AGREEMENT AND PLAN OF MERGER

 

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                                                                     EXHIBIT 2.1

 

                                                                  EXECUTION COPY

 

              -----------------------------------------------------

 

                           AGREEMENT AND PLAN OF MERGER

 

                                      among

 

                                 WPP GROUP PLC,

 

 

                            ABBEY MERGER CORPORATION

 

                                       and

 

                              GREY GLOBAL GROUP INC.

 

                         Dated as of September 11, 2004

 

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                                TABLE OF CONTENTS

 

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ARTICLE I THE MERGER.............................................................................      1

 

SECTION   1.1 The Merger..........................................................................      1

SECTION   1.2 Closing; Effective Time.............................................................      2

SECTION   1.3 Effects of the Merger...............................................................      2

SECTION   1.4 Certificate of Incorporation; By-Laws...............................................      2

SECTION   1.5 Directors and Officers..............................................................      2

 

ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS.............      3

 

SECTION   2.1 Conversion of Securities............................................................      3

SECTION   2.2 Certain Actions Related to Conversion of Securities.................................      4

SECTION   2.3 Options; Restricted Stock; SMIP.....................................................      8

SECTION   2.4 Convertible Debentures..............................................................     12

SECTION   2.5 Dissenting Shares...................................................................     12

SECTION   2.6 Surrender of Shares.................................................................     12

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................     16

 

SECTION   3.1 Organization and Qualification; Subsidiaries........................................     16

SECTION   3.2 Certificate of Incorporation and By-laws............................................     17

SECTION   3.3 Capitalization......................................................................     17

SECTION   3.4 Authority...........................................................................     18

SECTION   3.5 No Conflict; Required Filings and Consents..........................................     19

SECTION   3.6 Compliance..........................................................................     20

SECTION   3.7 SEC Filings; Financial Statements...................................................     20

SECTION   3.8 Absence of Certain Changes or Events................................................     21

SECTION   3.9 Absence of Litigation...............................................................     22

SECTION   3.10 Employee Benefit Plans.............................................................     22

SECTION   3.11 Labor and Employment Matters.......................................................     25

SECTION   3.12 Insurance..........................................................................     26

SECTION   3.13 Properties.........................................................................     26

SECTION   3.14 Tax Matters........................................................................     26

SECTION   3.15 Opinions of Financial Advisors.....................................................     28

SECTION   3.16 Brokers............................................................................     28

SECTION   3.17 Takeover Statutes; Rights Plans....................................................     28

SECTION   3.18 Intellectual Property..............................................................     28

SECTION   3.19 Environmental Matters..............................................................     29

SECTION   3.20 No Undisclosed Liabilities.........................................................     30

SECTION   3.21 Contracts..........................................................................     30

SECTION   3.22 Continuity of Business.............................................................     31

SECTION   3.23 Tax Treatment......................................................................     31

SECTION   3.24 Affiliate Transactions.............................................................     32

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SECTION   3.25 No Other Representations or Warranties.............................................     32

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................     32

 

SECTION   4.1 Organization and Qualification; Subsidiaries........................................     32

SECTION   4.2 Memorandum and Articles of Association; Deposit Agreement...........................     33

SECTION   4.3 Capitalization......................................................................     33

SECTION   4.4 Authority...........................................................................     34

SECTION   4.5 No Conflict; Required Filings and Consents..........................................     34

SECTION   4.6 Absence of Litigation...............................................................     35

SECTION   4.7 Brokers.............................................................................     35

SECTION   4.8 SEC Filings; Financial Statements...................................................     36

SECTION   4.9 Absence of Certain Changes or Events................................................     37

SECTION   4.10 Tax Treatment......................................................................     37

SECTION   4.11 Financing..........................................................................     37

SECTION   4.12 Operations of Merger Sub...........................................................     37

SECTION   4.13 Ownership of Shares................................................................     37

SECTION   4.14 Vote/Approval Required.............................................................     37

SECTION   4.15 No Undisclosed Liabilities.........................................................     37

SECTION   4.16 No Other Representations or Warranties.............................................     38

 

ARTICLE V CONDUCT PENDING THE MERGER.............................................................     38

 

SECTION   5.1 Conduct of the Company Pending the Merger...........................................     38

SECTION   5.2 Conduct of Parent Pending the Merger................................................     42

SECTION   5.3 No Control of Other Party's Business................................................     42

SECTION   5.4 Certain Notices.....................................................................     43

 

ARTICLE VI ADDITIONAL AGREEMENTS.................................................................     43

 

SECTION   6.1 Stockholders Meeting................................................................     43

SECTION   6.2 Registration Statement; Information Supplied........................................     44

SECTION   6.3 Resignation of Directors............................................................     45

SECTION   6.4 Access to Information; Confidentiality..............................................     45

SECTION   6.5 Acquisition Proposals...............................................................     46

SECTION   6.6 Employment and Employee Benefits Matters............................................     49

SECTION   6.7 Directors' and Officers' Indemnification and Insurance..............................     50

SECTION   6.8 Further Actions.....................................................................     51

SECTION   6.9 Public Announcements................................................................     53

SECTION   6.10 Takeover Statutes..................................................................     54

SECTION   6.11 Trading/Listing Applications; Establishment of Parent Depository Shares............     54

SECTION   6.12 Letters of Accountants.............................................................     54

SECTION   6.13 Agreements of Company Affiliates...................................................     55

SECTION   6.14 Tax Representation Letters.........................................................     55

SECTION   6.15 Section 16(b)......................................................................     55

SECTION   6.16 Convertible Debentures.............................................................     55

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SECTION   6.17 Tax Reporting Requirement..........................................................     55

 

ARTICLE VII CONDITIONS OF MERGER.................................................................     56

 

SECTION   7.1 Conditions to Obligation of Each Party to Effect the Merger.........................     56

SECTION   7.2 Conditions to Obligations of Parent and Merger Sub..................................     57

SECTION   7.3 Conditions to Obligations of the Company............................................     58

 

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................     59

 

SECTION   8.1 Termination.........................................................................     59

SECTION   8.2 Effect of Termination...............................................................     60

SECTION   8.3 Expenses............................................................................     62

SECTION   8.4 Amendment...........................................................................     62

SECTION   8.5 Waiver..............................................................................     62

 

ARTICLE IX GENERAL PROVISIONS....................................................................     62

 

SECTION   9.1 Non-Survival of Representations, Warranties and Agreements..........................     62

SECTION   9.2 Notices.............................................................................     62

SECTION   9.3 Certain Definitions.................................................................     63

SECTION   9.4 Severability........................................................................     65

SECTION   9.5 Entire Agreement; Assignment........................................................     65

SECTION   9.6 Parties in Interest.................................................................     65

SECTION   9.7 Governing Law.......................................................................     65

SECTION   9.8 Headings............................................................................     65

SECTION   9.9 Counterparts........................................................................     66

SECTION   9.10 Specific Performance; Jurisdiction.................................................     66

SECTION   9.11 Parent Guarantee...................................................................     66

SECTION   9.12 Interpretation.....................................................................     66

SECTION   9.13 WAIVER OF JURY TRIAL...............................................................     67

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                            INDEX OF PRINCIPAL TERMS

 

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2004 Bonus Program.......................................................................................    51

Acquisition Proposal.....................................................................................    49

affiliate................................................................................................    67

Agreement................................................................................................     1

Antitrust Law............................................................................................    55

beneficial owner.........................................................................................    67

beneficially owned.......................................................................................    67

Book-Entry Shares........................................................................................    13

Burdensome Conditions....................................................................................    55

business day.............................................................................................    67

By-Laws..................................................................................................    17

Cash Cap Number..........................................................................................     5

Cash Electing Share......................................................................................     3

Cash Election............................................................................................     3

Cash Election Number.....................................................................................     6

Cash Percentage..........................................................................................     5

Cause....................................................................................................    10

Certificate of Incorporation.............................................................................    17

Certificate of Merger....................................................................................     2

Certificates.............................................................................................     7

Class B Common Stock.....................................................................................     3

Class B Shares...........................................................................................     3

Closing..................................................................................................     2

Closing Date.............................................................................................     2

Code ....................................................................................................     1

Common Law Employee......................................................................................    26

Common Shares............................................................................................     3

Common Stock.............................................................................................     3

Company..................................................................................................     1

Company Affiliates.......................................................................................    58

Company Board Recommendation.............................................................................    46

Company Common Stock.....................................................................................     3

Company Confidentiality Agreement........................................................................    48

Company Disclosure Schedule..............................................................................    16

Company Employees........................................................................................    24

Company Material Adverse Effect..........................................................................    17

Company Plans............................................................................................    24

Company Proxy Statement..................................................................................    46

Company SEC Reports......................................................................................    22

Company Stock Option.....................................................................................     9

Company Stock Plans......................................................................................    18

Confidentiality Agreements...............................................................................    49

Contracts................................................................................................    20

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control..................................................................................................      67

controlled...............................................................................................      67

controlled by............................................................................................      67

Convertible Debenture Actions............................................................................   58,59

Convertible Debentures...................................................................................      12

corresponding section....................................................................................      67

Costs....................................................................................................      53

Deposit Agreement........................................................................................       4

Depository...............................................................................................       4

DGCL ....................................................................................................       1

Disability...............................................................................................      10

Dissenting Shares........................................................................................      13

DOJ .....................................................................................................      54

ECMR ....................................................................................................      21

Effective Time...........................................................................................       2

Electing Shares..........................................................................................       3

Election Date............................................................................................       8

EM Agreement.............................................................................................       1

employee benefit plan....................................................................................      24

Environmental Laws.......................................................................................      31

Environmental Permits....................................................................................      31

ERISA....................................................................................................      24

Europe...................................................................................................      10

Europe Company Stock Option..............................................................................       9

European Person..........................................................................................       9

Exchange Act.............................................................................................       8

Exchange Agent...........................................................................................      13

Exchange Ratio...........................................................................................       3

Excluded Shares..........................................................................................       3

Financial Advisors.......................................................................................      29

Foreign Antitrust Laws...................................................................................      21

Foreign Benefit Plan.....................................................................................      24

Form F-4.................................................................................................      46

