockholder Representative shall
reasonably consider such comments, but all decisions by the
Stockholder Representative to accept or reject such comments
shall be final. The Stockholder Representative shall control all
conferences and teleconferences with the IRS in connection with
the PHC Rulings. Parent shall be entitled to observe, through
the Parent Advisor or another advisor selected by Parent (but in
no event more than two representatives), any conference or, to
the extent practicable, teleconference the Company or its
representatives and the Stockholder Representative and its
representatives have with the IRS in connection with the PHC
Liability; provided that such advisor shall have no right
of, and agrees to refrain from, any participation in such
conference other than observation thereof. The Company shall
provide Parent and the Parent Advisor and the Stockholder
Representative and the Stockholder Representative’s Advisor
with notice of any scheduled conference or teleconference within
a reasonable amount of time in advance thereof. The Company
shall execute an IRS Form 8821 (Tax Information
Authorization) to permit Parent Advisor to observe any such
conference or teleconference to the extent provided by this
Section 3.07. The Company shall execute an IRS
Form 2848 (Power of Attorney and Declaration of
Representative) and any other documents required to permit the
Company Advisor, the Stockholder Representative’s Advisor
and the Stockholder Representative to represent the Company
before the IRS with respect to the PHC Rulings and other matters
provided by this Section 3.07, subject to the terms of this
Section 3.07. Parent and, after the Closing, the Company
shall not take any actions that would prejudice the rights of
the Stockholder Representative’s Advisor and Stockholder
Representative under this Section 3.07 or interfere with
the Stockholder Representative’s ability to obtain
PHC Rulings in a timely manner.
Following the Closing, Parent agrees to, and to cause the
Company and the CompanySubsidiaries to, afford to the
Stockholder Representative and its accountants, counsel and
other representatives and the Company Advisor access, upon
reasonable notice during normal business hours, to the
properties, books, contracts, commitments, Tax Returns, work of
the Company Advisor and records of the Company and the CompanySubsidiaries and to those employees of the Company and the
Company Subsidiaries to whom the Stockholder Representative or
the Company Advisor requests access, and, during such period
shall make available to the Stockholder Representative and the
Company Advisor any information concerning the Company or a
Company Subsidiary as the Stockholder Representative or Company
Advisor, as the case may be, may reasonably request in
connection with or related to the PHC Rulings.
(c) Within three Business Days of the receipt of any
proposed PHC Ruling from the IRS, the Company shall deliver a
complete and correct copy of such proposed PHC Ruling to each of
the Stockholder Representative and Parent. Parent shall be
entitled to at least five Business Days (or such longer period
as is reasonably requested by Parent in light of the
circumstances relating to the due date and the complexity of the
submissions) to make comments on such proposed PHC Ruling before
the IRS finalizes such proposed PHC Ruling, and the Stockholder
Representative shall reasonably consider such comments. Within
three Business Days of the receipt of any PHC Ruling from the
IRS, the Company shall deliver a complete and correct copy of
such PHC Ruling to the Stockholder Representative and Parent.
(d) Following each of (i) the receipt of a PHC Ruling,
(ii) the expiration of the statute of limitations (taking
into account any extensions thereof in accordance with this
Agreement and the application of Section 6501(f) of the
Code) with respect to any PHC Liability related to any Tax
Return filed with respect to any taxable year that
(A) ended after January 3, 2004 and (B) ends on
or prior to the Closing Date or includes the Closing Date and
(iii) the completion of any IRS audit of any such taxable
year (as evidenced by an IRS Form 870 or a no change
letter), the Stockholder Representative (with the input and
cooperation of the Company and the Company Advisor) shall
calculate and deliver to Parent notice of the PHC Liability (an
“Interim PHC Liability”), which calculation of
the Interim PHC Liability shall be subject to
Section 3.07(h). If, in the case of clause (i), one or more
Positive PHC Rulings are received as specified in
Section 3.07(a) of the Company Disclosure Letter, the
Interim PHC Liability shall be determined based on the amounts
set forth within the applicable scenario (any such applicable
scenario, an ‘‘Alternative” and
collectively, the “Alternatives”), which
amounts shall be adjusted to take into account (w) any
increase in liability attributable to any PHC Liability related
to any taxable years (or portions thereof) beginning after
January 3, 2009 and ending on or prior to the Closing Date,
(x) any decrease in liability attributable to any
abatements of penalty that result in the Company and the CompanySubsidiaries incurring a lesser amount of penalties than is
reflected in the applicable Alternative, (y) any increase
in liability attributable to any state and local Taxes
attributable to the inclusion of amounts in respect of consent
dividends in income and (z) any increase or decrease in
liability, as applicable, attributable to the amount of interest
actually incurred being greater or less than the amount assumed
in the applicable Alternative (clauses (w) through
(z) of this Section 3.07(d), the
“Adjustments”).
(e) The Stockholder Representative shall provide to the
Company and Parent drafts of any amended Tax Returns that the
Stockholder Representative proposes to file; provided
that the Stockholder Representative shall not change any
position on a previously filed Tax Return that does not relate
solely to the Company’s status as a “personal holding
company” under Section 542 of the Code or the
computation of “personal holding company tax” under
Section 541 of the Code. Subject to Section 3.07(h),
the Company, at the direction of the Stockholder Representative
shall timely file such amended Tax Returns and remit all Taxes
shown as due on all such Tax Returns. The amount shown as due on
such returns may be less than the Interim PHC Liability at such
time. Reasonably prior to making any payment of Taxes pursuant
to this Section 3.07(e), the Stockholder Representative and
Parent shall take all actions necessary to cause the Escrow
Agent to release to the Company an amount from the Escrow Fund
equal to the full amount of such Taxes. Any Tax Returns filed
pursuant to this Section 3.07(e) will be filed with any
attachments, disclosure, or other information as is required to
avoid the imposition of penalties under Section 6662 of the
Code, the United States Treasury Regulations promulgated
thereunder, or any other provision of Applicable Law. The
Company shall, at the direction of the Stockholder
Representative, file any amended Tax Return for the purpose of
requesting any available refunds from the IRS to the extent that
such refunds relate to the Company’s status as a
“personal holding company” under Section 542 of
the Code or the computation of “personal holding company
tax” under Section 541 of the Code; provided
that no such amended Tax Return shall be required to be filed
unless a draft of such amended Tax Return was delivered to
Parent and the Company, which draft was subject to
Section 3.07(h).
(f) The Stockholder Representative shall be entitled to
recover from the Escrow Fund its reasonable out of pocket costs,
expenses and disbursements incurred after the Closing Date
(including the reasonable fees of the Stockholder
Representative’s Advisor or any other advisors or counsel
and any fees and expenses required to be paid by the Stockholder
Representative under the terms of the Escrow Agreement and the
Stockholder Representative’s share of the fees of the
Expert) related to the PHC Rulings in an amount not to exceed
$500,000. As soon as practicable after the end of each month and
upon the Final PHC Liability Release Date, the Stockholder
Representative shall submit to Parent a statement detailing the
reasonable costs and expenses for which it is seeking
reimbursement pursuant to this Section 3.07(f), and Parent
shall take all actions necessary to cause the Escrow Agent to
release to the Stockholder Representative an amount from the
Escrow Fund equal to such amount of reasonable costs, expenses
and disbursements. For the avoidance of doubt, the Stockholder
Representative’s entitlement to reimbursement under this
Section 3.07(f) is without regard to any amounts retained
in the Escrow Fund for the Additional Expense Allocation, and
the Stockholder Representative must recover its reasonable
out-of-pocket
costs, expenses and disbursements under this
Section 3.07(f) prior to recovering any amounts pursuant to
Section 3.08(g).
(g) (i) If the Company is required to pay any amount
in respect of a PHC Liability to any applicable Tax authority,
other than in connection with an amended Tax Return as provided
in Section 3.07(e), the Stockholder Representative and
Parent shall take all actions necessary to cause the Escrow
Agent to release to the Company an amount from the Escrow Fund
equal to the amount of such payment.
(ii) Amounts from the Escrow Fund shall be promptly
released to the Paying Agent, subject to Section 3.07(h),
for distribution to the Stockholders at the direction of the
Stockholder Representative and pursuant to the terms of this
Agreement as follows; provided that all Escrow Payments
with respect to Company Stock Options, Company RSUs and Company
Performance RSUs shall be made no later than the fifth
anniversary of the Effective Time (at which time a payment will
be made to the holders of such Stock Options, Company RSUs and
Company Performance RSUs in an amount to be agreed by the
Stockholder Representative and the Company based upon a
reasonable estimate of the PHC Liability agreed by the
Stockholder Representative and the Company):
after the determination of an Interim PHC Liability in
accordance with Section 3.07(d) and Section 3.07(h) (an
“Interim PHC Liability Release Date”), an
amount equal to (x) the amount in the Escrow Fund at the
time of the application of this Section 3.07(g)(ii) without
regard to any amounts retained in the Escrow Fund for the
Additional Expense Allocation less (y) the Interim
PHC Liability as so determined, less (z) the
reasonable costs, expenses and disbursements of the Stockholder
Representative that have not been reimbursed prior to such time
in accordance with Section 3.07(f), shall be promptly
released to the Paying Agent for distribution to the
Stockholders at the direction of the Stockholder Representative
if such amount is greater than zero; provided that on the
first Interim PHC Liability Release Date (and, to the extent the
amount to be released to the Paying Agent for distribution to
the Stockholders on such date is less than the Additional
Expense Reimbursement Amount, any subsequent Escrow Release
Dates), the Additional Expense Reimbursement Amount shall be
deducted from the amount to be released to the Paying Agent for
distribution to the Stockholders at the direction of the
Stockholder Representative on such Interim PHC Liability Release
Date pursuant to Section 3.08(g).
The Interim PHC Liability Release Date on which the Interim PHC
Liability is zero (or the date on which the Escrow Fund has no
amount remaining therein, if earlier), shall be the
“Final PHC Liability Release Date” (such date,
together with the Interim PHC Liability Release Dates, the dates
on which any amounts are remitted for distribution to the
Stockholders pursuant to Section 3.07(j), and the dates of
any releases from the Escrow Fund pursuant to
Section 3.08(g), the ‘‘Escrow Release
Dates”). For the avoidance of doubt, any amounts for
which the Stockholder Representative is entitled to
reimbursement pursuant to Section 3.07(f) or 3.08(g) that
have not been reimbursed prior to such time shall be disbursed
on such Final PHC Liability Release Date.
(h) Any draft amended Tax Return delivered to Parent
pursuant to Section 3.07(e) shall be filed by the Company
pursuant to Section 3.07(e), and any determination of the
Interim PHC Liability delivered to Parent pursuant to
Section 3.07(c) shall become the Interim PHC Liability for
purposes of this Section 3.07, in each case five Business
Days following delivery thereof to Parent or such earlier time
as Parent shall elect to accept such Tax Return or
determination, unless prior to such date Parent delivers to the
Stockholder Representative written notice of its disagreement
with such Tax Return or determination based upon one of the
items set forth in this Section 3.07(h) (a “Notice
of Disagreement”), which Notice of Disagreement shall
specify the nature of any disagreement so asserted.
A Notice of Disagreement concerning a draft amended Tax Return
may only be provided in the event that Parent believes that
there is no reasonable basis for a position taken in such draft
amended Tax Return.
A Notice of Disagreement concerning a determination of the
Interim PHC Liability may only be provided if (i) Parent
believes that there is a material uncertainty as to the ability
of the Company to rely on a PHC Ruling received by the Company
resulting from (A) the assumptions or representations on
which such PHC Ruling is based being incorrect or omitting a
fact, (B) such PHC Ruling containing a misstatement or
omission of fact or law, or (C) such PHC Ruling containing
a caveat or similar qualification that raises a material
uncertainty about the applicability of the PHC Ruling to the PHC
Liability; provided that Parent may not submit a Notice
of Disagreement in respect of (A) or (B) if Parent had
actual knowledge of such assumption or representation being
incorrect or omitting such fact, or of such misstatement or
omission of fact or law, but did not propose any modification to
such items in its comments permitted under Section 3.07(b)
or its comments permitted under Section 3.07(c)); or
(ii) Parent disagrees with the calculation of Interim PHC
Liability; provided that if such calculation is based on
one or more Alternatives, Parent may only object to the
calculation of the Adjustments.
If a Notice of Disagreement is delivered by Parent to the
Stockholder Representative in a timely manner, then the draft
amended Tax Return shall be filed by the Company pursuant to
Section 3.07(e) or the determination of the Interim PHC
Liability shall become final for purposes of this
Section 3.07, as applicable, on the earlier of (a) the
date upon which the Stockholder Representative and Parent agree
in writing as to the amended Tax Return or the determination of
the Interim PHC Liability, as the case may be, and (b) the
date any disputed matters specified in the Notice of
Disagreement are finally resolved in writing by KPMG LLP (or an
alternative nationally recognized accounting firm or law firm
with the relevant tax expertise agreed upon in writing by the
Company, Parent and the Stockholder Representative) (the
“Expert”) in accordance with this
Section 3.07(h).
During the two Business Day period following the delivery of a
Notice of Disagreement, the Stockholder Representative and
Parent shall seek in good faith to resolve in writing any
differences they may have with respect to the matters specified
in the Notice of Disagreement. If at the end of such two
Business Day period (or such longer period as the Stockholder
Representative and Parent mutually agree) the Stockholder
Representative and Parent have not resolved any such
differences, the Stockholder Representative and Parent shall
promptly submit to the Expert for resolution any and all matters
that were included in the Notice of Disagreement and remain in
dispute.
The Expert shall be instructed to render its determination of
all matters submitted to it within ten Business Days following
submission and to determine (i) in the case of a Notice of
Disagreement related to a draft amended Tax Return, whether the
Company has a reasonable basis for the positions in such draft
amended Tax Return challenged by Parent; (ii) in the case
of a Notice of Disagreement related to the ability of the
Company to rely on a PHC Ruling, whether it would be in a
position to, if requested, provide a “should” level
opinion (as such term is customarily understood by legal and tax
accounting professionals) that the Company can rely on such PHC
Ruling, but such an opinion shall not be required to be
provided; (iii) in the case of a Notice of Disagreement
related to the calculation of Interim PHC Liability, the correct
amount of Interim PHC Liability, provided that if such
calculation is based on one or more Alternatives, the Expert may
only render its decision as to the amount of Adjustments
determined pursuant to Section 3.07(d) and
(iv) whether such matters are eligible for a determination
by the Expert with respect thereto under this Section 3.07.
If the Expert does not approve a draft amended Tax Return (as
described under clause (i) of the immediately preceding
paragraph), such Tax Return may not be filed with the IRS, but
the Stockholder Representative may propose a different draft
amended Tax Return that will be subject to the provisions set
forth in this Section 3.07. If the Expert determines that
it would not be in a position to, if requested, provide an
opinion that the Company should be entitled to rely on a PHC
Ruling (as described under clause (ii) of the immediately
preceding paragraph), the Stockholder Representative may not use
such PHC Ruling as a basis to determine the Interim PHC
Liability, but the Stockholder Representative shall be entitled
to attempt to receive from the IRS an amendment to such PHC
Ruling that shall be subject to Section 3.07(d) and this
Section 3.07(h). If the Expert corrects a calculation of
Interim PHC Liability (as described in clause (iii) of the
immediately preceding paragraph), the amount to be released from
the Escrow Fund, if any, shall be determined pursuant to
Section 3.07(g) based on the Expert’s corrected amount
of Interim PHC Liability.
The determination of the Expert shall be final, conclusive and
binding upon the parties. The Company, Parent and the
Stockholder Representative irrevocably waive their right to any
form of appeal, review or recourse in any court or other
judicial authority. Judgment may be entered upon the
determination of the Expert in any court having jurisdiction
over the party against which such determination is to be
enforced. The fees of the Expert shall be shared equally by the
Company and the Stockholder Representative; provided that
such fees to be paid by the Stockholder Representative shall be
recoverable from the Escrow Fund in accordance with
Section 3.07(f).
(i) In the event that (i) (A) the Company fails to
obtain a ruling indicating that the Company does not meet the
definition of a “personal holding company” under
Section 542 of the Code, or (B) the Company does
obtain such a ruling, but the Expert, pursuant to
Section 3.07(h), determines that it would not be in a
position to, if requested, provide an opinion that the Company
should be entitled to rely on such ruling, and (ii) (A) the
Company fails to obtain a ruling under U.S. Treasury
Regulations
Section 301.9100-1
granting an extension of time to file IRS Forms 972 and 973
to make consent dividends for all open years, or (B) the
Company does obtain such a ruling, but the Expert, pursuant to
Section 3.07(h), determines that it would not be in a
position to, if requested, provide an opinion that the Company
should be entitled to rely on such ruling, the Company and
Parent agree that (x) they shall consider in good faith
other alternatives proposed by the Stockholder Representative
and the Company to mitigate any PHC Liability (including but not
limited to the alternative set forth in Section 3.07(i)(x)
of the Company Disclosure Schedule) to the extent such
alternatives would not reasonably be expected to have a material
negative impact on the Company and (y) the steps specified
in Section 3.07(i)(y) of the Company Disclosure Schedule
would be reasonable to take as part of any such alternative.
(j) Any amount paid to the Company as a result of any
refund relating to the Company’s status as a “personal
holding company” under Section 542 of the Code or the
computation of “personal holding company tax” under
Section 541 of the Code shall (i) be remitted by the
Company to the Paying Agent for distribution to the Stockholders
at the direction of the Stockholder Representative in accordance
with Sections 3.02(d), 3.03(a)(ii), 3.03(b)(ii) and
3.03(c)(ii) if the refund (A) has been approved by the IRS
after “joint committee on taxation” review,
(B) is received pursuant to a Positive PHC Ruling or
(C) is received pursuant to a completed IRS audit (as
evidenced by an IRS Form 870 or a no change letter), or
(ii) in the case of such a refund not
described in (i), (A) if received prior to the Final PHC
Liability Release Date, be remitted to the Escrow Fund and
(B) if received on or after the Final PHC Liability Release
Date, be remitted by the Company to the Paying Agent for
distribution to the Stockholders at the direction of the
Stockholder Representative in accordance with
Sections 3.02(d), 3.03(a)(ii), 3.03(b)(ii) and 3.03(c)(ii)
after the expiration of the statute of limitations (taking into
account any extensions thereof in accordance with this Agreement
and the application of Section 6501(f) of the Code) for the
year to which the refund relates. Any amount paid (excluding any
insurance proceeds) to the Company as a result of the settlement
or litigation of any PHC Liability-related claims shall be
remitted by the Company to the Stockholder Representative for
distribution to the Stockholders in accordance with
Sections 3.02(d), 3.03(a)(ii), 3.03(b)(ii) and 3.03(c)(ii).
(k) The provisions of this Section 3.07 (other than
the first sentence of Section 3.07(j), the final paragraph
of Section 3.07(h) and, to the extent notice is given by
the Stockholder Representative to the Company prior to the Final
PHC Liability Release Date, the final two sentences of
Section 3.07(e), and, to the extent relating to a Tax
Return described in the final sentence of Section 3.07(e),
Section 3.07(h)) shall expire on the day after the Final
PHC Liability Release Date. The Stockholder Representative shall
have no rights to undertake any actions with respect to the
status of the Company or any of the CompanySubsidiaries as a
“personal holding company” under Section 542 of
the Code or the determination of “personal holding company
tax” under Section 541 of the Code except as provided
by this Section 3.07.
(l) If, at any time between the date hereof and the
Effective Time, there is a determination of Interim PHC
Liability in accordance with Section 3.07(d) and
Section 3.07(h) that would have resulted in a release from
the Escrow Fund pursuant to Section 3.07(g) had such
determination of Interim PHC Liability occurred after the
Effective Time, at the Effective Time the Escrow Amount shall be
paid as follows:
(i) an amount equal to the amount of any Taxes paid by the
Company that would have been paid from the Escrow Fund pursuant
to Section 3.07(e) or 3.07(g)(i) had such payment been made
after the Effective Time shall be paid on the Closing Date to
the Company;
(ii) an amount equal to the amount that would have been
released from the Escrow Fund to the Paying Agent pursuant to
Section 3.07(g)(ii) had such determination been made after
the Effective Time shall be paid on the Closing Date to the
Paying Agent for distribution to the Stockholders, subject to
Section 3.08(g) (without regard to the requirement in
Section 3.08(g) for an Interim PHC Liability Release
Date); and
(iii) any amount remaining after application of
(i) and (ii) shall be paid into the Escrow Fund.
SECTION 3.08. Stockholder
Representative. (a) In order to efficiently
administer, pursuant to the terms of this Agreement and the
Escrow Agreement, any action to be taken by or on behalf of the
Stockholders under this Agreement or the Escrow Agreement,
MatlinPatterson Global Opportunities Partners L.P. shall serve
as the Stockholder Representative for all purposes under this
Agreement or the Escrow Agreement.
(b) By participating in the Merger and receiving the
benefits thereof, including the right to receive the
consideration payable in connection with the Merger, each
Stockholder shall be deemed to:
(i) approve the designation of, and hereby designates,
MatlinPatterson Global Opportunities Partners L.P. as the
Stockholder Representative, under the terms set forth herein;
(ii) authorize the Stockholder Representative to take any
and all action as is contemplated to be taken by the Stockholder
Representative or by or on behalf of the Stockholders by the
terms of this Agreement or the Escrow Agreement;
(iii) agree that Parent and Merger Subsidiary shall be able
to rely conclusively on the instructions and decisions of the
Stockholder Representative as to any actions required to be
taken by the Stockholder Representative under this Agreement or
the Escrow Agreement (including any action taken or purported to
be taken by or on behalf of any Stockholder), and no Stockholder
shall have any cause of action against Parent or Merger
Subsidiary for any action taken by Parent in reliance upon any
action taken, decision made or instruction given by the
Stockholder Representative; and
(iv) agree that all actions, decisions and instructions of
the Stockholder Representative shall be conclusive and binding
upon each Stockholder and no Stockholder shall have any cause of
action against the Stockholder Representative for any action
taken, decision made or instruction given by the Stockholder
Representative under this Agreement or the Escrow Agreement,
except for fraud or willful breach of the Escrow Agreement by
the Stockholder Representative.
(c) In the event that the Stockholder Representative
becomes unable to perform its, his or her responsibilities under
this Agreement or the Escrow Agreement or resigns from such
position, MatlinPatterson Global Advisers LLC is hereby
authorized to select another representative to fill such vacancy
and such substituted representative shall be deemed to be the
Stockholder Representative for all purposes of the Escrow
Agreement.
(d) All decisions and actions by the Stockholder
Representative under this Agreement and the Escrow Agreement
shall be conclusive and binding upon each Stockholder, and no
Stockholder shall have the right to object, dissent, protest or
otherwise contest the same.
(e) The Stockholder Representative, including any
replacement of any such Stockholder Representative, is
authorized to act as attorney-in-fact for the Stockholders with
full power of substitution and authority, in its discretion, to
enforce this Agreement against the parties hereto, and to
execute any amendment or waiver of this Agreement and any other
document or instrument necessary or advisable in order to carry
out the provisions of this Agreement, to give and receive
notices and communications and, without limiting the foregoing
provisions of this Section 3.08, to agree to, negotiate,
enter into settlements and compromises of, and to comply with
orders of courts with respect to, any dispute or loss, and to
take all actions necessary or appropriate in the judgment of the
Stockholder Representative for the accomplishment of the
foregoing; provided, however, that the Stockholder
Representative shall not have the power or authority to execute
an amendment, waiver, document or other instrument that,
notwithstanding any other provision to the contrary, increases
in any material respect the obligations or liabilities of any
Stockholder without the prior written consent of that
Stockholder.
(f) The provisions of this Section 3.08 are
independent and severable, are irrevocable and coupled with an
interest and shall be enforceable notwithstanding any rights or
remedies that any Stockholder may have in connection with the
transactions contemplated by this Agreement or the Escrow
Agreement.
(g) Notwithstanding anything in this Agreement or otherwise
to the contrary, on the first Interim PHC Liability Release Date
(and, to the extent the amount to be released to the Paying
Agent for distribution to the Stockholders on such date is less
than the Additional Expense Reimbursement Amount, any subsequent
Escrow Release Dates), the Additional Expense Reimbursement
Amount shall be deducted from the amount to be released to the
Paying Agent for distribution to the Stockholders on such
Interim PHC Liability Release Date (and any subsequent Escrow
Release Dates, if applicable) and shall be retained in the
Escrow Fund (the “Additional Expense
Allocation”). All amounts retained in the Escrow Fund
for the Additional Expense Allocation shall be treated for all
purposes of this Agreement as having been paid to the
Stockholders. The Additional Expense Allocation shall be
available solely for the payment of all
out-of-pocket
fees and expenses reasonably incurred by the Stockholder
Representative after the Closing Date in performing its duties
under this Agreement and the Escrow Agreement in addition to
amounts available for such fees and expenses pursuant to
Section 3.07(f); provided that any portion of the
Additional Expense Allocation not ultimately required for the
payment of such fees and expenses shall be paid to the Paying
Agent or to the Stockholder Representative for distribution to
the Stockholders in the form of a Per Share Escrow Payment on
the Final PHC Liability Release Date and on such earlier dates
and in such amounts as the Stockholder Representative determines
in good faith is fair and equitable. In no event shall the
Additional Expense Allocation be available to pay any amounts to
which Parent may be entitled under this Agreement.
ARTICLE IV
Representations
and Warranties Relating to the Company
Except as disclosed in any report, schedule, form, statement or
other document filed with, or furnished to, the SEC since
December 29, 2007 by the Company and publicly available
prior to the date of this Agreement
(collectively, the “Filed SEC Documents”)
(excluding any forward looking disclosures set forth in any risk
factor section, any disclosures in any section regarding forward
looking statements and any other disclosures included therein to
the extent they are predictive in nature) or in the
corresponding section of the schedule dated the date of this
Agreement from the Company to Parent and Merger Subsidiary (the
“Company Disclosure Schedule”) (it being
understood that any information set forth in one section or
subsection of the Company Disclosure Schedule shall be deemed to
apply to and qualify the Section or subsection of this Agreement
to which it corresponds in number and each other Section or
subsection of this Agreement to the extent that it is reasonably
apparent that such information is relevant to such other Section
or subsection), the Company hereby represents and warrants to
Parent and Merger Subsidiary as follows:
SECTION 4.01. Organization and Standing;
Books and Records. Each of the Company and the
Company Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of organization. Each of the Company and the CompanySubsidiaries has full corporate power and authority necessary to
enable it to own, lease, use or otherwise hold its properties,
rights and assets and to carry on its business as presently
conducted. Each of the Company and the CompanySubsidiaries is
duly qualified to do business and in good standing in each
jurisdiction in which the conduct or nature of its business or
the ownership, leasing, use or holding of its properties, rights
and assets makes such qualification necessary, except such
jurisdictions where the failure to be so qualified or in good
standing has not had a Material Adverse Effect. The certificate
of incorporation and bylaws of the Company, each as amended to
the date of this Agreement, are included in the Filed SEC
Documents and the Company is not in violation of any provisions
contained in such documents in any material respect. The Company
has made available to Parent complete and correct copies of the
Company Significant Subsidiaries’ certificates of
incorporation and bylaws or comparable governing documents, each
as amended to the date of this Agreement, and each as so made
available is in effect on the date hereof and no Company
Significant Subsidiary is in violation of any provisions
contained in such documents in any material respect.
