<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
and
SCHEDULE 13D
Under the Securities Exchange Act of 1934
------------------------------
FIRST COMMONWEALTH, INC.
(Name of Subject Company)
------------------------------
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
FLOSS ACQUISITION CORP.
(Bidders)
------------------------------
Common Stock, par value $.001 per share
(Including the Associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
------------------------------
319983102
(CUSIP Number of Class of Securities)
------------------------------
Herschel Reich
Debra R. Smith, Esq.
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
(212) 598-8000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
------------------------------
COPY TO:
Timothy B. Goodell, Esq.
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
(212) 819-8200
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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- --------------------------------------------
<S> <C>
TRANSACTION AMOUNT OF FILING
VALUATION* FEE**
<CAPTION>
- --------------------------------------------
<S> <C>
$100,834,375.00 $20,166.88
<CAPTION>
- --------------------------------------------
- --------------------------------------------
</TABLE>
* Estimated solely for the purpose of determining the registration fee. This
calculation assumes the purchase of 4,033,375 shares of Common Stock at a
price of $25.00 per share, net to the seller in cash, without interest
thereon.
** The amount of the filing fee, calculated in accordance with Rule 0-11 under
the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent
of the aggregate of the cash offered by the bidder.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
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<PAGE>
SCHEDULE 14D-1 AND 13D
CUSIP No. 319983102
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
The Guardian Life Insurance Company of America
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) / /
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
0*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW(7)
EXCLUDES CERTAIN SHARES / /
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%*
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10. TYPE OF REPORTING PERSON
IC
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* On May 19, 1999, The Guardian Life Insurance Company of America, a New York
corporation ("Parent"), entered into a Stockholder Agreement (each, a
"Stockholder Agreement" and collectively, the "Stockholder Agreements") with
each of Christopher C. Multhauf and David W. Mulligan (collectively, the
'Stockholders"), which Stockholders own an aggregate of 697,075 shares of
Common Stock, par value $.001 per share (the "Subject Shares"), of the
Company. Pursuant to such Stockholder Agreements and subject to the terms
and conditions contained therein, the Stockholders will (i) validly tender
and not withdraw the Subject Shares, pursuant to the Offer (as defined in
the Offer to Purchase dated May 25, 1999 (the "Offer to Purchase")) and (ii)
vote the Subject Shares in favor of the Merger (as defined in the Offer to
Purchase), the approval and adoption of the Merger Agreement (as defined in
the Offer to Purchase) and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement. The filing of this
information by Parent and Floss Acquisition Corp., a Delaware corporation
(the "Purchaser") shall not be construed as an admission that either Parent
or the Purchaser, for purposes of Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, as amended, is the beneficial owner of the Subject
Shares and such persons expressly disclaim any beneficial ownership. The
Stockholder Agreements are attached hereto as Exhibit (c)(2) and (c)(3).
2
<PAGE>
SCHEDULE 14D-1 AND 13D
CUSIP No. 319983102
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1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Floss Acquisition Corp.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
AF
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5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) / /
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
0*
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8. CHECK IF THE AGGREGATE AMOUNT IN ROW(7)
EXCLUDES CERTAIN SHARES / /
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%*
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10. TYPE OF REPORTING PERSON
CO
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* On May 19, 1999, Parent entered into a Stockholder Agreement with each of
the Stockholders, which Stockholders own an aggregate of 697,075 shares of
Common Stock, par value $.001 per share, of the Company. Pursuant to such
Stockholder Agreements and subject to the terms and conditions contained
therein, the Stockholders will (i) validly tender and not withdraw the
Subject Shares, pursuant to the Offer and (ii) vote the Subject Shares in
favor of the Merger, the approval and adoption of the Merger Agreement and
the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement. The filing of this information by
Parent and the Purchaser shall not be construed as an admission that either
Parent or the Purchaser, for purposes of Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended, is the beneficial owner of the
Subject Shares and such persons expressly disclaim any beneficial ownership.
The Stockholder Agreements are attached hereto as Exhibit (c)(2) and (c)(3).
3
<PAGE>
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to each Stockholder Agreement. The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) This statement relates to the securities of First Commonwealth, Inc., a
Delaware corporation (the "Company"). The principal executive offices of the
Company are located at Suite 600, 444 N. Wells St., Chicago, Illinois 60610.
(b) This statement relates to the shares of Common Stock, par value $.001
per share, of the Company, including the associated preferred stock purchase
rights (together, the "Shares"). The information regarding the number of Shares
outstanding, the exact amount of Shares being sought and the consideration being
offered therefor is set forth in the Introduction to the Offer to Purchase dated
May 25, 1999 (the "Offer to Purchase") and is incorporated herein by reference.