Form of Election.........................................................................................       7

FTC .....................................................................................................      54

Good Reason..............................................................................................      10

Governmental Entity......................................................................................      21

HSR Act..................................................................................................      21

Indemnified Parties......................................................................................      53

Indenture................................................................................................      12

Intellectual Property....................................................................................      30

IRS .....................................................................................................      24

knowledge................................................................................................      68

Leases...................................................................................................      27

Licenses.................................................................................................      21

Material Contract........................................................................................      32

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materially delay.........................................................................................      68

Materials of Environmental Concern.......................................................................      31

Merger...................................................................................................       1

Merger Consideration.....................................................................................       5

Merger Requisite Votes...................................................................................      20

Merger Sub...............................................................................................       1

Non-Electing Holders.....................................................................................      14

Non-Electing Share.......................................................................................       4

Non-Europe Company Stock Option..........................................................................       9

Official List............................................................................................      11

Other Consideration......................................................................................       7

Other Shares Value.......................................................................................       7

Parent...................................................................................................       1

Parent ADRs..............................................................................................       4

Parent Confidentiality Agreement.........................................................................      49

Parent Depository Shares.................................................................................       3

Parent Disclosure Schedule...............................................................................      34

Parent Listing Particulars...............................................................................      47

Parent Material Adverse Effect...........................................................................      34

Parent Ordinary Share Certificates.......................................................................      13

Parent Ordinary Shares...................................................................................       4

Parent Reports...........................................................................................      38

Per Share Cash Consideration.............................................................................       3

Per Share Stock Consideration............................................................................       4

person...................................................................................................      68

Preferred Stock..........................................................................................      18

Representatives..........................................................................................      49

Restricted Shares........................................................................................      11

SEC .....................................................................................................      10

Securities Act...........................................................................................      21

Shares...................................................................................................       3

Shortfall Number.........................................................................................       6

Significant Subsidiary...................................................................................      19

SMIP ....................................................................................................      11

Stock Electing Share.....................................................................................       3

Stock Election...........................................................................................       3

Stockholders Meeting.....................................................................................      46

subsidiary...............................................................................................      68

Superior Proposal........................................................................................      50

Surviving Corporation....................................................................................       2

Takeover Statute.........................................................................................      30

Tax Representation Letter................................................................................      58

Tax Return...............................................................................................      29

Taxes....................................................................................................      29

Termination Date.........................................................................................      63

Termination Fee..........................................................................................      64

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U.K. GAAP................................................................................................      38

U.S. generally accepted accounting principles............................................................      68

UKLA ....................................................................................................      11

under common control with................................................................................      67

Voting Agreement.........................................................................................       1

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                          AGREEMENT AND PLAN OF MERGER

 

                  AGREEMENT AND PLAN OF MERGER, dated as of September 11, 2004

(this "Agreement"), among WPP Group plc, an English public limited company

("Parent"), Abbey Merger Corporation, a Delaware corporation and a wholly-owned

subsidiary of Parent ("Merger Sub"), and Grey Global Group Inc., a Delaware

corporation (the "Company").

 

                  WHEREAS, the Board of Directors of the Company has (i)

determined that it is in the best interests of the Company and the stockholders

of the Company, and declared it advisable, to enter into this Agreement with

Parent and Merger Sub providing for the merger (the "Merger") of the Company

with and into Merger Sub in accordance with the General Corporation Law of the

State of Delaware (the "DGCL"), upon the terms and subject to the conditions set

forth herein, (ii) approved this Agreement in accordance with the DGCL, upon the

terms and conditions contained herein, and (iii) resolved to recommend adoption

of this Agreement by the stockholders of the Company;

 

                  WHEREAS, the Boards of Directors of Parent and Merger Sub have

approved, and the board of directors of Merger Sub has declared it advisable for

Merger Sub to enter into, this Agreement providing for the Merger in accordance

with the DGCL, upon the terms and conditions contained herein;

 

                   WHEREAS, concurrently with the execution and delivery of this

Agreement and as a condition and inducement to the willingness of Parent and

Merger Sub to enter into this Agreement, Edward H. Meyer is entering into a

voting agreement with Parent and Merger Sub (the "Voting Agreement") pursuant to

which Mr. Meyer is agreeing in his capacity as a stockholder of the Company to

vote all of his Shares (as defined in Section 2.1(a)) in favor of the adoption

of this Agreement; and Mr. Meyer is entering into an agreement with the Company,

Merger Sub and Parent (the "Employment Agreement" setting forth, among other

things Mr. Meyer's role with the Surviving Corporation (as defined in Section

1.1) after the Effective Time (as defined in Section 1.2); and

 

                   WHEREAS, for U.S. federal income tax purposes, it is intended

that the Merger qualify as a reorganization under the provisions of Section 368

of the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and

regulations promulgated thereunder.

 

                  NOW, THEREFORE, in consideration of the foregoing and the

mutual covenants and agreements herein contained, and intending to be legally

bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

 

                                     ARTICLE I

 

                                   THE MERGER

 

                  SECTION 1.1 The Merger. Upon the terms and subject to the

conditions of this Agreement and in accordance with the DGCL, at the Effective

Time (as defined below), the Company shall be merged with and into Merger Sub.

As a result of the Merger, the separate

 

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corporate existence of the Company shall cease and Merger Sub shall continue as

the surviving corporation of the Merger (the "Surviving Corporation").

 

                  SECTION 1.2 Closing; Effective Time. Subject to the provisions

of Article VII, the closing of the Merger (the "Closing") shall take place at

the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York,

New York, as soon as practicable, but in no event later than the second business

day (or such later business day as necessary to allow for compliance with the

announcement requirement of the penultimate sentence of Section 2.2(d)(i)) after

the satisfaction or waiver of the conditions set forth in Article VII (excluding

conditions that, by their terms, cannot be satisfied until the Closing, but the

Closing shall be subject to the satisfaction or waiver of those conditions), or

at such other place or at such other date as Parent and the Company may mutually

agree. The date on which the Closing actually occurs is hereinafter referred to

as the "Closing Date". At the Closing, the parties hereto shall cause the Merger

to be consummated by filing a certificate of merger (the "Certificate of

Merger") with the Secretary of State of the State of Delaware, in such form as

required by, and executed in accordance with, the relevant provisions of the

DGCL (the date and time of the filing of the Certificate of Merger with the

Secretary of State of the State of Delaware, or such later time as is specified

in the Certificate of Merger and as is agreed to by the parties hereto, being

the "Effective Time") and shall make all other filings or recordings required

under the DGCL in connection with the Merger.

 

                  SECTION 1.3 Effects of the Merger. The Merger shall have the

effects set forth in the applicable provisions of the DGCL. Without limiting the

generality of the foregoing and subject thereto, at the Effective Time, all the

property, rights, privileges, immunities, powers and franchises of the Company

and Merger Sub shall vest in the Surviving Corporation and all debts,

liabilities and duties of the Company and Merger Sub shall become the debts,

liabilities and duties of the Surviving Corporation.

 

                  SECTION 1.4 Certificate of Incorporation; By-Laws.

 

                  (a) At the Effective Time, the certificate of incorporation of

Merger Sub shall be the certificate of incorporation of the Surviving

Corporation until thereafter amended in accordance with its terms and applicable

law.

 

                  (b) From and after the Effective Time, the by-laws of Merger

Sub shall be the by-laws of the Surviving Corporation until thereafter amended

in accordance with their terms, the certificate of incorporation of the

Surviving Corporation and applicable law.

 

                  SECTION 1.5 Directors and Officers. The directors of the

Company immediately prior to the Effective Time shall submit their resignations

to be effective as of the Effective Time. The directors of Merger Sub

immediately prior to the Effective Time shall be the initial directors of the

Surviving Corporation, each to hold office in accordance with the certificate of

incorporation and by-laws of the Surviving Corporation. Prior to the Effective

Time, Parent and Merger Sub shall take all necessary action to elect or appoint

the officers of the Company (other than those who Parent determines shall not

remain as officers of the Surviving Corporation) immediately prior to the

Effective Time as officers of the Surviving Corporation,

 

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which shall be effective as of the Effective Time. Such officers shall hold

office with the Surviving Corporation, in each case until the earlier of his or

her resignation or removal.

 

                                   ARTICLE II

 

                    EFFECT OF THE MERGER ON THE CAPITAL STOCK

                         OF THE CONSTITUENT CORPORATIONS

 

                  SECTION 2.1 Conversion of Securities. At the Effective Time,

by virtue of the Merger and without any action on the part of Parent, Merger

Sub, the Company or the holders of any of the following securities:

 

                  (a) Each share of Common Stock, par value $0.01 per share, of

the Company (the "Common Stock") and Limited Duration Class B Common Stock, par

value $0.01 per share of the Company (the "Class B Common Stock", and together

with the Common Stock, the "Company Common Stock") issued and outstanding

immediately prior to the Effective Time (other than any shares of Common Stock

("Common Shares") or shares of Class B Common Stock ("Class B Shares", and

together with the Common Shares, the "Shares") to be canceled pursuant to

Section 2.1(b) (any Shares to be so cancelled, "Excluded Shares") and any

Dissenting Shares (as defined in Section 2.5(a)) shall, subject to Section

2.2(c), be converted into the right to receive the following:

 

                           (i) Each Share with respect to which an election to

receive cash consideration (a "Cash Election") is properly made, and not

revoked, in accordance with Section 2.2(d) (each, a "Cash Electing Share"),

shall be converted into the right to receive $1,005 in cash, without interest

(the "Per Share Cash Consideration").

 

                           (ii) Each Share with respect to which an election to

receive share consideration (a "Stock Election") is properly made, and not

revoked, in accordance with Section 2.2(d) (each, a "Stock Electing Share" and

all Stock Electing Shares, together with all Cash Electing Shares, the "Electing

Shares"), shall be converted into the right to receive 21.746 (the "Exchange

Ratio") American Depository Shares of Parent ("Parent Depository Shares", each

Parent Depository Share representing five ordinary shares of nominal value 10p

each of Parent ("Parent Ordinary Shares")) (together with any cash in lieu of

fractional Parent Ordinary Shares or Parent Depository Shares to be paid

pursuant to Section 2.6(k), the "Per Share Stock Consideration"). Each holder of

Shares entitled to receive Parent Depository Shares in the Merger in respect of

the holder's Shares shall have the right to elect to receive, in lieu of some or

all of the Parent Depository Shares the holder is otherwise entitled to receive

pursuant to the prior sentence, the number of Parent Ordinary Shares represented

by the Parent Depository Shares in respect of which such election is made.