SECTION 4.02. Capitalization. (a) The
authorized capital stock of the Company consists of
41,140,698 shares of common stock (including
39,200,000 shares of Class A Common Stock,
800,000 shares of Class B Common Stock,
118,453 shares of Class C Common Stock,
498,688 shares of Class D common stock, par value
$0.01 per share (the “Class D Common
Stock”), and 523,557 shares of Class E common
stock, par value $0.01 per share (the “Class E
Common Stock”) and 173,000 shares of preferred
stock, par value $0.01 per share (the “Company Preferred
Stock”)). As of the close of business on
October 1, 2010, (i) 21,433,175 shares of Company
Common Stock were outstanding (consisting of
21,326,939 shares of Class A Common Stock (including
565,541 Company Restricted Shares granted under the Company
Stock Plans), 81,917 shares of Class B Common Stock,
24,319 shares of Class C Common Stock, no shares of
Class D Common Stock and no shares of Class E Common
Stock) and no shares of Company Preferred Stock were
outstanding, (ii) 55,485 shares of Class A Common
Stock were issuable upon the exercise of outstanding Company
Stock Options (whether or not presently exercisable),
(iii) 246,188 shares of Class A Common Stock were
subject to Company Performance RSUs, assuming settlement of such
awards based on the attainment of performance goals at target
levels, (iv) 34,870 shares of Class A Common
Stock subject to outstanding Company RSUs, (v) no shares of
Company Common Stock were held in treasury by the Company and
(vi) 393,675 shares of Company Common Stock were
issuable upon exercise of the Call Option. Except as set forth
above, there are no shares of capital stock or other equity
securities of the Company issued, reserved for issuance or
outstanding. All of the outstanding shares of capital stock of
the Company have been, and any shares of capital stock of the
Company issuable upon the exercise of Company Stock Options, the
Call Option or the settlement of Company Performance RSUs and
Company RSUs will be, duly authorized and validly issued, and
are or will be fully paid and nonassessable and not subject to
or issued in violation of any purchase option, call option,
right of first refusal, preemptive right, subscription right or
any similar right provided for in the DGCL, the certificate of
incorporation or the bylaws of the Company, each as amended to
the date of this Agreement, or any Contract to which the Company
is a party or otherwise bound. There are no Company Stock
Options whose exercise price is greater than the Per Share
Closing Payment. All the outstanding shares of capital stock of
each Company Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable. There are not any
bonds, debentures, notes or other Indebtedness of the Company
having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote)
on any matters on which any holder of any share of capital stock
of the Company may vote (“Voting Company
Debt”). Except as set forth above or in
Section 4.02(a) of the Company Disclosure Schedule, as of
the date of this Agreement, there are not any options, warrants,
rights, convertible or exchangeable securities,
“phantom” stock rights, preemptive rights, puts,
calls, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind
to which the Company or any Company Subsidiary is a party or by
which any of them is bound (i) obligating the Company or
any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or
other equity interests in, or any security convertible into or
exercisable for or exchangeable into, or giving any Person a
right to subscribe for or acquire, any shares of capital stock
of or other equity interest in, the Company or any Company
Subsidiary or any Voting Company Debt, (ii) obligating the
Company or any Company Subsidiary to issue, grant or enter into
any such option, warrant, right, security, commitment, Contract,
arrangement or undertaking, or (iii) pay an amount in cash
or in kind with respect to, or based on the value of, any shares
of capital stock of or other equity interest in the Company or
any Company Subsidiary or any Voting Company Debt (collectively
“Equity-based Securities”).
(b) There are not any outstanding contractual obligations
of the Company or any Company Subsidiary (i) to repurchase,
redeem or otherwise acquire any shares of capital stock of or
other equity interest in the Company or any Company Subsidiary
and (ii) relating to the voting or registration of any
equity securities of the Company or any Company Subsidiaries.
(c) Except for its interests in the CompanySubsidiaries
and except as set forth in Section 4.02(c) of the Company
Disclosure Schedule, the Company and the CompanySubsidiaries do
not, as of the date of this Agreement, own, directly or
indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any
Person. Neither the Company nor any of the CompanySubsidiaries
has entered into any commitment, arrangement or agreement to
make any investment (in the form of a loan, capital contribution
or other form of investment) in any Person, other than any such
commitments, arrangements or agreements between or among the
Company and the CompanySubsidiaries.
(d) Since January 1, 2010, the Company has not
declared or paid any dividend or distribution in respect of any
shares of capital stock or other equity interests of the Company
that has not been paid, and neither the Company nor any Company
Subsidiaries has issued, sold, repurchased, redeemed or
otherwise acquired any shares of capital stock or other equity
interests, and their respective boards of directors (or similar
governing bodies) have not authorized any of the foregoing.
SECTION 4.03. Authority; Execution and
Delivery; Enforceability. The Company has all
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
by this Agreement, subject only, in the case of the Merger, to
the receipt of the Stockholder Approval. The execution, delivery
and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by
this Agreement have been duly authorized by all necessary
corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary
to authorize this Agreement or to consummate the transactions
contemplated hereby, subject only, in the case of the Merger, to
the receipt of the Stockholder Approval. This Agreement has been
duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by each of the other
parties hereto, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights
of creditors generally and the availability of equitable
remedies. The Board of Directors, at a meeting duly called and
held at which all directors of the Company were present (and
based upon the recommendation of a special committee of the
Board of Directors (the “Special Committee”)
made pursuant to a meeting of the Special Committee duly called
and held at which all directors of the Special Committee were
present), duly adopted resolutions (i) approving and
declaring advisable this Agreement, the Merger and the other
transactions contemplated by this Agreement, (ii) declaring
that it is in the best interests of the stockholders of the
Company that the Company enter into this Agreement and
consummate the transactions contemplated by this Agreement on
the terms and subject to the conditions set forth in this
Agreement, (iii) declaring that the terms of the Merger are
fair to the Company and the stockholders of the Company,
(iv) approving the submission of this Agreement for
adoption by the
Merger Consent and (v) recommending that the stockholders
of the Company adopt this Agreement, which resolutions, except
to the extent permitted by Section 6.03, have not been
subsequently rescinded, modified or withdrawn in any way.
SECTION 4.04. No Conflicts;
Consents. (a) The execution, delivery and
performance by the Company of this Agreement do not and the
consummation of the Merger and the other transactions
contemplated hereby and compliance by the Company with the terms
hereof will not conflict with, or result in any violation,
modification, termination, acceleration or default (with or
without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation, modification or
acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties,
rights or assets of the Company or any Company Subsidiary under
(other than any such Lien created in connection with the
Financing) any provision of (i) the certificate of
incorporation or bylaws, each as amended to the date of this
Agreement, of the Company or the comparable governing
instruments, each as amended to the date of this Agreement, of
any Company Subsidiary, (ii) except as set forth in
Section 4.04(a) of the Company Disclosure Schedule, any
contract, lease, license, indenture, agreement, commitment or
other legally binding arrangement (a
“Contract”) to which the Company or any Company
Subsidiary is a party or by which any of their respective
properties, rights or assets is bound or (iii) any
judgment, order, injunction, ruling, settlement, arbitration
award or decree entered by or with any Governmental Entity (a
“Judgment”) or foreign, international, state,
provincial or domestic statute, treaty, law (including common
law), ordinance, code, or legally binding rule or regulation
(“Applicable Law”) applicable to the Company or
any Company Subsidiary or their respective properties, rights or
assets, other than, in the case of clauses (ii) and
(iii) above, any such items that have not had a Material
Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization (“Consent”) of, or registration,
declaration or filing with, any Federal, state, local or foreign
government or any court of competent jurisdiction,
administrative agency or commission or other governmental
authority, domestic or foreign (a “Governmental
Entity”), is required to be obtained or made by or with
respect to the Company or any Company Subsidiary in connection
with the execution, delivery and performance of this Agreement
or the consummation of the Merger or the other transactions
contemplated hereby, other than (i) the Stockholder
Approval, if required by Applicable Law, (ii) the filing of
the Certificate of Merger in connection with the Merger in
accordance with the DGCL, (iii) compliance with and filings
under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the ‘‘HSR
Act”), (iv) the filings and receipt, termination
or expiration, as applicable, of such other approvals or waiting
periods as may be required under any other applicable
competition, merger control, antitrust or similar Applicable Law
of any jurisdiction (“Foreign Merger Control
Laws”), (v) the filing with the SEC of (x) an
information statement with respect to the Stockholder Approval
(together with any amendments or supplements thereto and any
other required materials, the “Information
Statement”), and (y) such reports under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the “Exchange
Act”), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement
and (vi) any other Consent, registration, declaration or
filing the failure of which to obtain or make has not had a
Material Adverse Effect.
SECTION 4.05. SEC Documents; Undisclosed
Liabilities. (a) The Company has filed all
reports, schedules, forms, statements and other documents with
the Securities and Exchange Commission (“SEC”)
required to be filed by the Company since December 29, 2007
(the ‘‘SEC Documents”). As of their
respective dates of filing, the SEC Documents (including any
financial statements or schedules included therein) complied in
all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the “Securities
Act”), the Exchange Act, the Sarbanes-Oxley Act of 2002
(including the rules and regulations promulgated thereunder,
“SOX”) applicable to such SEC Documents, and
the rules and regulations of the SEC promulgated thereunder
applicable thereto, and except to the extent amended or
superseded by a subsequent filing with the SEC prior to the date
hereof, none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. No Company Subsidiary is subject
to the reporting requirements of the Exchange Act. The audited
consolidated financial statements and the unaudited quarterly
financial statements (including, in each case, the notes
thereto) of the Company included in the SEC Documents when filed
complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, have been
prepared in all material respects in accordance with GAAP
(except, in the case of unaudited quarterly statements, as
permitted by
Form 10-Q
of the SEC or other rules and regulations of the SEC) applied on
a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end adjustments
that have not been and are not expected to be individually or in
the aggregate material to the Company). Neither the Company nor
any of the CompanySubsidiaries has any Indebtedness,
liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise) of any nature (collectively,
“Liabilities”), except Liabilities (i) to
the extent reflected or reserved against in the consolidated
balance sheet of the Company as of July 3, 2010 (or the
notes thereto) included in the Filed SEC Documents,
(ii) that are incurred in connection with the transactions
contemplated by this Agreement, (iii) that relate to Taxes
(which are covered by Section 4.11 hereof) or
(iv) that are incurred after July 3, 2010 in the
ordinary course of business consistent with past practice.
(b) Each of the principal executive officers of the Company
and the principal financial officer of the Company (or each
former principal executive officer of the Company and each
former principal financial officer of the Company, as
applicable) has made all certifications required by
Rule 13a-14
or 15d-14
under the Exchange Act and Sections 302 and 906 of SOX with
respect to the SEC Documents, and the statements contained in
such certifications are true and accurate. For purposes of this
Agreement, “principal executive officer” and
“principal financial officer” shall have the meanings
given to such terms in SOX. Neither the Company nor any of the
Company Subsidiaries has outstanding, or has arranged any
outstanding, “extensions of credit” to directors or
executive officers within the meaning of Section 402 of SOX.
(c) The Company maintains a system of “internal
control over financial reporting” (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) sufficient to provide reasonable
assurance (A) regarding the reliability of the
Company’s financial reporting and the preparation of
financial statements for external purposes in accordance with
GAAP, (B) that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
GAAP, (C) that receipts and expenditures of the Company are
being made only in accordance with the authorization of
management and directors of the Company and (D) regarding
prevention or timely detection of the unauthorized acquisition,
use or disposition of the Company’s assets that could have
a material effect on the Company’s financial statements.
(d) The “disclosure controls and procedures” (as
defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) of the Company are designed to ensure that all
information (both financial and non-financial) required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and
forms of the SEC, and that all such information required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the
Company’s management as appropriate to allow timely
decisions regarding required disclosure and to enable the
principal executive officer and principal financial officer of
the Company to make the certifications required under the
Exchange Act with respect to such reports.
(e) Since December 29, 2007, the Company has not
received any oral or written notification of any
(x) “significant deficiency” or
(y) “material weakness” in the Company’s
internal control over financial reporting. There is no
outstanding “significant deficiency” or “material
weakness” which the Company’s independent accountants
certify has not been appropriately and adequately remedied by
the Company. For purposes of this Agreement, the terms
“significant deficiency” and “material
weakness” shall have the meanings assigned to them in
Release
2004-001 of
the Public Company Accounting Oversight Board, as in effect on
the date hereof. As of the date hereof, to the Knowledge of the
Company, there is no reason to believe that its outside auditors
and its chief executive officer and chief financial officer will
not be able to give the certifications and attestations required
pursuant to the rules and regulations adopted pursuant to
Section 404 of SOX, without qualification, when next due.
(f) To the Knowledge of the Company, as of the date hereof,
none of the Company SEC Documents is the subject of any ongoing
SEC review, outstanding SEC comment or outstanding SEC
investigation.
SECTION 4.06. Information
Supplied. None of the information included or
incorporated by reference in the Information Statement will at
the date it is first mailed to the stockholders of the Company,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with
respect to statements made or incorporated by reference in the
Information Statement based on information supplied by or on
behalf of Parent or Merger Subsidiary specifically for inclusion
or incorporation by reference therein. The Information Statement
will comply in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder.
SECTION 4.07. Assets Other than Real Property
Interests or Intellectual Property. (a) The
Company or a Company Subsidiary has good and valid title to all
material assets reflected on the consolidated balance sheet of
the Company as of January 2, 2010 (the “Balance
Sheet”) or thereafter acquired, other than those
otherwise disposed of since the date of the Balance Sheet, in
each case free and clear of all mortgages, liens, security
interests, charges, options or rights of first refusal to
purchase or lease or otherwise acquire any interest, title
retention agreements, adverse claims of ownership or use,
leases, restrictions or encumbrances of any kind (collectively,
“Liens”), except (i) Liens imposed by law,
including mechanics’, carriers’, workmen’s,
repairmen’s or other like Liens for amounts that are not
yet due or payable or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP, (ii) Liens
arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into
in the ordinary course of business consistent with past
practice, (iii) Liens securing the Financing,
(iv) Liens for Taxes, assessments, governmental charges or
levies that are not due and payable or that may thereafter be
paid without penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP, (v) Liens that
secure obligations that are reflected as liabilities on the
Balance Sheet or Liens the existence of which is referred to in
the notes to the Balance Sheet, (vi) pledges or deposits to
secure obligations under workers’ compensation laws or
similar legislation or to secure public or statutory
obligations, (vii) any Lien affecting the interest of third
party lessors in the Leased Property or arising under original
purchase price conditional sales contracts and (viii) other
imperfections of title or encumbrances, if any, that,
individually or in the aggregate, do not materially impair the
continued use and operation of the assets to which they relate
in the conduct of the business of the Company and the CompanySubsidiaries, taken as a whole, as presently conducted (the
Liens described in clauses (i) through (viii) above,
together with the Liens referred to in clauses (ii) and
(iii) of Section 4.08(a), are referred to collectively
as ‘‘Permitted Liens”).
(b) This Section 4.07 does not relate to real property
or interests in real property, such items being the subject of
Section 4.08, or to Intellectual Property, such items being
the subject of Section 4.09.
SECTION 4.08. Real
Property. (a) Section 4.08 of the
Company Disclosure Schedule sets forth, as of the date of this
Agreement, a complete list of all real property and interests in
real property owned in fee by the Company or any Company
Subsidiary (individually, an “Owned Property”).
Section 4.08 of the Company Disclosure Schedule also sets
forth, as of the date of this Agreement, a complete list of all
real property and interests in real property leased by the
Company or any Company Subsidiary (individually, a
“Leased Property”). Prior to the date of this
Agreement, the Company has made available to Parent true and
complete copies of all agreements evidencing the Company’s
or applicable Company Subsidiary’s leasehold interest in
the Leased Property (the “Leases”). Except as
set forth in Section 4.08 of the Company Disclosure
Schedule, the Company or a Company Subsidiary has good and valid
fee title to all Owned Property and good and valid title to the
leasehold estates in all Leased Property (an Owned Property or a
Leased Property being sometimes referred to herein,
individually, as a “Company Property”), in each
case free and clear of all Liens, except (i) leases,
subleases and similar agreements with third parties identified
in Section 4.08 of the Company Disclosure Schedule, (ii)
(A) easements, covenants,
rights-of-way
and other similar restrictions of record, (B) any
conditions that may be shown by a current, accurate survey or
physical inspection of any Company Property, (C) zoning,
building and other similar restrictions, none of which are
violated in any material respect
by the current use of the Company Property subject thereto,
(D) Liens that have been placed by any developer, landlord
or other third party on property over which the Company or any
Company Subsidiary has easement rights or on any Leased
Property, provided such Liens have not been granted or consented
to by the Company or any Company Subsidiary, and
(E) unrecorded easements, covenants,
rights-of-way
and other similar restrictions and (iii) any other
Permitted Liens. None of the items set forth in clause (ii)
above, individually or in the aggregate, materially impairs or
is reasonably likely to materially impair the continued use and
operation of the Company Property to which they relate in the
conduct of the business of the Company and the CompanySubsidiaries as presently conducted.
(b) All buildings, machinery, equipment and other tangible
assets currently being used by the Company or any Company
Subsidiary which are owned or leased by the Company or any
Company Subsidiary are in good operating condition, maintenance
and repair, ordinary wear and tear excepted, are usable in the
ordinary course of business and are reasonably adequate and
suitable for their current uses.
(c) Except as has not had a Material Adverse Effect, the
buildings and structures located on each of the Company
Properties currently have valid legal access to (i) public
roads or valid easements over private streets or private
property for such ingress to and egress from all such buildings
and structures, and (ii) water supply, telephone, gas and
electric connections, and fire protection, in each case as is
necessary for the operation of such Company Properties. The
current use of the Owned Property does not violate in any
material respect any restrictive covenants of record affecting
any of the Owned Property.
(d) Each Lease is a valid and binding obligation of the
Company or a Company Subsidiary, enforceable against the Company
or Company Subsidiary, as applicable, and, to the Company’s
Knowledge, any other party thereto, in accordance with its
terms, and, is in full force and effect with respect to the
Company or Company Subsidiary, as applicable, and, to the
Company’s Knowledge, with respect to any other party
thereto. Neither the Company nor any Company Subsidiary and, to
the Knowledge of the Company, no other party is in default or
breach in any material respect under any Lease or has received
any notice of default or any event that with notice or lapse of
time, or both, would constitute a default by the Company or any
Company Subsidiary under any such Lease.
SECTION 4.09. Intellectual
Property. (a) Except for license agreements
that are commercially available relating to computer software
licensed to the Company or any Company Subsidiary in the
ordinary course of business, Section 4.09 of the Company
Disclosure Schedule sets forth a true and complete list of
(i) all material Intellectual Property owned by or licensed
to the Company or any Company Subsidiary and used in the
operation of the business (the “Company Intellectual
Property”) (except for trade secrets and know-how which
are not disclosed therein), (ii) each registration which
has been issued to the Company or any Company Subsidiary with
respect to any of the Company Intellectual Property, including
the jurisdiction of each such issuance, (iii) each live
application for registration of any of the Company Intellectual
Property owned by the Company, including the jurisdiction of
each such application, and (iv) each material license,
sublicense, collaboration or other agreement (excluding Liens
for Indebtedness) to which the Company or any Company Subsidiary
is a party and pursuant to which any rights have been granted to
or by the Company or any Company Subsidiary with respect to any
Company Intellectual Property.
(b) (i) The Company and the CompanySubsidiaries have
full and sufficient title to, own or have legally enforceable
rights to all material Company Intellectual Property, free and
clear of all Liens and other encumbrances (other than Permitted
Liens), (ii) neither the Company nor any Company Subsidiary
has received any currently active written communication from any
Person asserting any ownership interest in any of the Company
Intellectual Property that is owned by the Company,
(iii) neither the Company nor any Company Subsidiary has
granted any current, active and material license of any kind
relating to any of the Company Intellectual Property, except
non-exclusive licenses to customers in the ordinary course of
business, (iv) the conduct of the business of the Company
and the CompanySubsidiaries as presently conducted does
not violate, conflict with or infringe the valid and enforceable
Intellectual Property of any Person and neither the Company nor
any Company Subsidiary has received any currently active written
communication (including cease and desist letters or invitations
to take a patent license) alleging the same, (v) no claims
are pending or, to the Knowledge of the Company, threatened
against the Company or any Company Subsidiary by any Person with
respect to the ownership, validity or enforceability of any
Company Intellectual Property owned by the Company or, to the
Knowledge of the Company, with respect to the ownership,
validity or enforceability of the Company Intellectual Property
licensed to the Company or any Company Subsidiaries,
(vi) neither the Company nor any Company Subsidiary is
obligated to make any payments by way of material royalties or
fees to any owner of, licensor of or other claimant to, any
material Company Intellectual Property with respect to the use
thereof or in connection with the conduct of the business as
currently conducted, (vii) to the Knowledge of the Company,
the Intellectual Property owned by the Company and the CompanySubsidiaries is not being violated, conflicted with or infringed
and (viii) the Company and the CompanySubsidiaries have
taken commercially reasonable steps to protect and maintain
(A) their confidential information and trade secrets,
(B) their ownership of material proprietary Company
Intellectual Property owned by the Company and (C) the
security and integrity of their material information technology
systems and software, which in the case of clauses (iv), (v),
(vi), (vii) and (viii) of this paragraph (b), have had
a Material Adverse Effect.
SECTION 4.10. Insurance. The
significant insurance policies carried by or for the benefit of
the Company, the CompanySubsidiaries or their assets,
properties or personnel as of the date of this Agreement are set
forth in Section 4.10 of the Company Disclosure Schedule.
Except as has not had a Material Adverse Effect, all such
policies (i) are in full force and effect, all premiums due
and payable thereon have been paid (other than retroactive or
retrospective premium adjustments and adjustments in respect of
self insured general liability and automobile liability fronting
programs, self insured health programs and self insured
workers’ compensation programs that are not yet, but may
be, required to be paid with respect to any period ending prior
to the Closing Date), and no written notice of cancellation or
termination has been received with respect to any such policy
other than in connection with ordinary renewals and
(ii) provide insurance in such amounts and against such
risks as is sufficient to comply with Applicable Law.
SECTION 4.11. Taxes. (a)
(i) The Company and each Company Subsidiary have filed or
caused to be filed in a timely manner (within any applicable
extension periods) all material Tax Returns required to be filed
in accordance with Tax Laws, (ii) all material Taxes due
and owing by the Company or any Company Subsidiary have been
timely paid or, with respect to taxable periods ending on or
before the date of the most recent audited financial statements
contained in the Filed SEC Documents, have been adequately
reserved for (excluding any reserve for deferred taxes) on such
financial statements in accordance with GAAP and
(iii) except for Liens described in
Section 4.07(a)(iv), no material Liens for Taxes exist with
respect to any of the assets or properties of the Company or any
Company Subsidiary.
(b) No deficiencies for any material Taxes have been
proposed or assessed in writing against or with respect to any
Taxes due by or Tax Returns of the Company or any Company
Subsidiary by any Taxing Authority which deficiency has not been
settled, paid or accrued. There is no audit, assessment,
dispute, examination or claim concerning any material Tax
liability of the Company or any Company Subsidiary currently in
progress or threatened in writing by a Taxing Authority, which
written threat has been received by the Company or any Company
Subsidiary. Neither the Company nor any Company Subsidiary has
received a written claim in the last five years by any Taxing
Authority in a jurisdiction where neither the Company nor any
Company Subsidiary files Tax Returns that claims the Company or
any Company Subsidiary is or may be subject to taxation by that
jurisdiction.
(c) With respect to any taxable period beginning after
2003, neither the Company nor any Company Subsidiary (i) is
or has ever been a member of an affiliated group (other than a
group the common parent of which is the Company) filing a
consolidated, combined, aggregate or unitary Tax Return or
(ii) has any liability for Taxes of any Person arising from
the application of United States Treasury Regulation
Section 1.1502-6
or any analogous provision of state, local or foreign law, or as
a transferee or successor or by contract.
(d) Neither the Company nor any Company Subsidiary is a
party to, is bound by or has any obligation under any Tax
sharing or Tax indemnity agreement or similar contract or
arrangement other than any such agreement, contract or
arrangement solely among the Company and the CompanySubsidiaries.
(e) None of the Company or any Company Subsidiary has been
either a “distributing corporation” or a
“controlled corporation” in a distribution occurring
during the last five years in which the parties to such
distribution treated the distribution as one to which
Section 355 of the Code is applicable.
(f) All Taxes required to be withheld, collected or
deposited by the Company or any Company Subsidiary have been
timely withheld, collected or deposited, as the case may be, and
to the extent required have been paid to the relevant Taxing
Authority, except with respect to Taxes or matters contested in
good faith and for which reserves have been established on the
most recent audited financial statements contained in the Filed
SEC Documents in accordance with GAAP.
(g) No closing agreement pursuant to Section 7121 of
the Code (or any similar provision of state, local or foreign
law) has been entered into by or with respect to the Company or
any Company Subsidiary.
(h) Neither the Company nor any Company Subsidiary has
granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment of, any
material Tax, which waiver is currently outstanding.
(i) Neither the Company nor any Company Subsidiary will be
required other than in the ordinary course of business to
include amounts in income, or exclude items of deduction, in a
taxable period beginning after the Closing Date as a result of
(i) a change in method of accounting occurring prior to the
Closing Date, (ii) an installment sale or open transaction
arising in a taxable period (or portion thereof) ending on or
before the Closing Date or (iii) a prepaid amount received,
or paid, prior to the Closing Date.
(j) None of the CompanySubsidiaries (i) is a passive
foreign investment company as defined under Section 1297 of
the Code or (ii) has recognized a material amount of
Subpart F income as defined in Section 952 of the Code.
