“But it’s in U.S. dollars, not yen?”
“Also correct.”
“And the maturity’s eight years from now, at a fixed interest rate of seven and a half percent?”
“That’s right.”
“Pretty sweet deal,” Lawrence Bonner observed.
“Yes, it is,” Herb Wylie agreed. “It’s better than anything we could do with the U.S. banks. Right, Mr. Banker?” he asked, turning to Ed Sharett.
“I’m sorry, what was the question?” Sharett asked, obviously wool-gathering at his end of the table.
“On-Line’s Japanese loan,” Bonner said. “Seven and a half percent fixed for eight years. Could your bank beat that?”
“No way,” Sharett said. “We’d like to borrow on those terms.”
“What we’re getting at, Harvey,” Bonner said, “is that Applications regards this cheap loan as a valuable asset, which was taken into account in pricing the deal. We assume it will continue after the merger. And we also assume that Machikin’s consent to the merger will be required. Is that correct?”
“That is correct,” Rawson said. “We’ve already started work on getting it, and the preliminary report is there won’t be any difficulty.”
“Who’s working on it?”
“Our Tokyo office. Schoonmaker arranged the loan in the first place so it makes sense for us to get the consent,” Rawson said.
“And it looks like there’s no problem?”
“That’s what Tokyo tells us.”
“I’m glad to hear it,” Lovett said. “That loan’s important to us.”
“We understand,” Rawson said.
After a discussion of the logistics of deploying accountants and lawyers to press the due diligence examination of On-Line forward, Merriman asked if there was anything else anyone wanted to bring up.
Before anyone could answer, Merriman’s boss entered the room. “Bill Richardson,” he said heartily, as he shook hands with the outsiders—paying no attention to the names he heard back—and took an empty seat two down from Merriman’s. Tall, with a patrician bearing, he looked every inch the self-confident, middle-aged Yale man that he was.
“How’s it going?” he asked.
“Pretty well,” Merriman answered. “We’ve just—”
Cutting her off in mid-sentence, Rawson interrupted to “express his concern” about the proposed timing. He made his pitch all over again for a closing on the twenty-first. “If we get early termination of the Hart-Scott waiting period, which even Ms. Merriman seems to think is in the cards, don’t you think the twenty-first is doable, Mr. Richardson?” he asked. “Can’t all the lawyers’ nitpicking be done by then?”
Merriman, furious at Rawson’s attempt to go over her head, slipped a copy of her draft time schedule to Richardson.
“I’m not sure I like to think of our legal work as ‘nitpicking,’ sir, but—”
“Harvey, we’ve been all through this,” Merriman said. “We—”
“I know your views, Julie,” Rawson said, cutting her off again. “I’m interested in what Mr. Richardson has to say.”
Richardson, veteran of a hundred such arguments over timing, did not need an explanation of the dispute. He put on his half-glasses and judiciously looked over Merriman’s work product.
“I think the twenty-first would be a little tight, sir,” Richardson said, still uncertain of Rawson’s name. “Ms. Merriman’s schedule looks like a prudent one to me.”
Rawson looked disgusted, his appeal to a higher authority denied.
“Any other burning issues?” Richardson asked.
“Not yet,” Merriman said.
“Good. For my sins, I have to catch a plane to the snowbelt this afternoon, so I’ll leave you to get on with your important business. I’m glad to meet you all, and I’m sure Ms. Merriman will look after you with her usual skill.”
Richardson stood, waved perfunctorily at the group and left quickly, before he could get caught in the middle of any other ruckus.
“Julie, is there a room here I can use?” Lovett asked, once Richardson had departed. “I want to talk to the Wylies about some operating stuff while we’re all here together.”
“You can use this one. I’m going back to my office to begin work on the merger agreement.”
“I’d just like to say one thing,” Harvey Rawson said, raising his high voice to be heard over the bustle caused by papers being packed up and Jim Lewis’ efforts to get back the pad with the participants’ addresses and telephone numbers. “This is a merger made in heaven. The fit between Applications and On-Line is fantastic. I know we’re on a tight timetable, but it’s to everybody’s advantage to get this one done. So go to work, guys!”