 

                           (iii) Each Share other than Shares with respect to

which a Cash Election or a Stock Election is properly made, and not revoked, in

accordance with Section 2.2(d) (each, a "Non-Electing Share"), shall be

converted into the right to receive the Per Share Cash Consideration and/or the

Per Share Stock Consideration, as determined in accordance with Section 2.2(c).

 

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                  (b) Each Share held in the treasury of the Company, Parent or

Merger Sub or owned by any direct or indirect subsidiary of such persons, in

each case immediately prior to the Effective Time, shall be canceled without any

conversion thereof and no consideration shall be paid with respect thereto.

 

                  (c) Each share of common stock of Merger Sub issued and

outstanding immediately prior to the Effective Time shall continue as one share

of common stock of the Surviving Corporation.

 

                  SECTION 2.2 Certain Actions Related to Conversion of

Securities.

 

                  (a) Parent Depository Shares.

 

                            (i) The Parent Depository Shares issued in connection

with the Merger shall be evidenced by one or more receipts ("Parent ADRs")

issued in accordance with the Amended and Restated Deposit Agreement, dated as

of October 24, 1995, among Parent, Citibank, N.A., as Depository (the

"Depository"), and the holders and beneficial owners from time to time of Parent

ADRs, as amended (the "Deposit Agreement"). As of the Effective Time, the

Company or Parent shall pay for all United Kingdom stamp duties, stamp duty

reserve tax and other similar taxes and similar levies imposed in connection

with the issuance or creation of the Parent Depository Shares to be issued in

the Merger and any Parent ADRs in connection therewith and any other United

Kingdom stamp duty, stamp duty reserve tax or other similar United Kingdom

governmental charge (or any interest or penalties thereon) that may be payable

by Parent and the Company pursuant to the Deposit Agreement. The Company and

Parent shall have the same obligation with respect to issuance of Parent

Depository Shares and Parent ADRs in connection with the exercise of any Company

Stock Options outstanding at the Effective Time that become exercisable for

Parent Depository Shares in accordance with Section 2.3(a). Subject to Section

2.6(f), no holder of Shares or Company Stock Options shall be obligated to pay

any fee or other charge or expense to the Depository in connection with the

issuance of Parent Ordinary Shares (or the related Parent Ordinary Share

Certificates) or Parent Depository Shares (or the related Parent ADRs) pursuant

to the Merger, upon exercise of Company Stock Options outstanding at the

Effective Time that become exercisable for Parent Depository Shares or Parent

Ordinary Shares in accordance with Section 2.3(a) or under a SMIP in accordance

with Section 2.3(d).

 

                           (ii) The cash payable, and the Parent Depository

Shares (or Parent Ordinary Shares, as applicable) issuable, in respect of each

of the Shares pursuant to this Article II, are referred to as the "Merger

Consideration." From and after the Effective Time, the Shares shall no longer be

outstanding and, subject to Section 2.5(b), no holder of Shares shall have any

rights with respect thereto except the right to receive Merger Consideration in

respect of such Shares pursuant to this Article II and the right to receive

dividends and other distributions pursuant to Section 2.6(i), in each case

without interest and only upon compliance with the applicable provisions of this

Article II.

 

                           (iii) Parent Depository Shares and Parent Ordinary

Shares issued in connection with the Merger (or under Company Stock Options

outstanding at the Effective Time that become exercisable for Parent Depository

Shares or Parent Ordinary Shares in accordance

 

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with Section 2.3(a) or under a SMIP in accordance with Section 2.3(d)) will rank

pari passu in all respects with the outstanding Parent Depository Shares and

Parent Ordinary Shares at the time of issue.

 

                  (b) Adjustment of Merger Consideration. Notwithstanding

anything in this Agreement to the contrary, if, between the date of this

Agreement and the Effective Time, the issued and outstanding Common Shares,

Class B Shares or Parent Ordinary Shares shall have been changed into a

different number of shares or a different class by reason of any stock split,

reverse stock split, stock dividend, reclassification, redenomination,

recapitalization, split-up, combination, exchange of shares or other similar

transaction, or Parent changes the number of Parent Ordinary Shares represented

by a Parent Depository Share, the Per Share Cash Consideration, the Exchange

Ratio, the Per Share Stock Consideration and any other dependent items, as the

case may be, shall be appropriately adjusted to provide to the holders of the

Company Common Stock the same economic effect as contemplated by this Agreement

prior to such action and as so adjusted shall, from and after the date of such

event, be the Per Share Cash Consideration, Exchange Ratio or Per Share Stock

Consideration or other dependent item, as applicable, subject to further

adjustment in accordance with this sentence.

 

                  (c) Proration. Notwithstanding anything in this Agreement to

the contrary (but subject to Section 2.5):

 

                           (i) The Cash Percentage (as defined below) of the

Shares issued and outstanding immediately prior to the Effective Time (other

than Excluded Shares) (such number, the "Cash Cap Number"), shall be converted

into the right to receive the Per Share Cash Consideration pursuant to Section

2.1(a)(i), and all other Shares issued and outstanding immediately prior to the

Effective Time (other than Excluded Shares) shall be converted into the right to

receive the Per Share Stock Consideration. The "Cash Percentage" shall be equal

to 50%, subject to adjustment as provided in Section 2.2(c)(iv).

 

                           (ii) (x) if the aggregate number of Cash Electing

Shares (such number, the "Cash Election Number") exceeds the Cash Cap Number,

then (A) all Stock Electing Shares and Non-Electing Shares shall be converted

into the right to receive the Per Share Stock Consideration and (B) the number

of Cash Electing Shares of each stockholder of the Company that shall be

converted into the right to receive the Per Share Cash Consideration shall be

equal to the product obtained by multiplying (A) the number of Cash Electing

Shares of such stockholder by (B) a fraction, the numerator of which is the Cash

Cap Number and the denominator of which is the Cash Election Number, with the

remaining number of such holder's Cash Electing Shares being converted into the

right to receive the Per Share Stock Consideration;

 

                                 (y) if the Cash Election Number is less than the

Cash Cap Number (the number of Shares by which the Cash Election Number is less

than the Cash Cap Number, the "Shortfall Number"), then (A) all Cash Electing

Shares shall be converted into the right to receive the Per Share Cash

Consideration and (B) the Stock Electing Shares and Non-Electing Shares shall be

treated in the following manner:

 

                                   (I) if the Shortfall Number is less than or

equal to the aggregate number of Non-Electing Shares, then (X) all Stock

Electing Shares shall be converted

 

                                      -5-

<PAGE>

 

into the right to receive the Per Share Stock Consideration and (Y) the

Non-Electing Shares of each stockholder of the Company shall be converted into

the right to receive the Per Share Cash Consideration in respect of that number

of Non-Electing Shares equal to the product obtained by multiplying (1) the

number of Non-Electing Shares of such stockholder by (2) a fraction, the

numerator of which is the Shortfall Number and the denominator of which is the

aggregate number of Non-Electing Shares, with the remaining number of such

holder's Non-Electing Shares being converted into the right to receive the Per

Share Stock Consideration; or

 

                                   (II) if the Shortfall Number exceeds the

aggregate number of Non-Electing Shares, then (X) all Non-Electing Shares shall

be converted into the right to receive the Per Share Cash Consideration and (Y)

the number of Stock Electing Shares of each stockholder of the Company that

shall be converted into the right to receive the Per Share Cash Consideration

shall be equal to the product obtained by multiplying (1) the number of Stock

Electing Shares of such stockholder by (2) a fraction, the numerator of which is

the amount by which the Shortfall Number exceeds the aggregate number of

Non-Electing Shares and the denominator of which is the aggregate number of

Stock Electing Shares, with the remaining number of such holder's Stock Electing

Shares being converted into the right to receive the Per Share Stock

Consideration.

 

                           (iii) For purposes of the calculations in this

Section 2.2(c), Shares that constitute Dissenting Shares immediately prior to

the Effective Time shall be deemed to be Non-Electing Shares.

 

                           (iv) Notwithstanding the foregoing provisions of this

Section 2.2, the Cash Percentage shall be reduced (A) if the aggregate Per Share

Cash Consideration plus an amount equal to (x) the Per Share Cash Consideration

multiplied by (y) the sum of the number of Dissenting Shares, if any, and the

number of Shares owned by Parent or Merger Sub canceled in accordance with

Section 2.1(b) (the product of (x) and (y) being referred to as the "Other

Shares Value") plus any other amounts paid by Parent (or any affiliate thereof)

to, or on behalf of, any holder of Shares (including any cash paid in lieu of

fractional Parent Ordinary Shares or Parent Depositary Shares) to the extent

such other amounts would be treated as exchanged for a "proprietary interest" in

the Company (within the meaning of Treasury Regulation Section 1.368-1(e)) (such

other amounts together with the Other Shares Value, the "Other Consideration")

would represent more than 60% of the fair market value of the aggregate Merger

Consideration (with the Per Share Stock Consideration being valued on the basis

of the average of the high and low prices of a Parent Depositary Share on The

New York Stock Exchange Composite Tape on the Closing Date) plus the Other

Consideration, to the minimum extent necessary so that the aggregate Per Share

Cash Consideration plus the Other Consideration equals 60% of the aggregate

value of the Merger Consideration (with the Per Share Stock Consideration being

valued on the basis of the average of the high and low prices of a Parent

Depositary Share on The New York Stock Exchange Composite Tape on the Closing

Date) plus the Other Consideration, or (B) if otherwise necessary to permit the

delivery of the tax opinions referred to in Sections 7.2(c) and 7.3(c), to the

minimum extent necessary to enable such opinions to be rendered. If the Cash

Percentage is reduced, Parent and the Company shall promptly announce the amount

of such reduction.