(c) The information concerning the principal markets in which the Shares are
traded and the sales prices for the Shares for each quarterly period during the
past two years is set forth in the Offer to Purchase under Section 6--"Price
Range of Shares; Dividends" and is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) Floss Acquisition Corp. (the "Purchaser") is a Delaware
corporation and a wholly owned subsidiary of The Guardian Life Insurance Company
of America, a New York corporation ("Parent"). The information set forth in the
Offer to Purchase under Section 8--"Certain Information Concerning the Purchaser
and Parent" is incorporated herein by reference. The name, business address,
present principal occupation or employment and material occupations, positions,
offices or employments during the last five years and citizenship of the
directors and executive officers of the Purchaser and Parent are set forth in
Schedule I to the Offer to Purchase and are incorporated herein by reference.
(e), (f) During the last five years, none of the Purchaser or Parent, or, to
the best of their knowledge, any of the persons listed in Schedule I to the
Offer to Purchase has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under the
Introduction, Section 10-- "Background of the Offer" and Section 11--"Purpose of
the Offer; Plans for the Company; Certain Agreements" is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in the Offer to Purchase under Section
9--"Source and Amount of Funds" is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Offer to Purchase under the
Introduction, Section 11-- "Purpose of the Offer; Plans for the Company; Certain
Agreements" and Section 13--"Effect of the Offer on the Market for the Shares;
Exchange Act Registration" is incorporated herein by reference.
4
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Offer to Purchase under the
Introduction, Section 8-- "Certain Information Concerning the Purchaser and
Parent", Section 10--"Background of the Offer" and Schedule I to the Offer to
Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase under the Introduction,
Section 10--"Background of the Offer", Section 11--"Purpose of the Offer; Plans
for the Company; Certain Agreements" and Section 15--"Certain Legal Matters;
Regulatory Approvals" is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Offer to Purchase under Section 16--"Fees
and Expenses" is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the Offer to Purchase under Section 8--"Certain
Information Concerning the Purchaser and Parent" is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Offer to Purchase under Section
11--"Purpose of the Offer; Plans for the Company; Certain Agreements" is
incorporated herein by reference.
(b)-(c) The information set forth in the Offer to Purchase under Section
15--"Certain Legal Matters; Regulatory Approvals" is incorporated herein by
reference.
(d) The information set forth in the Offer to Purchase under Section
13--"Effect of the Offer on the Market for the Shares; Exchange Act
Registration" is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the entire text of each of the Offer to
Purchase and the Letter of Transmittal, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------------- -----------------------------------------------------------------------------------------------
<S> <C>
Exhibit (a)(1) Offer to Purchase.
Exhibit (a)(2) Letter of Transmittal.
Exhibit (a)(3) Form of letter to brokers, dealers, commercial banks, trust companies and other nominees.
Exhibit (a)(4) Form of letter to be used by brokers, dealers, commercial banks, trust companies and nominees
to their clients.
Exhibit (a)(5) Press Release, dated May 19, 1999, announcing the tender offer.
Exhibit (a)(6) Form of newspaper advertisement, dated May 25, 1999, published in The Wall Street Journal.
Exhibit (a)(7) Notice of Guaranteed Delivery.
Exhibit (a)(8) Guidelines for Substitute Form W-9.
Exhibit (c)(1) Agreement and Plan of Merger, dated as of May 19, 1999, among The Guardian Life Insurance
Company of America, Floss Acquisition Corp. and First Commonwealth, Inc.
Exhibit (c)(2) Stockholder Agreement, dated as of May 19, 1999, between The Guardian Life Insurance Company of
America and Christopher C. Multhauf.
Exhibit (c)(3) Stockholder Agreement, dated as of May 19, 1999, between The Guardian Life Insurance Company of
America and David W. Mulligan.
Exhibit (c)(4) Confidentiality Agreement, dated as of March 24, 1999, between The Guardian Life Insurance
Company of America and First Commonwealth, Inc.
Exhibit (c)(5) Stockholders Rights Agreement, dated as of November 1, 1995, between First Commonwealth, Inc.
and First Chicago Trust Company of New York, as Rights Agent.
Exhibit (c)(6) First Amendment to Stockholders Rights Agreement, dated as of December 15, 1998.
Exhibit (c)(7) Second Amendment to Stockholders Rights Agreement, dated as of May 19, 1999.
Exhibit (c)(8) Non-binding Letter Agreement, dated May 18, 1999, between The Guardian Life Insurance Company
of America and Christopher C. Multhauf.
Exhibit (c)(9) Non-binding Letter Agreement, dated May 18, 1999, between The Guardian Life Insurance Company
of America and David W. Mulligan.
</TABLE>
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
THE GUARDIAN LIFE INSURANCE
Dated: May 25, 1999 COMPANY OF AMERICA
By: /s/ Herschel Reich
-----------------------------------------
Name: Herschel Reich
Title: Vice President, Group Health Care
Dated: May 25, 1999 FLOSS ACQUISITION CORP.
By: /s/ Herschel Reich
-----------------------------------------
Name: Herschel Reich
Title: Vice President, Dental Plans
</TABLE>
7
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
FIRST COMMONWEALTH, INC.