SECTION 4.12. Proceedings. There
is no civil, criminal or administrative action, suit, claim,
hearing, demand, arbitration, audit or proceeding (a
“Proceeding”) pending or, to the Knowledge of
the Company, threatened against the Company or any of the
Company Subsidiaries or any of their respective properties,
rights or assets that have had a Material Adverse Effect, nor is
there any judgment, settlement, decree, injunction, writ, award,
rule or order of any Governmental Entity or arbitrator
outstanding against, or, to the Knowledge of the Company,
investigation or inquiry by any Governmental Entity, or
involving the Company or any Company Subsidiaries or any of
their respective assets that would have a Material Adverse
Effect. As of the date hereof, there is no Proceeding pending
or, to the Knowledge of the Company, threatened, that challenges
or seeks to enjoin, prevent or materially alter or delay the
Merger.
SECTION 4.13. Benefit
Plans. (a) Section 4.13(a)(i) of the
Company Disclosure Schedule sets forth a true and complete list
of each material Company Benefit Plan as of the date of this
Agreement. Section 4.13(a)(ii) of the Company Disclosure
Schedule sets forth a true and complete list of each material
Company Benefit Agreement in effect as of the date of this
Agreement, other than any agreement or arrangement mandated by
(and the terms of which are governed substantially by)
Applicable Law. With respect to each material Company Benefit
Plan and material Company Benefit Agreement, the Company has
made available to Parent a current, complete, and accurate copy
(or to the extent no copy exists, an accurate summary) of
(i) each such Company Benefit Plan or Company Benefit
Agreement, including any material amendments thereto,
(ii) any trust, insurance, annuity or other funding
instrument related thereto, (iii) any summary plan
description and other written communications (or a description
of any oral communications) by the Company or a Company
Subsidiary to Company Employees concerning the extent of the
benefits provided under a Company Benefit Plan or Company
Benefit Agreement and (iv) for the two most recent years
and to the extent applicable, (A) audited financial
statements, (B) actuarial or other valuation reports
prepared with respect thereto (where such statements or reports
are required to be prepared under Applicable Law or otherwise
reasonably available), and (C) Form 5500 and attached
schedules.
(b) Each Company Benefit Plan intended to be
“qualified” or registered within the meaning of
Section 401(a) of the Code (or any comparable provision
under applicable
non-U.S. laws)
has received a favorable determination letter as to such
qualification or registration from the IRS (or any comparable
Governmental Entity), and, to the Knowledge of the Company,
nothing has occurred, whether by action or failure to act, that
could reasonably be expected to cause a loss of such
qualification. The most recent favorable determination plan for
each Company Benefit Plan intended to be so
“qualified” has been made available by the Company to
Parent.
(c) Each Company Benefit Plan and Company Benefit Agreement
has been administered in material compliance with its terms and
the applicable provisions of ERISA, the Code and all other
applicable laws, rules and regulations. Neither the Company nor
any of the CompanySubsidiaries has any Controlled Group
Liability, and no circumstance exists that would reasonably be
expected to result in any Controlled Group Liability for the
Company, Parent or any of their respective Subsidiaries after
the Closing. As of the date hereof and, except as would not
reasonably be expected to have a Material Adverse Effect as of
the Closing, (i) there are no pending or threatened
investigations, claims or lawsuits in respect of any Company
Benefit Plan or Company Benefit Agreement, (ii) no facts or
circumstances exist that could give rise to any such actions,
suits, or claims, (iii) no written or oral communication
has been received from the Pension Benefit Guaranty Corporation
(“PBGC”) in respect of any Company Benefit Plan
subject to Title IV of ERISA concerning the funded status
of any such plan or any transfer of assets and liabilities from
any such plan in connection with the transaction contemplated
herein during the past two years, and (iv) no
administrative investigation, audit, or other administrative
proceedings by the PBGC, the Internal Revenue Service, or other
governmental agencies are pending, threatened, or in progress
(including any routine requests for information from the PBGC).
For each Company Benefit Plan with respect to which a
Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form the
last day of the period covered thereby. Except as would not
reasonably be expected to result in any material liability to
the Company or any of the CompanySubsidiaries, no
“reportable event” (as such term is defined in
Section 4043 of ERISA) and no non-exempt “prohibited
transaction” (as such term is defined in Section 406
of ERISA and Section 4975 of the Code) has occurred with
respect to any Company Benefit Plan. Except as would not
reasonably be expected to have a Material Adverse Effect as of
the Closing, no Company Benefit Plan has failed to meet the
minimum funding standards (as determined under Section 303
of ERISA and Section 430 of the Code) applicable to such
plan. Neither the Company nor any of the CompanySubsidiaries
has incurred any current or projected liability in respect of
post-employment or post-retirement health, medical or life
insurance or other benefits for Company Employees, except for
continuation coverage under Section 4980B of the Code or
otherwise except as may be required pursuant to any other
Applicable Law.
(d) No Company Benefit Plan or Company Benefit Agreement
exists that would reasonably be expected to (i) entitle any
Company Employee to any payment, benefit or right, or increase
in payment, benefit or right, (ii) accelerate the time of
payment or vesting or result in any payment or funding (through
a grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or result in any other material
obligation pursuant to, any of the Company Benefit Plans or
Company Benefit Agreements, (iii) limit or restrict the
right of the Company to merge, amend or terminate any of the
Company Benefit Plans or Company Benefit Agreements or
(iv) result in payments under any of the Company Benefit
Plans or Company Benefit Agreements which would not be
deductible under Section 280G of the Code, in each case as
a result of the execution of this Agreement, Stockholder
Approval, or the consummation of the transactions contemplated
hereby (whether alone or in connection with any subsequent
event(s)).
(e) No Company Benefit Plan is a “multiemployer
plan” (as defined in Section 4001(a)(3) of ERISA) and
neither the Company, nor any Company Subsidiary, nor any
organization which is a member of a controlled group of
organizations with the Company or any Company Subsidiary within
the meaning of Sections 414(b), (c), (m) or
(o) of the Code has at any time sponsored or contributed
to, or has or had any liability or obligation in respect of, any
such multiemployer plan.
(f) Except as set forth in Section 4.13(f) of the
Company Disclosure Schedule, no material Company Benefit Plan is
maintained outside the jurisdiction of the United States, or
covers any employee residing or working primarily outside the
United States (any such material Company Benefit Plan set forth
in
Section 4.13(f) of the Company Disclosure Schedule,
“Foreign Benefit Plans”). With respect to any
Foreign Benefit Plans, (i) all Foreign Benefit Plans have
been established, maintained and administered in material
compliance with their terms and all applicable statutes, laws,
ordinances, rules, orders, decrees, judgments, writs, and
regulations of any controlling governmental authority or
instrumentality and (ii) all Foreign Benefit Plans that are
required to be funded are funded in accordance with the
applicable funding requirements.
SECTION 4.14. Absence of Changes or
Events. From the date of the Balance Sheet to the
date of this Agreement, (i) the Company and the CompanySubsidiaries have conducted their businesses in the ordinary
course consistent with past practice and (ii) there has not
been a Material Adverse Effect.
SECTION 4.15. Compliance with Applicable
Laws; Licenses. (a) Each of the Company and
the CompanySubsidiaries is, and has been since
December 31, 2008, in compliance in all respects with all
Applicable Laws (and with its own internal policies), except for
instances of noncompliance that have not had a Material Adverse
Effect.
(b) The Company and Company Subsidiaries each has obtained
and is in compliance with all permits, certifications,
approvals, registrations, consents, authorizations, franchises,
variances, exemptions and orders issued or granted by a
Governmental Entity (“Licenses”) necessary to
own, lease and operate its respective properties and assets and
to conduct its business as presently conducted and all such
Licenses are in full force and effect, except in each case as
would not have a Material Adverse Effect. There is no suspension
or cancellation of any of the Licenses necessary to own, lease
and operate any of the Company’s or the CompanySubsidiaries’ respective properties and assets or to
conduct their business as presently conducted pending or, to the
Knowledge of the Company, threatened, except where the
suspension or cancellation of any of the Licenses would not have
a Material Adverse Effect.
SECTION 4.16. Environmental
Matters. Except as would not have a Material
Adverse Effect, (a) the Company and the CompanySubsidiaries have obtained, and are in compliance with, all,
and, to the Knowledge of the Company, have not violated any,
Permits required for the Company and the CompanySubsidiaries to
conduct their respective businesses under Environmental Laws,
(b) the Company and the CompanySubsidiaries are in
compliance with all, and, to the Knowledge of the Company, have
not violated any, Environmental Laws, including as relating to
Permits under Environmental Laws, (c) neither the Company
nor any of the CompanySubsidiaries has received any written or,
to the Knowledge of the Company, verbal communication from a
Governmental Entity, or any other Person, since
December 29, 2007 or that otherwise has not been fully and
finally resolved, that alleges that the Company or any Company
Subsidiary is not in compliance with or has any liability
(including for any Release of Hazardous Materials) under any
Environmental Law, (d) there is no Proceeding pending or,
to the Knowledge of the Company, threatened, against, and there
is no Judgment or, to the Knowledge of the Company,
investigation outstanding against the Company or any of the
Company Subsidiaries, in each case, under or relating to any
Environmental Law, (e) to the Knowledge of the Company,
except as would not reasonably be expected to result in a claim
against or liability of the Company or any of the CompanySubsidiaries under any Environmental Law, (x) Hazardous
Materials have not been Released or threatened to be Released
at, or arranged to be Released by the Company or any of the
Company Subsidiaries from, any property or facility currently
owned, leased or operated by the Company or any of the CompanySubsidiaries, (y) during the period of ownership, leasehold
or operation by the Company or any of the CompanySubsidiaries,
Hazardous Materials were not Released or threatened to be
Released (in each case excluding passive migration of
pre-existing contamination) at, or arranged to be Released by
the Company or any of the CompanySubsidiaries from, any
property or facility formerly owned, leased or operated by the
Company or any of the CompanySubsidiaries that is located
within the United States and (z) during or prior to the
period of ownership, leasehold or operation by the Company or
any of the CompanySubsidiaries, Hazardous Materials were not
Released or threatened to be Released at, or arranged to be
Released by the Company or any of the CompanySubsidiaries from,
any property or facility formerly owned, leased or operated by
the Company or any of the CompanySubsidiaries that is located
outside the United States, and (f) to the Knowledge of the
Company, none of the Company and the CompanySubsidiaries has
assumed, or provided indemnity, which has not terminated in
accordance with its terms, against, any liabilities or
obligations of any other Person that would
reasonably be expected to result in a claim against, or
liability of, the Company or any of the CompanySubsidiaries
under or relating to any Environmental Law.
SECTION 4.17. Brokers and
Finders. No agent, broker, investment banker,
financial advisor or other Person, other than Blackstone
Advisory Partners L.P. and Janney Montgomery Scott LLC, the fees
and expenses of which will be paid by the Company, is entitled
to any broker’s, finder’s or financial advisor’s
fee or commission in connection with the Merger and the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or the CompanySubsidiaries (or the MP Stockholder or any of its Affiliates for
or on behalf of the Company or any of the CompanySubsidiaries).
Prior to the date hereof, the Company made available to Parent a
true and correct copy of each engagement letter between the
Company, on the one hand, and Blackstone Advisory Partners L.P.
or Janney Montgomery Scott LLC, on the other hand.
SECTION 4.18. Voting
Requirements. Assuming that the Stockholder
Approval is required by Applicable Law, the Stockholder Approval
is the only vote of the holders of any class or series of
capital stock of the Company necessary to adopt this Agreement.
SECTION 4.19. Labor and Employment
Matters. Except as set forth on Section 4.19
of the Company Disclosure Schedule, neither the Company nor any
of the CompanySubsidiaries is a party to any collective
bargaining agreement or any other material contract or agreement
with any labor organization (other than any such agreement with
a works council or other employee organization that applies on a
regional, nationwide or industry-wide basis by virtue of
Applicable Law or by virtue of the membership of the Company in
any employer federation or comparable organization), nor is any
such contract or agreement, as of the date hereof, being
negotiated. To the Knowledge of the Company, (a) as of the
date hereof, there are not any union organizing activities
concerning any employees of the Company or any of the CompanySubsidiaries, nor have there been since December 29, 2007;
(b) as of the date hereof, (y) with respect to North
American facilities, there are no labor strikes, slowdowns, work
stoppages or disruptions, or lockouts pending or, to the
Knowledge of the Company, threatened, or (z) with respect
to facilities outside of North America, there are no labor
strikes, slowdowns, work stoppages or disruptions, or lockouts
pending or, to the Knowledge of the Company, threatened that
would have a material effect upon the facility at which they
occur, in the case of each of clauses (y) and
(z) above, against the Company or any Company Subsidiary,
nor have there been since December 29, 2007; (c) with
respect to the Company and any Company Subsidiary, as of the
date hereof, (i) no unfair labor practice charge or
complaint is pending or, to the Knowledge of the Company,
threatened, (ii) no employee-related dispute, grievance or
arbitration proceeding is pending or, to the Knowledge of the
Company, threatened, (iii) no action, complaint, charge,
inquiry, proceeding or investigation by or on behalf of any
employee, prospective employee, former employee, labor
organization or other representative of the employees of the
Company or any Company Subsidiary is pending or, to the
Knowledge of the Company, threatened; (iv) the Company and
all Company subsidiaries have complied with all obligations
pursuant to the Worker Adjustment and Retraining Notification
Act of 1988 and similar other legislation and regulation except
as would not reasonably be expected to result in material
liability to the Company or any of the CompanySubsidiaries;
(v) the Company and each Company Subsidiary is in material
compliance with all Applicable Laws, agreements, contracts,
policies, plans, and programs relating to employment, employment
practices, compensation, benefits, hours, terms and conditions
of employment, and the termination of employment and
(vi) neither the Company nor any Company Subsidiary is a
party to, or otherwise bound by, any consent decree with, or
citation by, any Government agency relating to employees or
employment practices, in the case of clauses (i), (ii) and
(iii), which, if adversely decided, would reasonably be expected
to, individually or in the aggregate, result in liability to the
Company in excess of $1,000,000.
SECTION 4.20. Opinion of Financial
Advisor. The Special Committee has received the
opinion of Janney Montgomery Scott LLC, dated as of the date
hereof, that, as of such date, the Total Per Share Amount,
without the Additional Per Share Consideration, if any, to be
paid to the holders of shares of Company Common Stock (other
than the MP Stockholder and Affiliates) is fair, from a
financial point of view, to such holders.
SECTION 4.21. Takeover Statute Not
Applicable. The Company has taken all action
required to be taken by it in order to exempt this Agreement,
the Merger and the other transactions contemplated by this
Agreement from, and this Agreement, the Merger and the other
transactions contemplated by this Agreement are exempt from, the
requirements of any “moratorium”, “control share
acquisition”, “fair price”, “interested
shareholder”, “business combination” or other
anti-takeover laws and regulations of any Governmental Entity or
contained in the Company’s amended and restated certificate
of incorporation.
(a) Section 4.22 of the Company Disclosure Schedule
lists the following Contracts to which the Company or any of the
Company Subsidiaries is a party as of the date of this Agreement
(other than this Agreement, the Leases, the Company Benefit
Agreements and the Company Benefit Plans) (collectively with the
Contracts filed by the Company with the SEC as material
Contracts pursuant to Item 601(b)(10) of
Regulation S-K
or as a “definitive material agreement” (as such term
is defined in Item 1.01 of
Form 8-K
of the SEC under the Exchange Act), the “Company
Material Contracts”):
(i) any Contract containing any right of any exclusivity in
favor of the other parties thereto or any covenant limiting, in
any respect, the ability of the Company or any of the CompanySubsidiaries (or which, following the consummation of the
Merger, would restrict the ability of the Surviving Corporation
or any of its Affiliates or Subsidiaries) to engage in any line
of business or in any geographic area or to compete with any
Person or to solicit, hire or engage in transactions with the
employees, suppliers or customers of another Person;
(iii) each indenture, credit agreement, loan agreement,
security agreement, guarantee, note, mortgage or other evidence
of Indebtedness or agreement providing for Indebtedness, in each
case to a third party with an aggregate principal amount
outstanding or available borrowings of at least $1,000,000;
(iv) pursuant to which any earn-out, deferred or contingent
payment, or other indemnification or material other obligations
remain outstanding, in each case that relates to the acquisition
or disposition of any business (whether by merger, sale of
stock, sale of assets or otherwise);
(vi) each Contract containing restrictions with respect to
payment of dividends or any distributions in respect of the
equity interests of the Company or any of the CompanySubsidiaries;
(vii) each settlement agreement that imposes continuing
material obligations or material restrictions on the Company or
any of the CompanySubsidiaries;
(ix) each Contract disclosed pursuant to
Section 4.09(a)(iv); and
(x) each Contract regarding any hedging, factoring,
derivatives or similar arrangements.
(b) Section 4.22(b) of the Company Disclosure Schedule
sets forth for each instrument listed on
Section 4.22(a)(iii) of the Company Disclosure Schedule
(i) the aggregate principal amount outstanding as of
July 3, 2010 and (ii) a description of any prepayment,
redemption or make whole payments required to be paid in
connection with the repayment of such Indebtedness. As of the
date of this Agreement, there have been no changes to the
principal amounts referenced in clause (i), other than scheduled
amortization payments and the accrual of interest in accordance
with the terms of such instruments.
(c) All Company Material Contracts are enforceable against
the Company and, to the Company’s Knowledge, any other
party thereto in accordance with their terms (except those which
may be canceled,
rescinded, terminated or not renewed after the date hereof in
accordance with their terms) and are in full force and effect
with respect to the Company or Company Subsidiary, as
applicable, and, to the Company’s Knowledge, with respect
to any other party thereto, except in each case where the
failure to be in full force and effect would not have a Material
Adverse Effect, and neither the Company nor any of the CompanySubsidiaries or, to the Knowledge of the Company, any other
party thereto, is or alleged to be in violation or breach of or
default under (or with notice or lapse of time, or both, would
be in violation or breach of or default under) the terms of any
Material Contract, in each case, except where such default would
not have a Material Adverse Effect. Complete and correct copies
of each Material Contract have been delivered or made available
to the Parent or its advisors prior to the date hereof.
SECTION 4.23. Customers and
Suppliers. Section 4.23(a) of the Company
Disclosure Schedule contains a list of the top twenty customers
of the Company and the CompanySubsidiaries on a consolidated
basis (determined by revenue) for the 2009 fiscal year, and
Section 4.23(b) of the Company Disclosure Schedule contains
a list of the top twenty suppliers of the Company and the
Company Subsidiaries on a consolidated basis (determined by the
cost of items or services purchased) for the 2009 fiscal year.
As of the date of this Agreement and to the Knowledge of the
Company, no customer listed on Section 4.23(a) of the
Company Disclosure Schedule or supplier listed on
Section 4.23(b) of the Company Disclosure Schedule has
expressed its intention to cancel or otherwise terminate or
materially or adversely modify its relationship with the Company
or any Company Subsidiaries, and, to the Knowledge of the
Company, as of the date hereof no fact or circumstance has
arisen that will adversely affect any such relationship in any
material respect (other than ordinary course changes in customer
or supplier orders). The Company and the CompanySubsidiaries
have not, during the 12 month period prior to the date
hereof, canceled or otherwise terminated or materially and
adversely modified its relationship with any customer or
supplier set forth on Sections 4.23(a) and 4.23(b) of the
Company Disclosure Schedule.
ARTICLE V
Representations
and Warranties Relating to Parent and Merger
Subsidiary
Parent and Merger Subsidiary hereby jointly and severally
represent and warrant to the Company as follows:
SECTION 5.01. Organization, Standing and
Power. Each of Parent and Merger Subsidiary is
duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has full
corporate power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease, use or otherwise hold its
properties, rights and assets and to carry on its business as
presently conducted, other than such franchises, licenses,
permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had a material adverse
effect on the ability of Parent or Merger Subsidiary to
consummate the Merger and the other transactions contemplated
hereby (a “Parent Material Adverse Effect”).
SECTION 5.02. Authority; Execution and
Delivery; Enforceability. Each of Parent and
Merger Subsidiary has full power and authority to execute and
deliver this Agreement and to consummate the Merger and the
other transactions contemplated hereby. The execution, delivery
and performance by Parent and Merger Subsidiary of this
Agreement and the consummation of the Merger and the other
transactions contemplated hereby, including the Financing, have
been duly authorized by all necessary action. Each of Parent and
Merger Subsidiary has duly executed and delivered this
Agreement, and, assuming the due authorization, execution and
delivery by each of the other parties hereto, this Agreement
constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of
equitable remedies.
SECTION 5.03. No Conflicts;
Consents. (a) The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement
does not, and the consummation of the Merger and the other
transactions contemplated hereby, including the Financing, and
compliance by Parent and Merger Subsidiary with the
terms hereof will not, conflict with, or result in any
violation, modification, termination or acceleration of or
default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the
properties, rights or assets of Parent, Merger Subsidiary or any
of their Subsidiaries under, any provision of (i) the
governing instruments of Parent, Merger Subsidiary or any of
their Subsidiaries, (ii) any Contract to which Parent,
Merger Subsidiary or any of their Subsidiaries is a party or by
which any of their respective properties, rights or assets is
bound or (iii) any Judgment or Applicable Law applicable to
Parent, Merger Subsidiary or any of their Subsidiaries or their
respective properties, rights or assets, other than, in the case
of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, have not had a Parent Material
Adverse Effect.
(b) No Consent of or registration, declaration or filing
with any Governmental Entity is required to be obtained or made
by or with respect to Parent, Merger Subsidiary or any of their
Subsidiaries in connection with the execution, delivery and
performance of this Agreement or the consummation of the Merger
or the other transactions contemplated hereby, including the
Financing, other than (i) the filing of the Certificate of
Merger in connection with the Merger in accordance with the
DGCL, (ii) compliance with and filings under the HSR Act or
any Foreign Merger Control Law, (iii) Consents that may be
required solely by reason of the participation of the Company
(as opposed to any other third party) in the Merger and the
other transactions contemplated hereby and (iv) any other
Consent, registration, declaration or filing the failure of
which to obtain or make has not had, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 5.04. Information
Supplied. None of the information supplied or to
be supplied by or on behalf of Parent or Merger Subsidiary
specifically for inclusion or incorporation by reference in the
Information Statement will, at the time the Information
Statement is first mailed to the stockholders of the Company and
at the time of the stockholders’ meeting, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
SECTION 5.05. Litigation. There
are not any (a) outstanding Judgments against Parent,
Merger Subsidiary or any of their Subsidiaries,
(b) Proceedings pending or, to the Knowledge of Parent,
threatened in writing against Parent, Merger Subsidiary or any
of their Subsidiaries or (c) investigations by any
Governmental Entity that are, to the Knowledge of Parent,
pending or threatened against Parent, Merger Subsidiary or any
of their Subsidiaries that, in any case, individually or in the
aggregate, have had a Parent Material Adverse Effect.
SECTION 5.06. Ownership and
Operations. Parent owns of record and
beneficially owns all outstanding shares of capital stock of
Merger Subsidiary. Each of Parent and Merger Subsidiary was
formed solely for the purpose of engaging in the transactions
contemplated hereby, and has engaged in no other business or
other activities or incurred any liabilities, other than in
connection with or as contemplated in this Agreement.
SECTION 5.07. Availability of
Funds. The Parent has delivered to the Company
true and complete copies of: (i) the executed commitment
letter, dated as of October 4, 2010, between the Parent and
Citigroup Global Markets Inc., Morgan Stanley Senior Funding,
Inc., Barclays Bank PLC, Barclays Capital, Royal Bank of Canada
and RBC Capital Markets (the “Debt Financing
Commitments”), pursuant to which such entities agreed,
subject to the terms and conditions thereof, to lend the amounts
set forth therein (the “Debt Financing”) for
the purpose of funding the transactions contemplated by this
Agreement (including the payment of all outstanding Indebtedness
of the Company for borrowed money contemplated to be repaid on
the Closing Date and assuming the accuracy of the representation
set forth in Section 4.22(b)) and related fees and
expenses; and (ii) the executed equity commitment letter,
dated as of October 4, 2010, between the Parent and
Blackstone Capital Partners V L.P. (the
“Investor”) (the “Equity Financing
Commitments” and together with the Debt Financing
Commitments, the “Financing Commitments”),
pursuant to which the Investor has committed to invest, subject
to the terms and conditions thereof, the cash amount set forth
therein (the “Equity Financing” and together
with the Debt Financing, the “Financing”).
Except for a fee letter or other side letters with respect to
fees (and which do not contain any additional conditions to
closing or other agreements between the parties thereto relating
to the availability of the full amount of the Financing), there
are no
agreements or understandings in connection with the Financing
other than those provided to the Company prior to the date
hereof. As of the date hereof, each of the Financing
Commitments, in the form so delivered, is in full force and
effect and is a legal, valid and binding obligation of Parent
and, to the Knowledge of Parent, the other parties thereto. The
Financing Commitments have not been amended, supplemented or
otherwise modified in any respect, except, in each case, with
the prior written consent of the Company as permitted by
Section 6.12(a), and the financing commitments thereunder
have not been withdrawn or terminated. As of the date hereof, no
event has occurred that would constitute a default (or an event
which, with or without notice, lapse of time or both, would
become a default) or breach on the part of Parent under any term
or condition of the Financing Commitments, and, as of the date
hereof, Parent has no reason to believe that any term or
condition of closing in the Financing Commitments will not be
timely satisfied, or that any portion of the Financing to be
made thereunder will otherwise not be available to Parent to
consummate the Merger and the other transactions contemplated
hereby at the time required pursuant to this Agreement. As of
the date hereof, Parent has fully paid any and all commitment
fees or other fees required by the Financing Commitments to be
paid by it on or prior to the date of this Agreement. The
Financing, when funded in accordance with the Financing
Commitments, will provide Parent with funds sufficient to
satisfy all of Parent’s obligations under this Agreement in
connection with or as a result of the consummation of the
transactions contemplated by this Agreement and, assuming the
accuracy of the representation set forth in
Section 4.22(b), to fund the repayment or refinancing of
all outstanding Indebtedness of the Company for borrowed money
contemplated to be repaid on the Closing Date. The obligations
to make the Financing available to Parent pursuant to the terms
of the Financing Commitments are not subject to any conditions
other than the conditions set forth in the Financing Commitments.
SECTION 5.08. Brokers and
Finders. No agent, broker, investment banker,
financial advisor or other Person is entitled to any
broker’s, finder’s or financial advisor’s fee or
commission in connection with the Merger and the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Merger Subsidiary for which the
Company could have any liability prior to Closing.