 

                                       -6-

<PAGE>

 

                  (d) Election Procedures.

 

                           (i) Each person who, on or prior to the Election Date

(as defined in Section 2.2(d)(ii)), is a record holder of Shares (other than

Dissenting Shares) shall be entitled to specify, in accordance with this Section

2.2(d), (x) the number of such holder's Shares (including Restricted Shares (as

defined in Section 2.3(c)) and, if the Shares to which the election relates are

represented by Certificates, the particular Shares, with respect to which such

holder makes a Cash Election and (y) the number of such holder's Shares

(including Restricted Shares) and, if the Shares to which the election relates

are represented by Certificates, the particular Shares, with respect to which

such holder makes a Stock Election.

 

                           (ii) Parent shall prepare and file as an exhibit to

the Form F-4 (as defined in Section 6.2(a)) a form of election (the "Form of

Election") in form and substance reasonably acceptable to the Company. The Form

of Election shall specify that delivery shall be effected, and risk of loss and

title to any certificates representing Shares ("Certificates") shall pass, only

upon proper delivery of the Form of Election and any Certificates. The Company

shall mail the Form of Election with the Company Proxy Statement (as defined in

Section 6.2(a)) to all persons who are record holders of Shares as of the record

date for the Stockholders Meeting (as defined in Section 6.1(a)). The Form of

Election shall be used by each record holder of Shares (or, in the case of

nominee record holders, the beneficial owner through proper instructions and

documentation) who wishes to make a Cash Election and/or a Stock Election for

any or all Shares (including Restricted Shares) held by such holder. The Company

shall use its reasonable best efforts to make the Form of Election, together

with a copy of the Company Proxy Statement, available to all persons who become

record holders of Shares during the period between the record date for the

Stockholders Meeting and the Election Date. Any holder's Election shall have

been properly made only if the Exchange Agent (as defined in Section 2.6(a))

shall have received at its designated office, by 5:00 p.m., New York City time,

on (A) the date of the Stockholders Meeting or (B) if the Closing Date is more

than four business days following the Stockholders Meeting, the date that is two

business days prior to the Closing Date (the "Election Date"), a Form of

Election properly completed and signed and, if the Shares to which the Cash

Election and/or Stock Election relate are represented by Certificates, the Form

of Election shall have been accompanied by Certificates representing those

Shares duly endorsed in blank or otherwise in form acceptable for transfer on

the books of the Company (or by an appropriate guarantee of delivery of such

Certificates as set forth in such Form of Election from a firm which is an

"eligible guarantor institution" (as defined in Rule 17Ad-15 under the

Securities Exchange Act of 1934, as amended (the "Exchange Act")); provided,

that, such Certificates are in fact delivered to the Exchange Agent by the time

set forth in such guarantee of delivery). After a Cash Election or a Stock

Election is validly and properly made with respect to any Shares, no further

registration of transfers of such Shares shall be made on the stock transfer

books of the Company, unless and until such Cash Election or Stock Election is

properly revoked in accordance with Section 2.2(d)(iii). Parent and the Company

shall announce the anticipated Election Date at least five business days prior

to the anticipated Closing Date. If the Closing Date is delayed to a subsequent

date, the Election Date shall be similarly delayed to a subsequent date, and

Parent and the Company shall promptly announce any such delay and, when

determined, the rescheduled Election Date.

 

                                      -7-

<PAGE>

 

                           (iii) Any Cash Election or Stock Election may be

revoked with respect to all or a portion of the Shares subject thereto by the

holder who submitted the applicable Form of Election by written notice received

by the Exchange Agent prior to 5:00 p.m., New York City time, on the Election

Date. In addition, all Cash Elections and Stock Elections shall automatically be

revoked if this Agreement is terminated in accordance with Article VIII. If a

Cash Election or Stock Election is revoked with respect to Shares represented by

Certificates, Certificates representing such Shares shall be promptly returned

to the holder that submitted the same to the Exchange Agent.

 

                           (iv) The determination of the Exchange Agent (or the

determination of Parent, after reasonable consultation with the Company, in the

event that the Exchange Agent declines to make any such determination) shall be

conclusive and binding as to whether or not Cash Elections and Stock Elections

shall have been properly made or revoked pursuant to this Section 2.2(d) and as

to when Cash Elections, Stock Elections and revocations were received by the

Exchange Agent. The Exchange Agent (or Parent, after reasonable consultation

with the Company, in the event that the Exchange Agent declines to make the

following computation) shall also make all computations as to the proration

contemplated by Section 2.2(c), and absent manifest error this computation shall

be conclusive and binding. The Exchange Agent may, with the written agreement of

Parent, after Parent's reasonable consultation with the Company, make any rules

as are consistent with this Section 2.2(d) for the implementation of the Cash

Elections and Stock Elections provided for in this Agreement as shall be

necessary or desirable to effect these Cash Elections and Stock Elections.

 

                           (v) To the extent practicable, the Form of Election

shall permit each holder that beneficially owns Shares and/or whose affiliates

beneficially own Shares in more than one name or account to specify how to

allocate the Per Share Cash Consideration and Parent Depository Shares or Parent

Ordinary Shares, as the case may be, to be issued in the Merger among the

various accounts that such holder of Shares beneficially owns and, with the

requisite consent of such holder's affiliates, among the accounts beneficially

owned by such holder and its affiliates.

 

                  SECTION 2.3 Options; Restricted Stock; SMIP.

 

                  (a) The Board of Directors of the Company or the appropriate

committee thereof shall take all action necessary under the applicable Company

Stock Plans (as defined in Section 3.3(a)) so that (1) each option to purchase

Shares held by an employee, director, or former employee or former director of

the Company or any of its subsidiaries (each, a "Company Stock Option")

outstanding at the Effective Time shall, as of the Effective Time, cease to

represent a right to acquire Shares, (2) (x) each Company Stock Option held by a

person whose primary place of residence or employment with the Company or any of

its subsidiaries at the Effective Time is in Europe (as defined below) (such

option, a "Europe Company Stock Option" and such person, a "European Person")

shall be, from and after the Effective Time, an option to acquire Parent

Ordinary Shares as provided below, and (y) each Company Stock Option that is not

a Europe Company Stock Option (such option, a "Non-Europe Company Stock Option")

shall be, from and after the Effective Time, an option to acquire Parent

Depository Shares as provided below, (3) if the employment of a holder of

Company Stock Options is involuntarily terminated by the Surviving Corporation

or any of its subsidiaries after the Effective Time other

 

                                      -8-

<PAGE>

 

than for Cause (as defined below), the holder terminates his or her employment

with the Surviving Corporation or any of its subsidiaries after the Effective

Time for Good Reason (as defined below) or his or her employment with the

Surviving Corporation or any of its subsidiaries terminates as a result of his

or her death or Disability (as defined below), in any such case, all of the then

unvested Company Stock Options held by such holder shall become fully vested

upon such termination and exercisable, in the case of a termination not for

Cause or for Good Reason, for a period of thirty days following such termination

and, in the case of a termination on account of death or disability, for a

period of one year following such termination, and (4) except as expressly set

forth in this Section 2.3(a), from and after the Effective Time, each Company

Stock Option shall remain subject to the terms and conditions (including,

subject to the prior clause (3), the vesting terms) applicable thereto

immediately prior to the Effective Time. From and after the Effective Time, (i)

the number of Parent Ordinary Shares purchasable upon exercise of each

outstanding Europe Company Stock Option shall be equal to the product obtained

by multiplying (x) the number of Shares that were purchasable under that Europe

Company Stock Option immediately prior to the Effective Time by (y) five times

the Exchange Ratio (subject to adjustment as provided in Section 2.2(b)),

rounded up or down to the nearest whole number of Parent Ordinary Shares, and

(ii) the exercise price per Parent Ordinary Share under each Europe Company

Stock Option shall be equal to the quotient obtained by dividing (x) the

exercise price per Share of each Europe Company Stock Option immediately prior

to the Effective Time by (y) five times the Exchange Ratio (subject to

adjustment as provided in Section 2.2(b)), rounded up or down to the nearest

cent. From and after the Effective Time, (i) the number of Parent Depository

Shares purchasable upon exercise of each outstanding Non-Europe Company Stock

Option shall be equal to the product obtained by multiplying (x) the number of

Shares that were purchasable upon exercise of that Non-Europe Company Stock

Option immediately prior to the Effective Time and (y) the Exchange Ratio

(subject to adjustment as provided in Section 2.2(b)), rounded up or down to the

nearest whole number of Parent Depository Shares, and (ii) the exercise price

per Parent Depository Share under each Non-Europe Company Stock Option shall be

obtained by dividing (x) the exercise price per Share of each Non-Europe Company

Stock Option immediately prior to the Effective Time by (y) the Exchange Ratio

(subject to adjustment as provided in Section 2.2(b)), rounded up or down to the

nearest cent. Notwithstanding the foregoing, each Company Stock Option intended

to be an "incentive stock option" (as defined in Section 422 of the Code) shall

be adjusted in accordance with the requirements of Section 424 of the Code and

each Company Stock Option required by law of any applicable jurisdiction to be

adjusted in a manner other than as set forth above, shall be adjusted as

required by the applicable law. For the purposes of this Agreement, "Europe"

means only the following countries or regions: Austria, Belgium, Denmark, Eire

Island, Finland, France, Germany, Greece, Italy, Luxemburg, The Netherlands,

Portugal, Spain, Sweden and the United Kingdom. For purposes of this Section

2.3, the term "Cause" shall mean (i) the willful misappropriation of the funds

or property of the Surviving Corporation or any of its affiliates; (ii)

conviction in a court of law for, or the entering of a plea of guilty or no

contest to, a felony or any crime involving moral turpitude, fraud, dishonesty

or theft; and (iii) the commission of any willful misconduct which is

demonstrably injurious to the reputation, business or business relationships of

the Surviving Corporation or any of its affiliates. For purposes of this Section

2.3, the term "Good Reason" shall mean (i) a reduction in the employee's base

salary as in effect immediately prior to the date of this Agreement, (ii) a

significant diminution to the employee's position or significant decrease in the

employee's duties

 

                                      -9-

<PAGE>

 

from his or her position and duties in effect immediately after the Effective

Time, in each case without the employee's prior written consent, or (iii) a

change in the employee's principal work location, if the employee's principal

work location immediately after the Effective Time is in Manhattan, New York

City, to outside Manhattan, New York City, or, if the employee's principal work

location immediately after the Effective Time is outside Manhattan, New York

City, to outside of the city of the employee's principal work location, in each

case without the employee's prior written consent. For purposes of this Section

2.3, the term "Disability" shall mean (i) the term "Disability" as used in the

Surviving Corporation's long-term disability plan, if any, or (ii) a physical or

mental infirmity which impairs the employee's ability to perform substantially

his or her duties for a period of one hundred eighty (180) consecutive days as

determined by the Surviving Corporation.