AT
$25.00 NET PER SHARE
BY
FLOSS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
---------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 23, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE (THE "COMMON
STOCK"), INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS (TOGETHER, THE
"SHARES") OF FIRST COMMONWEALTH, INC. (THE "COMPANY") WHICH REPRESENT AT LEAST A
MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, (II) THE RECEIPT OF
ALL INSURANCE REGULATORY APPROVALS NECESSARY FOR THE ACQUISITION OF CONTROL OF
THE COMPANY AND ITS SUBSIDIARIES AND (III) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED. THE OFFER IS ALSO CONDITIONED UPON THE SATISFACTION OF
CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED IN SECTION 14--"CONDITIONS OF THE
OFFER".
THE OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED
AS OF MAY 19, 1999 (THE "MERGER AGREEMENT"), AMONG THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA ("PARENT"), FLOSS ACQUISITION CORP. (THE "PURCHASER") AND THE
COMPANY. SEE SECTION 11--"PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; CERTAIN
AGREEMENTS".
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (I) DETERMINED THAT
THE MERGER (AS DEFINED HEREIN) IS ADVISABLE AND THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE HOLDERS
OF COMMON STOCK (THE "HOLDERS"), (II) APPROVED THE OFFER, THE MERGER AND THE
MERGER AGREEMENT (AS DEFINED HEREIN) AND (III) RECOMMENDED THAT THE HOLDERS
ACCEPT THE OFFER AND (IF REQUIRED BY APPLICABLE LAW OR OTHERWISE) APPROVE THE
MERGER AGREEMENT AND THE MERGER.
------------------------------
IMPORTANT
Any Holder desiring to tender all or any portion of the Shares owned by such
Holder should either (i) complete and sign the Letter of Transmittal or a copy
thereof in accordance with the instructions in the Letter of Transmittal and
mail or deliver it, together with the certificate(s) evidencing tendered Shares
and any other required documents, to the Depositary, (ii) where applicable,
cause such Holder's broker, dealer, commercial bank, trust company or custodian
to tender such Shares pursuant to the procedures for book-entry transfer of
Shares or (iii) comply with the guaranteed delivery procedures, in each case,
upon the terms set forth in Section 3--"Procedures for Tendering Shares". Any
Holder whose Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such broker, dealer,
commercial bank, trust company or custodian if such Holder desires to tender
such Shares. See Section 3--"Procedures for Tendering Shares".
Any Holder who desires to tender Shares and whose certificate(s) evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3--"Procedures for Tendering Shares".
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal or other related tender offer
materials may be obtained from the Information Agent or from brokers, dealers,
commercial banks or trust companies.
------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
SALOMON SMITH BARNEY INC.
---------------
The date of this Offer to Purchase is May 25, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION............................................................................................... 1
THE TENDER OFFER........................................................................................... 3
1. Terms of the Offer................................................................................. 3
2. Acceptance for Payment and Payment for Shares...................................................... 5
3. Procedures for Tendering Shares.................................................................... 7
4. Withdrawal Rights.................................................................................. 10
5. Certain United States Federal Income Tax Consequences.............................................. 11
6. Price Range of Shares; Dividends................................................................... 12
7. Certain Information Concerning the Company......................................................... 12
8. Certain Information Concerning the Purchaser and Parent............................................ 15
9. Source and Amount of Funds......................................................................... 17
10. Background of the Offer............................................................................ 17
11. Purpose of the Offer; Plans for the Company; Certain Agreements.................................... 19
12. Dividends and Distributions........................................................................ 39
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration........................ 39
14. Conditions of the Offer............................................................................ 40
15. Certain Legal Matters; Regulatory Approvals........................................................ 42
16. Fees and Expenses.................................................................................. 47
17. Miscellaneous...................................................................................... 47
</TABLE>
SCHEDULE I Information Concerning the Directors and Executive Officers of The
Guardian Life Insurance Company of America and Floss Acquisition
Corp.
i
<PAGE>
To the Holders of Common Stock of
First Commonwealth, Inc.:
INTRODUCTION
Floss Acquisition Corp., a Delaware corporation (the "Purchaser"), and a
wholly owned subsidiary of The Guardian Life Insurance Company of America, a New
York corporation ("Parent"), hereby offers to purchase all of the issued and
outstanding shares of Common Stock, par value $.001 per share (the "Common
Stock"), including the associated Rights (as defined below), of First
Commonwealth, Inc., a Delaware corporation (the "Company"), at a price of $25.00
per Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, as they may be amended
and supplemented from time to time, together constitute the "Offer").
Unless the context indicates otherwise, as used herein, "Shares" shall mean
the shares of Common Stock. Unless the context indicates otherwise, all
references to shares of Common Stock shall include the associated preferred
stock purchase rights (the "Rights") issued pursuant to the Stockholders Rights
Agreement, dated as of November 1, 1995, between the Company and First Chicago
Trust Company of New York ("First Chicago"), as Rights Agent, as amended from
time to time (the "Rights Agreement").
Holders of Common Stock ("Holders") whose Shares are registered in their own
name and who tender directly to First Chicago, as Depositary (the "Depositary"),
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the
purchase of Shares pursuant to the Offer. The Purchaser will pay all charges and
expenses of Salomon Smith Barney Inc., as Dealer Manager (the "Dealer Manager"
or "Salomon Smith Barney"), the Depositary and Morrow & Co., Inc., as
Information Agent (the "Information Agent"), in each case incurred in connection
with the Offer. See Section 16--"Fees and Expenses".
