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AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 2, 1998
BY AND BETWEEN
ALBERTSON'S, INC.,
ABACUS HOLDINGS, INC.,
AND
AMERICAN STORES COMPANY
TABLE OF CONTENTS
ARTICLE I 2
Section 1.1 The Merger..............................................2
Section 1.2 The Closing; Effective Time.............................2
Section 1.3 Subsequent Actions......................................3
Section 1.4 Certificate of Incorporation; Bylaws; Directors
and Officers of the Surviving Corporation...............3
ARTICLE II 4
Section 2.1 Treatment of Capital Stock..............................4
Section 2.2 Conversion of Common Stock..............................4
Section 2.3 Cancellation of Excluded Shares.........................4
Section 2.4 Conversion of Common Stock of Abacus Holdings...........5
Section 2.5 Exchange Agent; Exchange Procedures.....................5
Section 2.6 Transfer Books..........................................6
Section 2.7 No Fractional Share Certificates; Termination of
Exchange Fund...........................................6
Section 2.8 Options to Purchase Abacus Shares.......................7
Section 2.9 Appraisal Rights........................................8
Section 2.10 Dividends..............................................8
Section 2.11 Certain Adjustments....................................9
ARTICLE III 9
Section 3.1 Organization and Qualification; Subsidiaries............9
Section 3.2 Certificate of Incorporation and Bylaws................10
Section 3.3 Capitalization.........................................10
Section 3.4 Power and Authority; Authorization; Valid & Binding....11
Section 3.5 No Conflict; Required Filings and Consents.............11
Section 3.6 SEC Reports; Financial Statements......................13
Section 3.7 Absence of Certain Changes.............................13
Section 3.8 Litigation and Liabilities.............................14
Section 3.9 No Violation of Law; Permits...........................15
Section 3.10 Employee Matters; ERISA...............................15
Section 3.11 Labor Matters.........................................18
Section 3.12 Environmental Matters.................................18
Section 3.13 Board Action; Vote Required...........................20
Section 3.14 Opinion of Financial Advisor..........................21
Section 3.15 Brokers...............................................21
Section 3.16 Tax Matters...........................................21
Section 3.17 Intellectual Property.................................22
Section 3.18 Insurance.............................................23
Section 3.19 Contracts and Commitments.............................23
Section 3.20 Accounting and Tax Matters............................24
Section 3.21 Ownership of Shares of Alphabet.......................24
ARTICLE IV 24
Section 4.1 Organization and Qualification; Subsidiaries...........24
Section 4.2 Certificate of Incorporation and Bylaws................25
Section 4.3 Capitalization.........................................25
Section 4.4 Power and Authority; Authorization; Valid & Binding....26
Section 4.5 No Conflict; Required Filings and Consents.............27
Section 4.6 SEC Reports; Financial Statements......................28
Section 4.7 Absence of Certain Changes.............................29
Section 4.8 Litigation and Liabilities.............................30
Section 4.9 No Violation of Law; Permits...........................30
Section 4.10 Employee Matters; ERISA...............................31
Section 4.11 Labor Matters.........................................33
Section 4.12 Environmental Matters.................................33
Section 4.13 Board Action; Vote Required...........................34
Section 4.14 Opinion of Financial Advisor..........................35
Section 4.15 Brokers...............................................35
Section 4.16 Tax Matters...........................................35
Section 4.17 Intellectual Property.................................36
Section 4.18 Insurance.............................................36
Section 4.19 Contracts and Commitments.............................37
Section 4.20 Accounting and Tax Matters............................38
Section 4.21 Ownership of Shares of Alphabet.......................38
Section 4.22. Rights Agreement.....................................38
ARTICLE V 38
Section 5.1 Interim Operations of Abacus...........................38
Section 5.2 Interim Operations of Alphabet.........................41
Section 5.3 No Solicitation by Abacus..............................43
Section 5.4 No Solicitation by Alphabet............................45
ARTICLE VI 48
Section 6.1 Meetings of Stockholders...............................48
Section 6.2 Filings Best Efforts...................................48
Section 6.3 Publicity..............................................50
Section 6.4 Registration Statement.................................50
Section 6.5 Listing Application....................................51
Section 6.6 Further Action.........................................51
Section 6.7 Expenses...............................................52
Section 6.8 Notification of Certain Matters........................52
Section 6.9 Access to Information..................................52
Section 6.10 Review of Information.................................53
Section 6.11 Indemnification, Directors' and Officers'
Insurance.............................................53
Section 6.12 Employee Benefit Plans................................54
Section 6.13 Alphabet Board of Directors...........................56
Section 6.14 Affiliates............................................57
Section 6.15 Pooling-of-Interests..................................58
Section 6.16 Tax-Free Reorganization...............................58
Section 6.17 Accountant's Comfort Letters..........................58
Section 6.18 Accountant's Pooling Letters..........................58
ARTICLE VII 58
Section 7.1 Conditions to Obligations of the Parties to
Consummate the Merger..................................58
Section 7.2 Additional Conditions to Obligations of Alphabet
and Abacus Holdings....................................59
Section 7.3 Additional Conditions to Obligations of Abacus.........60
ARTICLE VIII 62
Section 8.1 Termination............................................62
Section 8.2 Effect of Termination and Abandonment..................64
Section 8.3 Amendment..............................................67
ARTICLE IX 67
Section 9.1 Non-Survival of Representations, Warranties and
Agreements.............................................67
Section 9.2 Notices................................................67
Section 9.3 Certain Definitions; Interpretation....................68
Section 9.4 Headings...............................................70
Section 9.5 Severability...........................................70
Section 9.6 Entire Agreement; No Third-Party Beneficiaries.........70
Section 9.7 Assignment.............................................70
Section 9.8 Governing Law..........................................71
Section 9.9 Counterparts...........................................71
INDEX OF DEFINED TERMS
DEFINED TERM Page No.
Abacus....................................................................1
Abacus Acquisition Proposal..............................................42
Abacus Acquisition Transaction...........................................43
Abacus Benefit Plan......................................................14
Abacus Business Combination Proposal.....................................64
Abacus Capital Stock Disclosure Date......................................9
Abacus Certificate of Incorporation.......................................3
Abacus Common Stock.......................................................1
Abacus Contracts.........................................................22
Abacus Covered Employees.................................................52
Abacus Covered Salt Lake Employees.......................................54
Abacus Disclosure Letter..................................................8
Abacus Employee..........................................................15
Abacus Employees.........................................................15
Abacus Equity Rights.....................................................10
Abacus ERISA Affiliate...................................................16
Abacus Holdings...........................................................1
Abacus Material Adverse Effect...........................................66
Abacus Multiemployer Plan................................................15
Abacus Options............................................................7
Abacus Preferred Stock....................................................9
Abacus SEC Reports.......................................................12
Abacus Shares.............................................................1
Abacus Stock Option Agreement.............................................1
Abacus Superior Proposal.................................................42
Abacus Termination Fee...................................................62
Affiliate................................................................67
Agreement.................................................................1
Allowance Plan...........................................................53
Alphabet..................................................................1
Alphabet Acquisition Proposal............................................45
Alphabet Benefit Plan....................................................29
Alphabet Business Combination Proposal...................................64
Alphabet Capital Stock Disclosure Date...................................24
Alphabet Certificate of Incorporation.....................................3
Alphabet Common Stock.....................................................2
Alphabet Contracts.......................................................35
Alphabet Disclosure Letter...............................................23
Alphabet Employee........................................................30
Alphabet Employees.......................................................30
Alphabet Equity Rights...................................................24
Alphabet ERISA Affiliate.................................................30
Alphabet Material Adverse Effect.........................................66
Alphabet Multiemployer Plan..............................................29
Alphabet Preferred Stock.................................................24
Alphabet Rights..........................................................36
Alphabet Rights Agreement................................................36
Alphabet SEC Reports.....................................................27
Alphabet Shares...........................................................2
Alphabet Stock Option Agreement...........................................1
Alphabet Superior Proposal...............................................44
Alphabet Termination Fee.................................................62
Certificate of Incorporation..............................................3
Closing...................................................................2
Closing Date..............................................................2
Code......................................................................1
Confidentiality Agreement................................................42
Consents.................................................................58
Control..................................................................67
Current Premium..........................................................52
D&O Insurance............................................................52
Deloitte.................................................................56
DGCL......................................................................2
E&Y......................................................................56
Effective Time............................................................2
Environmental Claim......................................................18
Environmental Laws.......................................................18
Environmental Permits....................................................17
ERISA....................................................................67
Exchange Agent............................................................4
Exchange Fund.............................................................5
Exchange Ratio............................................................4
Excluded Shares...........................................................4
Fees and Expenses........................................................63
Filings..................................................................58
Form S-4.................................................................49
GAAP......................................................................1
Governmental Entity......................................................12
Hazardous Materials......................................................19
HSR Act..................................................................11
Indemnified Parties......................................................51
Knowledge................................................................67
Merger....................................................................1
Merger Sub................................................................1
NYSE......................................................................6
Party.....................................................................1
PCBs.....................................................................19
Pension Plan.............................................................15
Person...................................................................67
Proxy Statement/Prospectus...............................................49
Release..................................................................19
Renewal Date.............................................................53
Representative.......................................................41, 44
SEC.......................................................................1
Securities Act...........................................................11
Significant Subsidiary...................................................67
Stock Option Agreements...................................................1
Subsidiary...............................................................67
Surviving Corporation.....................................................2
Tax Return...............................................................21
Taxable..................................................................21
Taxes....................................................................21
Termination Date.........................................................60
Termination Fee..........................................................62
Trusts...................................................................41
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 2, 1998 (this
"Agreement"), between Albertson's, Inc. ("Alphabet") a Delaware
corporation, Abacus Holdings, Inc. ("Abacus Holdings" or "Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of Alphabet, and
American Stores Company ("Abacus"), a Delaware corporation. Alphabet and
Abacus are sometimes referred to herein, individually, as a "Party," and
together, as the "Parties."
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Alphabet, Abacus
Holdings and Abacus have each determined that the merger of Abacus Holdings
with and into Abacus (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is advisable, fair to and in the
best interests of their respective corporations and stockholders and have
approved the Merger;
WHEREAS, it is intended that, for federal income tax purposes,
the Merger will qualify as a tax-free reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, it is intended that, for accounting purposes, the Merger
will be accounted for as a pooling-of-interests under United States
generally accepted accounting principles ("GAAP") and applicable rules and
regulations of the Securities and Exchange Commission (the "SEC").
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Alphabet's willingness to
enter into this Agreement, Alphabet and Abacus have executed and delivered
a Stock Option Agreement, dated as of the date hereof (the "Abacus Stock
Option Agreement"), pursuant to which Abacus is granting to Alphabet an
option to purchase, under certain circumstances, up to a number of shares
of common stock, par value $1.00 per share, of Abacus (the "Abacus Common
Stock" or "Abacus Shares") equal to 19.9% of the outstanding shares of
Abacus Common Stock with an exercise price per share equal to $30.24.