 

                  (b) Parent shall have available after the Effective Time the

number of Parent Depository Shares and Parent Ordinary Shares required to

satisfy upon exercise of Company Stock Options outstanding immediately after the

Effective Time in accordance with Section 2.3(a) or issuable under the SMIPs in

accordance with Section 2.3(d). Parent shall file with the U.S. Securities and

Exchange Commission (the "SEC") a registration statement on an appropriate form

or a post-effective amendment to a previously filed registration statement under

the Securities Act prior to the Effective Time so that Parent shall have

available from and after the Effective Time the number of Parent Depository

Shares and Parent Ordinary Shares issuable upon the exercise of Non-Europe

Company Stock Options as provided in Section 2.3(a) or issuable to a Stock

Participant who is not a European Person in accordance with Section 2.3(d), and

shall use reasonable best efforts to (i) cause such registration statement or

post-effective amendment to become effective and comply, to the extent

applicable, with state securities or "blue sky" laws with respect thereto, at

the Effective Time, and (ii) maintain the current status of the prospectus

contained therein, as well as comply with any applicable state securities or

"blue sky" laws, for so long as those options remain outstanding. In addition,

Parent shall use its reasonable best efforts to do all such things as are

required under applicable laws and regulations for the Parent Ordinary Shares

issuable upon exercise of Company Stock Options or under the SMIPs to be

admitted to the official list (the "Official List") maintained by the U.K.

Listing Authority (the "UKLA") and to trading on the London Stock Exchange plc

(the "LSE").

 

                  (c) Notwithstanding anything to the contrary contained in this

Agreement, at the Effective Time, each issued and outstanding Share subject to

vesting or other lapse restrictions pursuant to the Company Stock Plans

immediately prior to the Effective Time ("Restricted Shares") shall be converted

into the right to receive the Per Share Cash Consideration or the Per Share

Stock Consideration in accordance with this Article II; provided, however, that,

(i) all Parent Ordinary Shares or Parent Depository Shares issuable upon

conversion of a Restricted Share shall be subject to the same terms (including

vesting terms) as applicable to the Restricted Share in respect of which they

are issued and (ii) all cash amounts (including any cash in lieu of fractional

Parent Ordinary Shares or Parent Depository Shares to be paid pursuant to

Section 2.6(k)) payable upon conversion of a Restricted Share shall be subject

to the same terms (including vesting terms) as applicable to the Restricted

Share in respect of which they are payable and shall be paid to the holder

thereof, at such time as such applicable vesting or other restrictions lapse,

together with simple annual interest on such cash amount accruing from the

Effective Time until such lapse at a rate of two percent per annum; provided

further, however, that, if the employment of a holder of a Restricted Share is

 

                                      -10-

<PAGE>

 

involuntarily terminated by the Surviving Corporation or any of its subsidiaries

after the Effective Time other than for Cause or the holder terminates his or

her employment with the Surviving Corporation or any of its subsidiaries after

the Effective Time for Good Reason, in either case, all of the Parent Ordinary

Shares, Parent Depositary Shares, and/or cash payable in respect of converted

Restricted Shares then held by such holder shall become fully vested and, in the

case of cash (including interest), be paid out, upon such termination. Holders

of Restricted Shares shall be entitled to make a Cash Election (or receive a

Form of Election) with respect to such Shares. The Board of Directors of the

Company or the appropriate committee thereof shall take all action necessary

under the applicable Company Stock Plans to implement the foregoing with respect

to the Restricted Shares.

 

                  (d) The Board of Directors of the Company or the appropriate

committee thereof shall take all action necessary under the Company's 1998

Senior Management Incentive Plan or 2003 Senior Management Incentive Plan

(together, the "SMIPs") so that, at the Effective Time, (i) the Stock

Accumulated Account of each Stock Participant (both as defined in the applicable

SMIP) shall be adjusted so that (x) the Stock Accumulated Account of each Stock

Participant that is a European Person shall have allocated or credited to it

that number of Parent Ordinary Shares that is equal to (A) five times the

Exchange Ratio (subject to adjustment as provided in Section 2.2(b)) multiplied

by (B) the number of Shares allocated or credited to the Stock Accumulated

Account of such Stock Participant immediately prior to the Effective Time (and,

with respect to such Stock Participant, for the period from and after the

Effective Time, all references to "Stock" in the applicable SMIP shall be deemed

to refer to Parent Ordinary Shares and all references to the Company in the

applicable SMIP shall be deemed to refer to Parent), (y) the Stock Accumulated

Account of each Stock Participant that is not a European Person shall have

allocated or credited to it that number of Parent Depository Shares equal to the

Exchange Ratio (subject to adjustment as provided in Section 2.2(b)) multiplied

by the number of Shares allocated or credited to the Stock Accumulated Account

of such Stock Participant immediately prior to the Effective Time (and, with

respect to such Stock Participant, for the period from and after the Effective

Time, all references to "Stock" in the applicable SMIP shall be deemed to refer

to Parent Depository Shares and all references to the Company in the applicable

SMIP shall be deemed to refer to Parent), (ii) if the employment of a

Participant (as defined in the applicable SMIP) is involuntarily terminated by

the Surviving Corporation or any of its subsidiaries after the Effective Time

other than for Cause or the Participant terminates his or her employment with

the Surviving Corporation or any of its subsidiaries after the Effective Time

for Good Reason, in either case, the Contingent Account of the Participant shall

become a Vested Account (both as defined in the applicable SMIP) upon such

termination and (iii) except as expressly set forth in this Section 2.3(d), from

and after the Effective Time, the SMIPs shall remain subject to the terms and

conditions (including, subject to the prior clause (ii), the vesting terms)

applicable thereto immediately prior to the Effective Time.

 

                   (e) For the avoidance of doubt, the parties hereto acknowledge

and agree that, except as expressly provided in this Section 2.3, none of the

execution of this Agreement, the performance by the parties of their obligations

hereunder, or the consummation of the Merger and the other transactions

contemplated hereby and thereby shall give rise to (i) accelerated vesting or

exercisability of any Company Stock Options, (ii) vesting of any Restricted

Shares, (iii) vesting of, or payments to participants from, account balances

under the SMIP or (iv) vesting of account balances in the Company's Employee

Stock Ownership Plan.

 

                                      -11-

<PAGE>

 

                  SECTION 2.4 Convertible Debentures. Pursuant to Section 11.11

of the Indenture, dated as of October 28, 2003 (the "Indenture"), between the

Company and American Stock Transfer & Trust Company, as Trustee, relating to the

Company's 5.0% Contingent Convertible Subordinated Debentures Due 2033 (the

"Convertible Debentures"), prior to the Effective Time, Parent shall take such

action as required under such section to establish the right of the holders of

the Convertible Debentures to convert each Convertible Debenture after the

Effective Time, to the extent otherwise convertible pursuant to the terms of the

Indenture, into the amount and type of Merger Consideration paid or issued

pursuant to the Merger in respect of such number of Non-Electing Shares that is

equal to the number of Common Shares into which such Convertible Debenture would

have been convertible absent consummation of the Merger. As soon as practicable

after the Effective Time, Parent shall, or shall cause the Surviving Corporation

to, deliver to the holders of the Convertible Debentures appropriate notices

setting forth such holders' rights pursuant to the Indenture with respect

thereto to the extent required by the terms thereof and any other notices

required by the terms of the Indenture as a result of the transactions

contemplated hereby, and shall comply with the terms of the Indenture with

respect to the making of an offer to purchase Convertible Debentures from the

holders thereof as a result of the transactions contemplated hereby, if required

by the terms of the Indenture.

 

                  SECTION 2.5 Dissenting Shares.

 

                  (a) Shares that are issued and outstanding immediately prior

to the Effective Time and which are held by holders of Shares who have not voted

in favor of or consented to the Merger and who have properly demanded and

perfected their rights to be paid the fair value of such Shares in accordance

with Section 262 of the DGCL (the "Dissenting Shares") shall not be converted

into the right to receive the Merger Consideration, and the holders thereof

shall be entitled to only such rights as are granted by Section 262 of the DGCL;

provided, however, that if any such stockholder of the Company shall fail to

perfect or shall effectively waive, withdraw or lose such stockholder's rights

under Section 262 of the DGCL, such stockholder's Shares in respect of which the

stockholder would otherwise be entitled to receive fair value under Section 262

of the DGCL shall thereupon be deemed to have been converted, at the Effective

Time, into the right to receive the Merger Consideration payable or issuable in

respect of Non-Electing Shares without any interest thereon.

 

                  (b) The Company shall give Parent (i) prompt notice of any

notice received by the Company of intent to demand the fair value of any Shares,

withdrawals of such notices and any other instruments served pursuant to Section

262 of the DGCL and received by the Company and (ii) the opportunity to direct

all negotiations and proceedings with respect to the exercise of dissenters'

rights under Section 262 of the DGCL. The Company shall not, except with the

prior written consent of Parent or as otherwise required by an order, decree,

ruling or injunction of a court of competent jurisdiction, make any payment with

respect to any such exercise of dissenters' rights or offer to settle or settle

any such rights.

 

                  SECTION 2.6 Surrender of Shares.