Julie Merriman walked up the fire stairs to the thirty-first floor, Beth Locke at her side. “I think we’ve got everything on track,” she said, with satisfaction. Harvey Rawson and his ridiculous time schedule had been faced down—twice—and she had established hegemony over the important details of the merger.
“It’s going to be rough, Beth,” she said. “But with a little of the old Chase & Ward do-or-die, we’ll get it done.”
CHAPTER
3
A Merger Made in Heaven: II
The next three weeks were busy ones for Juliana Merriman. Not only did she have to supervise—if from a distance—the small investigative army of lawyers and paralegals that descended on the headquarters of On-Line in New Jersey, and then collect and analyze the results in a “due diligence” memorandum for her client, but she also had to draft the basic merger documents. And then sit, as she had done the previous week, for two interminable days (and one night past two in the morning), negotiating them with the Wylies and their bankers and lawyers. Plus an added half-day with the First Fiduciary people, hammering out the terms and covenants of Applications’ loan agreement.
The activity had been welcome. As the three weeks went by, she had become more and more confident that the On-Line transaction would be a “star in her diadem” (a phrase that Chase & Ward associates derisively used among themselves to describe a triumph; it had been the highest encomium bestowed by a long-deceased Executive Partner, if one seldom accompanied by a raise or a bonus).
Bill Richardson, still tied up with the Argosy financing, only appeared rarely at the On-Line meetings and made no pretense that he, rather than Merriman, was in charge. When he was around, Rawson continued to treat him as a court of last resort, reraising points already negotiated. Merriman had been glad Richardson’s time for her transaction was limited.
The previous Saturday she had worked until very late, pulling together the “due diligence” memorandum for Lovett, finishing it in time to have it delivered to the Park Lane just prior to his arrival from L.A.
Then yesterday, Sunday, she had gone to dinner with Lovett and her live-in boyfriend, Marshall Genakis. Genakis, another émigré from Palo Alto, was the owner of a trendy restaurant, called Marshall’s, located not far from Clinton Plaza. The restaurant was closed that night, so they had met at Orso, where Genakis had been warmly received by his fellow restaurateur, Joe Allen, and the maître d’ of the evening, Ted McGee.
Genakis and Merriman had first become lovers in Palo Alto and, with Lovett, had been an inseparable trio while they all lived there. Lovett and Genakis were then best friends, so close that Lovett’s ineffectual try at stealing Juliana away from Genakis had not caused lasting damage to the friendship. Gently rejected by Juliana, Lovett had concentrated his emotional energies on his growing business and never seemed to feel the need to find a substitute for her. As for Genakis, once he had come to New York and developed his plan for a restaurant, Lovett had made him a substantial loan on easy terms that only a friend (and a rich one at that) would provide.
Lovett now saw his old pals once or twice a year, usually when he called unexpectedly on whirlwind business trips to New York. Together once again at Orso, they had eaten pizzas and recalled escapades from California days. Merriman had
declared a moratorium on talking about the merger: “I’ve lived and breathed the Wylie brothers for three weeks now. Tonight I want to relax and enjoy myself for not less than forty-five minutes.”
Shortly after ten, she had excused herself to return to Chase & Ward to make sure everything was in order for a meeting the next day at which the Agreement of Merger would be signed.
“You two can talk the night away if you like,” she had said. “Just be at Conference Room B at ten, Alan. I’ve got a dog and pony show all lined up for you. We’re going to snow you with the results of our due diligence, though I can’t say there are any big surprises. Your friends the Wylies will be along at noon to sign up.”
Genakis had been asleep when Merriman got home, and remained so when she left early Monday morning for the office, so she did not know how late he and Lovett had been up. Judging by Lovett’s appearance when he arrived, the evening had not been an early one.
“You boys behave last night?” she said to him in a voice too low for Beth Locke, arranging documents on the conference table, and Harold Lane to hear. “It doesn’t look as if you did.”