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Abacus' willingness to enter
into this Agreement, Abacus and Alphabet have executed and delivered a
Stock Option Agreement, dated as of the date hereof (the "Alphabet Stock
Option Agreement" and together with the Abacus Stock Option Agreement, the
"Stock Option Agreements"), pursuant to which Alphabet is granting to
Abacus an option to purchase, under certain circumstances, up to a number
of shares of common stock, par value $1.00 per share, of Alphabet, together
with the associated preferred stock purchase rights (the "Alphabet Common
Stock" or "Alphabet Shares") equal to 19.9% of the outstanding shares of
Alphabet Common Stock with an exercise price per share equal to $48.00.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows (certain
capitalized terms used herein are defined in Section 9.3 hereof):
ARTICLE I
Section 1.1 The Merger. At the Effective Time (as defined in Section
1.2(b)) and subject to and upon the terms and conditions of this Agreement
and in accordance with the Delaware General Corporation Law (the "DGCL"),
Abacus Holdings shall be merged with and into Abacus and the separate
corporate existence of Abacus Holdings shall cease. Abacus shall continue
as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation") in the Merger, and as of the Effective Time shall
be a wholly-owned subsidiary of Alphabet. The Merger shall have the effects
specified in Section 259(a) of the DGCL.
Section 1.2 The Closing; Effective Time. (a) The closing of the Merger
(the "Closing") shall take place (i) at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, New York, 10004,
at 10:00 A.M. local time, on the second business day following the date on
which the last to be satisfied or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or, where
permitted, waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place, time and/or
date as Alphabet and Abacus shall agree (the date of the Closing, the
"Closing Date").
(b) On the Closing Date, Alphabet, Abacus and Abacus Holdings
shall cause a certificate of merger in respect of the Merger to be properly
executed, and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the DGCL. The Merger shall become effective at
such time at which such certificate of merger shall be duly filed with
Secretary of State of Delaware, or at such later time reflected in such
certificate of merger as shall be agreed by Alphabet and Abacus (the time
that the Merger becomes effective, the "Effective Time").
Section 1.3 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to continue in, vest, perfect or confirm
of record or otherwise in the Surviving Corporation's right, title or
interest in, to or under any of the rights, properties, privileges,
franchises or assets of either of its constituent corporations acquired or
to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger, or otherwise to carry out the intent of this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either of
the constituent corporations of the Merger, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
each of such corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in the Surviving Corporation or otherwise
to carry out the intent of this Agreement.
Section 1.4 Certificate of Incorporation; Bylaws; Directors and
Officers of the Surviving Corporation. Unless otherwise agreed by Alphabet
and Abacus prior to the Closing, at the Effective Time:
(a) The Amended and Restated Certificate of Incorporation of
Abacus, as amended (the "Abacus Certificate of Incorporation;" it and the
Amended and Restated Certificate of Incorporation of Alphabet, as amended
(the "Alphabet Certificate of Incorporation"), are each sometimes referred
to herein as a "Certificate of Incorporation"), as in effect immediately
prior to the Effective Time shall be at and after the Effective Time (until
amended as provided by law and by such Certificate of Incorporation) the
certificate of incorporation of the Surviving Corporation, except that
Article Fourth of the Abacus Certificate of Incorporation shall be amended
to read in its entirety as follows: "The aggregate number of shares that
the Corporation shall have the authority to issue is 1,000 shares of Common
Stock, par value $1.00 per share."
(b) The Bylaws of Abacus as in effect immediately prior to the
Effective Time shall be at and after the Effective Time (until amended as
provided by law, its Certificate of Incorporation and its Bylaws, as
applicable) the Bylaws of the Surviving Corporation;
(c) The officers of Abacus immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
elected or appointed and qualified or until their resignation or removal;
and
(d) The directors of Abacus Holdings immediately prior to the
Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time, until their successors are elected or appointed
and qualified or until their resignation or removal.
ARTICLE II
Section 2.1 Treatment of Capital Stock. The manner and basis of
converting the shares of common stock of Abacus and Abacus Holdings, by
virtue of the Merger and without any action on the part of any holder
thereof, shall be as set forth in this Article II.
Section 2.2 Conversion of Common Stock. (a) Each share of Abacus
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding those held in the treasury of Abacus, by any of its Subsidiaries
or by Alphabet or any of its Subsidiaries (collectively, the "Excluded
Shares")), and all rights in respect thereof, shall at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to
exist and be converted into the right to receive .63 (the "Exchange Ratio")
validly issued, fully paid and nonassessable shares of Alphabet Common
Stock.
(b) Except as otherwise provided herein, commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of Abacus Common
Stock shall evidence the right to receive shares of Alphabet Common Stock
on the basis set forth in paragraph (a) above (and cash in lieu of any
fractional shares pursuant to Section 2.7 hereof).
Section 2.3 Cancellation of Excluded Shares. At the Effective Time,
each Excluded Share, by virtue of the Merger and without any action on the
part of the holder thereof, shall cease to be outstanding, shall be
canceled and retired, and no shares of stock or other securities of
Alphabet or the Surviving Corporation shall be issuable, and no payment or
other consideration shall be made or paid, in respect thereof.
Section 2.4 Conversion of Common Stock of Abacus Holdings. At the
Effective Time, each share of common stock of Abacus Holdings issued and
outstanding immediately prior to the Effective Time, and all rights in
respect thereof, shall, without any action on the part of Alphabet,
forthwith cease to exist and be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
Section 2.5 Exchange Agent; Exchange Procedures. (a) Subject to the
terms and conditions of this Agreement, at or prior to the Effective Time,
Alphabet shall appoint ChaseMellon Shareholder Services, L.L.C., or such
other exchange agent selected by Alphabet that is reasonably acceptable to
Abacus (the "Exchange Agent"), to effect the exchange of Abacus Shares for
shares of Alphabet Common Stock in accordance with the provisions of this
Article II. As soon as reasonably practicable following the Effective Time,
Alphabet shall deposit, or cause to be deposited, with the Exchange Agent
certificates representing the shares of Alphabet Common Stock to be issued
in the Merger, any cash payable in respect of fractional shares in
accordance with Section 2.7 hereof and the amount of any dividends or
distributions in accordance with Section 2.5(b) hereof (the "Exchange
Fund").
(b) As soon as reasonably practicable after the Effective Time,
Alphabet shall instruct the Exchange Agent to mail to each record holder of
a certificate or certificates which immediately prior to the Effective Time
represented Abacus Shares (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such
certificates shall pass, only upon delivery to the Exchange Agent and shall
be in such form and have such other provisions as Alphabet shall reasonably
specify) and (ii) instructions for use in effecting the surrender of
certificates which immediately prior to the Effective Time represented
Abacus Shares for certificates representing shares of Alphabet Common Stock
and cash in lieu of fractional shares, if any. Commencing immediately after
the Effective Time, upon the surrender to the Exchange Agent of such
certificate or certificates, together with a duly executed and completed
letter of transmittal and all other documents and other materials required
by the Exchange Agent to be delivered in connection therewith, the holder
thereof shall be entitled to receive a certificate or certificates
representing the number of whole shares of Alphabet Common Stock into which
the shares of Abacus Common Stock which immediately prior to the Effective
Time were represented by the certificate or certificates so surrendered
shall have been converted in accordance with the provisions of Section 2.2,
together with a cash payment (net of any applicable tax withholdings) in
lieu of fractional shares, if any. Unless and until any certificate or
certificates which immediately prior to the Effective Time represented
shares of Abacus Common Stock are so surrendered, no dividend or other
distribution, if any, payable to the holders of record of shares of
Alphabet Common Stock as of any date subsequent to the Effective Time shall
be paid to the holder of such certificate or certificates in respect
thereof. Except as otherwise provided herein, upon the surrender of any
certificate or certificates which immediately prior to the Effective Time
represented Abacus Shares, the record holder of the certificate or
certificates representing shares of Alphabet Common Stock issued in
exchange therefore shall be entitled to receive (i) at the time of
surrender, the amount of any dividends or other distributions (net of any
applicable tax withholdings) having a record date after the Effective Time
and a payment date prior to the surrender date, payable in respect of such
shares of Alphabet Common Stock and (ii) at the appropriate payment date,
the amount of dividends or other distributions (net of any applicable tax
withholdings) having a record date after the Effective Time and a payment
date subsequent to the date of such surrender, payable in respect of such
shares of Alphabet Common Stock. No interest shall be payable in respect of
the payment of dividends or distributions pursuant to the immediately
preceding sentence.
(c) Notwithstanding anything in this Agreement to the contrary,
certificates surrendered for exchange by any "affiliate" (as defined in
Section 6.14 hereof) of Abacus shall not be exchanged for shares of
Alphabet Common Stock until Alphabet shall have received a signed agreement
from such "affiliate" as provided in Section 6.14 hereof.
Section 2.6 Transfer Books. The stock transfer books of Abacus shall
be closed at the Effective Time and no transfer of any Abacus Shares will
thereafter be recorded on any of such stock transfer books. In the event of
a transfer of ownership of any Abacus Shares that is not registered in the
stock transfer records of Abacus at the Effective Time, a certificate or
certificates representing the number of full shares of Alphabet Common
Stock into which such Abacus Shares shall have been converted in the Merger
shall be issued to the transferee together with a cash payment (net of any
applicable tax withholdings) in lieu of fractional shares, if any, in
accordance with Section 2.7, and a cash payment in accordance with Section
2.5(b) of dividends or distributions, if any, only if the certificate or
certificates which immediately prior to the Effective Time represented such
Abacus Shares are surrendered as provided in Section 2.5, accompanied by
all documents required to evidence and effect such transfer and by evidence
of payment of any applicable stock transfer taxes.
Section 2.7 No Fractional Share Certificates; Termination of Exchange
Fund. (a) No scrip or fractional share certificate for Alphabet Common
Stock will be issued upon the surrender for exchange of a certificate or
certificates which immediately prior to the Effective Time represented
Abacus Shares, and no outstanding fractional share interest will entitle
the holder thereof to vote or receive dividends or distributions or any
other rights of a stockholder of Alphabet with respect to such fractional
share interest. Each holder entitled to receive a fractional share of
Alphabet Common Stock but for this Section 2.7(a) shall be entitled to
receive an amount of cash (net of applicable tax withholdings) equal to the
product obtained by multiplying (i) the fractional share interest to which
such holder would otherwise be entitled (after taking into account all
shares of Abacus Common Stock held immediately prior to the Effective Time
by such holder) by (ii) the closing price for a share of Alphabet Common
Stock on the New York Stock Exchange (the "NYSE") Composite Transaction
Tape on the trading day immediately prior to the Closing Date. No interest
shall be payable in respect of any cash payment for fractional share
interests.