ARTICLE VI
Covenants
SECTION 6.01. Covenants Relating to Conduct
of Business. Except for matters set forth in
Section 6.01 of the Company Disclosure Schedule or matters
otherwise permitted or required by the terms of this Agreement
(including any actions taken in accordance with the procedures
set forth in Section 3.07) or except as required by
Applicable Law, from the date of this Agreement to the Effective
Time, the Company shall, and shall cause each Company Subsidiary
to, conduct their respective businesses in the ordinary course
of business consistent with past practice, use reasonable best
efforts to keep intact their respective businesses, keep
available the services of their current employees and preserve
their relationships with customers, suppliers, licensors,
licensees, distributors and others with whom they deal. In
addition (and without limiting the generality of the foregoing),
except as set forth in Section 6.01 of the Company
Disclosure Schedule or otherwise permitted or required by the
terms of this Agreement (including any actions taken in
accordance with the procedures set forth in Section 3.07)
or except as required by Applicable Law, the Company shall not,
and shall not permit any Company Subsidiary to, do any of the
following without the prior written consent of Parent (which
consent shall not be unreasonably withheld, delayed or
conditioned):
(a) amend its amended and restated certificate of
incorporation or amended and restated bylaws or similar
governing instruments;
(b) issue, purchase, redeem or otherwise acquire any
capital stock or any option, warrant or right relating thereto
or any securities convertible into or exchangeable for any
shares of capital stock or other Equity Based Security, except
(i) upon the exercise of outstanding Company Stock Options
or the settlement of Company Performance RSUs and Company RSUs
in accordance with the terms thereof, (ii) forfeitures of
any Company Stock Options, Company Restricted Shares, Company
Performance RSUs or Company RSUs, (iii) as required
pursuant to any Company Benefit Plan disclosed on
Section 4.13(a) of the Company Disclosure Schedule or
(iv) in connection with any net share settlement or Tax
withholding permitted under any Company Benefit Plan or Company
Benefit Agreement disclosed on Section 4.13(a) of the
Company Disclosure Schedule;
(c) declare, establish a record date for, authorize, set
aside or pay any dividends on or make any distribution with
respect to its outstanding shares of capital stock or other
equity interests (whether in cash, assets, stock or other
securities of the Company or Company Subsidiaries), other than a
dividend or distribution by a Company Subsidiary to another
Company Subsidiary or to the Company except as restricted by
Section 6.01(l);
(d) split, combine or reclassify any of its capital stock
or other equity interests or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution of shares of its capital stock or other equity
interests;
(e) adopt or amend in any respect that would materially
increase the costs to the Company or any Company Subsidiary of
any Company Benefit Plan or Company Benefit Agreement (or any
plan that would be a Company Benefit Plan or Company Benefit
Agreement if adopted) or enter into, adopt, extend (beyond the
Closing Date), renew or amend any collective bargaining
agreement or other Contract with any labor organization, union
or association, except in each case (i) as required by any
Company Benefit Plan or Company Benefit Agreement disclosed on
Section 4.13(a) of the Company Disclosure Schedule or
(ii) as the Company reasonably determines to be required to
prevent an inclusion of income or penalties under
Section 409A of the Code so long as such amendment does not
materially increase the costs to the Company or any Company
Subsidiary; provided that the foregoing shall not
restrict the Company or any Company Subsidiary from entering
into or making available to newly hired employees or to
employees in the context of promotions based on job performance
or workplace requirements, in each case in the ordinary course
of business, plans, agreements, benefits and compensation
arrangements that have a value that is consistent with the past
practice of making compensation and benefits available to newly
hired or promoted employees in similar positions;
(f) grant to any director or executive officer or any
employee whose total annual compensation is expected to exceed
$175,000 any increase in compensation or benefits, except as may
be required under any Company Benefit Plan or Company Benefit
Agreement disclosed on Section 4.13(a) of the Company
Disclosure Schedule and except for any increases for which the
stockholders of the Company shall be solely obligated (so long
as such increase does not result in any loss of a tax deduction
to the Company as a result of Section 280G of the Code);
(g) increase the funding obligation or contribution rate of
any Company Benefit Plan or Company Benefit Agreement other than
in the ordinary course consistent with past practice or as
required by Applicable Law or the terms of any Company Benefit
Plan or Company Benefit Agreement disclosed on
Section 4.13(a) of the Company Disclosure Schedule;
(h) incur or assume, guarantee, or become obligated with
respect to any liabilities, obligations or Indebtedness, or
assume, guarantee or endorse or otherwise become responsible
for, whether directly, contingently or otherwise, any such
liabilities, obligations or Indebtedness of any Person (other
than the Company or the CompanySubsidiaries);
(i) permit, allow or suffer any of its assets to become
subjected to any Lien (other than Permitted Liens) of any nature
whatsoever that would have been required to be set forth in
Section 4.07 or 4.08 of the Company Disclosure Schedule if
existing on the date of this Agreement, other than as required
by the Credit Agreement;
(j) cancel any Indebtedness owed to the Company or any of
the CompanySubsidiaries that is material individually or in the
aggregate, to the Company and the CompanySubsidiaries, taken as
a whole, or waive any claims or rights of substantial value
other than in the ordinary course of business;
(k) pay, loan or advance any amount to, or sell, license,
transfer or lease any of its assets, rights or properties to, or
enter into any agreement or arrangement with, the stockholders
or any of their Affiliates, except for (i) transactions
among the Company and the CompanySubsidiaries,
(ii) intercompany
transactions in the ordinary course of business,
(iii) payments, loans or advances made pursuant to existing
agreements and (iv) payment of expenses related to the
consummation of the Merger;
(l) (i) make or change any material Tax election other
than in the ordinary course of business, (ii) make any
material change in accounting methods, other than as required by
(A) GAAP (or any interpretation thereof), including
pursuant to standards, guidelines and interpretations of the
Financial Accounting Standards Board or any similar
organization, (B) the SEC or (C) the Public Company
Accounting Oversight Board, (iii) file any amended Tax
Return with respect to any material Tax other than in the
ordinary course of business, (iv) enter into any closing
agreement or settle any material Tax claim or assessment
relating to the Company or any of the CompanySubsidiaries,
(v) adopt or change any accounting method with respect to
Taxes other than in the ordinary course of business,
(vi) surrender any right to claim a refund of Taxes or
(vii) consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment other than in
the ordinary course of business, including in connection with
any audit or examination or (viii) take any action with
respect to the application of the “personal holding
company” rules of the Code or United States Treasury
Regulations to the Company and the CompanySubsidiaries except
as provided in Section 3.07;
(m) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof
or otherwise acquire any assets, other than purchases of assets
in the ordinary course of business consistent with past practice;
(n) sell, lease, license or otherwise dispose of any of its
assets, rights or properties (including Intellectual Property)
having a value in excess of $2,500,000 in the aggregate, except
(i) inventory and obsolete or excess equipment or other
assets sold in the ordinary course of business consistent with
past practice and (ii) any such sale, lease, license or
other disposition to the extent permitted under clause (k)
above;
(o) settle or compromise any investigation, audit,
litigation, claim or Proceeding against the Company or any
Company Subsidiaries other than settlements or compromises of
litigation where the amount paid does not exceed $1,000,000 in
the aggregate and such settlement or compromise does not impose
any material restrictions on the business or operations of the
Company or the CompanySubsidiaries;
(p) make or commit to any capital expenditures, capital
additions or capital improvements (i) in excess of the
amounts set forth for such expenditures on Section 6.01(p)
of the Company Disclosure Schedule (which, for the avoidance of
doubt, shall be made or committed to by the last day of the
corresponding period set forth in Section 6.01(p) of the
Company Disclosure Schedule) plus (ii) $3,000,000 in
the aggregate, as such $3,000,000 may be apportioned between the
periods in the Company’s sole discretion;
(q) enter into any lease of real property, except any
renewals or expansions of existing leases in the ordinary course
of business consistent with past practice;
(r) enter into any new line of business;
(s) cancel, materially modify or terminate any Company
Material Contract or enter into any Contract that would have
been a Company Material Contract had it been entered into prior
to the date hereof; or
(t) authorize any of, or commit or agree to take, whether
in writing or otherwise, any of, the foregoing actions.
SECTION 6.02. Information Statement; Merger
Consent. (a) Promptly following the
execution and delivery of this Agreement by the parties hereto,
the Company shall, in accordance with the DGCL and the
Company’s bylaws, take all action necessary to seek and
obtain, as promptly as practicable, the Stockholder Approval by
irrevocable written consent of the MP Stockholder in the form
attached as Exhibit C (the “Merger
Consent”). The Company shall comply with the DGCL, the
Company’s amended and restated
certificate of incorporation and amended and restated bylaws,
and the Exchange Act (including Regulation 14C and
Schedule 14C promulgated under the Exchange Act) in
connection with the Stockholder Approval, including
(i) delivering the Information Statement to the
Company’s stockholders as required pursuant to the Exchange
Act and (ii) giving prompt notice of the taking of the
actions described in the Merger Consent in accordance with
Section 228 of the DGCL to all holders of Common Stock not
executing the Merger Consent and providing a description of the
appraisal rights of holders of Company Common Stock available
under Section 262 of the DGCL and any other disclosures
with respect to appraisal rights required by Delaware law.
(b) As promptly as reasonably practicable following the
date of this Agreement, the Company shall prepare and file with
the SEC the Information Statement. The Company shall use
reasonable best efforts as promptly as practicable (and after
consultation with Parent) to respond to any comments made by the
SEC with respect to the Information Statement. The Company will
use reasonable best efforts to cause the Information Statement
to be mailed to the stockholders of the Company as promptly as
practicable after confirmation from the SEC that it has no
further comments on the Information Statement (or that the
Information Statement is otherwise not to be reviewed by the
SEC). Parent and Merger Subsidiary shall cooperate with the
Company in the preparation of the Information Statement. Without
limiting the generality of the foregoing, (i) each of
Parent and Merger Subsidiary will furnish to the Company the
information relating to it and its Affiliates required by the
Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Information Statement, that is
customarily included in information statements prepared in
connection with transactions of the type contemplated by this
Agreement or that is reasonably requested by the Company and
(ii) prior to the filing with the SEC, or the mailing to
the Company’s stockholders, of the Information Statement,
the Company shall provide Parent with a reasonable opportunity
to review and comment on, and the Company shall reasonably
consider all comments reasonably proposed by Parent with respect
to, the Information Statement. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for any
amendments or supplements to the Information Statement, the
Company shall provide Parent with a reasonable opportunity to
review and comment on any such comments or requests from the SEC
or its staff, and the Company shall reasonably consider all
comments reasonably proposed by Parent in connection with any
filings with the SEC or its staff in response thereto, and, if
required by the Exchange Act, the Company shall mail to its
stockholders, as promptly as reasonably practicable, such
amendment or supplement.
SECTION 6.03. No
Solicitation. (a) The Company shall not, nor
shall it authorize or permit any of the CompanySubsidiaries to,
or authorize or permit any of their respective directors,
officers or employees or any investment banker, financial
advisor, attorney, accountant or other advisor, agent or
representative (collectively,
“Representatives”) retained by it or any of the
Company Subsidiaries or Representatives to, directly or
indirectly through another Person (and it shall instruct, and
cause each of the CompanySubsidiaries to instruct, each such
Representative not to), (i) solicit, initiate or knowingly
encourage (including by way of furnishing non-public information
regarding the Company or any Company Subsidiary), or take any
other action designed to facilitate, any Takeover Proposal or
(ii) engage, enter into, continue or otherwise participate
in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or otherwise cooperate
with any Person in any way relating to, or which would
reasonably be likely to lead to, any Takeover Proposal. The
Company shall, and shall cause the CompanySubsidiaries and the
Company Subsidiaries’ Representatives to, immediately cease
and cause to be terminated all existing discussions or
negotiations with any Person conducted heretofore with respect
to any Takeover Proposal. Notwithstanding anything in this
Agreement to the contrary, at any time prior to the receipt of
Stockholder Approval, in response to a bona fide written
Takeover Proposal that the Board of Directors determines in good
faith (after consultation with outside counsel and a financial
advisor of nationally recognized reputation) constitutes or
could reasonably be expected to lead to a Superior Proposal by
such party, and which Takeover Proposal was made after the date
hereof and did not result from a breach of this
Section 6.03, the Company may, subject to compliance with
this Section 6.03 with respect to such Takeover Proposal,
(x) furnish information with respect to the Company and the
Company Subsidiaries to the Person making such Takeover Proposal
(and its Representatives) pursuant to a customary
confidentiality agreement (which need not restrict such Person
from making an unsolicited Takeover Proposal) not less
restrictive of such Person in terms of confidentiality
restrictions than the Confidentiality Agreement, and
(y) participate in discussions or negotiations with the
Person making such Takeover Proposal (and its Representatives)
regarding such Takeover Proposal.
The term “Takeover Proposal” means any proposal
or offer from any Person (including within the meaning of
Section 13(d)(3) of the Exchange Act) (other than Parent
and its subsidiaries) relating to, or that would reasonably be
expected to lead to, any proposal or offer relating to, in one
transaction or a series of transactions, (i) any direct or
indirect acquisition or purchase of assets (including for the
purpose of this definition the outstanding equity securities of
the CompanySubsidiaries) or businesses that constitute 15% or
more of the revenues, net income or assets of the Company and
the CompanySubsidiaries, taken as a whole, or 15% or more of
the total equity securities of the Company, (ii) any tender
offer or exchange offer that if consummated would result in any
Person or group beneficially owning 15% or more of the total
equity securities of the Company or (iii) any merger,
consolidation, business combination, recapitalization,
liquidation, dissolution, joint venture, binding share exchange
or similar transaction involving the Company or any of the
Company Subsidiaries pursuant to which any Person or group or
the stockholders of any Person or group would own 15% or more of
the total equity securities of the Company or of any resulting
parent company of the Company or businesses or assets that
constitute 15% or more of the revenues, net income or assets of
the Company and the CompanySubsidiaries, taken as a whole,
other than, in the case of each of clauses (i), (ii) and
(iii), the transactions contemplated by this Agreement.
The term “Superior Proposal” means any bona
fide written Takeover Proposal, that if consummated would result
in such Person (or its stockholders) owning, directly or
indirectly, all or substantially all of the shares of Company
Common Stock then outstanding (or of the surviving entity in a
merger or the direct or indirect parent of the surviving entity
in a merger) or all or substantially all the assets of the
Company which the Board of Directors determines in good faith
(after consultation with outside counsel and a financial advisor
of nationally recognized reputation) to be (i) more
favorable to the stockholders of the Company from a financial
point of view than the Merger and (ii) reasonably capable
of being completed, taking into account all financial, legal,
regulatory and other aspects of such proposal (including the
likelihood of consummation), in each case, taking into account
any changes to the terms of this Agreement offered by Parent in
response to such Takeover Proposal or otherwise.
(b) Neither the Board of Directors nor any committee
thereof shall (i) (A) change, qualify, withdraw (or modify
in a manner adverse to Parent or Merger Subsidiary), or publicly
propose to change, qualify, withdraw (or modify in a manner
adverse to Parent or Merger Subsidiary), the approval,
recommendation or declaration of advisability by the Board of
Directors or any such committee thereof of this Agreement, the
Merger or the other transactions contemplated by this Agreement
or (B) recommend, adopt or approve, or propose publicly to
recommend, adopt or approve, any Takeover Proposal, or resolve
or agree to take any such action (any action described in this
clause (i) being referred to as a “Company Adverse
Recommendation Change”) or (ii) adopt, approve or
recommend, or propose to adopt, approve or recommend, or allow
the Company or any of its Affiliates to execute or enter into,
any letter of intent, memorandum of understanding, agreement in
principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or
other similar agreement constituting or related to, or that is
intended to or would reasonably be expected to lead to, any
Takeover Proposal (other than a confidentiality agreement
referred to in Section 6.03(a)) (an “Acquisition
Agreement”) or resolve or agree to take any such
action. Notwithstanding the foregoing, at any time prior to the
receipt of Stockholder Approval, the Board of Directors may
(x) make a Company Adverse Recommendation Change if the
Board of Directors determines in good faith (after consultation
with outside counsel) that failure to take such action would be
inconsistent with its fiduciary duties to the stockholders of
the Company under Applicable Law or (y) if the Company and
Company Subsidiaries have complied in all material respects with
this Section 6.03, allow the Company or any Company
Subsidiaries to enter into any Acquisition Agreement with
respect to a Superior Proposal if the Board of Directors
determines in good faith (after consultation with outside
counsel) that failure to take such action would be inconsistent
with its fiduciary duties to the stockholders of the Company
under Applicable Law and thereafter effect any transaction
contemplated by such Superior Proposal; provided,
however, that the Board of Directors may only take the
actions described in clause (y) if at such time the Company
is permitted to terminate, and terminates, this Agreement
pursuant to
Section 9.01(d)(ii) concurrently with entering into such
Acquisition Agreement and pays the Termination Fee in compliance
with Section 6.07(b).
(c) The Company shall promptly (and in any event within
24 hours after receipt) advise Parent both orally and in
writing of the receipt of any Takeover Proposal, and any inquiry
or request for information from, or any negotiations sought to
be initiated or continued with, the Company or its
Representatives concerning a Takeover Proposal. The
Company’s notice shall include a written summary of the
material terms and conditions (including any financial terms and
any other material term thereof) of such Takeover Proposal,
inquiry or request, including the identity of the Person making
any such Takeover Proposal, inquiry or request. The Company
shall keep Parent informed of the status and material terms and
conditions (including any change to the financial terms or any
other material term thereof) or developments of any such
Takeover Proposal, inquiry or request and any discussions and
negotiations concerning the material terms and conditions
thereof.
(d) Nothing contained in this Section 6.03 or
elsewhere in this Agreement shall prohibit the Company from
(x) taking and disclosing to its stockholders a position
contemplated by
Rule 14e-2(a)
under the Exchange Act or making a statement required by
Rule 14d-9
under the Exchange Act or (y) making any disclosure to the
stockholders of the Company, if, in the good faith judgment of
the Board of Directors (after consultation with outside
counsel), failure to so disclose would be inconsistent with its
obligations under Applicable Law, including the Board of
Directors’ duty of candor to the stockholders of the
Company; provided, however, that in no event shall
the Company or the Board of Directors or any committee thereof
take, or agree or resolve to take, any action prohibited by this
Section 6.03 (it being understood that any accurate
disclosure of factual information required to be made under
Applicable Law shall not be considered a modification prohibited
by Section 6.03).
SECTION 6.04. Access to
Information. The Company shall, and shall cause
the CompanySubsidiaries to, afford to Parent and its
accountants, counsel and other representatives reasonable
access, upon reasonable notice during normal business hours
during the period prior to the Closing, to the properties,
books, contracts, commitments, Tax Returns and records of the
Company and the CompanySubsidiaries and to those employees of
the Company and the CompanySubsidiaries to whom Parent
reasonably requests access (such access, in the case of
employees other than executive officers of the Company or any
Company Subsidiary, to be coordinated through one or more
employees of the Company designated by it and, in no case, shall
include the right to conduct any environmental testing,
including soil or groundwater sampling or other invasive testing
procedures), and, during such period shall make available to
Parent any information concerning the Company or a Company
Subsidiary as Parent may reasonably request; provided,
however, that such access (a) does not unreasonably
disrupt the normal operations of the Company and the CompanySubsidiaries and (b) does not, in the reasonable
determination of the Company, jeopardize the attorney-client
privilege of the Company or any of the CompanySubsidiaries or
contravene any Applicable Law or any Contract to which the
Company or any of the CompanySubsidiaries is a party or
subject; provided that the parties shall with respect to
clauses (a) and (b) above, to the extent possible,
make appropriate substitute disclosure arrangements under
circumstances in which such restrictions apply.
SECTION 6.05. Confidentiality. Parent
acknowledges that the information being provided to it in
connection with the Merger and the consummation of the other
transactions contemplated hereby is subject to the terms of a
confidentiality agreement between Blackstone Management Partners
L.L.C. and an affiliate of the MP Stockholder, the terms of
which extend to the Company as an express third-party
beneficiary thereof (the “Confidentiality
Agreement”), and the terms of which are incorporated
herein by reference.
SECTION 6.06. Reasonable Best
Efforts. (a) On the terms and subject to the
conditions of this Agreement, each party shall use its
reasonable best efforts to cause the Closing to occur, including
taking all actions reasonably necessary to comply promptly with
all legal requirements that may be imposed on it or its
Subsidiaries with respect to the Closing. Each party shall not
take any actions that would, or that would reasonably be
expected to, result in any of the conditions set forth in
Article VIII not being satisfied. Without limiting the
foregoing or the provisions set forth in Section 6.06(b),
each party shall use its reasonable best efforts to cause the
Closing to occur on or prior to the Outside Date.
(b) Each of the Company and Parent shall as promptly as
practicable (i) but in no event later than 10 calendar
days following the execution and delivery of this Agreement,
file or cause to be filed with the United States Federal Trade
Commission (the “FTC”) and the United States
Department of Justice (the “DOJ”) the
notification and report form, if any, required for the
transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the
HSR Act and (ii) make such other filings as are necessary
in other jurisdictions in order to comply with all Foreign
Merger Control Laws as provided in Section 6.06(b) of the
Company Disclosure Schedule (the “Foreign Merger
Filings”) and shall as promptly as reasonably
practicable provide any supplemental information requested by
applicable Governmental Entities relating thereto. Any such
notification and report form, Foreign Merger Filing or
supplemental information shall be in substantial compliance with
the requirements of the HSR Act and such other Foreign Merger
Control Laws, as applicable. Each of the Company and Parent
shall consult with one another (and their respective advisers)
as to the form and content of any notification and report form,
Foreign Merger Filing or supplemental information supplied to
any Governmental Entity, and allow the Company or the Parent, as
applicable (and their respective advisers) to review the same
(as may be redacted to remove any estimate of the valuation of
the Company, its business or shares, any identification of or
discussion with respect to other potential acquirers or to
preserve any applicable privilege) in advance of submission and
make such amendments as either may reasonably request. Each of
the Company and Parent shall furnish to the other such necessary
information and reasonable assistance as the other may request
in connection with its preparation of any filing or submission
that is necessary under the HSR Act and such other Foreign
Merger Control Laws as are necessary in other jurisdictions in
order to comply with all Foreign Merger Control Laws. The
Company and Parent shall keep each other apprised of the status
of any communications with, and any inquiries or requests for
additional information from, the FTC, the DOJ and any other
applicable Governmental Entity and shall respond as promptly as
reasonably practicable to any such inquiry or request and shall
as promptly as reasonably practicable provide any supplemental
information requested in connection with the filings made
hereunder pursuant to the HSR Act and such other Foreign Merger
Control Laws, as applicable, and, to the extent permitted by any
Governmental Entity: (i) to the extent reasonably
practicable, inform each party prior to all material
communications (including material telephone calls and meetings)
with a Governmental Entity, (ii) allow either party the
opportunity to participate in any such calls and meetings to the
extent reasonably practicable, and (iii) allow each party
(and their respective advisers) to review any material written
communications before submission and to make such amendments to
such communications as either the Company or the Parent may
reasonably request. Each party shall provide the other (and
their advisers) with a final copy of any notification, report
form or any other supplemental information submitted to and any
other material written communications with any Governmental
Entity, to the extent permitted by law. Each party shall use its
reasonable best efforts to obtain any clearance required under
the HSR Act and such other Foreign Merger Control Laws for the
consummation of the transactions contemplated by this Agreement,
including pursuant to a request for an early termination of the
waiting period thereunder. Parent shall be solely responsible
for any filing fees under the HSR Act and such other Foreign
Merger Control Laws. For purposes of this Section 6.06, the
“reasonable best efforts” of Parent shall include
promptly opposing any motion or action for a temporary,
preliminary or permanent injunction against the Merger or any
portion thereof, but under no circumstances will Parent, the
Company or any of their Affiliates be required to commit and
effect, by undertaking, consent decree, hold separate order, or
otherwise, to the sale, divestiture, license or disposition of
any assets or businesses of Parent, the Company or any of their
Affiliates, or otherwise to take or offer to commit to take any
action (including any action that limits their freedom of
action, ownership or control with respect to, or their ability
to retain or hold, any of the business, assets, product lines,
properties or services of Parent, the Company or any of their
Affiliates), or agree to any other remedy as a condition to
obtaining any clearance required under the HSR Act or any other
Foreign Merger Control Law. Parent and its Subsidiaries shall
refrain from taking, directly or indirectly, any action
(including engaging in, or agreeing to engage in, transactions
in the industries in which the Company and the CompanySubsidiaries operate) that would reasonably be expected to delay
or prevent clearance under the HSR Act or any other applicable
Foreign Merger Control Law for the consummation of the
transactions contemplated by this Agreement.
(c) Prior to the Closing, the Company shall use its
reasonable best efforts to obtain, and to cooperate in
obtaining, all Consents from third parties necessary or
appropriate to permit the consummation of the Merger
(including in connection with making or executing any
submissions, certifications or agreements necessary to comply
with any applicable requirements of the New Jersey Industrial
Site Recovery Act or similar real property transfer law);
provided, however, that no party shall be required
to pay or commit to pay any amount to (or incur any obligation
in favor of) any Person from whom any such Consent may be
required (other than nominal filing or application fees). Parent
acknowledges that the Consents and waivers with respect to the
Merger may be required from parties to certain Contracts as
specified on Section 4.04(a) of the Company Disclosure
Schedule (the “Specified Consents”) and that
such Specified Consents and waivers may not be obtained by
Closing. Other than in connection with a breach of this
Section 6.06(c), the Company shall not have any liability
whatsoever to Parent arising out of or relating to the failure
to obtain any Specified Consents. Parent acknowledges that no
representation, warranty or covenant of the Company contained
herein shall be breached or deemed inaccurate or breached, and
no condition shall be deemed not satisfied, as a result of the
failure to obtain any Specified Consent.
SECTION 6.07. Expenses; Transfer
Taxes. (a) Whether or not the Merger is
consummated, and except as otherwise specifically provided in
this Agreement and in this Section 6.07 all fees and
expenses incurred in connection with this Agreement, the Escrow
Agreement, the Merger and the other transactions contemplated by
this Agreement, including the Financing, shall be paid by the
party incurring such fees or expenses, including any costs and
expenses pursuant to Section 6.06; provided that
Parent shall bear and pay the filing fees, if any, incurred
under the HSR Act or in connection with any Foreign Merger
Control Law.