 

                  (a) Following the date of this Agreement and in any event not

less than three business days prior to the mailing of the Company Proxy

Statement to the stockholders of the Company, Parent shall select a bank or

trust company reasonably acceptable to the Company to

 

                                      -12-

<PAGE>

 

act as exchange agent in connection with the Merger (the "Exchange Agent") for

the purpose of exchanging Certificates or Shares represented by book-entry

("Book-Entry Shares"), for Parent ADRs, certificates representing Parent

Ordinary Shares ("Parent Ordinary Share Certificates"), as applicable, and/or

cash consideration (including cash payable in lieu of fractional interests in

Parent Depository Shares or Parent Ordinary Shares, as applicable, in accordance

with Section 2.6(k)).

 

                  (b) The Exchange Agent shall act as the agent for each holder

of Shares to receive the Merger Consideration to which such holder shall become

entitled to receive with respect to such holder's Shares pursuant to this

Article II.

 

                  (c) Parent shall deposit, or cause the Depository to deposit,

with the Exchange Agent, from time to time, (i) that number of Parent ADRs and

Parent Ordinary Share Certificates, as applicable, in any denominations as the

Exchange Agent shall specify and (ii) cash, in each case as are issuable or

payable, respectively, pursuant to this Article II in respect of Shares for

which Certificates or Book-Entry Shares have been properly delivered to the

Exchange Agent.

 

                  (d) Promptly after the Effective Time, the Surviving

Corporation shall cause to be mailed to each record holder, as of the Effective

Time, of Non-Electing Shares (these holders, "Non-Electing Holders"), (i) a form

of letter of transmittal (which shall specify that delivery shall be effected,

and risk of loss and title to the Certificates held by such holder representing

such Non-Electing Shares shall pass, only upon proper delivery of the

Certificates to the Exchange Agent or, in the case of Book-Entry Shares, upon

adherence to the procedures set forth in the letter of transmittal) and (ii)

instructions for use in effecting the surrender of the Certificates or, in the

case of Book-Entry Shares, the surrender of such Shares, for payment of the

Merger Consideration therefor.

 

                  (e) Each stockholder who properly made and did not revoke a

Cash Election or Stock Election shall be entitled to receive in exchange for

such stockholder's Electing Shares, and upon surrender by a Non-Electing Holder

to the Exchange Agent of a Certificate or Book-Entry Shares, as applicable,

together with a letter of transmittal, duly completed and validly executed in

accordance with the instructions thereto, and such other documents as may be

required pursuant to such instructions, the Non-Electing Holder shall be

entitled to receive in exchange therefor, (i) the number of whole Parent

Depository Shares (or Parent Ordinary Shares, as applicable), if any, into which

such holder's Shares represented by such holder's properly surrendered

Certificates or Book-Entry Shares, as applicable, were converted in accordance

with this Article II, and (ii) a check in an amount of U.S. dollars (after

giving effect to any required withholdings pursuant to Section 2.6(l)) equal to

(A) the amount of cash (including the Per Share Cash Consideration and cash in

lieu of fractional interests in Parent Depository Shares (or Parent Ordinary

Shares, as applicable) to be paid pursuant to Section 2.6(k)), if any, into

which such holder's Shares represented by such holder's properly surrendered

Certificates or Book-Entry Shares, as applicable, were converted in accordance

with this Article II, plus (B) any cash dividends or other distributions that

such holder has the right to receive pursuant to Section 2.6(i).

 

                                      -13-

<PAGE>

 

                  (f) No interest shall be paid or accrued for the benefit of

holders of the Certificates or Book-Entry Shares on the Merger Consideration

payable in respect of the Certificates or Book-Entry Shares. If payment or

issuance of the Merger Consideration is to be made to a person other than the

person in whose name the surrendered Certificate is registered, it shall be a

condition of payment or issuance that the Certificate so surrendered shall be

properly endorsed or shall be otherwise in proper form for transfer and that the

person requesting such payment or issuance shall have paid to the Exchange Agent

any transfer and other taxes required by reason of the payment or issuance of

the Merger Consideration to a person other than the registered holder of the

Certificate surrendered or shall have established to the satisfaction of the

Exchange Agent that such tax either has been paid or is not applicable. Until so

surrendered, each Certificate or Book-Entry Share shall, after the Effective

Time, represent for all purposes only the right to receive upon such surrender

the applicable Merger Consideration as contemplated by this Article II.

 

                  (g) At the Effective Time, the stock transfer books of the

Company shall be closed and thereafter there shall be no further registration of

transfers of Shares that were outstanding prior to the Effective Time. After the

Effective Time, Certificates or Book-Entry Shares presented to the Surviving

Corporation for transfer shall be canceled and exchanged for the consideration

provided for, and in accordance with the procedures set forth, in this Article

II.

 

                  (h) Any Parent Depository Shares (or Parent Ordinary Shares,

as applicable) to be issued and any cash to be paid in respect of Shares

(including any cash in lieu of fractional interests in Parent Depository Shares

(or Parent Ordinary Shares, as applicable) to be paid pursuant to Section

2.6(k), plus any cash dividend or other distribution that a former holder of

Shares has the right to receive pursuant to Section 2.6(i)) pursuant to this

Article II, that remains unclaimed by any former holder of Shares nine months

after the Effective Time shall be held by the Exchange Agent (or a successor

agent appointed by Parent) or shall be delivered to Parent (and/or to the

Depository upon the instruction of Parent and held by the Depository subject to

the instruction of Parent in an account or accounts designated for this

purpose). Parent shall not be liable to any former holder of Shares for any

securities properly delivered or any amount properly paid by the Depository, the

Exchange Agent or its nominee, as the case may be, to a public official pursuant

to applicable abandoned property, escheat or similar law. If any Certificate or

Book-Entry Shares has not been surrendered prior to two years after the

Effective Time (or immediately prior to an earlier date on which the Merger

Consideration in respect of the Certificate or Book-Entry Shares would otherwise

escheat to or become the property of any Governmental Entity (as defined in

Section 3.5(b)), any cash, share dividends and distributions otherwise payable

in respect of the Certificate or Book-Entry Shares shall, to the extent

permitted by applicable law, become the property of Parent, free and clear of

all claims or interest of any person previously entitled thereto.

 

                  (i) No dividends or other distributions with respect to Parent

Depository Shares (or Parent Ordinary Shares, as applicable), issuable with

respect to the Shares shall be paid to the holder of any unsurrendered

Certificates or Book-Entry Shares until those Certificates or Book-Entry Shares

are surrendered as provided in this Article II. Upon surrender, there shall be

issued and/or paid to the holder of the Parent Depository Shares (or Parent

Ordinary Shares, as applicable), issued in exchange therefor, without interest,

(A) at the time of surrender, the dividends or other distributions payable with

respect to those Parent Depository Shares (or

 

                                      -14-

<PAGE>

 

Parent Ordinary Shares, as applicable) with a record date on or after the date

of the Effective Time and a payment date on or prior to the date of this

surrender and not previously paid and (B) at the appropriate payment date, the

dividends or other distributions payable with respect to those Parent Depository

Shares (and Parent Ordinary Shares, as applicable) with a record date on or

after the date of the Effective Time but with a payment date subsequent to

surrender.

 

                  (j) In the event that any Certificate shall have been lost,

stolen or destroyed, upon the holder's compliance with the replacement

requirements established by the Exchange Agent, including, if necessary, the

posting by the holder of a bond in customary amount as indemnity against any

claim that may be made against it with respect to the Certificate, the Exchange

Agent shall deliver in exchange for the lost, stolen or destroyed Certificate

the applicable Merger Consideration payable in respect of the Shares represented

by the Certificate pursuant to this Article II.

 

                  (k) Each holder of Shares otherwise entitled to receive a

fractional interest in a Parent Depository Share or Parent Ordinary Share, as

applicable, pursuant to the terms of this Article II, shall be entitled to

receive, in accordance with the provisions of this Section 2.6(k), a cash

payment (without interest) in lieu of that fractional interest in a Parent

Depository Share (or Parent Ordinary Share, as applicable) determined by

multiplying the fractional interest to which such holder would otherwise be

entitled by (x) in the case of a fractional interest in a Parent Ordinary Share,

the closing price for a Parent Ordinary Share as reported on the Daily Official

List of the LSE on the first trading day following the date on which the

Effective Time occurs and (y) in the case of a fractional interest in a Parent

Depository Share, the amount determined pursuant to clause (x) multiplied by 5.

Any cash payment in lieu of a fractional interest shall be made in U.S. dollars,

in the case of a Parent Depository Share, and U.K. pounds sterling, in the case

of a Parent Ordinary Share.

 

                  (l) Notwithstanding anything in this Agreement to the

contrary, Parent and the Exchange Agent shall be entitled to deduct and withhold

from the consideration otherwise payable to any former holder of Shares pursuant

to this Agreement any amounts as may be required to be deducted and withheld

with respect to the making of this payment under the Code, or under any

provision of state, local or foreign tax law. To the extent that amounts are so

withheld and paid over to the appropriate taxing authority, the Surviving

Corporation shall be treated as though it withheld an appropriate amount of the

type of consideration otherwise payable pursuant to this Agreement to any former

holder of Shares, sold this consideration for an amount of cash equal to the

fair market value of the consideration at the time of the deemed sale and paid

these cash proceeds to the appropriate taxing authority.

 

                  (m) The Exchange Agent shall invest any cash deposited with

the Exchange Agent by Parent (or caused to be deposited by Parent), as directed

by Parent, provided that no such investment or losses thereon shall affect the

Per Share Cash Consideration payable to holders of Shares entitled to receive

such consideration or cash in lieu of fractional interests, as provided in

Section 2.6(k), and Parent shall promptly provide additional funds to the

Exchange Agent for the benefit of holders of Shares entitled to receive such

consideration in the amount of any such losses. Any interest or income produced

by such investments shall be payable to the Surviving Corporation or Parent, as

Parent directs.