(b) Any portion of the Exchange Fund which remains undistributed
one year after the Effective Time shall be delivered to Alphabet upon
demand, and each holder of Abacus Shares who had not theretofore
surrendered certificates or certificates which immediately prior to the
Effective Time represented Abacus Shares in accordance with the provisions
of this Article II shall thereafter look only to Alphabet for satisfaction
of such holder's claims for shares of Alphabet Common Stock, any cash in
lieu of fractional shares of Alphabet Common Stock and any dividends or
distributions payable in accordance with Section 2.5(b). Notwithstanding
the foregoing, none of Alphabet, the Surviving Corporation, the Exchange
Agent or any other Person shall be liable to any former holder of Abacus
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
Section 2.8 Options to Purchase Abacus Shares. (a) Prior to the
Effective Time, Abacus shall take all action necessary with respect to each
of the plans or arrangements of Abacus and its Subsidiaries pursuant to
which options to purchase Abacus Shares (the "Abacus Options") will be
outstanding immediately prior to the Effective Time such that as of and
after the Effective Time each Abacus Option shall entitle the holder
thereof to purchase such number of shares of Alphabet Common Stock as is
equal to the product of (x) the number of shares of Abacus Common Stock
subject to such option immediately prior to the Effective Time and (y) the
Exchange Ratio; and the exercise price per share of Alphabet Common Stock
subject to such option shall be equal to (x) the exercise price per share
of Abacus Common Stock immediately prior to the Effective Time divided by
(y) the Exchange Ratio. Abacus shall take no action to cause any Abacus
Option which pursuant to its terms as in effect as of the date hereof would
not become vested or exercisable by reason of the transactions contemplated
by this Agreement to become vested or exercisable in connection herewith,
and nothing contained in this Agreement shall be interpreted as causing any
such Abacus Option to become vested or exercisable.
(b) Notwithstanding the foregoing, the number of shares of
Alphabet Common Stock deliverable upon exercise of each Abacus Option at
and after the Effective Time as contemplated by paragraph (a) above shall
be rounded, if necessary, to the nearest whole share, and the exercise
price with respect thereto shall be rounded, if necessary, to the nearest
one one-hundredth of a cent. Other than as provided in paragraph (a) above
and in the prior sentence of this paragraph (b), as of and after the
Effective Time, each Abacus Option shall be subject to the same terms and
conditions as in effect immediately prior to the Effective Time, but giving
effect to the Merger (it being understood that all Options exercisable at
the same price and granted on the same date shall be aggregated for this
purpose).
(c) As soon as practicable after the Effective Time, Alphabet
shall deliver (i) to the holders of Abacus Options which become fully
vested and exercisable by virtue of the Merger a notice stating that by
virtue of the Merger and pursuant to the terms of the relevant Abacus
Benefit Plan (as herein defined) such Abacus Options have become fully
vested and exercisable and (ii) to the holders of all Abacus Options a
notice stating that the agreements evidencing the grants of such Abacus
Options shall continue in effect on the same terms and conditions (subject
to the adjustments required by this Section 2.8 after giving effect to the
Merger and the terms of the relevant Abacus Benefit Plan).
(d) Alphabet shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Alphabet Common Stock for
delivery upon exercise of Abacus Options in accordance with this Section
2.8. Promptly after the Effective Time, Alphabet shall file a registration
statement on Form S-8 (if available) (or any successor or other appropriate
forms) with respect to the shares of Alphabet Common Stock subject to such
options and shall use all reasonable efforts to maintain the effectiveness
of such registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options
remain outstanding.
Section 2.9 Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of Abacus Shares in
connection with the Merger.
Section 2.10 Dividends. Alphabet and Abacus shall coordinate with each
other the declaration of, and the setting of record dates and payment dates
for, dividends in respect of their respective common stock so that, in
respect of any fiscal quarter, holders thereof (i) do not receive dividends
in respect of both (x) Abacus Shares and (y) shares of Alphabet Common
Stock received pursuant to the Merger in respect thereof or (ii) fail to
receive a dividend in respect of both (x) Abacus Shares and (y) the shares
of Alphabet Common Stock received pursuant to the Merger in respect
thereof.
Section 2.11 Certain Adjustments. If between the date of this
Agreement and the Effective Time, the outstanding shares of Abacus Common
Stock or Alphabet Common Stock shall be changed into a different number of
shares by reason of any stock split, combination of shares, or any dividend
payable in stock shall be declared thereon with a record date within such
period, the Exchange Ratio shall be appropriately adjusted to provide the
holders of Abacus Shares the same economic effect as contemplated by this
Agreement prior to such event.
ARTICLE III
Except as set forth in the corresponding sections or subsections
of the disclosure letter, dated the date hereof, delivered by Abacus to
Alphabet (the "Abacus Disclosure Letter"), Abacus hereby represents and
warrants to Alphabet and Abacus Holdings as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) Abacus
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Subsidiaries of Abacus
is a corporation or other business entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, and each of Abacus and its Subsidiaries has the requisite
corporate or other organizational power and authority to own, operate or
lease its properties and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes
such qualification necessary, in each case except as would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect.
(b) All of the outstanding shares of capital stock and other
equity securities of the Significant Subsidiaries of Abacus have been
validly issued and are fully paid and nonassessable, and are owned,
directly or indirectly, by Abacus, free and clear of all pledges and
security interests. All outstanding shares of capital stock and other
equity interests of each Subsidiary of Abacus owned directly or indirectly
by Abacus are free and clear of all liens, claims or encumbrances as would,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect. There are no subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) entitling any Person to purchase or
otherwise acquire from Abacus or any of its Significant Subsidiaries at any
time, or upon the happening of any stated event, any shares of capital
stock or other equity securities of any of the Significant Subsidiaries of
Abacus. The Abacus Disclosure Letter lists the name and jurisdiction of
incorporation or organization of each of the Significant Subsidiaries of
Abacus.
(c) Except for interests in its Subsidiaries, neither Abacus nor
any of its Subsidiaries owns directly or indirectly any material equity
interest in any Person or has any obligation or made any commitment to
acquire any such interest or make any such investment.
Section 3.2 Certificate of Incorporation and Bylaws. Abacus has
furnished, or otherwise made available, to Alphabet a complete and correct
copy of the certificate of incorporation and bylaws, as amended to the date
of this Agreement, of Abacus. Such certificate of incorporation and bylaws
are in full force and effect. Abacus is not in violation of any of the
provisions of its certificate of incorporation or bylaws.
Section 3.3 Capitalization. (a) The authorized capital stock of Abacus
consists of 700,000,000 shares of Abacus Common Stock and 10,000,000 shares
of Preferred Stock, par value $1.00 per share (the "Abacus Preferred
Stock"). At the close of business on June 28, 1998 (the "Abacus Capital
Stock Disclosure Date"), (i) 274,216,016 shares of Abacus Common Stock, and
no shares of Abacus Preferred Stock, were issued and outstanding and (ii)
25,562,456 shares of Abacus Common Stock, and no shares of Abacus Preferred
Stock, were held by Abacus in its treasury. The Abacus Disclosure Letter
lists the number of shares of Abacus Common Stock and Abacus Preferred
Stock reserved for issuance as of the Abacus Capital Stock Disclosure Date
under each of the Abacus Benefit Plans (as defined in Section 3.10) or
otherwise. Since the Abacus Capital Stock Disclosure Date until the date of
this Agreement, no shares of Abacus Common Stock or Abacus Preferred Stock
have been issued or reserved for issuance, except in respect of the
exercise, conversion or exchange of Abacus Equity Rights (as defined below)
outstanding as of the Abacus Capital Stock Disclosure Date and in
connection with the Abacus Stock Option Agreement. For purposes of this
Agreement, "Abacus Equity Rights" shall mean subscriptions, options,
warrants, calls, commitments, agreements, conversion rights or other rights
of any character (contingent or otherwise) to purchase or otherwise acquire
from Abacus or any of its Subsidiaries at any time, or upon the happening
of any stated event, any shares of the capital stock of Abacus. The Abacus
Disclosure Letter sets forth the number and type of Abacus Equity Rights
(including the number and class of Abacus' capital stock for or into which
such Abacus Equity Rights are exercisable, convertible or exchangeable and
any Abacus Benefit Plan pursuant to which such Abacus Equity Rights were
granted or issued) outstanding as of the Abacus Capital Stock Disclosure
Date. Other than the Abacus Equity Rights disclosed in the Abacus
Disclosure Letter and the Abacus Equity Rights granted pursuant to the
Abacus Stock Option Agreement, Abacus does not have outstanding any Abacus
Equity Rights as of the date of this Agreement. Except as disclosed in the
Abacus SEC Reports (defined below), no stockholders of Abacus are party to
any voting agreement, voting trust or similar arrangement with respect to
Abacus Shares to which Abacus or any Subsidiary of Abacus is a Party.
(b) There are no outstanding obligations of Abacus or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Abacus Common Stock or any Abacus Equity Rights (except in connection with
the exercise, conversion or exchange of outstanding Abacus Equity Rights).
All of the issued and outstanding shares of Abacus Common Stock are validly
issued, fully paid, nonassessable and free of preemptive rights. The Abacus
Disclosure Letter sets forth the number of shares of Abacus Common Stock
repurchased, and the number issued, by Abacus or any of its Subsidiaries
since July 1, 1996.
Section 3.4 Power and Authority; Authorization; Valid & Binding.
Abacus has the necessary corporate power and authority to enter into and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, except that the Merger is
subject to the adoption and approval of this Agreement and the Merger by
Abacus' stockholders as required by the DCGL. The execution and delivery of
this Agreement by Abacus, the performance by it of its obligations
hereunder and the consummation by Abacus of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the
part of Abacus (other than with respect to the Merger, the adoption and
approval of this Agreement and the Merger by its stockholders as required
by the DGCL). This Agreement has been duly executed and delivered by Abacus
and, assuming the due authorization, execution and delivery by Alphabet and
Merger Sub, constitutes a legal, valid and binding obligation of Abacus
enforceable against it in accordance with the terms hereof or thereof,
subject to bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
Section 3.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Abacus Stock Option
Agreement by Abacus does not, and the performance by Abacus of its
obligations hereunder and thereunder and the consummation by Abacus of the
transactions contemplated hereby, and thereby will not, (i) violate or
conflict with the certificate of incorporation, or bylaws of Abacus, (ii)
subject to obtaining or making the notices, reports, filings, waivers,
consents, approvals or authorizations referred to in paragraph (b) below,
conflict with or violate any law, regulation, court order, judgment or
decree applicable to Abacus or any of its Subsidiaries or by which any of
their respective property is bound or affected, (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, cancellation, vesting, modification, alteration or
acceleration of any obligation under, result in the creation of a lien,
claim or encumbrance on any of the properties or assets of Abacus or any of
its Subsidiaries pursuant to, result in the loss of any material benefit
under (including an increase in the price paid by, or cost to, Abacus or
any of its Subsidiaries), require the consent of any other party to, or
result in any obligation of the part of Abacus or any of its Subsidiaries
to repurchase (with respect to a bond or a note), any agreement, contract,
instrument, bond, note, indenture, permit, license or franchise to which
Abacus or any of its Subsidiaries is a party or by which Abacus, any of its
Subsidiaries or any of their respective property is bound or affected,
except, in the case of clauses (ii) and (iii) above, as would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect.