“I’ve felt better,” Lovett said, abruptly. Merriman attributed his gruffness to a hangover and thought nothing of it, especially since he soon relaxed and got down to business.
“Alan, you read the memo I sent over to the hotel on Saturday. That was my attempt to put down in one place everything we learned about On-Line. As I said last night, there aren’t any real land mines. Nothing that would affect the value of the business, or the price you’re paying. I gather Price Waterhouse comes out the same way.”
“Yeah. The accountants have quibbles over some personal items the brothers charged to the business, but nothing important. I must say those boys have taught me a thing or two about deductible expenses.”
“There were one or two things we did want to go over with you personally,” Merriman explained. In succession she summoned the participants in her “dog and pony” show—firm experts on insurance, pension plans, litigation and real estate, as well as a young corporate associate who reported on what he had found in the minutes of the meetings of On-Line’s board of directors.
Their report raised only three items that Lovett found worthy of attention: a series of arrangements under which On-Line’s warehouse space was leased to it by a partnership owned by the Wylie brothers and their wives; leases of chauffeur-driven Cadillacs for each of the brothers; and a company apartment in the Sherry-Netherland in New York.
“How long are the warehouse leases for?” Lovett asked the Chase & Ward real estate lawyer who had read them.
“There are three leases, one in Jersey, one in Des Plaines, Illinois—that’s right near O’Hare Airport—and one in Oakland, California. The Wylie partnership’s the landlord. The leases are all alike and run for another ten years.”
“What’s the rent?” Lovett asked.
The lawyer produced the figures and said they did not seem out of line to him, but he was not an expert on rents in the three locations.
“Are they standard leases?” Lovett asked. “Or sweetheart family deals?”
“They’re good leases. They wanted them to stand up for tax purposes, so they didn’t fool around.”
“If we’ve got firm leases for ten years, and it’s a fair-market rent, I don’t give a damn who owns the property. Isn’t that right?” He looked at the real estate lawyer and Merriman for confirmation. They agreed.
“I’m more worried about the cars. Limousines with drivers, that’s pretty fancy. And expensive. How long do those agreements run?”
“They’re cancelable on ninety days’ notice,” Merriman said.
“Then I think we can forget them for now. Make a note to give a cancellation notice the day we take over. But I don’t see any need to debate this one with the Wylies. We’ll just terminate.”
“They may not like that, Alan,” Merriman said.
“Tough. Those boys are getting a good deal and they don’t have to have that kind of sweetener. They don’t need that company apartment, either. Hell, they all live in New Jersey, why is there a fancy set-up in New York?”
“That one’s a little tougher,” Merriman said. “The lease with the Sherry-Netherland has another fifteen months to run.”
“We’ll talk to the hotel. It may cost us something, but I’m sure we can get out of it. Or maybe I could use it myself. I’ll bet it’s a palace compared with the broom closet they managed to put me in at the Park Lane this time.”
“So you don’t want to bring the apartment up?” Harold Lane asked.
“Right. Let sleeping dogs lie. Where are the sleeping dogs, anyway? It’s twelve-fifteen. Before they get here, let me repeat—I don’t want to talk about the cars or the apartment today. And I also don’t want to get maneuvered into having lunch with the Wylies. I’ve got a couple of errands I have to do this afternoon, and I’m getting the four-thirty American to L.A. So no fooling around with lunch.”
He’s probably too hung over to eat, Merriman thought.
“Here they come now,” Lane said, as the Wylie brothers and Frank Martin came into the room, accompanied by a woman Merriman at first assumed must be the Wylies’ mother. She turned out to be Mavis Zimmerman, the secretary of On-Line and the guardian of the embossing device that would be used to imprint the company’s corporate seal on the merger documents about to be signed.
The Wylie party was followed in short order by Ed Sharett and Angelica Post. She was struggling to manage a dozen copies of the final version of the loan agreement between Applications and First Fiduciary. They were still warm, having just been snatched by Post from the Rudenstine & Fried reproduction room as she had dashed to meet her client. Beth Locke took the copies and put them down next to the other documents at the end of the table.