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES WHICH REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (II) THE SATISFACTION OF THE
INSURANCE REGULATORY CONDITION (AS DEFINED HEREIN) AND (III) THE SATISFACTION OF
THE HSR CONDITION (AS DEFINED HEREIN). THE OFFER IS ALSO CONDITIONED UPON THE
SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED IN SECTION
14--"CONDITIONS OF THE OFFER".
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (I) DETERMINED THAT
THE MERGER (AS DEFINED HEREIN) IS ADVISABLE AND THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE HOLDERS,
(II) APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (AS DEFINED HEREIN)
AND (III) RECOMMENDED THAT THE HOLDERS ACCEPT THE OFFER AND (IF REQUIRED BY
APPLICABLE LAW OR OTHERWISE) APPROVE THE MERGER AGREEMENT AND THE MERGER.
THE COMPANY HAS ADVISED PARENT THAT WILLIAM BLAIR & COMPANY L.L.C. ("WILLIAM
BLAIR & COMPANY"), THE FINANCIAL ADVISOR TO THE COMPANY, HAS DELIVERED TO THE
BOARD OF DIRECTORS OF THE COMPANY ITS WRITTEN OPINION DATED MAY 18, 1999, THAT,
AS OF SUCH DATE AND BASED UPON ITS REVIEW AND ANALYSIS AND SUBJECT TO THE
LIMITATIONS SET FORTH THEREIN, THE OFFER PRICE TO BE RECEIVED BY THE HOLDERS
PURSUANT TO THE OFFER AND THE MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO
SUCH HOLDERS. A COPY OF THE OPINION OF WILLIAM BLAIR & COMPANY, WHICH SETS FORTH
THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND SCOPE OF REVIEW UNDERTAKEN BY
WILLIAM BLAIR & COMPANY, IS CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"),
WHICH IS BEING MAILED TO THE HOLDERS CONCURRENTLY HEREWITH. HOLDERS ARE URGED TO
READ THE FULL TEXT OF THAT OPINION.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 19, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides that, promptly upon consummation of the
Offer, Parent will cause the Purchaser to be merged with and
1
<PAGE>
into the Company (the "Merger"). At the Effective Time (as defined herein) of
the Merger, except for (a) Shares which are held by any wholly owned subsidiary
of the Company or in the treasury of the Company, or which are held by Parent or
any subsidiary of Parent (including the Purchaser), all of which shall cease to
be outstanding and shall be canceled and retired and none of which shall receive
any payment with respect thereto and (b) Shares held by Holders exercising their
rights to dissent in accordance with the General Corporation Law of the State of
Delaware ("DGCL"), (i) each Share issued and outstanding immediately prior to
the Effective Time and all rights in respect thereof shall, by virtue of the
Merger and without any action on the part of the Holder, forthwith cease to
exist and be converted into and represent the right to receive an amount in cash
equal to $25.00, without interest. The Merger Agreement is more fully described
in Section 11--"Purpose of the Offer; Plans for the Company; Certain
Agreements". Under the DGCL, if the Purchaser acquires, pursuant to the Offer or
otherwise, at least 90% of the issued and outstanding shares of the Common
Stock, the Purchaser will be able to approve and effect the Merger without a
vote of the Company's stockholders pursuant to Section 253 of the DGCL. If,
however, the Purchaser does not acquire at least 90% of the issued and
outstanding shares of the Common Stock, pursuant to the Offer or otherwise, a
vote of the Company's stockholders to effect the Merger is required under the
DGCL and a longer period of time will be required to effect the Merger. See
Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements".
Parent has also entered into Stockholder Agreements, dated as of May 19,
1999 (each, a "Stockholder Agreement"), with each of Christopher C. Multhauf,
the Chairman of the Board of Directors and Chief Executive Officer of the
Company and the record and beneficial owner of 329,788 Shares (or approximately
8.2% of the Shares outstanding on a fully diluted basis as of May 18, 1999), and
David W. Mulligan, the President, Secretary and Chief Operating Officer of the
Company and the record and beneficial owner of 367,287 Shares (or approximately
9.1% of the Shares outstanding on a fully diluted basis as of May 18, 1999).
Each of Messrs. Multhauf and Mulligan has agreed (i) to irrevocably tender
pursuant to the Offer (and not withdraw) all of his Shares and (ii) vote his
Shares in favor of the Merger, the approval and adoption of the Merger Agreement
and the approval of the terms thereof and each of the other transactions
contemplated thereby.
The Company has informed the Purchaser that, as of May 18, 1999, there were
(i) 3,730,135 Shares issued and outstanding, (ii) 740 Shares held in the
Company's treasury, (iii) 413,389 Shares reserved for future issuance pursuant
to the Company's Stock Option Plans (as defined herein) and (iv) stock options
issued under the Company's Stock Option Plans covering 305,240 Shares (of which
stock options covering 303,240 Shares have exercise prices of less than $25.00
per Share). As a result, as of such date, the Minimum Condition would be
satisfied if at least 2,017,688 Shares are validly tendered and not properly
withdrawn prior to the Expiration Date (as defined herein). The Company has been
advised, and has informed Parent, that each of its directors and executive
officers intends to tender pursuant to the Offer all Shares owned of record and
beneficially by him or her, except to the extent that such tender would violate
applicable securities laws.