(b) Except for applicable requirements, if any, under the
premerger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing of a
certificate of merger with respect to the Merger as required by the DGCL,
filings with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, any filings required pursuant to
any state securities or "blue sky" laws, any filings required pursuant to
any state liquor, gaming or pharmacy laws, any applicable Environmental
Laws (as defined herein) governing the transfer of any interest in real
property or of business operations (including without limitation transfer
acts, notifications, and deed restrictions), and the transfer or
application requirements with respect to the environmental permits of
Abacus or its Subsidiaries, or pursuant to the rules and regulations of any
stock exchange on which the Abacus Shares are listed, neither Abacus nor
any of its Subsidiaries is required to submit any notice, report or other
filing with any Governmental Entity (defined below) in connection with the
execution, delivery, performance or consummation of this Agreement, the
Stock Option Agreements or the Merger except for such notices, reports or
filings that, if not made, would not, individually or in the aggregate,
reasonably be expected to have an Abacus Material Adverse Effect. Except as
set forth in the immediately preceding sentence, no waiver, consent,
approval or authorization of any governmental or regulatory authority,
court, agency, commission or other governmental entity or any securities
exchange or other self-regulatory body, domestic or foreign ("Governmental
Entity"), is required to be obtained by Abacus or any of its Subsidiaries
in connection with its execution, delivery, performance or consummation of
this Agreement, the Stock Option Agreement or the transactions contemplated
hereby except for such waivers, consents, approvals or authorizations that,
if not obtained or made, would not, individually or in the aggregate,
reasonably be expected to have, an Abacus Material Adverse Effect.
Section 3.6 SEC Reports; Financial Statements. (a) Abacus has filed
all forms, reports and documents (including all Exhibits, Schedules and
Annexes thereto) required to be filed by it with the SEC since January 1,
1995, including any amendments or supplements thereto (collectively,
including any such forms, reports and documents filed after the date
hereof, the "Abacus SEC Reports"), and, with respect to the Abacus SEC
Reports filed by Abacus after the date hereof and prior to the Closing
Date, will deliver or make available, to Alphabet all of its Abacus SEC
Reports in the form filed with the SEC. The Abacus SEC Reports (i) were
(and any Abacus SEC Reports filed after the date hereof will be) in all
material respects in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) as of their respective filing dates, did
not (and any Abacus SEC Reports filed after the date hereof will not)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Abacus SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Abacus SEC Reports filed after the
date hereof, will fairly present in all material respects) the consolidated
financial position of Abacus and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of operations,
retained earnings and cash flows of Abacus and its consolidated
subsidiaries for the respective periods indicated, in each case in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the
notes thereto) and the rules and regulations of the SEC, except that
interim financial statements are subject to normal year-end adjustments
which are not and are not expected to be, individually or in the aggregate,
material in amount and do not include certain notes which may be required
by GAAP but which are not required by Form 10-Q of the SEC.
Section 3.7 Absence of Certain Changes. Except as disclosed in the
Abacus SEC Reports filed prior to the date hereof, since the end of Abacus'
fiscal year last ended, (a) Abacus and each of its Subsidiaries has
conducted its business in all material respects in the ordinary and usual
course of its business consistent with past practice and there has not been
any change in the financial condition, business or results of operations of
Abacus and its Subsidiaries, or any development or combination of
developments that, individually or in the aggregate, has had or would
reasonably be expected to have an Abacus Material Adverse Effect and (b)
since the end of Abacus' fiscal year last ended until the date hereof there
has not been (i) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Abacus, other than
regular cash dividends consistent with past practice; (ii) any change by
Abacus to its accounting policies, practices or methods; (iii) any
amendment or change to the terms of any of its indebtedness material to
Abacus and its Subsidiaries taken as a whole; (iv) any incurrence of any
material indebtedness outside of the ordinary course of business; (v)
outside the ordinary course of business, any transfer, lease, license,
sale, mortgage, pledge, encumbrance or other disposition of assets or
properties material to Abacus and its Subsidiaries taken as a whole; (vi)
any material damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by Abacus or its
Subsidiaries material to Abacus and its Subsidiaries taken as a whole,
whether or not covered by insurance; (vii) except on a case-by-case basis
in the ordinary course of business consistent with past practice for
employees other than executive officers or directors, or except as required
by applicable law or pursuant to a contractual obligation in effect as of
the date of this Agreement, (A) any execution, adoption or amendment of any
agreement or arrangement relating to severance or any employee benefit plan
or employment or consulting agreement (including, without limitation, the
Abacus Benefit Plans referred to in Section 3.10 hereof) or (B) any grant
of any stock options or other equity related award; or (viii) any agreement
or commitment entered into with respect to any of the foregoing. With
respect to Abacus, any action taken by Abacus pursuant to and consistent
with its corporate and functional consolidations or its Delta Plan shall be
deemed for the purposes hereof to be an action of Abacus that is consistent
with past practice.
Section 3.8 Litigation and Liabilities. (a) Except as disclosed in the
Abacus SEC Reports filed prior to the date hereof, there are no civil,
criminal or administrative actions, suits or claims, proceedings (including
condemnation proceedings) or, to the knowledge of Abacus, hearings or
investigations, pending or, to the knowledge of Abacus, threatened against,
or otherwise adversely affecting Abacus or any of its Subsidiaries or any
of their respective properties and assets, except for any of the foregoing
which would not, individually or in the aggregate, reasonably be expected
to have an Abacus Material Adverse Effect.
(b) Neither Abacus nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) the existence of
which would, individually or in the aggregate, reasonably be expected to
have an Abacus Material Adverse Effect except (i) liabilities, described in
the Abacus SEC Reports filed with the SEC prior to the date hereof or
reflected on Abacus' consolidated balance sheet (and related notes thereto)
as of the end of its most recently completed fiscal year filed in the
Abacus SEC Reports, (ii) liabilities incurred since the end of Abacus' most
recently completed fiscal year in the ordinary course of business
consistent with past practice that would not, individually or in the
aggregate, reasonably be expected to have an Abacus Material Adverse Effect
or (iii) liabilities permitted to be incurred pursuant to Section 5.1.
Section 3.9 No Violation of Law; Permits. The business of Abacus and
each of its Subsidiaries is being conducted in accordance with all
applicable statutes of law, ordinances, regulations, judgments, orders or
decrees of any Governmental Entity, and not in violation of any permits,
franchises, licenses, authorizations or consents granted by any
Governmental Entity, and Abacus and each of its Subsidiaries has obtained
all permits, franchises, licenses, authorizations or consents necessary for
the conduct of its business, except, in each case, as would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect. Neither Abacus nor any of its Subsidiaries is
subject to any cease and desist or other order, judgment, injunction or
decree issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or, to the knowledge of Abacus, is a
party to any commitment letter or similar undertaking to, or, to the
knowledge of Abacus, is subject to any order or directive by, or has
adopted any board resolutions at the request of, any Governmental Entity,
that materially restricts the conduct of its business (whether the type of
business, the location thereof or otherwise) and which, individually or in
the aggregate, would reasonably be expected to have an Abacus Material
Adverse Effect, nor to the knowledge of Abacus, has Abacus been advised in
writing that any Governmental Entity has proposed issuing or requesting any
of the foregoing.
Section 3.10 Employee Matters; ERISA. (a) Set forth in the Abacus
Disclosure Letter is a complete list of each Abacus Benefit Plan and each
Abacus Multiemployer Plan. The term "Abacus Benefit Plan" shall mean (i)
each plan, program, policy, contract or agreement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any
kind, including, without limitation, any "employee benefit plan," within
the meaning of Section 3(3) of ERISA but excluding any "multiemployer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, and (ii) each
employment, severance, consulting, non-compete, confidentiality, or similar
agreement or contract, in each case, with respect to which Abacus or any
Subsidiary of Abacus has or may have any liability (accrued, contingent or
otherwise). The term "Abacus Multiemployer Plan" shall mean any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA in
respect to which Abacus or any Subsidiary of Abacus has or may have any
liability (accrued, contingent or otherwise).
(b) Abacus has provided or made available, or has caused to be
provided or made available, to Alphabet (i) current, accurate and complete
copies of all documents embodying each Abacus Benefit Plan, including all
amendments thereto, written interpretations thereof (which interpretation
materially increases the liabilities of Abacus and its Subsidiaries taken
as a whole under the relevant Abacus Benefit Plan) and all trust or funding
agreements with respect thereto; (ii) the most recent annual actuarial
valuation, if any, prepared for each Abacus Benefit Plan; (iii) the most
recent annual report (Series 5500 and all schedules thereto), if any,
required under ERISA in connection with each Abacus Benefit Plan or related
trust; (iv) the most recent determination letter received from the Internal
Revenue Service, if any, for each Abacus Benefit Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the
Code; (v) if any Abacus Benefit Plan is funded, the most recent annual and
periodic accounting of such Abacus Benefit Plan's assets; (vi) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Abacus Benefit Plan; and (vii) all material communications to any one or
more current, former or retired employee, officer, consultant, independent
contractor, agent or director of Abacus or any Subsidiary of Abacus (each,
an "Abacus Employee" and collectively, the "Abacus Employees") relating to
each Abacus Benefit Plan (which communication materially increases the
liabilities of Abacus and its Subsidiaries taken as a whole under the
relevant Abacus Benefit Plan). The Board of Directors of Abacus has adopted
a resolution described on Schedule 3.10(b).
(c) All Abacus Benefit Plans have been administered in all
respects in accordance with the terms thereof and all applicable laws
except for violations which, individually or in the aggregate, would not
reasonably be expected to have an Abacus Material Adverse Effect. Each
Abacus Benefit Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to
be qualified under Section 401(a) of the Code (each, an "Abacus Pension
Plan"), has received a favorable determination letter from the Internal
Revenue Service, and Abacus is not aware of any circumstances that would
reasonably be expected to result in the revocation or denial of such
qualified status. Except as otherwise set forth in the Abacus Disclosure
Letter or in the Abacus SEC Reports filed prior to the date hereof, there
is no pending or, to Abacus' knowledge, threatened, claim, litigation,
proceeding, audit, examination or investigation relating to any Abacus
Benefit Plans or Abacus Employees that, individually or in the aggregate,
would reasonably be expected to have an Abacus Material Adverse Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Abacus or any Subsidiaries of Abacus
or any entity which is considered a single employer with Abacus or any
Subsidiary of Abacus under Section 4001(a)(15) of ERISA or Section 414 of
the Code (an "Abacus ERISA Affiliate"). No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Abacus Pension Plan within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the
aggregate) required to be made under the terms of any Abacus Benefit Plan
have been made. No Abacus Pension Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither Abacus nor any Subsidiaries of
Abacus nor any Abacus ERISA Affiliate has provided, or is required to
provide, security to any Abacus Pension Plan pursuant to Section 401(a)(29)
of the Code.