(b) In the event that (i) this Agreement is terminated
by the Company pursuant to Section 9.01(d)(ii) or (ii)
(A) prior to the termination of this Agreement, a Takeover
Proposal shall have been made directly to the stockholders of
the Company generally or shall have otherwise become publicly
known, or any Person shall have publicly announced an intention
(whether or not conditional and whether or not withdrawn) to
make a Takeover Proposal, (B) thereafter this Agreement is
terminated by either Parent or the Company pursuant to
Section 9.01(b)(i) and (C) within 12 months after
such termination, the Company enters into a definitive Contract
to consummate, or consummates, any Takeover Proposal, then the
Company shall pay Parent a fee equal to $8,000,000 (the
“Termination Fee”) by wire transfer of
same-day
funds on the first Business Day following (x) in the case
of a payment required by clause (i) above, the date of
termination of this Agreement and (y) in the case of a
payment required by clause (ii) above, the date of the
first to occur of the events referred to in clause (ii)(C). For
purposes of clause (ii)(C) of the immediately preceding sentence
only, the term “Takeover Proposal” shall have the
meaning assigned to such term in Section 6.03(a), except
that all references to “15%” therein shall be deemed
to be references to “50%”.
(c) Notwithstanding anything in this Agreement to the
contrary, Parent acknowledges that in the event it is entitled
to receive the Termination Fee, Parent’s right to receive
such amount shall constitute Parent’s sole and exclusive
remedy for the termination of this Agreement regardless of the
circumstances giving rise to such termination and Parent shall
have no further rights, directly or indirectly, against any
other party hereto or any of their respective Affiliates,
stockholders, partners, members, directors, officers and agents,
whether at law or equity, or in contract.
(d) In the event that this Agreement is terminated by
Parent pursuant to Section 9.01(c)(i), the Company shall
pay to Parent the documented fees and expenses (including, fees
and expenses of counsel and other advisors) incurred by Parent
and its Affiliates in connection with the transactions
contemplated by this Agreement, whether incurred before or after
the date hereof, including without limitation reasonable and
documented fees and expenses incurred in connection with its
investigation, structuring, financing, negotiation, due
diligence, and financial, operating, legal and other analysis
with respect to the transactions contemplated by this Agreement.
(e) All transfer Taxes incurred in connection with the
transactions contemplated hereby shall be paid by the Surviving
Corporation. Each party shall use reasonable efforts to avail
itself of any available exemptions from any such Taxes or fees,
and to cooperate with the other parties hereto in providing any
information and documentation that may be necessary to obtain
such exemptions.
SECTION 6.08. FIRPTA
Certificate. The Company or MP Stockholder shall
deliver to Parent on or before the Closing a certificate, in
form and substance reasonably satisfactory to Parent and as will
permit
Parent to effect the transactions contemplated hereby without
withholding pursuant to the Foreign Investment in Real Property
Tax Act.
SECTION 6.09. Publicity. The
initial press release or announcement announcing the execution
of this Agreement and the transactions contemplated hereby shall
be in a form reasonably agreed in advance by the parties hereto.
From the date of such announcement through the Closing Date, and
so long as this Agreement is in effect, none of the Company,
Parent or Merger Subsidiary, nor any of their respective
Affiliates, shall issue or cause the publication of any press
release or other announcement concerning the transactions
contemplated hereby without the prior consultation of the other
parties hereto (which consent shall not be unreasonably
withheld, delayed or conditioned), except in connection with a
Takeover Proposal or a Company Adverse Recommendation Change or
as may be required by law or the rules or regulations of any
United States or foreign securities exchange as determined
in the good faith judgment of the party wanting to make such
press release or other announcement; provided,
however, that the Company, on the one hand, and Parent,
on the other hand, may make internal announcements to their
respective employees and Affiliates after reasonable prior
notice to and consultation with the other parties hereto.
SECTION 6.10. Further
Assurances. Subject to the terms and conditions
of this Agreement, each party shall execute and deliver, or
cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such
further or other actions (subject to the limitations set forth
herein, including Section 6.06 and Section 6.12), as
such other party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement,
including executing and delivering such assignments, deeds,
bills of sale, consents and other instruments as may be
reasonably necessary to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title
and interest in, to and under any of the rights, properties or
assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the
Merger and the transactions contemplated hereby.
SECTION 6.11. Agreement to Defend and
Indemnify. (a) For six years from the
Effective Time, Parent shall cause the Company or the Surviving
Corporation, as applicable, to provide officers’ and
directors’ liability insurance covering each Person who is
currently, or will be on the Closing Date, covered by the
Company’s or any of the CompanySubsidiaries’
officers’ and directors’ liability insurance with
respect to acts or omissions occurring prior to the Effective
Time, all on terms no less favorable in the aggregate than such
insurance maintained in effect by the Company or the CompanySubsidiaries existing as of the date hereof; provided,
however, that in no event shall the Surviving Corporation
be required to expend annually in excess of 150% of the annual
premium currently paid by the Company under its current
policies; providedfurther, however, that if the
premium of such insurance exceeds the foregoing limit, the
Surviving Corporation shall be obligated to obtain and maintain
a policy with the greatest coverage available for a cost not
exceeding such limit.
(b) Parent and the Company agree that all rights to
indemnification, advancement of expenses and exculpation now
existing in favor of present or former directors, officers,
employees and agents pursuant to the amended and restated
certificate of incorporation and amended and restated bylaws (in
each case, as in effect immediately prior to the Effective Time)
of the Company are contract rights and agree to cause the
Surviving Corporation to honor such rights in accordance with
their terms, and further agree that such rights to
indemnification, advancement of expenses and exculpation shall
not be modified or amended in any way as to adversely affect the
rights of any Person covered by this Section 6.11.
(c) In the event that either Parent or the Surviving
Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and other assets to any
Person, then, and in each such case, Parent shall cause proper
provision to be made so that the applicable successors and
assigns or transferees expressly assume the obligations set
forth in this Section 6.11.
(d) The provisions of this Section 6.11 shall survive
the closing of the Merger and are intended to be for the benefit
of, and will be enforceable by, each covered or indemnified
Person referred to in Sections 6.11(a)
and 6.11(b), his or her heirs and his or her representatives,
and are in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such Person
may have by contract or otherwise. Parent, the Company or the
Surviving Corporation shall pay all reasonable expenses,
including reasonable attorneys’ fees, that may be incurred
by any indemnified Person, his heirs or representatives, in
successfully enforcing the rights provided in this
Section 6.11.
SECTION 6.12. Financing. (a) Parent
shall not agree to or permit any amendment, supplement or other
modification of, or waive any of its rights under, any Financing
Commitments or the definitive agreements relating to the
Financing, if such amendment, supplement, modification or waiver
reduces the aggregate amount of Financing or would reasonably be
likely to delay or prevent the Closing or make any portion of
the financing less likely to occur (provided that Parent
may replace or amend the Debt Financing Commitments solely to
add lenders, lead arrangers, bookrunners, syndication agents or
similar entities who had not executed the Debt Financing
Commitments as of the date hereof; Parent shall promptly provide
notice to the Company of such replacement or amendment) and
Parent shall use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to obtain the Financing on
the terms and conditions described in the Financing Commitments,
including using its reasonable best efforts to
(i) negotiate and enter into the definitive agreements with
respect thereto on the terms and conditions contained in the
Financing Commitments, (ii) satisfy on a timely basis all
conditions applicable to Parent set forth therein and
(iii) subject to the terms and conditions contemplated by
the Financing Commitments, consummate the Financing contemplated
by the Financing Commitments at the Closing, including using its
reasonable best efforts to cause the lenders and any other
Persons providing such Financing to fund the Financing required
to consummate the Merger at the Closing (including by enforcing
its rights under the Financing Commitments). In the event that
any portion of the Debt Financing becomes unavailable on the
terms and conditions set forth in the Debt Financing
Commitments, other than due to the breach of representations and
warranties or covenants of the Company or a failure of a
condition to be satisfied by the Company, Parent shall promptly
notify the Company and shall use its reasonable best efforts to
obtain any such portion from alternative sources, on terms not
less favorable, taken as a whole, to Parent, that will still
enable Parent to consummate the transactions contemplated by
this Agreement, as promptly as practicable following the
occurrence of such event. Parent shall deliver to the Company
true and complete copies of all agreements pursuant to which any
such alternative source shall have committed to provide Parent
with any portion of the Debt Financing. Parent shall refrain
from taking, directly or indirectly, any action that would
reasonably be expected to result in a failure of any of the
conditions contained in the Financing Commitments or in any
definitive agreement related to the Financing. Parent shall keep
the Company informed on a timely basis in reasonable detail of
the status of its efforts to obtain the Financing.
(b) Prior to the Closing, the Company shall provide, shall
cause the CompanySubsidiaries to provide, and shall use its
reasonable best efforts to cause any Representative retained by
the Company or any of the CompanySubsidiaries to provide, such
reasonable cooperation in connection with the arrangement of the
Debt Financing (which for purposes of this Section 6.12(b),
shall include any alternative financing) as may be reasonably
requested by Parent, including (i) participation in
meetings, presentations, drafting sessions and due diligence
with prospective lenders, investors and rating agencies in
connection with the Financing, (ii) furnishing Parent and
its Financing Sources as promptly as practicable with financial,
business and other pertinent information regarding the Company
and the CompanySubsidiaries as may be reasonably requested by
Parent to consummate the Debt Financing, including, all
financial, business and other pertinent information related to
the Company
and/or the
Company Subsidiaries reasonably required by Parent for Parent to
produce the financial statements and other offering document
information to consummate the Debt Financing, including all
financial statements, pro forma financial statements, financial
and other data of the type required by
Regulation S-X
and
Regulation S-K
under the Securities Act and of type and form customarily
included in an offering memorandum under Rule 144A of the
Securities Act (information required to be delivered pursuant to
this clause (ii) being referred to as the “Required
Information”), (iii) assisting Parent and its
Financing Sources in the preparation of (A) an offering
memorandum, bank information memoranda, private placement
memoranda and similar documents, including “roadshow”
or investor meeting slides required for any portion of the Debt
Financing (including requesting any consents of accountants for
use of their reports in any materials relating to the Financing
and the delivery of one or more customary representation
letters) and
(B) materials for rating agency presentations,
(iv) reasonably cooperating with the marketing efforts of
Parent and its Financing Sources for any portion of the Debt
Financing, (v) reasonably cooperating with the pledging of
collateral in connection with the Debt Financing, including
facilitating the preparation of any customary pledge and
security documents, currency or interest hedging arrangements or
other definitive financing documents or other certificates,
legal opinions, surveys and title insurance (including
non-imputation title policy endorsements and affidavits
reasonably required by the title company) and documents as may
be reasonably requested by Parent (provided that the
obligations contained in any related documents shall be
effective no earlier than as of the Closing),
(vi) providing to the Financing Sources a certificate of
the chief financial officer of the Company and the CompanySubsidiaries with respect to solvency matters as of the Closing
on a pro forma basis, (vii) providing to the Financing
Sources of the Debt Financing all documentation and other
information required by regulatory authorities with respect to
the Company under applicable “know your customer” and
anti-money laundering rules and regulations, including without
limitation the PATRIOT Act, (viii) using reasonable best
efforts to obtain accountants’ comfort letters, legal
opinions, surveys and title insurance as reasonably requested by
Parent and (ix) facilitating the execution and delivery (at
the Closing) of definitive documents related to the Financing on
the terms contemplated by the Debt Financing Commitments;
provided, that such definitive documents shall be
executed by officers of the Surviving Corporation as of the
Effective Time; provided, further, that such
requested cooperation does not unreasonably interfere with the
ongoing operations of the Company and the CompanySubsidiaries
prior to the Effective Time. Except as set forth in this
Section 6.12, Parent and Merger Subsidiary shall be
responsible for all fees and expenses related to the Debt
Financing contemplated hereby. Accordingly, notwithstanding
anything to the contrary in Section 6.07, Parent shall,
promptly upon request by the Company, reimburse the Company for
all reasonable
out-of-pocket
costs incurred by the Company or any of the CompanySubsidiaries
in connection with such cooperation. Parent shall indemnify and
hold harmless the Company, the CompanySubsidiaries and their
respective Representatives from and against any and all losses
or damages suffered or incurred by them in connection with the
arrangement of the Debt Financing and any information utilized
in connection therewith (other than any information provided by
or on behalf of the Company or the CompanySubsidiaries but
which shall be subject to Section 6.10). The Company hereby
consents to the reasonable use of the Company’s and Company
Subsidiaries’ logos in connection with the Financing,
provided that such logos are used in a manner that is not
intended to harm or disparage the Company or the CompanySubsidiaries or their marks and on such other customary terms
and conditions as the Company shall reasonably impose.
(c) Not less than two Business Days prior to the Closing
Date, the Company shall deliver to Parent payoff letters from
third-party lenders in form and substance reasonably
satisfactory to Parent, with respect to all Indebtedness of the
Company and the CompanySubsidiaries identified on
Section 6.12(c) of the Company Disclosure Schedule. Such
payoff letters shall correctly specify the amount, including any
applicable premiums or fees and expenses, necessary to repay
such Indebtedness and completely discharge the obligations of
the Company and the CompanySubsidiaries with respect thereto,
and each shall acknowledge that, subject to the repayment of the
aggregate principal amount outstanding under the relevant debt
instrument, credit facility or other instrument, together with
all interest accrued thereon and any other fees or expenses
payable thereunder, (i) such debt instrument, credit
facility or other instrument has been terminated, (ii) any
and all Liens held by any Person under the relevant debt
instrument, credit facility or debt instrument have been
released and (iii) the Company and the CompanySubsidiaries
have been released from any and all liabilities and obligations
under such debt instruments, credit facility or other instrument
and any related guaranties (other than any obligation under any
indemnification or similar provision that by its terms survives
such termination).
SECTION 6.13. No Financing
Condition. For the avoidance of doubt, the
obligation of Parent and Merger Subsidiary to close the
transactions contemplated by this Agreement is not conditioned
upon the consummation of the Financing and, accordingly, the
parties hereto agree that a failure of Parent and Merger
Subsidiary to close the transactions contemplated by this
Agreement resulting from a failure or inability to consummate
the Financing constitutes a breach for purposes of this
Agreement, enforceable subject to the limitations set forth in
Section 9.02(c).
SECTION 6.14. Resignation of
Directors. At the Closing, if requested by the
Parent, the Company shall deliver to Parent evidence reasonably
satisfactory to Parent of the resignation of any or all the
directors of the Company and Company Subsidiaries, effective at
the Effective Time.
SECTION 6.15. Section 16
Matters. Prior to the Effective Time, the Company
will take all such steps as may be reasonably necessary or
advisable hereto to cause to be exempt under
Rule 16b-3
promulgated under the Exchange Act any dispositions of shares of
Company Common Stock (including derivative securities with
respect to shares of Company Common Stock) that are treated as
dispositions under such rule and result from the transactions
contemplated by this Agreement by each director or officer of
the Company who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to the
Company.
SECTION 6.16. Shareholder
Actions. The Company shall give Parent and Merger
Subsidiary the opportunity to participate at its own expense in
the defense of any shareholder litigation against the Company
and its directors or officers relating to the transactions
contemplated by this Agreement or the Merger; provided,
however, that no settlement by the Company of any such
litigation shall be agreed to without Parent’s prior
consent, which consent shall not be unreasonably withheld,
conditioned or delayed.
SECTION 6.17. Termination of Agreements with
MP Stockholder and its Affiliates. Immediately
prior to the Effective Time, the Company shall execute an
agreement in a form reasonably acceptable to the parties
terminating all contracts between the Company or any of Company
Subsidiaries, on the one hand, and the MP Stockholder and
any of its other Affiliates, on the other hand.
SECTION 6.18. Phase II Call
Option. Prior to the Closing Date, the Company
shall, and shall cause PGI Spain to, submit the Exercise
Notice to exercise the Acquirer’s Call Option (as such
terms are defined in the Spain Agreement), such exercise to be
conditioned upon consummation of the Merger. The Company shall,
and shall cause PGI Spain to, use its reasonable best efforts to
effectuate the Closing Date of Phase II, subject to the Second
Condition (as such terms are defined in the Spain Agreement)
pursuant to the terms and conditions of the Spain Agreement at
the Closing. The Company shall not, and shall cause PGI Spain
not to, enter into any amendment, alteration, modification or
waiver in connection with or related to the terms of the Spain
Agreement without the written consent of Parent.
ARTICLE VII
Employee
Matters
SECTION 7.01. Employee
Matters. (a) During the period from the
Effective Time until the first anniversary thereof, Parent
shall, or shall cause the Surviving Corporation to, provide to
the employees of the Company and each Company Subsidiary
immediately prior to the Effective Time (the “Current
Employees”), compensation and benefits that are
substantially comparable, in the aggregate, to those provided to
the Current Employees immediately prior to the date hereof (with
such modifications that occur prior to Closing to the extent
permitted by Section 6.01), while such Current Employees
remain employed by the Company and the CompanySubsidiaries.
Notwithstanding the foregoing with regard to any employees of
the Company or any Company Subsidiary who are represented for
collective bargaining by a labor organization, Parent shall, or
shall cause the Surviving Corporation to, provide to such
union-represented employees such terms and conditions of
employment, and comply with all of the employer’s
obligations, as are provided for under the terms of the existing
collective bargaining agreements and for the terms thereof, in
accordance with law.
(b) From and after the Effective Time, Parent shall, or
shall cause the Surviving Corporation to, (i) honor, in
accordance with their terms, all Company Benefit Plans and
Company Benefit Agreements and (ii) pay all annual bonuses
that become payable to Current Employees with respect to the
fiscal year in which the Effective Time occurs and all bonuses
accrued before the Effective Time under the annual bonus plans
of the Company and the CompanySubsidiaries, including unpaid
bonuses accrued in the fiscal year prior to the Effective Time.
For the avoidance of doubt and notwithstanding anything to the
contrary herein or in any Company Benefit Plan or Company
Benefit Agreement, except to the extent inconsistent with
Section 409A of the Code, for purposes of any Company
Benefit Plan or Company Benefit Agreement containing a
definition
of “change in control” or “change of
control”, and the Merger when effected shall be deemed to
constitute a “change in control” or “change of
control”.
(c) The provisions of this Section 7.01 are for the
sole benefit of the parties to this Agreement and nothing
herein, expressed or implied, is intended or shall be construed
to confer upon or give to any Person (including for the
avoidance of doubt any current or former employees, officers or
directors of the Company or any Company Subsidiary, Parent or
any of its Subsidiaries, or on or after the Effective Time, the
Surviving Corporation or any of its Subsidiaries), other than
the parties hereto, any legal or equitable or other rights or
remedies with respect to the matters provided for in this
Section 7.01. Nothing in this Agreement shall be construed
as an amendment of a Company Benefit Plan or Company Benefit
Agreement, or as requiring Parent or the Surviving Corporation
to employ any Company Employee or continue any specific Company
Benefit Plan or Company Benefit Agreement for any length of time
following the Effective Time.
ARTICLE VIII
Conditions
Precedent
SECTION 8.01. Conditions to Each Party’s
Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger is subject to the
satisfaction or (to the extent permitted by law) waiver on or
prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Stockholder
Approval shall have been obtained.
(b) Information Statement. The
Information Statement shall have been mailed to the
Company’s stockholders and 20 days shall have elapsed.
(c) HSR Act; Foreign Merger Control
Laws. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired and all consents required
under any Foreign Merger Control Laws of the jurisdictions
listed on Section 8.01(c) of the Company Disclosure
Schedule shall have been obtained.
(d) No Injunctions or Restraints. No
Applicable Law or injunction enacted, entered, promulgated,
enforced or issued by any Governmental Entity
(“Restraint”) preventing consummation of the
Merger shall be in effect.
SECTION 8.02. Conditions to Obligations of
Parent and Merger Subsidiary to Effect the
Merger. The respective obligations of Parent and
Merger Subsidiary to effect the Merger shall be subject to the
fulfillment (or waiver by Parent) on or prior to the Closing
Date of the following additional conditions:
(a) The representations and warranties of the Company
(i) set forth in Sections 4.01, 4.02, 4.03, and 4.17
shall be true and correct in all material respects as of the
date hereof and as of the Effective Time as if made at and as of
the Effective Time (except to the extent any such
representations and warranties speak as of another time, in
which case such representations and warranties will be true and
correct as of such other time) and (ii) set forth in
Article IV of this Agreement, other than those described in
clause (i) above (made without giving effect to any
limitation as to “materiality” or “Material
Adverse Effect” contained herein), will be true and correct
as of the date hereof and as of the Effective Time as if made at
and as of the Effective Time (except to the extent any such
representations and warranties speak as of another time, in
which case such representations and warranties will be true and
correct as of such other time), except in the case of this
clause (ii) where the failure of such representations and
warranties to be so true and correct does not have a Material
Adverse Effect.
(b) The Company will have performed in all material
respects all of the obligations, and complied in all material
respects with the agreements and covenants, required to be
performed by it under this Agreement at or prior to the Closing
Date.
(c) The Company shall have delivered to Parent a
certificate, dated as of the Closing Date and signed on behalf
of the Company by the Chief Executive Officer of the Company,
certifying to the effect that the conditions set forth in
Sections 8.02(a) and 8.02(b) have been satisfied.
(d) Since January 2, 2010, there has not been a
Material Adverse Effect.
(e) Consolidated EBITDA (as defined on Section 8.02(e)
of the Company Disclosure Schedule) for the twelve month period
ending October 4, 2010 shall not be less than $111,000,000.
(f) The Closing Phase II (as defined in the Spain
Agreement) shall have occurred or occur simultaneously with the
Closing.
SECTION 8.03. Conditions to Obligations of
the Company to Effect the Merger. The obligation
of the Company to effect the Merger shall be subject to the
satisfaction (or waiver by the Company) on or prior to the
Closing Date of the following additional conditions:
(a) The representations and warranties of each of Parent
and Merger Subsidiary (i) set forth in Section 5.07
shall be true and correct in all material respects as of the
date hereof and as of the Effective Time as if made at and as of
the Effective Time (except to the extent any such
representations and warranties speak as of another time, in
which case such representations and warranties will be true and
correct as of such other time) and (ii) set forth in this
Agreement, other than those described in clause (i) above
(made without giving effect to any limitation as to
“materiality” or “Material Adverse Effect”
contained herein), will be true and correct as of the date
hereof and as of the Effective Time as if made at and as of the
Effective Time (except to the extent any such representations
and warranties speak as of another time, in which case such
representations and warranties will be true and correct as of
such other time), except in the case of this clause (ii)
where the failure of such representations and warranties to be
so true and correct does not materially and adversely affect the
ability of Parent or Merger Subsidiary to consummate the Merger
and the other transactions contemplated by this Agreement.
(b) Parent and Merger Subsidiary will have performed in all
material respects all of the obligations, and complied in all
material respects with the agreements and covenants, required to
be performed by them under this Agreement at or prior to the
Closing Date.
(c) Parent shall have delivered to the Company a
certificate, dated as of the Closing Date and signed on behalf
of Parent by a duly authorized officer of Parent, certifying to
the effect that the conditions set forth in
Sections 8.03(a) and 8.03(b) have been satisfied.
ARTICLE IX
Termination,
Amendment and Waiver
SECTION 9.01. Termination. This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after receipt of the Stockholder
Approval:
(a) by mutual written consent of Parent, Merger Subsidiary
and the Company at any time prior to the Effective Time;
(i) if the Merger shall not have occurred prior to
February 8, 2011 (the “Outside Date”);
provided, however, that (A) the right to
terminate this Agreement under this Section 9.01(b)(i)
shall not be available to any party whose action or failure to
act has been a principal cause of or directly resulted in the
failure of the Effective Time to occur prior to such date and
such action or failure to act constitutes a breach of this
Agreement (for the avoidance of doubt, the Buyer’s failure
to close due to the unavailability of the Debt Financing (or, if
alternative financing is being used in accordance with
Section 6.12, such alternative financing) shall not be
deemed to be an action or failure to act for purposes of this
Section 9.01(b)(i) so long as Parent has performed in all
material respects its obligations under Section 6.12(a))
and (B) in the event that the conditions set forth in
Sections 8.01 (other than the conditions set forth in
Section 8.01(c)), 8.02 and 8.03 (in each case other than
those conditions that by their terms are to be satisfied at the
Closing) have been satisfied but the condition set forth in
Section 8.01(c) was not satisfied by the Outside Date,
Parent will seek a three month extension of the Debt Financing
Commitments on terms not less favorable, in the aggregate, as
those set forth in the Debt
Financing Commitments (for the avoidance of doubt, without the
payment of any additional fees, an increase in any interest rate
or a change to any “flex” provisions); if such
extension is obtained, Parent or the Company may, by delivery of
a written notice to the other party, change the Outside Date to
May 6, 2011 (or such earlier date as mutually agreed by the
Parent and the Company); or
(ii) if any Restraint preventing the consummation of the
Merger shall be in effect and shall have become final and
nonappealable.
(c) by Parent:
(i) if the Stockholder Approval shall not have been
obtained by 11:59 p.m., New York City time, on the date
hereof; or
(ii) if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure
to perform (A) would give rise to the failure of the
conditions set forth in Sections 8.02(a) or (b) and
(B) is incapable of being cured by the Company by the
Outside Date, or, if capable of being cured by the Company by
the Outside Date, is not cured by the Company within 45 calendar
days following receipt of written notice of such breach or
failure to perform from Parent; provided that Parent
shall not have the right to terminate this Agreement pursuant to
this Section 9.01(c)(ii) if Parent or Merger Subsidiary
shall have breached or failed to perform any of its
representations, warranties or covenants set forth in this
Agreement which breach or failure to perform would give rise to
the failure of the conditions set forth in Sections 8.03(a)
or (b).
(i) if Parent or Merger Subsidiary shall have breached or
failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement which breach
or failure to perform (A) would give rise to the failure of
the conditions set forth in Sections 8.03(a) or
(b) and (B) is incapable of being cured by Parent or
Merger Subsidiary by the Outside Date or, if capable of being
cured by Parent or Merger Subsidiary by the Outside Date, is not
cured by Parent or Merger Subsidiary within 45 calendar days
following receipt of written notice of such breach or failure to
perform from the Company; provided that the Company shall
not have the right to terminate this Agreement pursuant to this
Section 9.01(d)(i) if the Company shall have breached or
failed to perform any of its representations, warranties or
covenants set forth in this Agreement which breach or failure to
perform would give rise to the failure of the conditions set
forth in Sections 8.02(a) or (b);
(ii) at any time prior to obtaining Stockholder Approval to
accept a Superior Proposal in accordance with the terms of
Section 6.03(b)(y); or
(iii) if (x) all the conditions set forth in
Sections 8.01 and 8.02 shall have been satisfied and
(y) Parent breaches its obligation to consummate the
Closing at the time on which the Closing was required to occur
pursuant to Section 2.02.