"Insurance Regulatory Condition" means the completion of all necessary
filings with the Department of Insurance of each of the States of Arizona,
Illinois, Indiana, Wisconsin, Missouri and Michigan and, to the extent required,
the receipt of a final order (which order shall not have been stayed or
enjoined) from each Department of Insurance approving, exempting or otherwise
authorizing the consummation of the Offer and the Merger and all other
transactions contemplated by the Merger Agreement.
"HSR Condition" means the expiration or termination of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder (the "HSR Act"). See
Section 14--"Conditions of the Offer" for a complete description of the
conditions of the Offer.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
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THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any extension or amendment), the Purchaser will accept for payment and pay
for all Shares validly tendered prior to the Expiration Date (as hereinafter
defined) and not withdrawn in accordance with Section 4--"Withdrawal Rights".
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, June 23, 1999, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition, the Insurance Regulatory Condition and the HSR Condition. The
Offer is also subject to certain other conditions set forth in Section
14--"Conditions of the Offer". If these or any of the other conditions referred
to in Section 14--"Conditions of the Offer" are not satisfied or any of the
events specified in Section 14--"Conditions of the Offer" have occurred or are
determined by the Purchaser to have occurred prior to the Expiration Date, the
Purchaser, subject to the terms of the Merger Agreement, expressly reserves the
right (but is not obligated) to (i) decline to purchase any of the Shares
tendered in the Offer and terminate the Offer, and return all tendered Shares to
the tendering Holders, (ii) waive or amend any or all conditions to the Offer
and, to the extent permitted by applicable law and applicable rules and
regulations of the Securities and Exchange Commission (the "Commission")
purchase all Shares validly tendered or (iii) subject to the limitations
described below, extend the Offer and, subject to the right of a tendering
Holder to withdraw its Shares until the Expiration Date, retain the Shares which
have been tendered during the period or periods for which the Offer is extended,
PROVIDED, HOWEVER, that, subject to the terms of the Merger Agreement, without
the prior written consent of the Company, the Purchaser will not (i) waive the
Minimum Condition, (ii) reduce the number of Shares subject to the Offer, (iii)
reduce the Offer Price, (iv) extend the Offer if all of the conditions set forth
in Section 14--"Conditions of the Offer" are satisfied or waived, (v) change the
form of consideration payable in the Offer, or (vi) amend, add or waive any term
or condition of the Offer in any manner that would adversely affect the Company
or its stockholders in any material respect. Parent and the Purchaser have
agreed that if at any scheduled expiration date of the Offer, the Minimum
Condition, the Insurance Regulatory Condition or the HSR Condition has not been
satisfied, but at such scheduled expiration date each of the other conditions
specified in Section 14--"Conditions of the Offer" shall have been satisfied, at
the request of the Company, Purchaser shall extend the Offer from time to time,
subject to the right of Parent, the Purchaser or the Company to terminate the
Merger Agreement pursuant to the terms thereof. Pursuant to the Merger
Agreement, Parent and the Purchaser have further agreed that, in the event the
Purchaser wishes to terminate the Offer solely by reason of the existence of a
banking moratorium or suspension of payments in respect of banks in the United
States in accordance with clause (i) of the second sentence of Section
14--"Conditions of the Offer", the Purchaser shall first extend the Offer for a
minimum period of ten days, it being understood that, if at the end of such
ten-day period, a banking moratorium or suspension of payments in respect of
banks in the United States shall be in effect, the Purchaser shall then be
entitled to terminate the Offer under the provisions of the condition described
in clause (i) of the second sentence of Section 14--"Conditions of the Offer,"
PROVIDED, that Purchaser shall not be required to extend the Offer more than
once pursuant to this requirement. Notwithstanding anything to the contrary
contained herein or in the Merger Agreement, Parent, the Purchaser and the
Company have further agreed that, in the event that upon any scheduled
expiration date of the Offer (or any extension thereof), (x) all conditions to
the Offer set forth in Section 14--"Conditions of the Offer" have been satisfied
and (y) for a period of five consecutive trading days prior to the expiration of
the Offer (or any extension thereof), the average of the daily closing values of
the Standard & Poor's Index of 500 Industrial Companies (the "S&P Index") for
such five trading days shall reflect a decline in excess of 25% as compared to
the closing value of the S&P Index on the close of business on the trading day
next preceding the date of the Merger Agreement, then Purchaser shall be
entitled to extend the Offer for a period not to exceed eight trading days.