(f) Except as set forth in the Abacus SEC Reports filed prior to
the date hereof, under each Abacus Pension Plan which is a defined benefit
plan, as of the last day of the most recent plan year ended prior to the
date hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in each such
Pension Plan's most recent actuarial valuation) did not exceed the then
current value of the assets of such Pension Plan, and there has been no
adverse change in the financial condition of such Pension Plan (with
respect to either assets or benefits) since the last day of the most recent
plan year of such Pension Plan.
(g) As of the Closing Date, neither Abacus, any Subsidiary of
Abacus nor any Abacus ERISA Affiliate will have incurred any withdrawal
liability as described in Section 4201 of ERISA for withdrawals that have
occurred on or prior to the Closing Date that has not previously been
satisfied. Neither Abacus, any Subsidiary of Abacus nor any Abacus ERISA
Affiliate has knowledge that any Abacus Multiemployer Plan fails to qualify
under Section 401(a) of the Code, is insolvent or is in reorganization
within the meaning of Part 3 of Subtitle E of Title IV of ERISA nor of any
condition that would reasonably be expected to result in an Abacus
Multiemployer Plan becoming insolvent or going into reorganization.
(h) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event
under any Abacus Benefit Plan, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any Abacus Employee, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of
Abacus, any Subsidiary of Abacus or Alphabet to amend or terminate any
Abacus Benefit Plan. No payment or benefit which will or may be made by
Abacus, any Subsidiary of Abacus, Alphabet or any of their respective
affiliates with respect to any Abacus Employee will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 3.11 Labor Matters. (a) Except as set forth in the Abacus SEC
Reports filed prior to the date hereof, and except for those matters that
would not, individually or in the aggregate, reasonably be expected to have
an Abacus Material Adverse Effect no work stoppage, slowdown, lockout or
labor strike against Abacus or any Subsidiary of Abacus by Abacus Employees
(or any union that represents them) is pending or, to the knowledge of
Abacus, threatened.
(b) Except as set forth in the Abacus SEC Reports filed prior to
the date hereof and as, individually or in the aggregate, would not
reasonably be expected to have an Abacus Material Adverse Effect, as of the
date of this Agreement, neither Abacus nor any Subsidiary of Abacus is
involved in or, to the knowledge of Abacus, threatened with any labor
dispute, grievance, or arbitration or union organizing activity (by it or
any of its employees) involving any Abacus Employees.
Section 3.12 Environmental Matters. Except as set forth in the Abacus
SEC Reports filed prior to the date hereof and except for those matters
that would not, individually or in the aggregate, reasonably be expected to
have an Abacus Material Adverse Effect:
(i) Abacus and each of its Subsidiaries is in compliance
with all applicable Environmental Laws (as defined below), and neither
Abacus nor any of its Subsidiaries has received any written communication
from any Person or Governmental Entity that alleges that Abacus or any of
its Subsidiaries is not in compliance with applicable Environmental Laws.
(ii) Abacus and each of its Subsidiaries has obtained or has
applied for all applicable environmental, health and safety permits,
licenses, variances, approvals and authorizations required under
Environmental Laws (collectively, the "Environmental Permits") necessary
for the construction of its facilities or the conduct of its operations,
and all those Environmental Permits are in effect or, where applicable, a
renewal application has been timely filed and is pending agency approval,
and Abacus and its Subsidiaries are in compliance with all terms and
conditions of such Environmental Permits.
(iii) There is no Environmental Claim (as defined below)
pending or, to the knowledge of Abacus, threatened (i) against Abacus or
any of its Subsidiaries, (ii) against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by Abacus or
any of its Subsidiaries, or (iii) against any real or personal property or
operations which Abacus or any of its Subsidiaries owns, leases or
operates, in whole or in part.
(iv) There have been no Releases (as defined below) of any
Hazardous Material (as defined below) that would be reasonably likely to
form the basis of any Environmental Claim against Abacus or any of its
Subsidiaries, or against any Person whose liability for any Environmental
Claim has been retained or assumed contractually by Abacus or any of its
Subsidiaries.
(v) None of the properties owned, leased or operated by
Abacus, its Subsidiaries or any predecessor thereof are now, or were in the
past, listed on the National Priorities List of Superfund Sites or any
analogous state list (excluding easements that transgress those Superfund
sites).
For purposes of this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person (including any federal, state,
local or foreign governmental authority) alleging potential liability
(including, without limitation, potential responsibility for or liability
for enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by the representing Party or any of its
Subsidiaries; or (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law; or (C) any and all claims by
any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable foreign,
federal, state and local laws, rules, requirements and regulations relating
to pollution, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to the environment including,
without limitation, laws and regulations relating to Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials or relating to management of asbestos in buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos or asbestos-containing
materials, urea formaldehyde foam insulation, any form of natural gas,
explosives, polychlorinated biphenyls ("PCBs"), radioactive materials,
ionizing radiation, electromagnetic field radiation or microwave
transmissions; (B) any chemicals, materials or substances, whether waste
materials, raw materials or finished products, which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous substances," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "pollutants,"
"contaminants," or words of similar import under any Environmental Law; and
(C) any other chemical, material or substance, whether waste materials, raw
materials or finished products, regulated or forming the basis of liability
under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the environment (including without limitation ambient air, atmosphere,
soil, surface water, groundwater or property).
Section 3.13 Board Action; Vote Required. (a) Abacus' Board of
Directors has approved this Agreement, the Abacus Stock Option Agreement
and the transactions contemplated hereby and thereby, including the Merger,
has determined that the Merger is advisable, fair to and in the best
interests of Abacus and its stockholders and has resolved to recommend to
stockholders that they vote in favor of approving and adopting this
Agreement and approving the Merger. Neither Section 203 of the DGCL nor any
other state takeover or similar statute or regulation applies to the
Merger, this Agreement, the Abacus Stock Option Agreement (including the
purchase of shares of Abacus Common Stock thereunder) or any of the
transactions contemplated hereby or thereby. The Board of Directors of
Abacus has duly adopted (and not withdrawn) a resolution rescinding any
authorization previously granted permitting Abacus to repurchase shares of
Abacus Common Stock. In connection with each Abacus Benefit Plan under
which a holder of an option granted pursuant thereto would be entitled, in
respect of such option, to receive cash upon a change of control, the Board
of Directors (or the appropriate Committee thereof) has taken all necessary
action so that in connection with the Merger such holder would be entitled
to exercise such option solely for shares of Abacus Common Stock or,
following the Merger, Alphabet Common Stock.
(b) The affirmative vote of the holders of a majority of all of
the outstanding shares of Abacus Common Stock is necessary to approve and
adopt this Agreement and the Merger. Such vote is the only vote of the
holders of any class or series of Abacus' capital stock required to approve
this Agreement, the Abacus Stock Option Agreement and the transactions
contemplated hereby and thereby.
Section 3.14 Opinion of Financial Advisor. Abacus or its Board of
Directors has received the written opinion of The Blackstone Group, dated
as of the date hereof, to the effect that, as of the date hereof, the
Exchange Ratio is fair to the holders of shares of Abacus Common Stock from
a financial point of view. An executed copy of such opinion has been
delivered to Alphabet.
Section 3.15 Brokers. Set forth in the Abacus Disclosure Letter is a
list of each broker, finder or investment banker and other Person entitled
to any brokerage, finder's, investment banking or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Abacus or any of
its Subsidiaries and the expected amounts of such fees and commissions.
Abacus has previously provided to Alphabet copies of any agreements giving
rise to any such fee or commission.
Section 3.16 Tax Matters. (a) All material Tax Returns (defined below)
required to be filed by Abacus or its Subsidiaries on or prior to the
Effective Time or with respect to taxable periods ending on or prior to the
Effective Time have been or will be prepared in good faith and timely filed
with the appropriate Governmental Entity on or prior to the Effective Time
or by the due date thereof including extensions except where the failure to
so file would not, individually or in the aggregate, reasonably be expected
to have an Abacus Material Adverse Effect.
(b) Except where the failure to pay, collect or withhold would
not, individually or in the aggregate, reasonably be expected to have an
Abacus Material Adverse Effect (i) all Taxes (defined below), that are
required to be paid, have been or will be fully paid (except with respect
to matters contested in good faith as set forth in the Abacus Disclosure
Letter) or as of May 2, 1998 adequately reflected as a liability on Abacus'
or its Subsidiaries' books and records (without taking into account any
deferred Tax liabilities) and (ii) all Taxes required to be collected or
withheld from third parties have in all material respects been collected or
withheld.
(c) Abacus and each of its Subsidiaries have not waived any
statute of limitations with respect to federal income Taxes or agreed to
any extension of time with respect to federal income or material state Tax
assessment or deficiency.
(d) As of the date hereof, there are not pending or, to the
knowledge of Abacus, threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters that
(i) were raised by any Taxing authority in a written communication to
Abacus or any Subsidiary and (ii) would, individually or in the aggregate,
reasonably be expected to have an Abacus Material Adverse Effect after
taking into account any reserves for Taxes set forth on the most recent
balance sheet contained in the Abacus SEC Reports filed prior to the date
hereof.
(e) Abacus has made available to Alphabet true and correct copies
of the United States federal income and all material state income or
franchise Tax Returns filed by Abacus and its Subsidiaries for each of its
fiscal years ended on or about January 31, 1995, 1996, and 1997.
As used in this Agreement, (i) the term "Tax " (including, with
correlative meaning, the terms "Taxes" and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
license, premium, environmental (including taxes under Section 59A of the
Code), capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, transfer, property, withholding, excise,
production, occupation, windfall profits, customs duties, social security
(or similar), registration, value added, alternative or add-on minimum,
estimated, occupancy and other taxes, duties or governmental assessments of
any nature whatsoever, together with all interest, penalties and additions
imposed with respect to such amounts and any interest in respect of such
penalties and additions, and (ii) the term "Tax Return" includes all
returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be supplied to a
Tax authority relating to Taxes.
Section 3.17 Intellectual Property. Neither Abacus nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel
and members of the legal department of Abacus involved in intellectual
property, has in the past utilized, any existing or pending patent,
trademark, trade name, service mark, copyright, software, trade secret or
know-how, except for those which are owned, possessed or lawfully used by
Abacus or its Subsidiaries in their business operations, and neither Abacus
nor any of its Subsidiaries infringes upon or unlawfully uses any patent,
trademark, trade name, service mark, copyright or trade secret owned or
validly claimed by another Person except, in each case, as would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect. Abacus and its Subsidiaries own, have a valid
license to use or have the right validly to use all existing and pending
patents, trademarks, tradenames, service marks, copyrights and software
necessary to carry on their respective businesses substantially as
currently conducted except the failure of which to own, validly license or
have the right validly to use, individually or in the aggregate, would not
reasonably be expected to have an Abacus Material Adverse Effect.