SECTION 9.02. Effect of
Termination. (a) If this Agreement is
terminated by the Company pursuant to Section 9.01(d)(iii),
then Parent shall pay to the Company a termination fee of
$15,000,000 in cash; provided, however that solely
in the circumstances where the Company is entitled to seek
specific performance pursuant to Section 10.07(b) other
than clause (iv) thereof, the termination fee shall be
$30,000,000 in cash (such payment, as applicable, the
“Parent Termination Fee”), such payment to be
made by wire transfer of immediately available funds, within
three Business Days following such termination.
(b) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in
Section 9.01, this Agreement shall become null and void and
of no further force and effect, except for the provisions of
Section 6.05 relating to the obligation of Parent and
Merger Subsidiary to keep confidential certain information and
data obtained by them and for the provisions of
(a) Section 6.07 relating to certain expenses,
(b) Section 6.09 relating to publicity,
(c) Section 9.01 and (d) this Section 9.02,
each of which, solely in accordance with its respective terms,
shall survive indefinitely. Notwithstanding the foregoing, but
subject to Section 6.07(c) and Section 9.02(c), the
termination of this Agreement shall not be deemed to
release any party from any liability for any breach by such
party of the terms and provisions of this Agreement.
(c) Notwithstanding anything to the contrary in this
Agreement, if Parent and Merger Subsidiary fail to effect the
Closing when required by Section 2.02 for any reason or
otherwise breach this Agreement (whether willfully,
intentionally, unintentionally or otherwise) or fail to perform
hereunder (whether willfully, intentionally, unintentionally or
otherwise), then, (i) except for an order of specific
performance as and only to the extent expressly permitted by
Section 10.07, the Company’s and its Affiliates’
sole and exclusive remedies (whether at law, in equity, in
contract, in tort or otherwise) against Parent, Merger
Subsidiary, the Investor and any of their respective former,
current and future direct or indirect equityholders, controlling
persons, stockholders, directors, officers, employees, agents,
Affiliates, members, managers, general or limited partners,
Financing Sources or assignees (each a “Related
Party” and collectively, the “Related
Parties”) or any Related Party of a Related Party for
any breach, loss or damage shall be (x) to terminate this
Agreement and receive payment of the Parent Termination Fee, in
each case, only to the extent provided by Section 9.02(a)
or pursuant to the Limited Guarantee, as applicable or
(y) to terminate this Agreement pursuant to
Section 9.01(d)(i) and seek to recover monetary damages
from Parent, provided that in no event shall Parent be
subject to monetary damages in excess of $15,000,000 in the
aggregate, and (ii) except as provided in the immediately
foregoing clause (i), none of the Related Parties or any Related
Party of a Related Party will have any Liability to any Person,
including the Company or any of its Affiliates relating to or
arising out of this Agreement, the Limited Guarantee, the
Financing Commitments or in respect of any other document or
theory of law or equity or in respect of any oral
representations made or alleged to be made in connection
herewith or therewith, whether at law or equity in contract, in
tort or otherwise. Nothing in this Section 9.02 shall limit
the rights of the Company, the CompanySubsidiaries and their
Representatives pursuant to Section 6.12(b).
(d) Notwithstanding anything to the contrary herein, if a
court of competent jurisdiction has ordered Parent to pay the
Parent Termination Fee pursuant to Section 9.02(a), the
Company shall not be permitted or entitled to enforce such order
if (x) Parent delivers to the Company, within five
(5) Business Days following the issuance of such order, a
notice electing to consummate the Closing in accordance with
Article 2 and (y) the Closing occurs within ten
(10) Business Days following the delivery of such notice.
In no event shall the Company be entitled to seek the remedy of
specific performance of this Agreement other than solely under
the specific circumstances and as specifically set forth in
Section 10.07. For the avoidance of doubt, while the
Company may pursue both a grant of specific performance as and
only to the extent expressly permitted by Section 10.07 and
the payment of the Parent Termination Fee only to the extent
expressly permitted by Section 9.02(a), under no
circumstances shall the Company be permitted or entitled to
receive both such grant of specific performance and payment of
the Parent Termination Fee.
SECTION 9.03. Nonsurvival of Representations
and Warranties. None of the representations and
warranties or covenants contained in this Agreement and in any
document delivered in connection herewith shall survive the
Effective Time, except those covenants that by their terms
explicitly relate to periods of time after the Effective Time.
SECTION 9.04. Amendments and
Waivers. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing, Parent, on the one
hand, or the Company, on the other hand, may waive compliance by
the other with any term or provision of this Agreement that such
other party was or is obligated to comply with or perform.
ARTICLE X
General
Provisions
SECTION 10.01. Assignment. This
Agreement and the rights and obligations hereunder shall not be
assignable or transferable by any party (including by operation
of law in connection with a merger or consolidation of such
party) without the prior written consent of the other parties
hereto, except that each of Parent and Merger Subsidiary may
assign all or any of its rights and obligations hereunder to any
Affiliate of
Parent; provided, however, that no assignment
shall limit or affect the assignor’s obligations hereunder.
Any attempted assignment in violation of this Section 10.01
shall be void.
SECTION 10.02. No Third-Party
Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and
nothing herein expressed or implied shall give or be construed
to give to any Person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder, and other than
in respect of (i) Section 6.11 (which is enforceable
by the Persons covered in Section 6.11(d)),
(ii) Section 9.02(c) (which is enforceable by each
Related Party) and (iii) the second sentence of
Section 10.07(c) and Sections 10.08 and 10.10 (in each
case, which is enforceable by each Financing Source and its
successors and assigns). Notwithstanding the immediately
preceding sentence, following the Effective Time, the provisions
of Article III relating to the payment of the Per Share
Closing Payments and the Per Share Escrow Payments shall be
enforceable by holders of the Certificates and agreements
evidencing Company Stock Options, Company Restricted Shares,
Company Performance RSUs and Company RSUs as provided therein.
SECTION 10.03. Notices. All
notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by
hand or sent by facsimile or sent, postage prepaid, by
registered, certified or express mail or overnight courier
service and shall be deemed given when received, as follows:
(i) if to Parent or Merger Subsidiary, to:
c/o The
Blackstone Group
345 Park Avenue New York, NY10154
Fax No.:
(212) 583-5722
Attention: Chinh E. Chu
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue New York, NY10017
Fax No.:
(212) 455-4502
Attention: Peter Martelli, Esq.
MatlinPatterson Global Opportunities Partners L.P.
520 Madison Avenue New York, NY10022-4213
Fax No.:
(212) 651-4010
Attention: General Counsel
with a copy to:
Whalen LLP
19000 MacArthur Boulevard, Suite 600 Irvine, CA92612
Fax No.:
(949) 833-1710
Attention: Michael Whalen, Esq.
SECTION 10.04. Counterparts. This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective when one or more such counterparts have been
signed by each of the parties hereto and delivered to the other
parties hereto.
SECTION 10.05. Entire
Agreement. This Agreement and the Confidentiality
Agreement, along with the Exhibits and Schedules hereto and
thereto, contain the entire agreement and understanding among
the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings relating to
such subject matter. None of the parties hereto shall be liable
or bound to any other party in any manner by any
representations, warranties or covenants relating to such
subject matter except as specifically set forth herein or in the
Confidentiality Agreement.
SECTION 10.06. Severability. If
any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to
any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any
other Persons or circumstances.
SECTION 10.07. Specific Performance;
Exclusive Jurisdiction. (a) The parties
hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached and that any breach of this Agreement could not be
adequately compensated by monetary damages alone. It is
accordingly agreed that, subject to the limitation set forth in
Section 10.07(b), the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the performance of the
terms and provisions of this Agreement without proof of actual
damages. Each party further agrees that (i) no other party
hereto or any other Person shall be required to obtain, furnish
or post any bond or similar instrument in connection with or as
a condition to obtaining any remedy referred to in this
Section 10.07, and each party hereto irrevocably waives any
right it may have to require the obtaining, furnishing or
posting of any such bond or similar instrument and (ii) it
will not oppose the granting of such remedy on the basis that
the other parties have an adequate remedy at law.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, it is explicitly agreed that the Company shall
be entitled to seek specific performance of Parent’s right
to cause the Equity Financing to be funded and to consummate the
Merger only in the event that (i) Parent and Merger
Subsidiary are required to complete the Closing pursuant to
Section 2.02, (ii) the Debt Financing (or, if
alternative financing is being used in accordance with
Section 6.12, pursuant to commitments with respect thereto)
has been funded or will be funded at the Closing if the Equity
Financing is funded at the Closing, (iii) Parent and Merger
Subsidiary fail to complete the Closing in accordance with
Section 2.02 and (iv) the Company has irrevocably
confirmed that if specific performance is granted and the Equity
Financing and Debt Financing (or, if alternative financing is
being used in accordance with Section 6.12, pursuant to
commitments with respect thereto) are
funded, then the Closing pursuant to Section 2.02 will
occur. For the avoidance of doubt, in no event shall the Company
be entitled to enforce or seek to enforce specifically
Parent’s right to cause the Equity Financing to be funded
or to complete the Merger if the Debt Financing (or, if
alternative financing is being used in accordance with
Section 6.12, pursuant to commitments with respect thereto)
has not been funded (or will not be funded at the Closing if the
Equity Financing is funded at the Closing).
(c) Any proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, including the
Merger, shall be brought in the Court of Chancery of the State
of Delaware, and each party irrevocably submits to the exclusive
jurisdiction of each such court in any such proceeding, waives
any objection it may now or hereafter have to venue or to
convenience of forum, agrees that all claims in respect of the
proceeding shall be heard and determined only in any such court,
and agrees not to bring any proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby, including the Merger, in any other court.
Notwithstanding the foregoing, each of the parties hereto agrees
that it will not bring or support any action, cause of action,
claim, cross-claim or third-party claim of any kind or
description, whether in law or in equity, against the Financing
Sources in any way relating to this Agreement or any of the
transactions contemplated by this Agreement, including but not
limited to any dispute arising out of or relating in any way to
the Debt Financing Commitments or the performance thereof, in
any forum other than the Supreme Court of the State of New York,
County of New York, or, if under applicable law exclusive
jurisdiction is vested in the Federal courts, the United States
District Court for the Southern District of New York (and
appellate courts thereof).
SECTION 10.08. Governing
Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law
thereof or of any other jurisdiction.
SECTION 10.09. Conflict
Waiver. Recognizing that Cravath,
Swaine & Moore LLP has acted as advisor to the Company
prior to the Closing, Parent hereby waives, on its own behalf,
and agrees to cause the Company to waive, effective as of the
Closing, any conflicts that may arise in connection with
Cravath, Swaine & Moore LLP representing or advising
the Stockholder Representative after the Closing in connection
with the matters covered by Section 3.07.
SECTION 10.10. Waiver of Jury
Trial. Each party hereby waives, to the fullest
extent permitted by Applicable Law, any right it may have to a
trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with this
Agreement or any transaction contemplated hereby. Each party
(a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to
enforce the foregoing waiver and (b) acknowledges that it
and the other parties hereto have been induced to enter into
this Agreement by, among other things, the mutual waivers and
certifications in this Section 10.10.
FIRST. The name of the Corporation is Polymer Group,
Inc.
SECOND. The registered office and registered agent of
the Corporation in the State of Delaware is The Corporation
Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware, 19801.
THIRD. The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be
organized under the Delaware General Corporation Law or any
successor statute.
FOURTH. The total number of shares of capital stock
which the Corporation shall have authority to issue is
1,000 shares of common stock, par value $0.01 per share.
FIFTH. The Board of Directors of the Corporation,
acting by majority vote, is expressly authorized to make, alter,
amend or repeal the Bylaws of the Corporation. In furtherance
and not in limitation of the powers conferred by law, subject to
any limitations contained elsewhere in this Certificate of
Incorporation, Bylaws of the Corporation may be adopted, amended
or repealed by a majority of the Board of Directors of the
Corporation, but any Bylaws adopted by the Board of Directors
may be amended or repealed by the stockholders entitled to vote
thereon. Election of directors need not be by written ballot.
SIXTH. (a) No director of the Corporation shall
be personally liable to the Corporation or its stockholders for
monetary damages for breach of his or her fiduciary duty as a
director, except to the extent that such exemption from
liability or limitation thereof is not permitted under the
Delaware General Corporation Law as currently in effect or as
the same may hereafter be amended. Any repeal or modification of
this subsection (a) of this Article SIXTH by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director, officer or the Corporation
existing at the time of such repeal or modification. If the
Delaware General Corporation Law is amended after the filing of
this Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law, as so amended. All
references herein to a director or officer shall be references
to current and former directors or officers of the Corporation.
(b) The Corporation shall indemnify and hold harmless any
person who was or is a party or is threatened to be made a party
to, or testifies in, any threatened, pending or completed
action, claim, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, employee benefit plan, trust or other enterprise,
against all claims, losses, liabilities, expenses (including
attorneys’ fees and disbursements), damages, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or
proceeding to the fullest extent permitted under the Delaware
General Corporation Law, and the Corporation may adopt Bylaws or
enter into agreements with any such person for the purpose of
providing for such indemnification.
(c) To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
paragraph (b) of this Article SIXTH, or in defense of
any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith.
(d) Expenses (including attorneys’ fees) incurred by
an officer or director in defending or testifying in a civil,
criminal, administrative or investigative action, claim, suit or
proceeding by reason of the fact that such person is or was an
officer or director of the Corporation (or is or was serving at
the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise) shall be paid
by the Corporation in advance of the final disposition of such
action, claim, suit or proceeding within ten business days of
the Corporation’s receipt of a request for advancement of
such expenses from such director or officer and, to the extent
required by law, upon receipt of an undertaking by or on behalf
of any such director or officer to repay such amount if it shall
ultimately be determined that such director or officer is not
entitled to be indemnified by the Corporation against such
expenses as authorized by the relevant sections of the Delaware
General Corporation Law, and the Corporation may adopt Bylaws or
enter into agreements with such persons for the purpose of
providing for such advances.
(e) The indemnification permitted by this
Article SIXTH shall not be deemed exclusive of any other
rights to which any person may be entitled under any agreement,
vote of stockholders or disinterested directors or otherwise,
both as to action in such person’s official capacity and as
to action in another capacity while holding an office, and shall
continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors
and administrators of such person. To assure indemnification
under this Article SIXTH of all current and former
directors and officers who are determined by the Corporation or
otherwise to be or to have been “fiduciaries” of any
employee benefit plan of the Corporation which may exist from
time to time, Section 145 of the Delaware General
Corporation Law shall, for the purposes of this
Article SIXTH, be interpreted as follows: “other
enterprise” shall be deemed to include such an employee
benefit plan, including without limitation, any plan of the
Corporation which is governed by the Act of Congress entitled
“Employee Retirement Income Security Act of 1974,” as
amended from time to time; the Corporation shall be deemed to
have requested a person to serve an employee benefit plan where
the performance by such person of his duties to the Corporation
also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan;
and excise taxes assessed on a person with respect to an
employee benefit plan pursuant to such Act of Congress shall he
deemed “fines.”
(f) The Corporation shall have the power to purchase and
maintain insurance to protect itself and any person who is or
was a director, officer, employee or agent of the Corporation,
or while a director, officer, employee or agent of the
Corporation, is or was serving at the request of the Corporation
as a director, officer, employee or agent of another
corporation, partnership, joint venture, employee benefit plan
trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or
arising out of such person’s status as such, whether or not
the Corporation would have the power to indemnify such person
against such liability under the Delaware General Corporation
Law or the provisions of this Article SIXTH or otherwise.
SEVENTH. Except as otherwise agreed in writing
between such director and the Corporation, or as provided below,
to the fullest extent permitted by law, except as may be
otherwise agreed in writing between such director and the
Corporation, (a) no director of the Corporation shall have
any duty (fiduciary or otherwise) or obligation, if any, to
refrain from (i) engaging in the same or similar activities
or lines of business as the Corporation or any of its
subsidiaries or (ii) doing business with any client,
customer or vendor of the Corporation or any of its
subsidiaries, including, in the cases of clauses (i) or
(ii), any such matters as may be Corporate Opportunities (as
defined below); and (b) no officer, director or employee
thereof shall be deemed to have breached any duty (fiduciary or
otherwise), if any, to the Corporation or any of its
subsidiaries or stockholders solely by reason of any director of
the Corporation engaging in any such activity or entering into
such transactions, including any Corporate Opportunities.
“Corporate Opportunity” means any potential
transaction, investment or business opportunity or prospective
economic or competitive advantage in which the Corporation or
any of its subsidiaries could have any expectancy or interest.
Without limiting the foregoing, the Corporation and its
subsidiaries shall have no interest or expectation in, nor right
to be informed of, any Corporate Opportunity, and in the event
that any director of the Corporation acquires knowledge of a
potential transaction or matter which may be a Corporate
Opportunity, such director shall, to the fullest extent
permitted by law, have no duty (fiduciary or otherwise) or
obligation to communicate or offer such Corporate Opportunity to
the Corporation or any of its subsidiaries or to any other
director of the Corporation and shall not, to the fullest extent
permitted by law, be liable to the Corporation or any of its
subsidiaries or stockholder for breach of any fiduciary duty as
a director or officer of the Corporation or any of its
subsidiaries solely by reason of the fact that any director of
the Corporation
acquires or seeks such Corporate Opportunity for itself, directs
such Corporate Opportunity to another individual, partnership,
joint venture, corporation, association, joint stock company,
limited liability company, trust, unincorporated organization or
government or an department or agency or political subdivision
thereof, or otherwise does not communicate information regarding
such Corporate Opportunity to the Corporation or its
subsidiaries, and the Corporation and its subsidiaries, to the
fullest extent permitted by law, waive and renounce any claim
that such business opportunity constituted a Corporate
Opportunity that should have been presented to the Corporation
or its subsidiaries; provided that if an opportunity is
expressly communicated to a director of the Corporation in his
or her capacity as a director as an opportunity intended
exclusively for the Corporation or its subsidiaries (hereinafter
called an “Identified Corporate Opportunity”),
such Identified Corporate Opportunity shall belong to the
Corporation and its subsidiaries and, unless the Corporation
notifies the stockholders that neither the Corporation nor any
of its subsidiaries intend to pursue such Identified Corporate
Opportunity.
SECTION 1. Registered
Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State
of Delaware.
SECTION 2. Other Offices. The
Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. Place of
Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at
such time and place, either within or without the State of
Delaware, as shall be designated from time to time by the Board
of Directors.
SECTION 2. Annual
Meetings. The Annual Meeting of Stockholders
shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors, at which
meeting the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before
the meeting.
SECTION 3. Special
Meetings. Special Meetings of stockholders for
any purpose or purposes may be called at any time by the
Chairman of the Board or the Board of Directors, but such
Special Meetings may not be called by any other person or
persons. Business transacted at any Special Meeting shall be
limited to the purposes stated in the notice.
SECTION 4. Notice of
Meetings. Notice of an Annual Meeting or Special
Meeting stating the place, date, and hour of the meeting and in
the case of a Special Meeting, the purpose or purposes for which
the meeting is called, shall be given by the Corporation either
personally or by mail or by other lawful means not less than ten
nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
SECTION 5. Quorum. Except as
otherwise provided by law or by the Certificate of
Incorporation, the holders of a majority in voting power of the
capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting of the time, place, if any, thereof and the means of
remote communications, if any, by which stockholders may be
deemed present in person at such adjourned meeting, until a
quorum shall be present or represented. If the adjournment is
for more than thirty (30) days, or if after the adjournment
a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
SECTION 6. Voting. Except as
otherwise provided by or pursuant to the provisions of the
Certificate of Incorporation, each stockholder entitled to vote
at any meeting of stockholders shall be entitled to one vote for
each share of stock held by such stockholder which has voting
power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to
express consent to corporate action in writing without a meeting
may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides
for a longer period. A proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or
by delivering to the Secretary of the Corporation a revocation
of the proxy or a new proxy bearing a later date. Voting at
meetings of stockholders need not be by written ballot. At all
meetings of stockholders for the election of directors a
plurality of the votes cast shall be sufficient to elect. All
other elections and questions shall, unless otherwise provided
by the Certificate of Incorporation, these Bylaws, the rules or
regulations of any stock exchange applicable to the Corporation,
or applicable law or pursuant to any regulation applicable to
the Corporation or its securities, be decided by the affirmative
vote of the holders of a majority in voting power of the shares
of stock of the Corporation which are present in person or by
proxy and entitled to vote thereon.
SECTION 7. Action by
Consent. Any action required to be taken at any
Annual or Special meeting of stockholders, or any action which
may be taken at any Annual or Special meeting of such
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent shall be given by the
holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous
consent shall be given to those stockholders who have not
consented and who, if the action had been taken at a meeting,
would have been entitled to notice of the meeting if the record
date for such meeting had been the date that consents given by a
sufficient number of holders to take the action were delivered
to the Corporation.
SECTION 8. List of Stockholders Entitled to
Vote. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the
meeting, as required by applicable law. Except as otherwise
provided by law, the stock ledger shall be the only evidence as
to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 9. Organization. At
every meeting of stockholders, the Chairman of the Board, if
there be one, shall be the chairman of the meeting or, in the
case of vacancy in office or absence of the Chairman of the
Board, one of the following officers present shall be the
Chairman of the meeting in the order stated: the Vice Chairman
of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President, any Vice President, or, in the absence
of any of the foregoing, a Chairman chosen by the stockholders
at the meeting shall act as Chairman, and the Secretary, or in
his or her absence, an Assistant Secretary, or in the absence of
both the Secretary and Assistant Secretaries, a person appointed
by the chairman of the meeting, shall act as Secretary.
SECTION 10. Record Date. In
order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate
action without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors and which record date: (i) in the case of
determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty nor less than ten days
before the date of such meeting; (ii) in the case of
determination of stockholders entitled to express consent to
corporate action without a meeting, shall not be more than ten
days from the date upon which the resolution fixing the record
date is adopted by the Board of Directors; and (iii) in the
case of any other action, shall not be more than sixty days
prior to such other action. If no record date is fixed:
(a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (b) the
record date for determining stockholders entitled to express
consent to corporate action without a meeting when no prior
action of the Board of Directors is required by law, shall be
the first day on which a consent setting forth the action taken
or proposed to be taken is delivered to the Corporation in
accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action; and (c) the record
date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 11. Conduct of
Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be announced at the
meeting by the chairman of the meeting. The Board of Directors
may adopt by resolution such rules and regulations for the
conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules
and regulations as adopted by the Board of Directors, the
chairman of any meeting of stockholders shall have the right and
authority to convene and to adjourn the meeting, to prescribe
such rules, regulations and procedures and to do all such acts
as, in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or
procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without
limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety
of those present; (iii) limitations on attendance at or
participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or
such other persons as the chairman of the meeting shall
determine; (iv) restrictions on entry to the meeting after
the time fixed for the commencement thereof; and
(v) limitations on the time allotted to questions or
comments by participants. The chairman of any meeting of
stockholders, in addition to making any other determinations
that may be appropriate to the conduct of the meeting, shall, if
the facts warrant, determine and declare to the meeting that a
matter or business was not properly brought before the meeting
and if such chairman should so determine, such person shall so
declare to the meeting and any such matter or business not
properly brought before the meeting shall not be transacted or
considered. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of
stockholders shall not be required to be held in accordance with
the rules of parliamentary procedure.
ARTICLE III
DIRECTORS
SECTION 1. Number and Election of
Directors. The number of directors that shall
constitute the Board of Directors shall be not less than one nor
more than five. The initial directors shall be determined by
resolution of the sole incorporator of the Corporation.
Thereafter, within the limits specified above, the number of
directors shall be determined by the Board of Directors. Each
elected director shall hold office until the next Annual Meeting
and until his successor is duly elected and qualified, or until
his earlier resignation or removal.
SECTION 2. Vacancies. Vacancies
and newly created directorships resulting from any increase in
the authorized number of directors may be filled by a majority
vote of all directors then in office, even if less than a
quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and
until their successors are duly elected and qualified, or until
their earlier resignation or removal.
SECTION 3. Committees. The
Board of Directors may designate one or more committees, which
committees shall, to the extent provided in the resolution of
the Board of Directors establishing such a committee, have all
authority and may exercise all the powers of the Board of
Directors in the management of the business and affairs of the
Corporation to the extent lawful under the General Corporation
Law of the State of Delaware.
SECTION 4. Duties and
Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all
such
lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
SECTION 5. Meetings. The Board
of Directors of the Corporation may hold meetings, both regular
and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time
be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the President or any one
director with one day’s notice to each director, either
personally or by mail, telephone, facsimile transmission or
other means of electronic transmission.
SECTION 6. Quorum; Board
Action. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these
Bylaws, at all meetings of the Board of Directors, a majority of
the entire Board of Directors shall constitute a quorum for the
transaction of business, and the vote of a majority of the
directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If a quorum shall
not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of
the time, place, if any, thereof and the means of remote
communications, if any, by which directors may be deemed present
in person at such adjourned meeting, until a quorum shall be
present.
SECTION 7. Actions of
Board. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a
meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in accordance
with applicable law.
SECTION 8. Removal. Unless
otherwise restricted by the Certificate of Incorporation or
these Bylaws, any director or the entire Board of Directors may
be removed, with or without cause, by the holders of not less
than eighty percent (80%) in voting power of outstanding shares
of capital stock entitled to vote at an election of directors.
SECTION 9. Telephonic Meetings
Permitted. Members of the Board of Directors, or
any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference
telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this By-law shall
constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer and such other additional officers with
such titles as the Board of Directors shall determine, all of
whom shall be chosen by and shall serve at the pleasure of the
Board of Directors. Such officers shall have the usual powers
and shall perform all the usual duties incident to their
respective offices. All officers shall be subject to the
supervision and direction of the Board of Directors. The
authority, duties or responsibilities of any officer of the
Corporation may be suspended by the President with or without
cause. Any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors with or
without cause.
ARTICLE V
NOTICES
SECTION 1. Notices. Except as
otherwise provided herein or permitted by applicable law,
whenever notice is required by law, the Certificate of
Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given
by mail, addressed to such director, member of a committee or
stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be
deposited in the
United States mail. Notice to directors may also be given
personally or by telegram, telecopier, telephone or other means
of electronic transmission.
SECTION 2. Waivers of
Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws, to be given to
any director, member of a committee or stockholder, a waiver
thereof, given by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends
upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, may be declared
by the Board of Directors at any regular or special meeting, and
may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its
absolute discretion, deems proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
SECTION 2. Fiscal Year. The
fiscal year of the Corporation shall be fixed by resolution of
the Board of Directors.