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Rights are presently evidenced by the certificates for the Common Stock and
the tender by a Holder of such Holder's Shares will also constitute a tender of
the associated Rights. Pursuant to the Offer, no separate payment will be made
by the Purchaser for the Rights. Pursuant to the Merger Agreement, the Board of
Directors of the Company, at its meeting on May 18, 1999, approved an amendment
of the Rights Agreement to provide that (i) neither Parent, nor any of its
Affiliates or Associates (each as defined in the Rights Agreement), including
but not limited to the Purchaser, is or shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) as a result of (a) the execution and
delivery of the Merger Agreement or (b) any action taken by Parent, the
Purchaser or any of their Affiliates, Associates or shareholders in accordance
with the provisions of the Merger Agreement, including, without limitation, the
initiation or consummation of the Offer or the consummation of the Merger in
accordance with the provisions of the Merger Agreement; and (ii) neither (a) a
Distribution Date (as defined in the Rights Agreement), (b) a Section 11(a)(ii)
Event (as defined in the Rights Agreement), (c) a Section 13 Event (as defined
in the Rights Agreement), (d) a Share Acquisition Date (as defined in the Rights
Agreement) or (e) a Triggering Event (as defined in the Rights Agreement) shall
occur by reason of the execution of the Merger Agreement, the announcement of
the Offer, the consummation of the Offer, the consummation of the Merger, or any
other transaction contemplated by the Merger Agreement. Upon any termination of
the Merger Agreement, the amended terms described in the preceding sentence
(except clause (ii)(a)) will become null and void and of no further force or
effect. See Section 11--"Purpose of the Offer; Plans for the Company; Certain
Agreements--Rights Agreement".
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission and to applicable law, the Purchaser expressly
reserves the right, in its sole discretion, at any time and from time to time,
to extend for any reason the period of time during which the Offer is open,
including upon the occurrence of any of the events specified in Section
14--"Conditions of the Offer", by giving notice of such extension to the
Depositary and by making a public announcement thereof. There can be no
assurance that the Purchaser will exercise its right to extend the Offer. During
any such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering Holder to withdraw
its Shares. See Section 4--"Withdrawal Rights".
Subject to the applicable rules and regulations of the Commission and to
applicable law, the Purchaser also expressly reserves the right, in its sole
discretion (subject to the terms of the Merger Agreement), at any time and from
time to time (i) to delay acceptance for payment of, or, regardless of whether
such Shares were theretofore accepted for payment, payment for, any Shares (a)
if any applicable waiting period under the HSR Act has not expired or been
terminated, (b) if any applicable waiting period under the applicable insurance
laws and regulations described in Section 15--"Certain Legal Matters; Regulatory
Approvals" has not expired or been terminated or (c) in order to comply in whole
or in part with any other applicable law, (ii) to terminate the Offer and not
accept for payment any Shares if any of the conditions referred to in Section
14--"Conditions of the Offer" are not satisfied or any of the events specified
in Section 14--"Conditions of the Offer" have occurred and (iii) subject to the
terms of the Merger Agreement, to waive any condition or otherwise amend the
Offer in any respect by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof, PROVIDED HOWEVER, that, subject to the terms of the Merger
Agreement, without the prior written consent of the Company, the Purchaser will
not (i) waive the Minimum Condition, (ii) reduce the number of Shares subject to
the Offer, (iii) reduce the Offer Price, (iv) extend the Offer if all of the
conditions set forth in Section 14--"Conditions of the Offer" are satisfied or
waived, (v) change the form of consideration payable in the Offer, or (vi)
amend, add or waive any term or condition of the Offer in any manner that would
adversely affect the Company or its stockholders in any material respect.
The Purchaser reserves the right to modify the terms of the Offer including,
without limitation, except as provided below, the right to extend the Offer
beyond any scheduled expiration date, PROVIDED that, without the prior written
consent of the Company, the Purchaser will not (i) waive the Minimum Condition,
(ii) reduce the number of Shares subject to the Offer, (iii) extend the Offer if
all of the conditions of the Offer have been satisfied or waived, (iv) change
the form of consideration payable in the Offer, (v) reduce the Offer Price, or
(vi) amend, add or waive any term or condition of the Offer in any
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manner that would adversely affect the Company or the Holders in any material
respect. The Purchaser reserves the right (but, subject to the terms of the
Merger Agreement, will not be obligated) to extend the offer from time to time
if and to the extent the applicable waiting period under the HSR Act has not
expired or been terminated on the Expiration Date or the requisite consents and
approvals under applicable insurance laws and regulations described in Section
15--"Certain Legal Matters; Regulatory Approvals" have not been obtained. The
Purchaser also expressly reserves the right (but will not be obligated) to,
extend the Offer, without the consent of the Company, if (i) at the then
scheduled expiration date of the Offer any of the conditions to the Purchaser's
obligations to accept for payment and pay for Shares set forth in Section
14--"Conditions of the Offer" shall not have been satisfied or waived, until the
fifth business day after the date the Purchaser reasonably believes to be the
earliest date on which such conditions will be satisfied; (ii) for any period
required by any rule, regulation, interpretation or position of the Commission
or its staff applicable to the Offer; or (iii) for an aggregate period of not
more than ten business days (for all such extensions) notwithstanding the
satisfaction of all conditions of the Offer.