Section 3.18 Insurance. Except to the extent adequately accrued on the
most recent balance sheet contained in the Abacus SEC Reports filed as of
the date hereof, neither Abacus nor its Subsidiaries has any obligation
(contingent or otherwise) to pay in connection with any insurance policies
any retroactive premiums or "retro-premiums" that, individually or in the
aggregate, would reasonably be expected to have an Abacus Material Adverse
Effect.
Section 3.19 Contracts and Commitments. Set forth in the Abacus
Disclosure Letter is a complete and accurate list of all of the following
contracts (written or oral), plans, undertakings, commitments or agreements
("Abacus Contracts") to which Abacus or any of its Subsidiaries is a party
or by which any of them is bound as of the date of this Agreement:
(a) each distribution, supply, inventory purchase, franchise,
license, sales, agency or advertising contract involving annual
expenditures or liabilities in excess of $30,000,000 which is not
cancelable (without material penalty, cost or other liability) within one
year;
(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money,
whether as borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other
arrangement containing any "radius clause" applicable to markets in which
Alphabet has operations the compliance (or failure to comply) with which
would reasonably be expected, individually or in the aggregate, to have an
Abacus Material Adverse Effect;
(d) each joint venture or partnership agreement pursuant to which
any third party is entitled to develop any property and/or facility on each
behalf of Abacus or any of its Subsidiaries material to Abacus and its
Subsidiaries taken as a whole; and
(e) any contract that would constitute a "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
True and complete copies of the written Abacus Contracts, as
amended to date, that would be required to be filed as exhibits to Abacus'
Form 10-K if such Form 10-K were being filed on the date hereof, that are
identified in the Abacus Disclosure Letter and have not been filed prior to
the date hereof as Exhibits to the Abacus SEC Reports have been delivered
or made available to Alphabet.
To the knowledge of Abacus, each Abacus Contract is valid and
binding on Abacus, any Subsidiary of Abacus which is a party thereto and
each other party thereto and is in full force and effect, and Abacus and
its Subsidiaries have performed and complied with all obligations required
to be performed or compiled with by them under each Abacus Contract, except
in each case as would not, individually or in the aggregate, reasonably be
expected to have an Abacus Material Adverse Effect.
Section 3.20 Accounting and Tax Matters. Neither Abacus nor any of its
affiliates has taken or agreed to take any action, nor does Abacus have any
knowledge of any fact or circumstance with respect to Abacus, which would
prevent the business combination to be effected pursuant to the Merger from
being accounted for as a "pooling-of-interests" under GAAP or the rules and
regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 3.21 Ownership of Shares of Alphabet. Abacus and its
Subsidiaries do not beneficially own (as defined in Rule 13d-3 under the
Exchange Act) any capital stock or other equity securities of Alphabet or
any Alphabet Equity Rights (as defined herein) other than pursuant to the
Alphabet Stock Option Agreement.
ARTICLE IV
Except as set forth in the corresponding sections or subsections
of the disclosure letter, dated the date hereof, delivered by Alphabet to
Abacus (the "Alphabet Disclosure Letter"), Alphabet and Abacus Holdings
hereby represent and warrant to Abacus as follows:
Section 4.1 Organization and Qualification; Subsidiaries. (a) Alphabet
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Subsidiaries of
Alphabet (including Abacus Holdings) is a corporation or other business
entity duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, and each of Alphabet
and its Subsidiaries has the requisite corporate or other organizational
power and authority to own, operate or lease its properties and to carry on
its business as it is now being conducted, and is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
in each case except as would not, individually or in the aggregate,
reasonably be expected to have an Alphabet Material Adverse Effect.
(b) All of the outstanding shares of capital stock and other
equity securities of the Significant Subsidiaries of Alphabet (including
Abacus Holdings) have been validly issued and are fully paid and
nonassessable, and are owned, directly or indirectly, by Alphabet, free and
clear of all pledges and security interests. All outstanding shares of
capital stock and other equity interests of each Subsidiary of Alphabet
owned directly or indirectly by Alphabet are free and clear of all liens,
claims or encumbrances as would, individually or in the aggregate,
reasonably be expected to have an Alphabet Material Adverse Effect. There
are no subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or
otherwise) entitling any Person to purchase or otherwise acquire from
Alphabet or any of its Significant Subsidiaries at any time, or upon the
happening of any stated event, any shares of capital stock or other equity
securities of any of the Subsidiaries of Alphabet (including Abacus
Holdings). The Alphabet Disclosure Letter lists the name and jurisdiction
of incorporation or organization of each of the Significant Subsidiaries of
Alphabet.
(c) Except for interests in Subsidiaries, neither Alphabet nor
any of its Subsidiaries owns directly or indirectly any material equity
interest in any Person or, other than pursuant to this Agreement, has any
obligation or made any commitment to acquire any such interest or make any
such investment.
Section 4.2 Certificate of Incorporation and Bylaws. Alphabet has
furnished, or otherwise made available, to Abacus a complete and correct
copy of the certificate of incorporation and bylaws, as amended to the date
of this Agreement, of Alphabet. Such certificate of incorporation and
bylaws are in full force and effect. Alphabet is not in violation of any of
the provisions of its certificate of incorporation or bylaws.
Section 4.3 Capitalization. (a) The authorized capital stock of
Alphabet consists of 1,200,000,000 shares of Alphabet Common Stock and
10,000,000 shares of Preferred Stock, par value $1.00 per share (the
"Alphabet Preferred Stock"). At the close of business on July 30, 1998 (the
"Alphabet Capital Stock Disclosure Date"), (i) 245,507,844 shares of
Alphabet Common Stock, and no shares of Alphabet Preferred Stock, were
issued and outstanding and (ii) no shares of Alphabet Common Stock, and no
shares of Alphabet Preferred Stock, were held by Alphabet in its treasury.
The Alphabet Disclosure Letter lists the number of shares of Alphabet
Common Stock and Alphabet Preferred Stock reserved for issuance as of the
Alphabet Capital Stock Disclosure Date under each of the Alphabet Benefit
Plans (as defined in Section 4.10) or otherwise. Since the Alphabet Capital
Stock Disclosure Date until the date of this Agreement, no shares of
Alphabet Common Stock or Alphabet Preferred Stock have been issued or
reserved for issuance, except in respect of the exercise, conversion or
exchange of Alphabet Equity Rights outstanding as of the Alphabet Capital
Stock Disclosure Date and in connection with the Alphabet Stock Option
Agreement. For purposes of this Agreement, "Alphabet Equity Rights" shall
mean subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from Alphabet or any of its
Subsidiaries at any time, or upon the happening of any stated event, any
shares of the capital stock of Alphabet. The Alphabet Disclosure Letter
sets forth the number and type of Alphabet Equity Rights (including the
number and class of Alphabet's capital stock for or into which such
Alphabet Equity Rights are exercisable, convertible or exchangeable and any
Alphabet Benefit Plan pursuant to which such Alphabet Equity Rights were
granted or issued) outstanding as of the Alphabet Capital Stock Disclosure
Date. Other than the Alphabet Equity Rights disclosed in the Alphabet
Disclosure Letter and the Alphabet Equity Rights granted pursuant to the
Alphabet Stock Option Agreement, Alphabet does not have any outstanding
Alphabet Equity Rights as of the date of this Agreement. Except as
disclosed in the Alphabet SEC Reports (defined below), no stockholders of
Alphabet are party to any voting agreement, voting trust or similar
arrangement with respect to Alphabet Shares to which Alphabet or any
Subsidiary of Alphabet is a Party.
(b) There are no outstanding obligations of Alphabet or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Alphabet Common Stock or any Alphabet Equity Rights (except in connection
with the exercise, conversion or exchange of outstanding Alphabet Equity
Rights). All of the issued and outstanding shares of Alphabet Common Stock
are validly issued, fully paid, nonassessable and free of preemptive
rights. The Alphabet Disclosure Letter sets forth the number of shares of
Alphabet Common Stock repurchased, and the number issued, by Alphabet or
any of its Subsidiaries since July 1, 1996.
Section 4.4 Power and Authority; Authorization; Valid & Binding. Each
of Alphabet and Abacus Holdings has the necessary corporate power and
authority to deliver this Agreement and, in the case of Alphabet, the Stock
Option Agreements, to perform its obligations hereunder, as applicable, and
to consummate the transactions contemplated hereby, as applicable, except
that the issuance of shares of Alphabet Common Stock in accordance with the
terms of this Agreement is subject to the approval of stockholders of
Alphabet as required by the rules and regulations of the NYSE. The
execution and delivery by each of Alphabet and Abacus Holdings of this
Agreement and, in the case of Alphabet, the Stock Option Agreements, the
performance by it of its obligations hereunder and thereunder, as
applicable, and the consummation by Alphabet of the transactions
contemplated hereby and thereby, as applicable, have been duly authorized
by all necessary corporate action on the part of Alphabet, except that the
issuance of shares of Alphabet Common Stock in accordance with the terms of
this Agreement and the Merger is subject to the approval of stockholders of
Alphabet as required by the rules and regulations of the NYSE. This
Agreement has been duly executed and delivered by Alphabet and Abacus
Holdings and, assuming the due authorization, execution and delivery by
Abacus, constitutes a legal, valid and binding obligation of Alphabet and
Abacus Holdings enforceable against such parties in accordance with the
terms hereof or thereof, subject to bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
Section 4.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by each of Alphabet and Abacus
Holdings and the Alphabet Stock Option Agreement by Alphabet does not, and
the performance by Alphabet of its obligations hereunder and thereunder and
the consummation by Alphabet of the transactions contemplated hereby and
thereby will not, (i) violate or conflict with the certificate of
incorporation or bylaws of Alphabet (ii) subject to obtaining or making the
notices, reports, filings, waivers, consents, approvals or authorizations
referred to in paragraph (b) below, conflict with or violate any law,
regulation, court order, judgment or decree applicable to Alphabet or any
of its Subsidiaries or by which any of their respective property is bound
or affected, (iii) subject to obtaining the approval of the stockholders of
Alphabet for the issuance of shares of Alphabet Common Stock in accordance
with the terms hereof, result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, cancellation, vesting,
modification, alteration or acceleration of any obligation under, result in
the creation of a lien, claim or encumbrance on any of the properties or
assets of Alphabet or any of its Subsidiaries pursuant to, result in the
loss of any material benefit under (including an increase in the price paid
by, or cost to, Alphabet or any of its Subsidiaries), require the consent
of any other party to, or result in any obligation on the part of Alphabet
or any of its Subsidiaries to repurchase (with respect to a bond or a
note), any agreement, contract, instrument, bond, note, indenture, permit,
license or franchise to which Alphabet or any of its Subsidiaries is a
party or by which Alphabet, any of its Subsidiaries or any of their
respective property is bound or affected, except, in the case of clauses
(ii) and (iii) above, as would not, individually or in the aggregate,
reasonably be expected to have an Alphabet Material Adverse Effect.