 

                                      -15-

<PAGE>

 

                                   ARTICLE III

 

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

                  The Company hereby represents and warrants to Parent and

Merger Sub that, except as set forth on the corresponding section of the Company

Disclosure Schedule delivered by the Company to the Parent and Merger Sub prior

to the execution of this Agreement (the "Company Disclosure Schedule") and

except as disclosed in the Company SEC Reports (as defined in Section 3.7(a))

filed or furnished prior to the date of this Agreement (but excluding the

disclosures in "Risks Relating to Our Business" and "Forward-Looking Statements"

sections of any such Company SEC Report):

 

                  SECTION 3.1 Organization and Qualification; Subsidiaries. The

Company and each of its subsidiaries is duly organized, validly existing and in

good standing (with respect to jurisdictions that recognize the concept of good

standing) under the laws of the jurisdiction of its organization and has all

requisite corporate or similar power and authority to own, lease and operate its

properties and to carry on its business as it is now being conducted, except

where any such failure to be so organized, existing or in good standing or to

have such power or authority, individually or in the aggregate, (x) has not had,

and would not reasonably be expected to have, a Company Material Adverse Effect

(as defined below) and (y) would not reasonably be expected to prevent,

materially delay or materially impede the ability of the Company to consummate

the Merger or the other transactions contemplated by this Agreement. The Company

and each of its subsidiaries is duly qualified or licensed to do business, and

is in good standing (with respect to jurisdictions that recognize the concept of

good standing) in each jurisdiction where the character of its properties owned,

leased or operated by it or the conduct of its business or the nature of its

activities makes such qualification or licensing necessary, except for any such

failure to be so qualified or licensed or in good standing which, individually

or in the aggregate, (x) has not had, and would not reasonably be expected to

have, a Company Material Adverse Effect and (y) would not reasonably be expected

to prevent, materially delay or materially impede the ability of the Company to

consummate the Merger or the other transactions contemplated by this Agreement.

"Company Material Adverse Effect" means any change, event or effect that has

been or would be materially adverse to the business, financial condition or

results of operations of the Company and its subsidiaries taken as a whole,

other than any change, event or effect resulting from (i) changes in general

economic conditions (except to the extent that those changes, events or effects

have a materially disproportionate effect on the Company and its subsidiaries

relative to other participants in the advertising industry), (ii) the

announcement of this Agreement and the transactions contemplated hereby,

including any termination of, or reduction in, client business due to the

announcement and performance of this Agreement or the identity of the parties to

this Agreement, or the performance of this Agreement and the transactions

contemplated hereby, including compliance with the covenants contained herein,

(iii) changes in general conditions in the advertising industry (except to the

extent that those changes, events or effects have a materially disproportionate

effect on the Company and its subsidiaries relative to other participants in the

advertising industry), (iv) changes in any tax laws or regulations or applicable

accounting regulations or principles (except to the extent that those changes,

events or effects have a materially disproportionate effect on the Company and

its subsidiaries relative to other participants in the advertising industry) or

(v) only with respect to the clients listed on Section 3.1 of the Company

Disclosure Schedule, the impact of any change

 

                                      -16-

 

<PAGE>

 

in client business publicly announced by the Company or such client prior to the

date of this Agreement; provided that the exception set forth in clause (ii)

shall not apply with respect to the representations and warranties set forth in

Sections 3.4 and 3.5 or the absence of conflict or similar representations set

forth in Section 3.10(j) or with respect to any failure by the Company or any of

its subsidiaries to take any action prohibited by Section 5.1 for which the

consent of Parent is properly withheld).

 

                  SECTION 3.2 Certificate of Incorporation and By-laws. The

Company has heretofore furnished or otherwise made available to Parent a true,

complete and correct copy of the restated certificate of incorporation (the

"Certificate of Incorporation") and the by-laws (the "By-Laws") of the Company,

in each case as currently in effect. The Certificate of Incorporation and

By-Laws of the Company, as so made available, are in full force and effect and

no other organizational documents are applicable to or binding upon the Company.

The Company is not in violation of any provisions of its Certificate of

Incorporation or By-Laws in any material respect.

 

                  SECTION 3.3 Capitalization.

 

                  (a) The authorized capital stock of the Company consists of

(i) 50,000,000 shares of Common Stock, (ii) 10,000,000 shares of Class B Common

Stock and (iii) 500,000 shares of preferred stock, par value $0.01 per share

(the "Preferred Stock"). As of the close of business on September 1, 2004, (i)

1,162,631 shares of Common Stock were issued and outstanding, all of which were

duly authorized, validly issued, fully paid and nonassessable and were issued

free of preemptive rights, (ii) 229,737 shares of Class B Common Stock were

issued and outstanding, all of which were duly authorized, validly issued, fully

paid and nonassessable and were issued free of preemptive rights, (iii) an

aggregate of 315,709 shares of Common Stock and 0 shares of Class B Common Stock

were reserved for issuance upon or otherwise deliverable in connection with the

grant of equity-based awards or the exercise of outstanding Company Stock

Options issued pursuant to the Company's 1994 Stock Incentive Plan, the SMIPs

and Employee Stock Ownership Plan (the "Company Stock Plans"), an aggregate of

156,055 shares of Common Stock were reserved for issuance upon, or otherwise

deliverable in connection with, the conversion of the Convertible Debentures and

no other Shares are reserved for issuance by the Company, (iv) no shares of

Preferred Stock were outstanding or reserved for issuance. As of the date of

this Agreement, the Company had outstanding Company Stock Options to purchase

112,417 Common Shares and 0 Class B Shares, with a weighted average exercise

price of $347.82, and a total of 7365.33 Common Shares are allocated or credited

to accounts of Stock Participants under the SMIPs. From the close of business on

September 1, 2004 until the date of this Agreement, no shares of Company Common

Stock or Preferred Stock have been issued except for Common Shares issued

pursuant to the exercise of Company Stock Options, the conversion of Convertible

Debentures or the conversion of Class B Shares. Except as set forth above, there

are no outstanding options, warrants or other outstanding rights of any kind

which obligate the Company or any of its subsidiaries to issue or deliver any

shares of capital stock or voting securities of the Company or any securities or

obligations convertible or exchangeable into or exercisable for any shares of

capital stock or voting securities of the Company.

 

                  (b) Except as set forth in Section 3.3(a), there are no

preemptive rights of any kind which obligate the Company or any of its

subsidiaries to issue or deliver any shares of

 

                                      -17-

 

<PAGE>

 

capital stock or voting securities of the Company or any securities or

obligations convertible or exchangeable into or exercisable for, or giving any

person a right to subscribe for or acquire from the Company or its subsidiaries,

any shares of capital stock or voting securities of the Company. Except as set

forth above, the Company does not have outstanding any bonds, debentures, notes

or other obligations the holders of which have the right to vote (or which are

convertible, exchangeable or exercisable for or into securities having the right

to vote) with the stockholders of the Company on any matter. As of the date of

this Agreement, each such Company Stock Option has the exercise price, is

subject to the vesting schedule, has an exercise period, and is held by the

holder set forth with respect thereto, as set forth in Section 3.3 of the

Company Disclosure Schedule. As of the date of this Agreement, each outstanding

Restricted Share is subject to the vesting schedule and held by the holder set

forth with respect thereto in Section 3.3 of the Company Disclosure Schedule.

Section 3.3 of the Company Disclosure Schedule sets forth, as of the date of

this Agreement, (x) each participant in a SMIP, identifying the applicable SMIP,

the amount of cash and/or number of Common Shares, if any, allocated or credited

to such participant's Contingent Account or Vested Account (both as defined in

the applicable SMIP), as applicable, and the Allocation Amount (as defined in

the applicable SMIP) for such participant for each uncompleted Plan Year (as

defined in the applicable SMIP).

 

                  As used herein, the term "Significant Subsidiary" shall mean

any subsidiary listed on Section 3.3(b) of the Company Disclosure Schedule. The

aggregate annual revenues of the Significant Subsidiaries of the Company for the

year ended December 31, 2003 represented at least 75% of the consolidated annual

revenues of the Company for the year ended December 31, 2003.

 

                  (c) Each of the outstanding shares of capital stock, other

ownership interests and other voting securities of each of the Company's

Significant Subsidiaries is duly authorized, validly issued, fully paid and

nonassessable and all such shares, other ownership interests and voting

securities are owned by the Company or another wholly-owned subsidiary of the

Company, in each case, free and clear of all security interests, liens, claims,

pledges, agreements, limitations in voting rights, charges or other encumbrances

of any nature whatsoever, except where any such failure to own any such shares,

ownership interests or voting securities free and clear, has not had, and would

not reasonably be expected to have, individually or in the aggregate, a Company

Material Adverse Effect. There are no preemptive or other outstanding rights,

options, warrants, conversion rights, stock appreciation rights, redemption

rights, repurchase rights, agreements, arrangements, call, commitments or rights

of any kind which obligate the Company or any of its subsidiaries to issue or

deliver any shares of capital stock, other ownership interests or voting

securities of any Significant Subsidiary or any securities or obligations

convertible or exchangeable into or exercisable for, or giving any person a

right to subscribe for or acquire from the Company or any of its subsidiaries,

any shares of capital stock, other ownership interests or voting securities in

any Significant Subsidiary of the Company, except as would not have, or

reasonably be expected to have, individually or in the aggregate, a Company

Material Adverse Effect.

 

                  SECTION 3.4 Authority. (a) The Company has all necessary

corporate power and authority to execute and deliver this Agreement and the

Employment Agreement to perform its obligations hereunder and thereunder and to

consummate the transactions contemplated hereby and thereby. The execution,

delivery and performance of this Agreement and the

 

                                      -18-

 

<PAGE>

 

Employment Agreement by the Company and the consummation by the Company of the

transactions contemplated hereby and thereby have been duly and validly

authorized by all necessary corporate action and no other corporate proceedings

on the part of the Company are necessary to authorize this Agreement and the

Employment Agreement, to perform its obligations hereunder or thereunder or to

consummate the transactions contemplated hereby and thereby (other than adoption

of this Agreement by (i) the holders of not less than two-thirds in voting power

of the outstanding Shares and (ii) the holders of not less than two-thirds of

the outstanding Shares (the "Merger Requisite Votes"), and the filing with the

Secretary of State of the State of Delaware of the Certificate of Merger as

required by the DGCL). Each of this Agreement and the Employment Agreement has

been duly and validly executed and delivered by the Company and, assuming the

due authorization, execution and delivery hereof and thereof by the other

parties hereto and thereto, constitutes a legal, valid and binding obligation of

the Company enforceable against the Company in accordance with its terms,

subject to the effects of bankruptcy, insolvency, fraudulent conveyance,

reorganization, moratorium and other similar laws relating to or affecting

creditors' rights generally, general equitable principles (whether considered in

a proceeding in equity or at law) and any implied covenant of good faith and

fair dealing. The Board of Directors of the Company has, by resolutions duly

adopted at a meeting duly called and held, (A) approved this Agreement and the

Employment Agreement, the Merger, and the other transactions contemplated hereby

and thereby, (B) declared the advisability of this Agreement, and (C) subject to

Section 6.1(b), recommended that the Company's stockholders vote in favor of the

adoption of this Agreement at the Stockholders Meeting. The only votes of the

stockholders of the Company required to adopt this Agreement and approve the

transactions contemplated hereby are the Merger Requisite Votes.