SECTION 3. Corporate Seal. The
corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words
“Corporate Seal, Delaware”. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended or repealed, in whole or in
part, or new Bylaws may be adopted by the majority vote of the
Board of Directors.
SECTION 1. Entire Board of
Directors. As used in these Bylaws generally, the
term “entire Board of Directors” means the total
number of the directors which the Corporation would have if
there were no vacancies or newly created directorships.
Pursuant
to Section 228 of the
General Corporation Law of the State of Delaware
Pursuant to Section 228 of the Delaware General Corporation
Law (the “DGCL”) and the Amended and Restated
Certificate of Incorporation and the Amended and Restated Bylaws
of Polymer Group, Inc., a Delaware corporation (the
“Company”), the undersigned, the holders of
13,596,921 shares of Company Common Stock (as defined
below), constituting approximately 63.4% of the voting power of
the outstanding shares of the Company’s Class A common
stock, par value $0.01 per share (the “Class A
Common Stock”), Class B common stock, par value
$0.01 per share (the “Class B Common
Stock”) and Class C common stock, par value $0.01
per share (together with the Class A Common Stock and the
Class B Common Stock, the “Company Common
Stock”), voting or consenting together as a single
class, do hereby irrevocably consent to the adoption of the
following resolutions without the necessity of a meeting of the
stockholders of the Company:
Adoption
of the Merger Agreement
WHEREAS, the Board of Directors of the Company (the
“Board”), acting upon the recommendation of the
special committee established by the Board and comprised of
independent directors of the Board, has (i) approved and
declared advisable (A) the Agreement and Plan of Merger
(the “Merger Agreement”) among the Company,
Scorpio Acquisition Corporation, a Delaware corporation
(“Parent”), Scorpio Merger Sub Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent
(“Merger Subsidiary”), and MatlinPatterson
Global Opportunities Partners L.P., a Delaware limited
partnership, as the Stockholder Representative (as defined in
the Merger Agreement), which is attached hereto as
Exhibit A, pursuant to which, among other things,
Merger Subsidiary will be merged with and into the Company and
the Company will be the surviving entity in the Merger (the
“Merger”), (B) the Merger and (C) the
other transactions contemplated by the Merger Agreement,
(ii) declared that it is in the best interests of the
stockholders of the Company that the Company enter into the
Merger Agreement and consummate the transactions contemplated by
the Merger Agreement on the terms and subject to the conditions
set forth in the Merger Agreement, (iii) declared that the
terms of the Merger are fair to the Company and the stockholders
of the Company, (iv) approved the submission of the Merger
Agreement for adoption by the irrevocable written consent of the
undersigned and (v) recommended that the stockholders of
the Company adopt and approve the Merger Agreement;
WHEREAS, the Merger Agreement was executed by the parties
thereto on October 4, 2010;
WHEREAS, the Merger Agreement provides that $64,500,000
shall be deposited, or caused to be deposited, by Parent with
the Escrow Agent (as defined in the Merger Agreement), to cover
certain liabilities, costs and expenses related to the potential
application of the “personal holding company” rules of
the Internal Revenue Code of 1986, as amended, to the Company
and its Subsidiaries, upon the terms and subject to the
conditions of the Merger Agreement;
WHEREAS, the Merger Agreement provides that, at the
Effective Time (as defined in the Merger Agreement), each issued
and outstanding share of Company Common Stock (other than
(1) shares of Company Common Stock held in the treasury of
the Company or by Parent or Merger Subsidiary immediately prior
to the Effective Time, (2) shares of Company Common Stock
held by any Company Subsidiary (as defined in the Merger
Agreement) and (3) shares in respect of which appraisal
rights have been properly
exercised) shall be cancelled and shall be converted
automatically into the right to receive the Per Share Closing
Payment and the Per Share Escrow Payments (each as defined in
the Merger Agreement));
WHEREAS, the undersigned understand and agree that, by
executing and delivering this Action by Written Consent of
Certain Stockholders, they will be deemed to have made certain
other consents and agreements as set forth in the Merger
Agreement, including without limitation, the approval and
designation of the Stockholder Representative as the
representative of the holders of Company Common Stock, Company
Stock Options, Company Restricted Shares, Company Performance
RSUs and Company RSUs, as contemplated by Section 3.08 of
the Merger Agreement; and
WHEREAS, the undersigned have reviewed the Merger
Agreement and such other information as they believed necessary
to make an informed decision concerning their vote on the
adoption of the Merger Agreement, and the undersigned have had
the opportunity to consult with their own legal, tax
and/or
financial advisor(s) regarding the consequences to them of the
Merger, the Merger Agreement and the execution of this Action by
Written Consent of Certain Stockholders.
NOW, THEREFORE, BE IT RESOLVED, that the Merger Agreement
and the transactions and agreements contemplated thereby,
including the Merger, be, and the same hereby are, adopted and
approved in all respects.
Other
Matters
WHEREAS, one or more of the undersigned are parties to
that Shareholders Agreement, dated as of March 5, 2003, by
and among the Company, MatlinPatterson Global Opportunities
Partners L.P., a Delaware limited partnership, Northeast
Investors Trust, a Massachusetts business trust, One Group
Income Bond Fund, a Massachusetts mutual fund, One Group High
Yield Bond Fund, a Massachusetts mutual fund, Southern Ute
Growth Fund, an Indian Tribal Fund, Southern Ute Permanent Fund,
an Indian Tribal Fund, Atlantic Global Funding Ltd., a Cayman
Islands company, CHYPS
1997-1 Ltd.,
a Cayman Islands company, CHYPS
1999-1 Ltd.,
a Cayman Islands company, James G. Boyd, and Jerry Zucker (as
amended, the “2003 Shareholders
Agreement”); and
WHEREAS, the Board has approved the termination of the
2003 Shareholders Agreement, subject to the satisfaction or
waiver of all conditions to the Merger set forth in
Article VIII of the Merger Agreement, such termination to
be effective immediately prior to the Effective Time.
NOW, THEREFORE, BE IT RESOLVED, that, subject to the
satisfaction or waiver of all conditions to the Merger set forth
in Article VIII of the Merger Agreement, the undersigned
hereby approve and agree to the termination of the
2003 Shareholders Agreement effective immediately prior to
the Effective Time.
FURTHER, the undersigned hereby agree (on their own
behalf and on behalf of their
successors-in-interest,
transferees or assignees) to forego participation as a plaintiff
or member of a plaintiff class in any action (including any
class action) with respect to any claim, direct, derivative or
otherwise, based on their status as stockholders of the Company
relating to the negotiation, execution or delivery of this
Written Consent or the Merger Agreement or the consummation of
(but not the failure to consummate) the Merger and the other
transactions contemplated by the Merger Agreement, and to take
all necessary steps to affirmatively waive and release any right
or claim of recovery or recovery in any settlement or judgment
related to any such action reasonably requested by the Parent in
writing; provided, however, that the Stockholder
Representative shall not be required to forego participation as
a plaintiff in its role as the Stockholder Representative for
any breach of the Merger Agreement or the Escrow Agreement. For
the avoidance of doubt, none of the undersigned waive, release
or discharge any claims relating to the right to receive the Per
Share Closing Payment or the Per Share Escrow Payments under the
Merger Agreement or the Escrow Agreement.
THIS ESCROW AGREEMENT (as the same may be amended or
modified from time to time pursuant hereto, the
“Agreement”) entered into as of [•], 2010,
by and among Scorpio Acquisition Corporation, a Delaware
corporation (“Parent”), Polymer Group, Inc., a
Delaware corporation (the “Company”),
MatlinPatterson Global Opportunities Partners L.P., a Delaware
limited partnership, as the representative of the Stockholders
(the “Stockholder Representative”)
(collectively, the “Parties”), and JPMorgan
Chase Bank, National Association, as escrow agent (the
“Escrow Agent”).
WHEREAS, pursuant to the Agreement and Plan of Merger dated as
of October 4, 2010 among the Company, Parent, Scorpio
Merger Sub Corporation, a Delaware corporation (“Merger
Subsidiary”) and the Stockholder Representative (the
“Merger Agreement”), Merger Subsidiary shall
merge with and into the Company (the “Merger”)
and the Company shall be the surviving corporation;
WHEREAS, the Merger Agreement contemplates the due execution of
this Agreement prior to the Effective Time (as defined in the
Merger Agreement);
WHEREAS, at or prior to the Effective Time, Parent shall
deposit, or cause to be deposited with the Escrow Agent, for the
benefit of the Stockholders and the Company, an amount of cash
equal to $64,500,000 (the “Escrow Amount”),
subject to reduction pursuant to Section 3.07(l) of the
Merger Agreement, into an escrow account (the “Escrow
Account”);
WHEREAS, pursuant to the Merger Agreement, the Parties desire
that the Escrow Amount be held and distributed in accordance
with the provisions of the Merger Agreement by the Escrow Agent
pursuant to the terms of this Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent
hereunder on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the Parties hereby agree as follows:
1. Defined Terms. Unless otherwise
indicated, all initially capitalized terms used herein shall
have the respective meanings attributed to them in the Merger
Agreement.
2. Appointment. The Parties hereby
appoint the Escrow Agent as their escrow agent for the purposes
set forth herein, and the Escrow Agent hereby accepts such
appointment under the terms and conditions set forth herein.
3. Establishment of Escrow.
(a) Pursuant to the Merger Agreement, at or prior to the
Effective Time, Parent shall notify the Escrow Agent and shall
deposit, or cause to be deposited with the Escrow Agent, for the
benefit of the Stockholders and the Company, the Escrow Amount.
The Escrow Amount (together with any Earnings (as defined below)
accrued thereon, the “Escrowed Funds”) shall be
held, invested and distributed pursuant to the terms and
conditions of this Agreement.
(b) Except as Parent, the Company and the Stockholder
Representative may otherwise agree to in writing, no part of the
Escrowed Funds may be withdrawn from the Escrow Account except
as expressly provided in this Agreement and pursuant to the
Merger Agreement. The Escrow Agent agrees to hold and distribute
the Escrowed Funds only in accordance with the terms and
conditions of this Agreement.
4. Investment of Escrow Amount. The
Escrow Amount, and any interest, dividends, earnings or other
income received by the Escrow Agent on such investment and
reinvestment of the Escrow Amount (“Earnings”),
shall be invested and reinvested in such of the following
investments (the “Permitted
Investments”) as specified in a written notice from
the Stockholder Representative and delivered from time to time
to the Escrow Agent:
(a) direct obligations of the United States or any agency
thereof or obligations guaranteed by the United States or any
agency thereof;
(b) commercial paper with a rating of at least
A-1 by
Standard & Poor’s Corporation or
P-1 by
Moody’s Investors Services, Inc. that is scheduled to
mature not more than ninety (90) days after the date of
issue and is issued by a corporation organized under the laws of
the United States or any state thereof; and
(c) JPMorgan Chase Bank, N.A. money market deposit
accounts, which have rates of compensation that may vary from
time to time based upon market conditions.
(d) money market funds including without limitation a
JPMorgan Money Market Mutual Fund that invest only in securities
described above in clauses (a) through (c) (collectively,
“MMMF”), selected by [•] and as set forth in a
written instruction, and as shall be available to the Escrow
Agent, based upon [•] independent review of prospectuses
previously delivered to [•]. The Parties acknowledge that
an affiliate of Escrow Agent, JPMorgan Asset Management
(“JPMAM”), serves as investment manager for the
selected MMMF and receives fees from the invested funds for
services rendered separate from the fees for services rendered
by Escrow Agent as further provided within this Agreement.
On the date hereof and until further notice from the Stockholder
Representative in accordance with this Section 4, the
Escrow Amount shall be invested and reinvested by the Escrow
Agent in [•].
The Escrow Agent shall have no obligation to invest or reinvest
the Escrowed Funds that are deposited with the Escrow Agent
after 12:00 p.m. (Eastern Time) on such day of deposit.
Instructions received after 10:00 a.m. (Eastern Time) will
be treated as if received on the following Business Day.
“Business Day” shall mean any day other than a
Saturday, Sunday or any other day on which the Escrow Agent
located at the notice address set forth in Section 17 is
authorized or required by law or executive order to remain
closed.
The Escrow Agent shall have the power to sell or liquidate
investments in the Escrow Account whenever the Escrow Agent
shall be required to release or distribute the Escrowed Funds
pursuant to the terms hereof. The Escrow Agent shall have no
liability for any investment losses resulting from the
investment, reinvestment or liquidation of the Escrowed Funds
prior to its maturity or for the failure of the Parties to give
the Escrow Agent instructions to invest or reinvest the Escrowed
Funds, except as a result of the Escrow Agent’s gross
negligence or willful misconduct. Subject to Section 6, any
Earnings shall continue to be held in the Escrow Account and
shall increase the amount of Escrow Amount. Written investment
instructions, if any, shall specify the type and identity of the
investments to be purchased
and/or sold.
The Escrow Agent is hereby authorized to execute purchases and
sales of investments through the facilities of its own trading
or capital markets operations or those of any affiliated entity.
The Escrow Agent or any of its affiliates may receive
compensation with respect to any investment directed hereunder
including without limitation charging an agency fee in
connection with each transaction. The Stockholder Representative
and the Company recognize and agree that the Escrow Agent will
not provide supervision, recommendations or advice relating to
either the investment of moneys held in the Escrowed Funds or
the purchase, sale, retention or other disposition of any
investment described herein.
5. Disbursements from the Escrow Account.
(a) The Company shall notify the Escrow Agent in writing of
the occurrence of the Closing within fifteen (15) days
following the Closing and shall concurrently deliver such notice
to the Stockholder Representative.
(b) The Escrow Agent shall disburse all or any portion of
the Escrow Account pursuant to and in accordance with either
(i) the joint written instructions of the Parties; or
(ii) the instructions set forth in any written letter of
direction, substantially in the form of Exhibit A hereto
(the “Letter of Direction”), executed by the
Company and the Stockholder Representative. The Company and the
Stockholder Representative shall execute the Letter of Direction
pursuant to Section 3.07 of the Merger Agreement
with respect to disbursements (including reimbursements of the
Stockholder Representative’s fees and expenses, to the
extent provided in the Merger Agreement) from the Escrow Account
in accordance with Section 3.07 of the Merger Agreement.
(c) Notwithstanding the foregoing, the first $500,000 to be
released by the Escrow Agent to the Paying Agent for
distribution to the Stockholders in accordance with paragraph
(b) above shall, pursuant to instructions provided by the
Parties in one or more Letters of Direction, be retained by the
Escrow Agent in the Escrow Account. The Escrow Agent shall
disburse all or any portion of such amount pursuant to and in
accordance with the instructions set forth in any certificate,
substantially in the form of Exhibit B hereto (the
“Stockholder Representative Certificate”),
executed by the Stockholder Representative (such funds to be
provided for the reimbursement of fees and expenses of the
Stockholder Representative or to be distributed to the
Stockholders, in each case pursuant to Section 3.08(g) of
the Merger Agreement). The Escrow Agent shall act solely upon
the instructions that it receives in accordance with this
Section and shall not be responsible for determining whether the
instructions are in accordance with the Merger Agreement. The
obligations contained in this Section 5 shall survive the
termination of this Agreement and the resignation, replacement
or removal of the Escrow Agent.
6. Fees of Escrow Agent. The fees and
costs, including reasonable attorneys’ fees, of the Escrow
Agent in performing its duties hereunder along with any fees or
charges for accounts, including those levied by any governmental
authority which the Escrow Agent may impose, charge or
pass-through, which unless otherwise agreed in writing shall be
as described in Schedule I attached hereto, shall be
paid to the Escrow Agent first from any Earnings on the Escrow
Amount remaining in the Escrow Account from time to time and if
such Earnings shall at any time be insufficient, (i) each
of the Company and the Stockholder Representative shall be
responsible to pay or cause to be paid 50% of the remaining
portion of such fees and costs and (ii) if any such Party
shall pay more than its share of such fees, such Party shall
have a right of contribution from the other with respect to such
fees paid by that Party. The obligations contained in this
Section 6 shall survive the termination of this Agreement
and the resignation, replacement or removal of the Escrow Agent.
7. Confidentiality. The Escrow Agent may
be provided reasonable access to information regarding the
Merger for the sole purpose of performing its duties hereunder;
provided that the Escrow Agent shall treat confidentially
all non-public information (“Confidential
Information”), and shall restrict access to the
Confidential Information to those of the Escrow Agent’s
officers, directors, employees, agents, regulators (including
the officers, directors, employees, agents and regulators of
JPMorgan Chase Bank, NA’s corporate parent and those of
such parent’s direct or indirect subsidiaries), and
non-employee consultants or advisors, in each case, with a
“need to know” for the purposes of administering this
Agreement. “Confidential Information” shall not
include any information that:
(a) becomes generally available to the public other than as
a result of a disclosure by the receiving party in violation of
an obligation of confidentiality;
(b) was lawfully available to the Escrow Agent on a
non-confidential basis prior to the disclosure; or
(c) becomes lawfully available to the Escrow Agent on a
non-confidential basis from a source other than the Parties or
their agents, advisors, or representatives which such source is
entitled, to the best of the Escrow Agent’s knowledge, to
make the disclosure.
Notwithstanding the foregoing, if the Escrow Agent is requested
or required (by oral questions, interrogatories, requests for
information or documents, any law, regulation, governmental
order or judicial order, subpoena, civil investigative demand or
similar process) to disclose any Confidential Information, the
Parties acknowledge and agree that, if lawful and not
prejudicial to any legal privilege which may be applicable, the
Escrow Agent shall provide the Parties or Party, as applicable,
with prompt notice of such request(s) or obligations in
accordance with Section 17, so that such Parties may seek
an appropriate protective order
and/or waive
the Escrow Agent’s compliance with the provisions of this
Section 7. If, failing the entry of a protective order or
the receipt of a waiver hereunder, the Escrow Agent is, in the
opinion of the Escrow Agent’s counsel, compelled or
appropriately requested to disclose Confidential Information
under pain of liability for contempt
or other censure, penalty, or adverse consequences the Escrow
Agent may disclose such information without liability hereunder.
8. Responsibilities and Liabilities of the Escrow
Agent.
(a) The Escrow Agent shall administer the Escrowed Funds
only in accordance with this Agreement and to the extent
referred to herein. The Escrow Agent shall have only those
duties as are specifically and expressly provided herein, which
shall be deemed purely ministerial in nature and no other duties
shall be implied. The Escrow Agent assumes no liabilities except
those expressed in this Agreement and shall have no
responsibility or liability to any person with respect to any
action taken, suffered or omitted to be taken by it in good
faith under this Agreement, or for any mistake of fact or law,
or for anything that it may do or refrain from doing in
connection herewith, except to the extent that a final
adjudication of a court of competent jurisdiction determines
that the Escrow Agent’s gross negligence or willful
misconduct was the primary cause of any loss to any Party. The
Escrow Agent shall neither be responsible for, nor chargeable
with, knowledge of, nor have any requirements to comply with,
the terms and conditions of any other agreement, instrument or
document between or among the Parties, in connection herewith,
if any, including without limitation the Merger Agreement (each,
an “Underlying Agreement”), nor shall the Escrow Agent
be required to determine if any person or entity has complied
with any Underlying Agreement, nor shall any additional
obligations of the Escrow Agent be inferred from the terms of
any Underlying Agreements, even though reference thereto may be
made in this Agreement. In the event of any conflict, solely
with respect to the rights or obligations of the Escrow Agent,
between the terms and provisions of this Agreement and those of
any Underlying Agreement, the terms and conditions of this
Agreement shall control. The Escrow Agent may rely upon and
shall not be liable for acting or refraining from acting upon
any written notice, document, instruction or request furnished
to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper Party or Parties without
inquiry and without requiring substantiating evidence of any
kind. The Escrow Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such
document, notice, instruction or request. The Escrow Agent shall
not be liable to any Party, any beneficiary or other person for
refraining from acting upon any instruction setting forth,
claiming, containing, objecting to, or related to the transfer
or distribution of the Escrowed Funds, or any portion thereof,
unless such instruction shall have been delivered to the Escrow
Agent in accordance with Section 24 below and the Escrow
Agent has been able to satisfy any applicable security
procedures as may be required thereunder. The Escrow Agent shall
be under no duty to inquire into or investigate the validity,
accuracy or content of any such document, notice, instruction or
request. The Escrow Agent shall have no duty to solicit any
payments which may be due it or the Escrow Account, nor shall
the Escrow Agent have any duty or obligation to confirm or
verify the accuracy or correctness of any amounts deposited with
it hereunder.
(b) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable
for special, incidental, punitive, indirect or consequential
loss or damages of any kind (including but not limited to lost
profits), even if the Escrow Agent has been advised of the
likelihood for such loss or damage and regardless of the form of
action.
(c) The Escrow Agent shall be protected in acting upon any
notice, request, certificate, approval, consent, or other
document delivery of which complies with Section 17
and/or
Section 24, as applicable, and that the Escrow Agent
reasonably believes to be genuine and to be signed by the proper
Party or Parties. The Escrow Agent may execute any of its powers
and perform any of its duties hereunder directly or through
affiliates or agents. The Escrow Agent may act in reliance upon
the advice of counsel satisfactory to it in reference to any
matter in connection with this Agreement and shall not incur any
liability for any action taken in good faith in accordance with
such advice. In the event that the Escrow Agent shall be
uncertain or believe there is some ambiguity as to its duties or
rights hereunder or shall receive instructions, claims or
demands from any Party hereto which, in its opinion, conflict
with any of the provisions of this Agreement, it shall be
entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow
until it shall be given a direction in writing by the Company
and the Stockholder Representative which eliminates such
ambiguity or uncertainty to
the satisfaction of Escrow Agent or by a final and
non-appealable order or judgment of a court of competent
jurisdiction.
(d) The Escrow Agent or any Successor Escrow Agent (as
defined in Section 12) hereunder may resign hereunder
(i) at any time, with the consent of the Stockholder
Representative and the Company and the appointment of a
substitute Escrow Agent by the Stockholder Representative and
the Company; (ii) upon the petitioning of a court of
competent jurisdiction seeking the appointment of a substitute
Escrow Agent and the appointment by such court of a substitute
Escrow Agent; or (iii) upon 30 days’ written
notice to the Stockholder Representative and the Company and
such resignation shall be effective from the date specified in
such notice. If the Parties have failed to appoint a successor
escrow agent prior to the expiration of thirty (30) days
following receipt of the notice of resignation, the Escrow Agent
may petition any court of competent jurisdiction for the
appointment of a successor escrow agent or for other appropriate
relief, and any such resulting appointment shall be binding upon
all of the Parties hereto. The Escrow Agent’s sole
responsibility after such thirty (30) day notice period
expires shall be to hold the Escrowed Funds (without any
obligation to reinvest the same) and to deliver the same to a
designated substitute escrow agent, if any, or in accordance
with the directions of a final order or judgment of a court of
competent jurisdiction, at which time of delivery Escrow
Agent’s obligations hereunder shall cease and terminate,
subject to the provisions of Sections 6, 7 and 9 hereunder.
After receipt of notice of the Escrow Agent’s intent to
resign, the Stockholder Representative and the Company will work
in good faith to select a substitute Escrow Agent. In case the
office of the Escrow Agent shall become vacant for any reason,
the Stockholder Representative and the Company shall appoint a
bank or trust company with an office in New York City having a
net worth (as reflected in its latest publicly available
certified financial statements) in excess of $1,000,000,000 as
the successor Escrow Agent hereunder by an instrument or
instruments in writing delivered by the Stockholder
Representative and the Company to such successor Escrow Agent,
whereupon such successor Escrow Agent shall succeed to all
rights and obligations of the retiring Escrow Agent as if this
Agreement were originally executed by such successor Escrow
Agent, and the retiring Escrow Agent shall deliver to such
successor Escrow Agent all amounts in the Escrow Account.
(e) Any corporation into which the Escrow Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent shall be a party, or any
corporation to which substantially all the escrow business of
the Escrow Agent may be transferred, shall be the Escrow Agent
under this Escrow Agreement without further act.
(f) Subject to Section 6 and Section 14 hereof,
the Escrow Agent shall not have any interest in the Escrow
Account, but shall serve as escrow holder only and have
possession thereof. Any distribution or payment of Earnings from
the Escrow Account shall be subject to withholding regulations
then in force with respect to United States Taxes and as set
forth in Section 15 below.
(g) The Escrow Agent shall acknowledge receipt of the
Escrow Amount and shall hold the Escrow Amount pursuant to the
terms and conditions of this Agreement.
9. Indemnification. The Escrow Agent and
its affiliates and their respective successors, assigns, agents,
and employees (the “indemnitees”) shall be
indemnified by each of the Parties in proportion to such
Party’s respective responsibility, if any, from and against
any and all damages, claims, liabilities, penalties, judgments,
settlements, actions, suits, proceedings, litigation,
investigations and reasonable costs and expenses (including,
without limitation, the reasonable fees and expenses of in house
or outside counsel and experts and their staffs and all expense
of document location, duplication and shipment) (collectively
“Losses”) arising out of or in connection with
(a) the Escrow Agent’s execution and performance of
this Agreement, tax reporting or withholding, the enforcement of
any rights or remedies under or in connection with this
Agreement, or as may arise by reason of any act, omission or
error of the indemnitee, except in the case of any indemnitee to
the extent that such Losses have been primarily caused by the
gross negligence or willful misconduct of such indemnitee, or
(b) its following any instructions or other directions,
whether joint or singular, from the Company and the Stockholder
Representative, except to the extent that its following any such
instruction or
direction is expressly forbidden by the terms hereof. The
Parties hereto acknowledge that the foregoing indemnitees shall
survive the resignation, replacement or removal of the Escrow
Agent or the termination of this Agreement.
10. Termination Date. This Agreement
shall terminate on the earlier to occur of (i) the date on
which all of the Escrowed Funds are disbursed or released in
accordance with the provisions of this Agreement and
(ii) the Escrow Agent’s receipt of a notice signed by
the Stockholder Representative and the Company notifying that
this Escrow Agreement has been terminated and instructing the
Escrow Agent to distribute the Escrowed Funds to a Party using
the wire transfer instructions provided therein.
11. Interpleader. In the event that the
Escrow Agent shall at any time be confronted with inconsistent
claims or demands by the Parties hereto, the Escrow Agent shall
have the right to interplead said Parties in any court of
competent jurisdiction and request that such court determine
such respective rights of the Parties with respect to this
Agreement, and upon doing so, the Escrow Agent automatically
shall be released from any obligations or liability as a
consequence of any such claims or demands, except that the
Escrow Agent shall not be released from any liability for its
gross negligence or willful misconduct occurring during the time
that it served as Escrow Agent.