The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), requires the Purchaser to
pay the consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) the Purchaser may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the second preceding paragraph), any Shares upon the occurrence of any of the
conditions specified in Section 14--"Conditions of the Offer" without extending
the period of time during which the Offer is open.
During any such extension, all Shares previously tendered and not withdrawn
will remain subject to the Offer, subject to the right of a tendering holder to
withdraw its Shares. Any such extension, delay, termination, waiver or amendment
will be followed, as promptly as practicable, by public announcement thereof,
with such announcement in the case of an extension to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date. Subject to applicable law (including Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act, which require that material changes
be promptly disseminated to holders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser will have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release to the Dow Jones News Service or as otherwise
may be required by applicable law.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
offer or information concerning the offer, other than a change in price or a
change in the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to holders and investor
response.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings in respect of the Shares for the purpose of
disseminating the Offer to Purchase, the Letter of Transmittal and other
relevant materials to Holders. This Offer to Purchase, the Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares whose
names appear on the Company's list of holders of Shares and will be furnished,
for subsequent transmittal to beneficial owners of Shares, to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the Company's list of holders of the Shares or,
where applicable, who are listed as participants in the security position
listing of The Depository Trust Company ("DTC").
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will purchase, by accepting for payment, and will pay for, all Shares
validly
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tendered prior to the Expiration Date (and not properly withdrawn in accordance
with Section 4-- "Withdrawal Rights") as promptly as practicable after the later
to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions set forth in Section 14--"Conditions of the Offer", including, but
not limited to, the regulatory conditions specified in Section 15--"Certain
Legal Matters; Regulatory Approvals." Subject to applicable rules of the
Commission and the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its discretion, to delay acceptance for payment of, or
payment for, Shares in order to comply, in whole or in part, with any applicable
law. If, following acceptance for payment of Shares, the Purchaser asserts such
regulatory approvals as a condition and does not promptly pay for Shares
tendered, the Purchaser will promptly return such Shares.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares into the
Depositary's account at DTC (the "Book-Entry Transfer Facility"), pursuant to
the procedures set forth in Section 3--"Procedures for Tendering Shares", (ii)
the Letter of Transmittal (or a copy thereof), properly completed and duly
executed with any required signature guarantees, or an Agent's Message (as
defined below) in connection with a book-entry transfer and (iii) any other
documents required to be included with the Letter of Transmittal under the terms
and subject to the conditions thereof and of this Offer to Purchase.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary forming a part of a
Book-Entry Confirmation system, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from a participant in the
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Upon the
terms and subject to the conditions of the Offer, payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering Holders for the
purpose of receiving payments from the Purchaser and transmitting payments to
such tendering Holders whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
PURCHASER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT OR EXTENSION OF THE
EXPIRATION DATE. Upon the deposit of funds with the Depositary for the purpose
of making payments to tendering Holders, the Purchaser's obligation to make such
payment shall be satisfied, and tendering Holders must thereafter look solely to
the Depositary for payment of amounts owed to them by reason of the acceptance
for payment of Shares pursuant to the Offer.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Certificates are submitted
evidencing more Shares than are tendered, Certificates evidencing Shares not
purchased will be returned, without expense to the tendering Holder (or, in the
case of Shares tendered by book-entry transfer into the Depositary's account at
the Book-Entry Transfer Facility pursuant to the procedure set forth in Section
3--"Procedures for Tendering Shares", such Shares will be credited to an account
maintained at the Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.
The Purchaser reserves the right to assign to Parent, or to any other direct
or indirect wholly owned subsidiary of Parent, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such assignment
will not relieve the Purchaser of its obligations under the Offer and will in no
way prejudice the rights of tendering Holders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
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3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES. In order for Shares to be validly tendered pursuant
to the Offer, a Holder must, prior to the Expiration Date, either (i) deliver to
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase (a) a properly completed and duly executed Letter of Transmittal (or
a copy thereof) with any required signature guarantees, (b) the Certificates for
Shares to be tendered and (c) any other documents required to be included with
the Letter of Transmittal under the terms and subject to the conditions thereof
and of this Offer to Purchase, (ii) cause such Holder's broker, dealer,
commercial bank, trust company or custodian to tender applicable Shares pursuant
to the procedures for book-entry transfer described below or (iii) comply with
the guaranteed delivery procedures described below.
Pursuant to the Rights Agreement, until the close of business on the
Distribution Date, the Rights will be transferred with and only with the
certificates for Common Stock and the surrender for transfer of any certificates
for Common Stock will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates. Pursuant to the amendment to
the Rights Agreement described under Section 11--"Purpose of the Offer; Plans
for the Company; Certain Agreements", no Distribution Date will occur by reason
of the commencement of the Offer or the consummation of the Merger or the other
transactions contemplated by the Merger Agreement.