 

                  (b) As of September 1, 2004, to the knowledge of the Company,

the adoption of this Agreement by the holders of not less than two thirds of the

outstanding Shares will constitute adoption of this Agreement by the holders of

a majority of the outstanding Shares, excluding Shares beneficially owned by

directors, officers or employees of the Company.

 

                  SECTION 3.5 No Conflict; Required Filings and Consents.

 

                  (a) The execution, delivery and performance of this Agreement

and the Employment Agreement by the Company do not and will not (i) conflict

with or violate the Certificate of Incorporation or By-Laws of the Company, (ii)

conflict with or violate the certificate of incorporation, by-laws or comparable

constituent documents of the subsidiaries of the Company, (iii) assuming that

all consents, approvals, authorizations, declarations and permits contemplated

by clauses (i) through (vii) of subsection (b) below have been obtained, and all

filings described in such clauses have been made, conflict with or violate any

law, rule, regulation, order, judgment or decree applicable to the Company or

any of its subsidiaries or by which its or any of their respective properties

are bound, or (iv) result in any breach or violation of or constitute a default

(or an event which with notice or lapse of time or both would become a default)

or result in the loss of a benefit under, or give rise to any right of

termination, cancellation, amendment or acceleration of, any note, bond,

mortgage, indenture, contract, agreement, lease, license or other instrument or

obligation ("Contracts") to which the Company or any of its subsidiaries is a

party or by which the Company or any of its subsidiaries or its or any of their

respective properties are bound, except, in the case of clauses (ii), (iii) and

(iv) above, for any such conflict, violation, breach, default, acceleration,

loss, right or other

 

                                      -19-

 

<PAGE>

 

occurrence that, individually or in the aggregate, would not, and would not

reasonably be expected to, (x) have a Company Material Adverse Effect or (y)

prevent, materially delay or materially impede the Company's ability to

consummate the Merger or the other transactions contemplated by this Agreement.

 

                  (b) The execution, delivery and performance of this Agreement

and the Employment Agreement by the Company and the consummation of the

transactions contemplated hereby and thereby by the Company, do not and will not

require any consent, approval, authorization, declaration or permit of, action

by, filing with or notification to, any governmental or regulatory (including

stock exchange) authority, agency, court, commission, or other governmental body

(each, a "Governmental Entity"), except for (i) applicable requirements of the

Securities Act of 1933, as amended (the "Securities Act") and the rules and

regulations promulgated thereunder, the applicable requirements of the Exchange

Act and the rules and regulations promulgated thereunder, the Hart-Scott-Rodino

Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the rules and

regulations promulgated thereunder, and state securities, takeover and "blue

sky" laws, (ii) the applicable requirements of the Nasdaq, (iii) the filing with

the Secretary of State of the State of Delaware of the Certificate of Merger as

required by the DGCL, (iv) the filing with the European Commission of a merger

notification in accordance with Council Regulation (EC) 139/2004, the E.C.

Merger Regulation (the "ECMR"), (v) the applicable requirements of the competent

authority of any member state of the European Union to which any of the

transactions contemplated by this Agreement is referred pursuant to Article 9 of

the ECMR, (vi) the applicable requirements of antitrust, competition or other

similar laws, rules, regulations and judicial doctrines of jurisdictions other

than the United States and the European Union or of investment laws relating to

foreign ownership (collectively, "Foreign Antitrust Laws") and (vii) any such

consent, approval, authorization, declaration, permit, action, filing or

notification the failure of which to make or obtain, individually or in the

aggregate, would not reasonably be expected to, (A) prevent, materially delay or

materially impede the Company's ability to consummate the Merger or the other

transactions contemplated by this Agreement and the Employment Agreement or (B)

have a Company Material Adverse Effect.

 

                  SECTION 3.6 Compliance. Neither the Company nor any of its

subsidiaries is in violation of, or has violated, any law, rule, regulation,

order, judgment or decree to which the Company or any of its subsidiaries is

subject or by which its or any of their respective properties are bound, except

for any such violation which would not have, or reasonably be expected to have,

individually or in the aggregate, have a Company Material Adverse Effect. The

Company and its subsidiaries have all permits, licenses, authorizations,

exemptions, orders, consents, approvals and franchises ("Licenses") from

Governmental Entities required to conduct their respective businesses as now

being conducted and all such Licenses are valid and in full force and effect,

except for any such Licenses the failure of which to have or to be in full force

and effect has not had, and would not reasonably be expected to have,

individually or in the aggregate, a Company Material Adverse Effect.

 

                  SECTION 3.7 SEC Filings; Financial Statements.

 

                  (a) The Company has filed or otherwise transmitted all forms,

reports, statements, certifications and other documents (including all exhibits,

amendments and supplements thereto) required to be filed by it with the SEC

since January 1, 2002 (all such

 

                                       -20-

 

<PAGE>

 

forms, reports, statements, certificates and other documents filed by the

Company with the SEC since January 1, 2002, whether or not required to be filed,

collectively, the "Company SEC Reports"). Each of the Company SEC Reports, as

amended, complied as to form in all material respects with the applicable

requirements of the Securities Act, the Exchange Act and the rules and

regulations promulgated thereunder, each as in effect on the date so filed. None

of the Company SEC Reports, when filed as amended, contained any untrue

statement of a material fact or omitted to state a material fact required to be

stated or incorporated by reference therein or necessary in order to make the

statements therein, in the light of the circumstances under which they were

made, not misleading. There are no outstanding comments from the SEC with

respect to any of the Company SEC Reports.

 

                  (b) Each of the consolidated financial statements of the

Company and its subsidiaries (including the related notes and schedules)

included in the Company SEC Reports have been prepared in accordance with U.S.

generally accepted accounting principles applied on a consistent basis

throughout the periods involved (except as may be indicated in the notes

thereto). Each of the consolidated balance sheets of the Company and its

subsidiaries included in the Company SEC Reports (including the related notes

and schedules) fairly presents, in all material respects, the consolidated

financial position of the Company and its subsidiaries at the respective dates

thereof and each of the related consolidated statements of operations, cash

flows and changes in stockholders' equity included in the Company SEC Reports

(including any related notes and schedules) fairly presents, in all material

respects, the results of operations and cash flows of the Company and its

subsidiaries for the periods indicated (subject, in the case of unaudited

statements, to normal period-end adjustments).

 

                  (c) The Company has (x) designed and maintains disclosure

controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to

ensure that material information relating to the Company, including its

consolidated subsidiaries, is made known to the management of the Company by

others within those entities, and (y) has disclosed, based on its most recent

evaluation, to the Company's outside auditors and the audit committee of the

Board of Directors of the Company (A) any significant deficiencies and material

weaknesses in the design or operation of internal control over financial

reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are

reasonably likely to adversely affect in any material respect the Company's

ability to record, process, summarize and report financial data and (B) any

fraud, whether or not material, that involves management or other employees who

have a significant role in the Company's internal control over financial

reporting. A summary of any of those disclosures made by management to the

Company's auditors and audit committee has been made available to Parent.

 

                  SECTION 3.8 Absence of Certain Changes or Events. From

December 31, 2003 (and with respect to periods after the date of this Agreement,

except as expressly contemplated hereby), the Company and its subsidiaries have,

in all material respects, conducted their businesses only in, and have not

engaged in any material transaction other than in accordance with, the ordinary

course of these businesses. From December 31, 2003, there has not been (i) any

change in the business, financial condition, or results of operations of the

Company and its subsidiaries except those changes that, individually or in the

aggregate, have not had, and would not reasonably be expected to have, a Company

Material Adverse Effect; (ii) any declaration, setting aside or payment of any

dividend or other distribution in cash, stock or property in

 

                                      -21-

 

<PAGE>

 

respect of the Company's capital stock or any securities convertible,

exchangeable or exercisable for or into shares of its capital stock, except for

(x) regular quarterly cash dividends of no more than $1.00 per Share and (y)

interest payments in respect of the Convertible Debentures in accordance with

their terms; (iii) any redemption, repurchase or other acquisition of any shares

of capital stock or ownership interests of the Company of any of its

subsidiaries or any securities convertible, exchangeable or exercisable for or

into shares of capital stock or ownership interests of the Company or any of its

subsidiaries other than acquisitions of Restricted Shares at their applicable

original cost, pursuant to the terms of any Company Stock Plan or any employment

agreement listed in Section 3.10(a) of the Disclosure Schedule, or (iv) any

material change by the Company in its accounting principles, practices or

methods except as required by changes in U.S. generally accepted accounting

principles. Between December 31, 2003 and the date of this Agreement, there has

been no corporate directive or authorization from the Company to increase

compensation payable or which could become payable to any employees of the

Company that has been made as a result of or in contemplation of a change of

control of the Company or its subsidiaries, and between December 31, 2003 and

the date of this Agreement, there have not been any material alterations or

changes in overall compensation and benefit practices and plans of the Company

or its subsidiaries.

 

                   SECTION 3.9 Absence of Litigation.

 

                  There are no civil, criminal or administrative actions, suits,

claims, hearings, proceedings, arbitrations, mediations or investigations

pending or, to the knowledge of the Company, threatened against the Company or

any of its subsidiaries or, to the knowledge of the Company, any of the

executive officers of the Company, except, in each case, for those that,

individually or in the aggregate, (x) have not had, and would not reasonably be

expected to have, a Company Material Adverse Effect and (