(b) Except for applicable requirements, if any, under the
premerger notification requirements of the HSR Act, the filing of a
certificate of merger with respect to the Merger as required by the DGCL,
filings with the SEC under the Securities Act and the Exchange Act, any
filings required pursuant to any state securities or "blue sky" laws any
filings required pursuant to any state liquor, gaming or pharmacy laws, any
applicable Environmental Laws (as defined herein) governing the transfer of
any interest in real property or of business operations (including without
limitation transfer acts, notifications, and deed restrictions), and the
transfer or application requirements with respect to the environmental
permits of Alphabet or its Subsidiaries, or pursuant to the rules and
regulations of any stock exchange on which the Alphabet Shares are listed,
and approval of stockholders required under the rules and regulations of
the NYSE, neither Alphabet nor any of its Subsidiaries (including Abacus
Holdings) is required to submit any notice, report or other filing with any
Governmental Entity in connection with the execution, delivery, performance
or consummation of this Agreement, the Stock Option Agreements or the
Merger except for such notices, reports or filings, that, if not made,
would not, individually or in the aggregate, reasonably be expected to have
an Alphabet Material Adverse Effect. Except as set forth in the immediately
preceding sentence, no waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained by Alphabet or any of its
Subsidiaries (including Abacus Holdings) in connection with its execution,
delivery, performance or consummation of this Agreement, the Stock Option
Agreements or the transactions contemplated hereby and thereby except for
such waivers, consents, approvals or authorizations that, if not obtained
or made, would not, individually or in the aggregate, reasonably be
expected to have an Alphabet Material Adverse Effect.
Section 4.6 SEC Reports; Financial Statements. (a) Alphabet has filed
all forms, reports and documents (including all Exhibits, Schedules and
Annexes thereto) required to be filed by it with the SEC since January 1,
1995, including any amendments or supplements thereto (collectively,
including any such forms, reports and documents filed after the date
hereof, the "Alphabet SEC Reports"), and, with respect to the Alphabet SEC
Reports filed by Alphabet after the date hereof and prior to the Closing
Date, will deliver or make available, to Abacus all of its Alphabet SEC
Reports in the form filed with the SEC. The Alphabet SEC Reports (i) were
(and any Alphabet SEC Reports filed after the date hereof will be) in all
material respects in accordance with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) as of their respective filing dates, did
not (and any Alphabet SEC Reports filed after the date hereof will not)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Alphabet SEC Reports (or incorporated therein
by reference) fairly present in all material respects (or, with respect to
financial statements contained in the Alphabet SEC Reports filed after the
date hereof, will fairly present in all material respects) the consolidated
financial position of Alphabet and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of operations,
retained earnings and cash flows of Alphabet and its consolidated
subsidiaries for the respective periods indicated, in each case in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the
notes thereto) and the rules and regulations of the SEC, except that
interim financial statements are subject to normal year-end adjustments
which are not and are not expected to be, individually or in the aggregate,
material in amount and do not include certain notes which may be required
by GAAP but which are not required by Form 10-Q of the SEC.
Section 4.7 Absence of Certain Changes. Except as disclosed in the
Alphabet SEC Reports filed prior to the date hereof, (a) since the end of
Alphabet's fiscal year last ended, Alphabet and each of its Subsidiaries
has conducted its business in all material respects in the ordinary and
usual course of its business consistent with past practice and there has
not been any change in the financial condition, business or results of
operations of Alphabet and its Subsidiaries or any development or
combination of developments that, individually or in the aggregate, has had
or would reasonably be expected to have an Alphabet Material Adverse Effect
and (b) since the end of Alphabet's fiscal year last ended until the date
hereof, there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution in respect of the capital stock of
Alphabet, other than regular cash dividends consistent with past practice;
(ii) any change by Alphabet to its accounting policies, practices or
methods; (iii) any amendment or change to the terms of any of its
indebtedness material to Alphabet and its Subsidiaries taken as a whole;
(iv) any incurrence of any material indebtedness outside of the ordinary
course of business; (v) outside the ordinary course of business, any
transfer, lease, license, sale, mortgage, pledge, encumbrance or other
disposition of assets or properties material to Alphabet and its
Subsidiaries taken as a whole; (vi) any material damage, destruction or
other casualty loss with respect to any asset or property owned, leased or
otherwise used by Alphabet or its Subsidiaries material to Alphabet and its
Subsidiaries taken as a whole, whether or not covered by insurance; (vii)
except on a case-by-case basis in the ordinary course of business
consistent with past practice for employees other than executive officers
or directors, or except as required by applicable law or pursuant to a
contractual obligation in effect as of the date of this Agreement, (A) any
execution, adoption or amendment of any agreement or arrangement relating
to severance or any employee benefit plan or employment or consulting
agreement (including, without limitation, the Alphabet Benefit Plans
referred to in Section 4.10 hereof) or (B) any grant of any stock options
or other equity related award; or (viii) any agreement or commitment
entered into with respect to any of the foregoing.
Section 4.8 Litigation and Liabilities. (a) Except as disclosed in the
Alphabet SEC Reports filed prior to the date hereof, there are no civil,
criminal or administrative actions, suits or claims, proceedings (including
condemnation proceedings) or, to the knowledge of Alphabet, hearings or
investigations, pending or, to the knowledge of Alphabet, threatened
against, or otherwise adversely affecting Alphabet or any of its
Subsidiaries or any of their respective properties and assets, except for
any of the foregoing which would not, individually or in the aggregate,
reasonably be expected to have an Alphabet Material Adverse Effect.
(b) Neither Alphabet nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) the existence of
which would, individually or in the aggregate, reasonably be expected to
have an Alphabet Material Adverse Effect, except (i) liabilities described
in the Alphabet SEC Reports filed with the SEC prior to the date hereof or
reflected on the Alphabet's consolidated balance sheet (and related notes
thereto) as of the end of its most recently completed fiscal year filed in
the Alphabet SEC Reports, (ii) liabilities incurred since the end of
Alphabet's most recently completed fiscal year in the ordinary course of
business consistent with past practice, that would not, individually or in
the aggregate, reasonably be expected to have an Alphabet Material Adverse
Effect or (iii) liabilities permitted to be incurred pursuant to Section
5.2.
Section 4.9 No Violation of Law; Permits. The business of Alphabet and
each of its Subsidiaries is being conducted in accordance with all
applicable statutes of law, ordinances, regulations, judgments, orders or
decrees of any Governmental Entity, and not in violation of any permits,
franchises, licenses, authorizations or consents granted by any
Governmental Entity, and Alphabet and each of its Subsidiaries has obtained
all permits, franchises, licenses, authorizations or consents necessary for
the conduct of its business, except, in each case, as would not,
individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect. Neither Alphabet nor any of its
Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by or is a party to any written agreement,
consent agreement or memorandum of understanding with, or to the knowledge
of Alphabet, is a party to any commitment letter or similar undertaking to,
or, to the knowledge of Alphabet, is subject to any order or directive by,
or has adopted any board resolutions at the request of, any Governmental
Entity, that materially restricts the conduct of its business (whether the
type of business, the location thereof or otherwise) and which,
individually or in the aggregate, would reasonably be expected to have an
Alphabet Material Adverse Effect, nor to the knowledge of Alphabet, has
Alphabet been advised in writing that any Governmental Entity has proposed
issuing or requesting any of the foregoing.
Section 4.10 Employee Matters; ERISA. (a) Set forth in the Alphabet
Disclosure Letter is a complete list of each Alphabet Benefit Plan and each
Alphabet Multiemployer Plan. The term "Alphabet Benefit Plan" shall mean
(i) each plan, program, policy, contract or agreement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any
kind including, without limitation, any "employee benefit plan," within the
meaning of Section 3(3) of ERISA but excluding any "multiemployer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, and (ii) each
employment, severance, consulting, non-compete, confidentiality, or similar
agreement or contract, in each case, with respect to which Alphabet or any
Subsidiary of Alphabet has or may have any liability (accrued, contingent
or otherwise). The term "Alphabet Multiemployer Plan" shall mean any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA in
respect to which Alphabet or any Subsidiary of Alphabet has or may have any
liability (accrued, contingent or otherwise).
(b) Alphabet has provided or made available, or has caused to be
provided or made available, to Abacus (i) current, accurate and complete
copies of all documents embodying each Alphabet Benefit Plan, including all
amendments thereto, written interpretations thereof (which interpretation
materially increases the liabilities of Alphabet and its Subsidiaries taken
as a whole under the relevant Alphabet Benefit Plan) and all trust or
funding agreements with respect thereto; (ii) the most recent annual
actuarial valuation, if any, prepared for each Alphabet Benefit Plan; (iii)
the most recent annual report (Series 5500 and all schedules thereto), if
any, required under ERISA in connection with each Alphabet Benefit Plan or
related trust; (iv) the most recent determination letter received from the
Internal Revenue Service, if any, for each Alphabet Benefit Plan and
related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (v) if any Alphabet Benefit Plan is funded, the most
recent annual and periodic accounting of such Alphabet Benefit Plan's
assets; (vi) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA
with respect to each Alphabet Benefit Plan; and (vii) all material
communications to any one or more current, former or retired employee,
officer, consultant, independent contractor, agent or director of Alphabet
or any Subsidiary of Alphabet (each, an "Alphabet Employee" and
collectively, the "Alphabet Employees") relating to each Alphabet Benefit
Plan (which communication materially increases the liabilities of Alphabet
and its Subsidiaries taken as a whole under the relevant Alphabet Benefit
Plan).
(c) All Alphabet Benefit Plans have been administered in all
respects in accordance with the terms thereof and all applicable laws
except for violations which, individually or in the aggregate, would not
reasonably be expected to have an Alphabet Material Adverse Effect. Each
Alphabet Benefit Plan which is a Pension Plan and which is intended to be
qualified under Section 401(a) of the Code (each, an "Alphabet Pension
Plan"), has received a favorable determination letter from the Internal
Revenue Service, and Alphabet is not aware of any circumstances that would
reasonably be expected to result in the revocation or denial of such
qualified status. Except as otherwise set forth in the Alphabet Disclosure
Letter or in the Alphabet SEC Reports filed prior to the date hereof, there
is no pending or, to Alphabet's knowledge, threatened, claim, litigation,
proceeding, audit, examination or investigation relating to any Alphabet
Benefit Plans or Alphabet Employees that, individually or in the aggregate,
would reasonably be expected to have an Alphabet Material Adverse Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Alphabet or any Subsidiaries of
Alphabet or any entity which is considered a single employer with Alphabet
or any Subsidiary of Alphabet under Section 4001(a)(15) of ERISA or Section
414 of the Code (an "Alphabet ERISA Affiliate"). No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Alphabet Pension Plan within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the
aggregate) required to be made under the terms of any Alphabet Benefit Plan
have been made. No Alphabet Pension Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither Alphabet nor any Subsidiaries of
Alphabet nor any Alphabet ERISA Affiliate has provided, or is required to
provide, security to any Alphabet Pension Plan pursuant to Section
401(a)(29) of the Code.