12. Removal of the Escrow Agent. The
Stockholder Representative and the Company, acting together,
shall have the right to remove the Escrow Agent hereunder by
giving thirty (30) days advance notice in writing to the
Escrow Agent, specifying the date upon which such removal shall
take effect. In the event of such removal, the Stockholder
Representative and the Company agree that, prior to the
effective date of removal of the Escrow Agent, they will jointly
appoint a successor to the Escrow Agent (the “Successor
Escrow Agent”), and the Escrow Agent hereby agrees
that, upon receiving such joint instructions, it shall turn over
and deliver to such Successor Escrow Agent the Escrowed Funds in
accordance with the terms of such joint instructions and render
the accounting required by Section 14.
13. Successor Escrow Agent. Upon receipt
of the Escrowed Funds, the Successor Escrow Agent shall
thereupon be bound by all of the provisions hereof, and the term
“Escrow Agent” as used herein shall mean the
Successor Escrow Agent.
14. Accounting. In the event of the
resignation or removal of the Escrow Agent, upon the termination
of this Agreement or upon demand under reasonable circumstances,
the Escrow Agent shall render to the Stockholder Representative,
the Company and the substitute Escrow Agent or Successor Escrow
Agent(s), if any, an account in writing of the property
constituting the Escrowed Funds and all disbursements therefrom
unless waived in writing by the Stockholder Representative and
the Company. (i) Each of the Company and the Stockholder
Representative shall be responsible for 50% of all reasonable
fees and expenses of the Escrow Agent for the preparation of
such accounting, including the reasonable fees and disbursements
of counsel and (ii) if any such Party shall pay more than
its share of such fees and expenses, such Party shall have a
right of contribution from the other with respect to such fees
and expenses paid by that Party. This Section shall be subject
to Sections 6 and 9 of this Agreement and shall in no way
limit any rights granted to the Escrow Agent in Sections 6
and 9 herein.
15. Tax Matters. The Company and the
Stockholder Representative have provided the Escrow Agent with
the respective fully executed Internal Revenue Service
(“IRS”)
Form W-8,
or W-9
and/or other
required documentation. The Parties agree that, solely for Tax
reporting purposes, all Earnings and fees payable out of such
Earnings pursuant to this Agreement shall be allocable to the
Company, and the Escrow Agent shall report such Earnings
consistently therewith to the IRS on IRS form 1099 or 1042S
(or other appropriate form) and to any other Taxing authority
(on the applicable form or forms), and, except as required by
applicable law, the Escrow Agent and the Parties shall not take
any position inconsistent therewith on any Tax Return or in any
administrative or judicial proceeding. The Escrow Agent shall
disburse to the Company, from time to time, pursuant to written
instructions from the Parties, reasonably in advance of the date
on which the Company is required to pay Taxes with respect to
any period for which the Company is allocated Earnings, as a tax
distribution, funds in an amount equal to 40% of the amount
equal to (i) such Earnings allocated to the Company for
such period less (ii) any deductible fees allocated to the
Company pursuant to this Agreement for such period (which amount
of fees in this (ii) shall be determined under accrual
principles). The Company
and the Stockholder Representative shall provide Escrow Agent at
the time of any disbursement, a schedule indicating the
allocation of such disbursement from the Escrowed Funds between
(a) principal and (b) income to be reported on IRS
form 1099 or 1042S (or other appropriate form). The Parties
acknowledge and agree that Escrow Agent shall have no
responsibility for the preparation
and/or
filing of any Tax Return other than those Tax Returns referred
to in the second and last sentences of this Section 15. The
Escrow Agent shall withhold any Taxes required to be withheld by
applicable law (other than any applicable Foreign Investment in
Real Property Tax Act (“FIRPTA”) withholding),
and shall timely remit such Taxes, together with any applicable
forms (other than FIRPTA reporting forms), to the appropriate
authorities.
16. Amendments. This Agreement may only
be amended by the mutual written agreement of Parent, the
Stockholder Representative, the Company and the Escrow Agent.
17. Notices. All notices, consents,
waivers and other communications required or permitted by this
Agreement shall be in writing and except for communications from
the Parties setting forth, claiming, containing, objecting to,
or in any way related to the transfer or distribution of funds,
including but not limited to funds transfer instructions (all of
which shall be specifically governed by Section 24 below),
shall be deemed to be duly given after it has been received
(a) by facsimile; (b) by overnight courier; or
(c) by prepaid registered mail, return receipt and
requested, in each case, to the appropriate notice address set
forth below or at such other address as any party hereto may
have furnished to the other parties in writing by registered
mail, return receipt requested.
If to the Stockholder Representative:
MatlinPatterson Global Opportunities Partners L.P.
Notwithstanding the above, in the case of communications
delivered to the Escrow Agent, such communications shall be
deemed to have been given on the date received by an officer of
the Escrow Agent or any employee of the Escrow Agent who reports
directly to any such officer at the above-referenced office. In
the event that the Escrow Agent, in its sole discretion, shall
determine that an emergency exists, the Escrow Agent may use
such other means of communication as the Escrow Agent deems
appropriate.
18. Governing Law; Jurisdiction. This
Agreement, and all claims or causes of action (whether in
contract or tort) that may be based upon or arise out of this
Agreement or the negotiation, execution or performance of this
Agreement (including any claim or cause of action based upon,
arising out of or related to any representation or warranty made
in or in connection with this Agreement), shall be governed by,
and construed in accordance with, the laws of the State of New
York. The Parties hereby waive any right to a trial by jury with
respect to any lawsuit or judicial proceeding arising or
relating to this Agreement. Each Party and the Escrow Agent
irrevocably waive any objection on the grounds of venue, forum
non-conveniens or any similar grounds and irrevocably consents
to service of process by mail or in any other manner permitted
by applicable law and consents to the jurisdiction of the courts
located in the State of New York. To the extent that in any
jurisdiction either Party may now or hereafter be entitled to
claim for itself or its assets, immunity from suit, execution,
attachment (before or after judgment), or other legal process,
such Party shall not claim, and it hereby irrevocably waives,
such immunity. No Party to this Agreement is liable to any other
Party for losses due to, or if it is unable to perform its
obligations under the terms of this Escrow Agreement because of,
acts of God, fire, war, terrorism, floods, strikes, electrical
outages, equipment or transmission failure, or other causes
reasonably beyond its control.
19. Counterparts. This Agreement may be
executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and
the same agreement.
20. Entire Agreement; Waiver. This
Agreement represents the entire understanding and agreement
between the Parties, on the one hand, and the Escrow Agent, on
the other hand, with respect to the subject matter hereof. This
Agreement and the Merger Agreement represent the entire
understanding and agreement between the Parties with respect to
the subject matter hereof and thereof. No action taken pursuant
to this Agreement, including any investigation by or on behalf
of any Party, shall be deemed to constitute a waiver by the
Party taking such action of compliance with any representation,
warranty, covenant or agreement contained
herein. The waiver by the Escrow Agent or any Party hereto of a
breach of any provision of this Agreement shall not operate or
be construed as a further or continuing waiver of such breach or
as a waiver of any other or subsequent breach. No failure on the
part of the Escrow Agent or any Party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of such right, power or remedy by the Escrow Agent or
such Party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
21. Severability. If any provision of
this Agreement shall be deemed invalid or unenforceable by a
court of competent jurisdiction, then this Agreement shall be
construed with the invalid or inoperative provisions deleted and
the rights and obligations of the parties shall be construed and
enforced accordingly. Any provision deemed invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
22. Captions. The captions contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
23. Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
This Agreement may not be assigned by any party hereto (except
as described in the next sentence) without the prior written
consent of the other parties. Nothing in this Agreement shall
create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement.
24. Security
Procedures. (a) Notwithstanding anything to
the contrary as set forth in Section 17, any instructions
setting forth, claiming, containing, objecting to, or in any way
related to the transfer or distribution of funds, including but
not limited to any such funds transfer instructions that may
otherwise be set forth in a written instruction permitted
pursuant to Section 5 of this Agreement, may be given to
the Escrow Agent only by confirmed facsimile and no instruction
for or related to the transfer or distribution of the Escrowed
Funds, or any portion thereof, shall be deemed delivered and
effective unless the Escrow Agent actually shall have received
such instruction by facsimile at the number provided to the
Parties by the Escrow Agent in accordance with Section 17
and as further evidenced by a confirmed transmittal to that
number. In the event funds transfer instructions are given,
whether in writing or by facsimile, the Escrow Agent is
authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on
Schedule II hereto (“Schedule II”),
and the Escrow Agent may rely upon the confirmation of anyone
purporting to be the person or persons so designated. Each funds
transfer instruction shall be executed by an authorized
signatory, a list of such authorized signatories is set forth on
Schedule II. The persons and telephone numbers for
call-backs may be changed only in a writing actually received
and acknowledged by the Escrow Agent. If the Escrow Agent is
unable to contact any of the authorized representatives
identified on Schedule II, the Escrow Agent is hereby
authorized both to receive written instructions from and seek
confirmation of such instructions by telephone call-back to any
one or more of the Company or the Stockholder
Representative’s executive officers (the “Executive
Officers”), which shall include, in the case of
Stockholder Representative, those persons with the titles of
General Counsel or Chief Financial Officer and, in the case of
the Company, those persons with the titles of General Counsel or
Chief Financial Officer, in each case as the Escrow Agent may
select. Such Executive Officer shall deliver to the Escrow Agent
a fully executed incumbency certificate, and the Escrow Agent
may rely upon the confirmation of anyone purporting to be any
such officer. The Escrow Agent and the beneficiary’s bank
in any funds transfer may rely solely upon any account numbers
or similar identifying numbers provided by the Company or the
Stockholder Representative to identify (a) the beneficiary,
(b) the beneficiary’s bank, or (c) an
intermediary bank. The Escrow Agent may apply any of the
Escrowed Funds for any payment order it executes using any such
identifying number, even when its use may result in a person
other than the beneficiary being paid, or the transfer of funds
to a bank other than the beneficiary’s bank or an
intermediary bank designated. The Company and the Stockholder
Representative acknowledge that these security procedures are
commercially reasonable.
(b) The Company acknowledges that the Escrow Agent is
authorized to use the following funds transfer instructions to
disburse any funds due to the Company under this Agreement
without a verifying call-back as set forth in Section 24(a)
above:
Stockholder Representative acknowledges that the Escrow Agent is
authorized to use the following funds transfer instructions to
disburse any funds due to the Stockholder Representative under
this Agreement without a verifying call-back as set forth in
Section 24(a) above:
The Stockholder Representative’s Bank account information:
Bank name:
Bank Address:
ABA number:
Account name:
Account number:
The Parties acknowledge that the Escrow Agent is authorized to
use the following funds transfer instructions to disburse any
funds due to the Paying Agent under this Agreement without a
verifying call-back as set forth in Section 24(a) above:
The Paying Agent’s Bank account information:
Bank name:
Bank Address:
ABA number:
Account name:
Account number:
(c) In addition to the Paying Agent’s and their
respective funds transfer instructions as set forth in
Section 24(b) above, the Company or the Stockholder
Representative acknowledges that repetitive funds transfer
instructions may be given to the Escrow Agent for one or more
beneficiaries where only the date of the requested transfer, the
amount of funds to be transferred,
and/or the
description of the payment shall change within the repetitive
instructions (“Standing Settlement Instructions”).
Accordingly, the Company or the Stockholder Representative shall
deliver to Escrow Agent such specific Standing Settlement
Instructions only for each respective beneficiary as set forth
in Schedule II, by facsimile in accordance with
Section 24. The Escrow Agent may rely solely upon such
Standing Settlement Instructions and all identifying information
set forth therein for each beneficiary. The Escrow Agent and the
Company or the Stockholder Representative agree that such
Standing Settlement Instructions shall be effective as the funds
transfer instructions of the Company or the Stockholder
Representative, without requiring a verifying callback, whether
or not authorized, if such Standing Settlement Instructions are
consistent with previously authenticated Standing Settlement
Instructions for that beneficiary.
(d) The Parties acknowledge that the security procedures
set forth in this Section 24 are commercially reasonable.
25. Compliance with Court Orders. In the
event that any escrow property shall be attached, garnished or
levied upon by any court order, or the delivery thereof shall be
stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order
affecting the property deposited under this Agreement, the
Escrow Agent is hereby expressly authorized, in its sole
discretion, to obey and comply with all writs, orders or decrees
so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or
complies with any such writ, order or decree it shall not be
liable to any of the Parties hereto or to
any other person, entity, firm or corporation, by reason of such
compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.
26. Patriot Act
Disclosure. Section 326 of the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (“USA
PATRIOT Act”) requires the Escrow Agent to implement
reasonable procedures to verify the identity of any person that
opens a new account with it. Accordingly, the Company and
Stockholder Representative acknowledge that Section 326 of
the USA PATRIOT Act and the Escrow Agent’s identity
verification procedures require the Escrow Agent to obtain
information which may be used to confirm the Company and
Stockholder Representative identity including without limitation
name, address and organizational documents (“identifying
information”). The Company and the Stockholder
Representative agree to provide the Escrow Agent with and
consent to the Escrow Agent obtaining from third parties any
such identifying information required as a condition of opening
an account with or using any service provided by the Escrow
Agent.
Telephone call backs shall be made to the Parties if joint
instructions are required pursuant to the agreement. All funds
transfer instructions must include the signature of the
person(s) authorizing said funds transfer and must not be the
same person confirming said transfer.
Reference is made to the ESCROW AGREEMENT dated as [•],
2010 (the “Agreement”), by and among SCORPIO
ACQUISITION CORPORATION, a Delaware corporation, POLYMER GROUP,
INC., a Delaware corporation (the “Company”),
MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P., a Delaware
limited partnership, as the representative of the Stockholders
(as defined in the Merger Agreement) (the “Stockholder
Representative”), and JP MORGAN CHASE BANK, NATIONAL
ASSOCIATION, as escrow agent. Capitalized terms used but not
defined herein have the meanings set forth in the Agreement.
In accordance with Section 5(b) of the Agreement, the
Stockholder Representative and the Company hereby certify that
distributions are to be made to the [Company] [Stockholder
Representative] in accordance with Section 5(b) of the
Agreement in an amount equal to $[•]. Please remit the
amount described in the preceding sentence in accordance with
Section 5(b) of the Agreement to the account identified in
writing by the [Company] [Stockholder Representative].
Very truly yours,
POLYMER GROUP, INC.,
By
Name:
Title:
MATLINPATTERSON GLOBAL
OPPORTUNITIES PARTNERS L.P., as Stockholder Representative
Form of
Stockholder Representative Certificate pursuant to
Section 5(c)
[Date]
To:
JPMorgan Chase Bank, N.A.
4 New York Plaza, 21st Floor New York, NY10004
Attention: [•]
Ladies and Gentlemen:
Reference is made to the ESCROW AGREEMENT dated as [•],
2010 (the “Agreement”), by and among SCORPIO
ACQUISITION CORPORATION, a Delaware corporation, POLYMER GROUP,
INC., a Delaware corporation, MATLINPATTERSON GLOBAL
OPPORTUNITIES PARTNERS L.P., a Delaware limited partnership, as
the representative of the Stockholders (as defined in the Merger
Agreement) (the “Stockholder Representative”),
and JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, as escrow agent.
Capitalized terms used but not defined herein have the meanings
set forth in the Agreement.
In accordance with Section 5(c) of the Agreement, the
Stockholder Representative hereby certifies that distributions
are to be made to the Stockholder Representative in accordance
with Section 5(c) of the Agreement in an amount equal to
$[•]. Please remit the amount described in the preceding
sentence in accordance with Section 5(c) of the Agreement
to the account identified in writing by the Stockholder
Representative.
Very truly yours,
MATLINPATTERSON GLOBAL
OPPORTUNITIES PARTNERS L.P., as Stockholder Representative
JPMorgan Chase Bank, N.A.
4 New York Plaza, 21st Floor New York, NY10004
Attention: [•]
Ladies and Gentlemen:
Reference is made to the ESCROW AGREEMENT dated as [•],
2010 (the “Agreement”), by and among SCORPIO
ACQUISITION CORPORATION, a Delaware corporation, POLYMER GROUP,
INC., a Delaware corporation (the “Company”),
MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS L.P., a Delaware
limited partnership, as the representative of the Stockholders
(as defined in the Merger Agreement) (the “Stockholder
Representative”), and JP MORGAN CHASE BANK, NATIONAL
ASSOCIATION, as escrow agent. Capitalized terms used but not
defined herein have the meanings set forth in the Agreement.
In accordance with the [Form of Letter of Direction] [Form of
Stockholder Representative Certificate] provided by [the Company
and the Stockholder Representative] [the Stockholder
Representative] pursuant to Section [5(b)][5(c)] of the
Agreement, please remit to the account set forth below, the
amounts authorized in the [Form of Letter of Direction] [Form of
Stockholder Representative Certificate].
Section 262
of the Delaware General Corporation Law
ANNEX B
§ 262. Appraisal rights
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholder’s shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
“stockholder” means a holder of record of stock in a
corporation; the words “stock” and “share”
mean and include what is ordinarily meant by those words; and
the words “depository receipt” mean a receipt or other
instrument issued by a depository representing an interest in 1
or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 255, § 256,
§ 257, § 258, § 263 or
§ 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (b)(1) of this section,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 255, 256, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing paragraphs
(b)(2)a., b. and c. of this section.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 or
§ 267 of this title is not owned by the parent
immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale
of all or substantially all of the assets of the corporation. If
the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting (or such members who received
notice in accordance with § 255(c) of this title) with
respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice a
copy of this section and, if 1 of the constituent corporations
is a nonstock corporation, a copy of § 114 of this
title. Each stockholder electing to demand the appraisal of such
stockholder’s shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder’s shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder’s shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228, § 253, or § 267 of this
title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall
notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section and, if 1 of
the constituent corporations is a nonstock corporation, a copy
of § 114 of this title. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder’s
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holder’s shares. If such notice did not notify stockholders
of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such
second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder’s shares in
accordance with this subsection. An affidavit of the secretary
or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholder’s demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder’s
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such person’s own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and
who has submitted such stockholder’s certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court’s decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney’s fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholder’s demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholder’s demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
Members of the Board of Directors and of the Special Committee:
Polymer Group, Inc., a Delaware corporation (“PGI”),
Scorpio Acquisition Corporation, a Delaware corporation
(“Parent”), Scorpio Merger Sub Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent
(“Merger Sub”), and MatlinPatterson Global
Opportunities Partners L.P., a Delaware limited partnership, as
the Stockholder Representative, are entering into an Agreement
and Plan of Merger (the “Merger Agreement”) pursuant
to which Merger Sub will merge with and into PGI (the
“Merger”). Parent and Merger Sub are affiliates of
Blackstone Capital Partners V L.P. (“BCP”). The
proposed merger consideration is an aggregate amount in cash
equal to $18.16 per share (the “Consideration”), of
which $2.91 per share will be deposited in escrow for payment of
liabilities, costs and expenses related to the PHC Liability (as
defined in the Merger Agreement) with the remainder, if any, to
be distributed as provided in the Merger Agreement and in the
Escrow Agreement (as defined in the Merger Agreement) plus the
Additional Per Share Consideration (as defined below), if any,
without interest. If the Merger closes after December 31,2010, the holders of PGI stock will receive additional per share
consideration (“Additional Per Share Consideration”)
equal to the number of days during the period beginning on
January 1, 2011 and ending on the calendar day prior to
closing the Merger multiplied by $53,571.43 and divided by the
total share number outstanding as of the effective time of the
Merger, calculated on a fully diluted basis. We did not account
for Additional Per Share Consideration, the effects of the PHC
Liability or any disbursements made from the portion of the
Consideration held in escrow in our analyses or opinion because
of their conditional natures. You have asked our opinion, as of
the date hereof, whether the Consideration to be paid to the
shareholders of PGI pursuant to the Merger is fair, from a
financial point of view, to the shareholders of PGI other than
MatlinPatterson Global Opportunities Partners, L.P. (the
“Minority Shareholders”).
Janney Montgomery Scott LLC, as part of its investment banking
business, is engaged in the valuation of companies and their
securities in connection with mergers and acquisitions. We have
acted as financial advisor to the Special Committee in
connection with the Merger on a monthly retainer basis for our
services. We will also receive a fee for rendering this opinion
(which fee is not contingent on the successful completion of the
Merger). We will not receive any other significant payment or
compensation contingent upon the successful completion of the
Merger. PGI has agreed to reimburse our reasonable expenses and
to indemnify us for certain liabilities arising out of rendering
this opinion. In addition, in the ordinary course of our
business as a
broker-dealer,
we may, from time to time, have a long or short position in, and
buy or sell, debt or equity securities of PGI for our own
account or for the accounts of our customers.
Our opinion does not address the relative merits of the Merger
as compared to other business strategies or transactions that
might be available to PGI’ or PGFs underlying business
decision to effect the Merger. Our opinion does not constitute a
recommendation to any shareholder as to how such shareholder
should vote or act with respect to the Merger. At your
direction, we have not been asked to, nor do we, offer any
opinion as to the terms, other than the Consideration to the
extent expressly specified herein, of the Merger Agreement or
the form of the Merger. In rendering this opinion, we have
assumed, with your consent, that (i) the final executed
form of the Merger Agreement will not differ in any material
respect from the draft dated September 23, 2010 (3:03 pm)
that we have reviewed, (ii) PGI, Parent and Merger Sub will
comply with all material terms of the Merger Agreement, and
(iii) the Merger will be consummated in accordance with the
terms of the Merger Agreement without any adverse waiver or
amendment of any material term or condition thereof. We have
also assumed that all governmental, regulatory or other
consents, including BCP internal consents and approvals
necessary for the consummation of the Merger, will be obtained
without any material adverse effect on PGI, Parent or Merger Sub
or the Merger.
In rendering our opinion, we have, among other things:
(a) reviewed the historical financial performance, current
financial position and general prospects of PGI;
(b) considered the proposed financial terms of the Merger;
(c) considered the results of efforts to solicit
indications of interest and definitive proposals from third
parties with respect to a possible acquisition of PGI;
(d) reviewed the historical market price ranges and trading
activity performance of the common stock of PGI;
(e) reviewed publicly-available information such as annual
reports, quarterly reports and SEC filings;
(f) to the extent deemed relevant, analyzed information of
certain other selected public companies and compared PGI from a
financial point of view to these other companies;
(g) to the extent deemed relevant, analyzed information of
certain other selected comparable merger and acquisition
transactions and compared the Merger from a financial point of
view to these other transactions to the extent information
concerning such transactions was publicly available;
(h) discussed with certain members of senior management of
PGI the strategic aspects of the Merger, including, but not
limited to, past and current business operations, financial
condition and prospects (including their views on the risks and
uncertainties of achieving PGI’s projections);
(i) reviewed a draft of the Merger Agreement dated
September 23, 2010 (3:03 pm)
(j) discussed with PGI and its advisors hypothetical
scenarios with respect to personal holding company tax
liabilities; and
(k) performed such other analyses and examinations as we
deemed necessary.
In performing our review, we have relied upon the accuracy and
completeness of all of the financial and other information that
was available to us from public sources, that was provided to us
by PGI or their
respective representatives or that was otherwise reviewed by us
and have assumed such accuracy and completeness for purposes of
rendering this opinion. We have further relied on the assurances
of management of PGI that they are not aware of any facts or
circumstances that would make any of such information inaccurate
or misleading. We have not been asked to and have not undertaken
any independent verification of any of such information and we
do not assume any responsibility or liability for the accuracy
or completeness thereof. We did not make an independent
evaluation or appraisal of the specific assets, the collateral
securing assets or the liabilities (contingent or otherwise) of
PGI or BCP or any of their affiliates or subsidiaries, or the
ability to collect any such assets, nor have we been furnished
with any such evaluations or appraisals. With respect to the
financial projections prepared by PGI’s management,
PGI’s management has confirmed that they reflect the best
currently available estimates and judgments of such management
of the future financial performance of PGI, and we have assumed
that such performance will be achieved for the periods
presented. We express no opinion as to such financial
projections or the assumptions on which they are based. We have
also assumed that there has been no change in PGI’s or
BCP’s assets, financial condition, results of operations,
business or prospects since the date of the most recent
financial statements made available to us. We have assumed in
all respects material to our analysis that PGI and Parent will
remain as going concerns for all periods relevant to our
analysis, that all of the representations and warranties
contained in the Merger Agreement and all related agreements are
true and correct, that each party to such agreements will
perform all of the covenants required to be performed by such
party under such agreements and that the conditions precedent to
the Merger Agreement are not waived. We express no opinion as to
the personal holding company tax liabilities of PGI.
Our conclusion is rendered on the basis of market, economic and
other conditions prevailing as of the date hereof and on the
conditions and prospects, financial and otherwise, of PGI, as
they exist and are known to us on the date hereof and we assume
no responsibility for updating, revising or reaffirming this
opinion based on circumstances, developments or events occurring
after the date hereof. Our opinion is directed to the Special
Committee of the Board of Directors of PGI and to the Board of
Directors of PGI, in each case in connection with its
consideration of the Merger, and does not constitute a
recommendation to any shareholder of PGI as to how such
shareholder should vote on the Merger. Our opinion is directed
only to the fairness, from a financial point of view, as of the
date hereof, of the Consideration to the Minority Shareholders
and does not address the fairness of the Merger to, or any
consideration received in connection therewith by, shareholders
other than the Minority Shareholders or the amount or nature of
any compensation to be paid or payable to any of the officers,
directors or employees of PGI, whether relative to the
Consideration or otherwise. We are not expressing any opinion as
to the impact of the Merger on the solvency or viability of PGI,
any of the other parties to the Merger Agreement or BCP or their
ability to pay their debts when they become due. Our opinion is
not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, proxy statement or in any
other document (other than (i) the Merger Agreement,
(ii) the preliminary information statement and definitive
information statement (and, in each case, any amendments or
supplements thereto) filed by PGI with the SEC in connection
with the Merger and (iii) any materials presented or
distributed to the Special Committee in connection with the
Merger), nor shall this opinion be used for any other purposes,
without our prior written consent (which consent shall not be
unreasonably withheld). We consent to providing a copy of this
opinion to the Board of Directors of PGI. This opinion has been
approved by our fairness opinion committee.
On the basis of and subject to the foregoing, we are of the
opinion that as of the date hereof, the Consideration to be paid
to the Minority Shareholders pursuant to the Merger Agreement is
fair, from a financial point of view, to the Minority
Shareholders.
Very truly yours,
JANNEY MONTGOMERY SCOTT LLC
C-4
Dates Referenced Herein and Documents Incorporated by Reference