“Now that we’re all here—I assume the investment bankers aren’t coming today—maybe I should explain where we’re at,” Merriman said. “Bill Richardson apologizes for not joining us. He had to be in Detroit again today. Now, except for a few loose ends, which I’m sure we can button up in the next few days, even with the holidays, our due diligence review is finished. And so is Price Waterhouse’s. Alan Lovett may want to say something more about that when I get through.”
Glenn and Herbert Wylie, sitting in the same chairs where they had placed themselves at the first meeting and all the negotiating sessions since, looked at each other in alarm. What did Lovett have in mind? their looks seemed to be asking. Merriman saw this and laughed.
“Don’t worry, fellows, I don’t think there’ll be any bombshells,” she said. “So let me go on and describe what we have here to be signed. First is the basic Agreement of Merger, which we’ve all now been over about fifteen times and on which I think everybody’s signed off. It provides for the merger to take place next week, if all the conditions precedent are met.”
“You still hope to close on the twenty-ninth?” Ed Sharett asked.
“Thursday, the twenty-ninth, that’s right,” Merriman answered. “That gives us one day’s grace, if we need it. Here’s the Certificate of Merger, which will be filed in Delaware on the twenty-ninth. And, of course, your employment agreements.”
“I’ve got a question about them,” Skip Wylie said. “They don’t say anything about our limousines. I think they should.”
“Limousines? I don’t understand you,” Lovett said, disingenuously.
“Yeah, well, Herb, Glenn and I all have company cars, cars and drivers that On-Line pays for.”
“Skip, as far as I’m concerned, that’s a detail,” Lovett said. “It’s not part of the big picture, which is to get this deal done by year end. Save it till we’re married.”
“It may be a detail for you, Mr. Lovett, but it’s important to us. Frank, shouldn’t the cars be covered?” Skip Wylie asked, turning to Frank Martin, the family lawyer.
“Skip, you can put anything you want in your contract,” Martin said, uneasily. “If you want to cover t
he cars, we should cover the cars. Or you can wait, as Mr. Lovett says, and talk about them later.”
“What do you recommend?” Skip asked him.
Martin shifted uncomfortably, but Lovett saved him from further embarrassment. “Look, I thought I made myself clear. We’re not going to discuss a lot of trivial stuff now. The cars can wait.”
“Herb? What do you think?” Skip asked his elder brother, plaintively.
“Of course the cars are important, Skip, but I have faith that Mr. Lovett will be fair when we talk about them later,” Herb said. He had detected the steel in Lovett’s tone and was not going to prolong the debate. Merriman had caught it too and marveled, as she had more than once doing the negotiations, at Lovett’s capacity for toughness, a new veneer to his laid-back, California-mellow persona that his business experience must have given him.
“And what about the apartment?” Skip Wylie persisted. “That’s important, too.”
“I know about the apartment,” Lovett said. “My answer’s the same on that. We’ll evaluate it in due course.”
“The apartment, the apartment,” Herb Wylie mumbled. “You know I’ve never even been there? Some people use it though,” he said, looking pointedly at Skip.
Seeing that glance, Juliana Merriman thought that it was just possible that the On-Line corporate apartment doubled as Skip Wylie’s trysting spot. Her suspicion was not allayed as she saw Glenn Wylie’s sudden uneasiness and his peremptory statement that there were “more important things to get crossed off the list” than the future of the Sherry-Netherland apartment.
“You brought the new loan agreements, Angelica?” Merriman asked First Fiduciary’s lawyer. “That’s the last document that will get signed today.”
“I put copies there on the table,” Angelica Post replied. “One is red-lined to show the changes.”
“The only changes are the ones we talked about yesterday, I assume,” Merriman said.
“Yes.”
“I’ll look at the red-lined copy in a minute. Let me explain that also here on the table is a draft memorandum of closing for the twenty-ninth. It lists all the documents that will be exchanged next week, and at the back is a list showing who is responsible for producing each one, and the quantities we’ll need. Please look it over before you leave and let me know if you have any problems.”
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