(f) Except as set forth in the Alphabet SEC Reports filed prior
to the date hereof, under each Alphabet Pension Plan which is a defined
benefit plan, as of the last day of the most recent plan year ended prior
to the date hereof, the actuarially determined present value of all
"benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained in each
such Pension Plan's most recent actuarial valuation) did not exceed the
then current value of the assets of such Pension Plan, and there has been
no adverse change in the financial condition of such Pension Plan (with
respect to either assets or benefits) since the last day of the most recent
plan year of such Pension Plan.
(g) As of the Closing Date, neither Alphabet, any Subsidiary of
Alphabet nor any Alphabet ERISA Affiliate will have incurred any withdrawal
liability as described in Section 4201 of ERISA for withdrawals that have
occurred on or prior to the Closing Date that has not previously been
satisfied. Neither Alphabet, any Subsidiary of Alphabet nor any Alphabet
ERISA Affiliate has knowledge that any Alphabet Multiemployer Plan fails to
qualify under Section 401(a) of the Code, is insolvent or is in
reorganization within the meaning of Part 3 of Subtitle E of Title IV of
ERISA nor of any condition that would reasonably be expected to result in
an Alphabet Multiemployer Plan becoming insolvent or going into
reorganization.
(h) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event
under any Alphabet Benefit Plan, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Alphabet Employee, or (ii)
result in the triggering or imposition of any restrictions or limitations
on the right of Alphabet or any Subsidiary of Alphabet to amend or
terminate any Alphabet Benefit Plan. No payment or benefit which will or
may be made by Alphabet, any Subsidiary of Alphabet or any of their
respective affiliates with respect to any Alphabet Employee will be
characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code.
Section 4.11 Labor Matters. (a) Except as set forth in the Alphabet
SEC Reports filed prior to the date hereof and except for those matters
that would not, individually or in the aggregate, reasonably be expected to
have an Alphabet Material Adverse Effect, no work stoppage, slowdown,
lockout or labor strike against Alphabet or any Subsidiary of Alphabet by
Alphabet Employees (or any union that represents them) is pending or, to
the knowledge of Alphabet, threatened.
(b) Except as set forth in the Alphabet SEC Reports filed prior
to the date hereof and as, individually or in the aggregate, would not
reasonably be expected to have an Alphabet Material Adverse Effect, as of
the date of this Agreement, neither Alphabet nor any Subsidiary of Alphabet
is involved in or, to the knowledge of Alphabet, threatened with any labor
dispute, grievance, or arbitration or union organizing activity (by it or
any of its employees) involving any Alphabet Employees.
Section 4.12 Environmental Matters. Except as set forth in Alphabet's
SEC Reports filed prior to the date hereof and except for those matters
that would not, individually or in the aggregate, reasonably be expected to
have an Alphabet Material Adverse Effect:
(i) Alphabet and each of its Subsidiaries is in compliance
with all applicable Environmental Laws, and neither Alphabet nor any of its
Subsidiaries has received any written communication from any Person or
Governmental Entity that alleges that Alphabet or any of its Subsidiaries
is not in compliance with applicable Environmental Laws.
(ii) Alphabet and each of its Subsidiaries has obtained or
has applied for all Environmental Permits necessary for the construction of
its facilities or the conduct of its operations, and all those
Environmental Permits are in effect or, where applicable, a renewal
application has been timely filed and is pending agency approval, and
Alphabet and its Subsidiaries are in compliance with all terms and
conditions of such Environmental Permits.
(iii) There is no Environmental Claim pending or, to the
knowledge of Alphabet, threatened (i) against Alphabet or any of its
Subsidiaries, (ii) against any Person whose liability for any Environmental
Claim has been retained or assumed contractually by Alphabet or any of its
Subsidiaries, or (iii) against any real or personal property or operations
which Alphabet or any of its Subsidiaries owns, leases or operates, in
whole or in part.
(iv) There have been no Releases of any Hazardous Material
that would be reasonably likely to form the basis of any Environmental
Claim against Alphabet or any of its Subsidiaries, or against any Person
whose liability for any Environmental Claim has been retained or assumed
contractually by Alphabet or any of its Subsidiaries.
(v) None of the properties owned, leased or operated by
Alphabet, its Subsidiaries or any predecessor thereof are now, or were in
the past, listed on the National Priorities List of Superfund Sites or any
analogous state list (excluding easements that transgress those Superfund
sites).
Section 4.13 Board Action; Vote Required. (a) Alphabet's Board of
Directors has approved this Agreement, the Alphabet Stock Option Agreement
and the transactions contemplated hereby and thereby, including the Merger,
has determined that the Merger is advisable, fair to and in the best
interests of Alphabet and its stockholders and has resolved to recommend to
its stockholders that they vote in favor of the issuance of shares of
Alphabet Common Stock pursuant to the terms hereof. Neither Section 203 of
the DGCL, nor any other state takeover or similar statute or regulation
applies to the Merger, this Agreement, the Alphabet Stock Option Agreement
(including the purchase of shares of Alphabet Common Stock thereunder) or
any of the transactions contemplated hereby or thereby. The Board of
Directors of Alphabet has duly adopted (and not withdrawn) a resolution
rescinding any authorization previously granted permitting Alphabet to
repurchase shares of Alphabet Common Stock.
(b) The affirmative vote of the holders of a majority of the
shares of Alphabet Common Stock present in person or by proxy at a duly
convened and held meeting of the stockholders of Alphabet is necessary to
approve the issuance by Alphabet of the shares of Alphabet Common Stock
pursuant to the terms hereof. Such vote is the only vote of the holders of
any class or series of Alphabet's capital stock required in connection with
this Agreement, the Stock Option Agreements and the transactions
contemplated hereby and thereby.
Section 4.14 Opinion of Financial Advisor. Alphabet or its Board of
Directors has received the written opinion of Merrill Lynch, Pierce, Fenner
& Smith Incorporated dated as of the date hereof, to the effect that, as of
the date hereof, the Exchange Ratio is fair from a financial point of view
to Alphabet. An executed copy of such opinion has been delivered to Abacus.
Section 4.15 Brokers. Set forth in the Alphabet Disclosure Letter is a
list of each broker, finder or investment banker and other Person entitled
to any brokerage, finder's, investment banking or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Alphabet or any
of its Subsidiaries and the expected amounts of such fees and commissions.
Alphabet has previously provided to Abacus copies of any agreements giving
rise to any such fee or commission.
Section 4.16 Tax Matters. (a) All material Tax Returns required to be
filed by Alphabet or its Subsidiaries on or prior to the Effective Time or
with respect to taxable periods ending on or prior to the Effective Time
have been or will be prepared in good faith and timely filed with the
appropriate Governmental Entity on or prior to the Effective Time or by the
due date thereof including extensions except where the failure to so file
would not, individually or in the aggregate, reasonably be expected to have
an Alphabet Material Adverse Effect.
(b) Except where the failure to pay, collect or withhold would
not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect (i) all Taxes that are required to be paid
have been or will be fully paid (except with respect to matters contested
in good faith as set forth in the Alphabet Disclosure Letter) or as of May
2, 1998 adequately reflected as a liability on Alphabet's or its
Subsidiaries' books and records (without taking into account any deferred
Tax liabilities) and (ii) all Taxes required to be collected or withheld
from third parties have in all material respects been collected or
withheld.
(c) Alphabet and each of its Subsidiaries have not waived any
statute of limitations with respect to federal income Taxes or agreed to
any extension of time with respect to a federal income or material state
Tax assessment or deficiency.
(d) As of the date hereof, there are not pending or, to the
knowledge of Alphabet, threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters that
(i) were raised by any Taxing authority in a written communication to
Alphabet or any Subsidiary and (ii) would, individually or in the
aggregate, reasonably be expected to have an Alphabet Material Adverse
Effect after taking into account any reserves for Taxes set forth on the
most recent balance sheet contained in the Alphabet SEC Report filed prior
to the date hereof.
(e) Alphabet has made available to Abacus true and correct copies
of the United States federal income and all material state income or
franchise Tax Returns filed by Alphabet and its Subsidiaries for each of
its fiscal years ended on or about January 31, 1995, 1996, 1997.
Section 4.17 Intellectual Property. Neither Alphabet nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel
and the members of the legal department of Alphabet involved in
intellectual property, has in the past, utilized any existing or pending
patent, trademark, trade name, service mark, copyright, software, trade
secret or know-how, except for those which are owned, possessed or lawfully
used by Alphabet or its Subsidiaries in their business operations, and
neither Alphabet nor any of its Subsidiaries infringes upon or unlawfully
uses any patent, trademark, trade name, service mark, copyright or trade
secret owned or validly claimed by another Person except, in each case, as
would not, individually or in the aggregate, reasonably be expected to have
an Alphabet Material Adverse Effect. Alphabet and its Subsidiaries own or
have a valid license to use or have the right validly to use all existing
and pending patents, trademarks, tradenames, service marks, copyrights and
software necessary to carry on their respective businesses substantially as
currently conducted except the failure of which to own, or validly license,
or have the right to validly use individually or in the aggregate, would
not reasonably be expected to have an Alphabet Material Adverse Effect.
Section 4.18 Insurance. Except to the extent adequately accrued on the
most recent balance sheet contained in the Alphabet SEC Reports filed as of
the date hereof, neither Alphabet nor its Subsidiaries has any obligation
(contingent or otherwise) to pay in connection with any insurance policies
any retroactive premiums or "retro premiums" that, individually in the
aggregate, would reasonably be expected to have, an Alphabet Material
Adverse Effect.
Section 4.19 Contracts and Commitments. Set forth in the Alphabet
Disclosure Letter is a complete and accurate list of all of the following
contracts (written or oral), plans, undertakings, commitments or agreements
("Alphabet Contracts") to which Alphabet or any of its Subsidiaries is a
party or by which any of them is bound as of the date of this Agreement.
(a) each distribution, supply, inventory purchase, franchise,
license, sales, agency or advertising contract involving annual
expenditures or liabilities in excess of $30,000,000 which is not
cancelable (without material penalty, cost or other liability) within one
(1) year;
(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money,
whether as borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other
arrangement containing any "radius clause" applicable to markets in which
Alphabet has operations the compliance (or failure to comply) with which
would not reasonably be expected, individually or in the aggregate, to have
an Alphabet Material Adverse Effect;
(d) each joint venture or partnership agreement pursuant to which
any third party is entitled to develop any property and/or facility on each
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