If separate certificates representing the Rights are issued to Holders prior
to the time a Holder's Shares are tendered pursuant to the Offer, certificates
representing a number of Rights equal to the number of shares of Common Stock
tendered must be delivered to the Depositary, or, if available, a Book-Entry
Confirmation received by the Depositary with respect thereto, in order for such
shares of Common Stock to be validly tendered. If the Distribution Date occurs
and separate certificates representing the Rights are not distributed prior to
the time shares of Common Stock are tendered pursuant to the Offer, Rights may
be tendered prior to a Holder receiving the certificates for Rights by use of
the guaranteed delivery procedures described below. A tender of Shares
constitutes an agreement by the tendering Holder to deliver certificates
representing all Rights formerly associated with the number of shares of Common
Stock tendered pursuant to the Offer to the Depositary prior to expiration of
the period permitted by such guaranteed delivery procedures for delivery of
certificates for, or a Book-Entry Confirmation with respect to, Rights (the
"Rights Delivery Period"). However, after expiration of the Rights Delivery
Period, the Purchaser may elect to reject as invalid a tender of shares of
Common Stock with respect to which certificates for, or a Book-Entry
Confirmation with respect to, the number of Rights required to be tendered with
such Common Stock have not been received by the Depositary. Nevertheless, the
Purchaser will be entitled to accept for payment shares of Common Stock tendered
by a shareholder prior to receipt of the certificates for the Rights required to
be tendered with such shares of Common Stock, or a Book-Entry Confirmation with
respect to such Rights, and either (a) subject to complying with applicable
rules and regulations of the Commission, withhold payment for such shares of
Common Stock pending receipt of the certificates for, or a Book-Entry
Confirmation with respect to, such Rights or (b) make payment for shares of
Common Stock accepted for payment pending receipt of the certificates for, or a
Book-Entry Confirmation with respect to, such Rights in reliance upon the
agreement of a tendering shareholder to deliver Rights and such guaranteed
delivery procedures. Any determination by the Purchaser to make payment for
shares of Common Stock in reliance upon such agreement and such guaranteed
delivery procedures or, after expiration of the Rights Delivery Period, to
reject a tender as invalid will be made in the sole and absolute discretion of
the Purchaser.
THE METHOD OF DELIVERY OF SHARES, CERTIFICATES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING HOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
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BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by (i) causing such securities to be
transferred in accordance with the Book-Entry Transfer Facility's procedures
into the Depositary's account and (ii) causing the Letter of Transmittal to be
delivered to the Depositary by means of an Agent's Message. Although delivery of
Shares may be effected through book-entry transfer, either the Letter of
Transmittal (or manually signed facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or any Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering Holder must comply with the guaranteed
delivery procedures described below. DELIVERY OF DOCUMENTS OR INSTRUCTIONS TO
THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. All signatures on a Letter of Transmittal must be
guaranteed by a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
the registered holder of Shares who has not completed the box entitled "Special
Payment Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 to the Letter of Transmittal.
If a Certificate is registered in the name of a person other than the signer
of the Letter of Transmittal, or if payment is to be made, or a Certificate not
accepted for payment or not tendered is to be returned to a person other than
the registered holder(s), then the Certificate must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Certificate, with the signature(s) on such
certificate or stock powers guaranteed as described above. See Instructions 1, 5
and 7 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a Holder desires to tender Shares (or Rights, if
applicable) pursuant to the Offer and such Holder's Certificates are not
immediately available (including because certificates for Rights have not yet
been distributed by the Rights Agent) or time will not permit all required
documents to reach the Depositary prior to the Expiration Date or the procedure
for book-entry transfer cannot be completed on a timely basis, such Shares (and
Rights, if applicable) may nevertheless be tendered if all the following
conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary as provided below prior to the Expiration Date; and
(iii) the certificates for all tendered Shares (and Rights, if
applicable) in proper form for transfer, together with a properly completed
and duly executed Letter of Transmittal (or a copy thereof) with any
required signature guarantee (or, in the case of a book-entry transfer, a
Book-Entry Confirmation along with an Agent's Message) and any other
documents required by such Letter of Transmittal, are received by the
Depositary within three trading days after the date of execution of the
Notice of Guaranteed Delivery, or in the case rights certificates have been
issued, three business days after the date certificates for Rights are
distributed to Holders by the Rights Agent. A "trading day" is any day on
which the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") is open for business.
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Any Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by facsimile transmission or by mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery. In the case of Shares held through the Book-Entry
Transfer Facility, the Notice of Guaranteed Delivery must be delivered to the
Depositary by a participant by means of the confirmation system of the
Book-Entry Transfer Facility.
OTHER REQUIREMENTS. Notwithstanding any other provision hereof, payment for
Shares accepted for payment pursuant to the Offer will, in all cases, be made
only after timely receipt by the Depositary of (i) certificates evidencing such
Shares or a Book-Entry Confirmation of the delivery of such Shares, and if
certificates evidencing Rights have been issued, such certificates or a
Book-Entry Confirmation, if available, with respect to such certificates (unless
the Purchaser elects, in its sole discretion, to make payment for the Shares
pending receipt of such certificates or a Book-Entry Confirmation, if available,
with respect to such certificates), (ii) a properly completed and duly executed
Letter of Transmittal or a copy thereof with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message) and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
Holders may be paid at different times depending upon when certificates for
Shares (or Rights) or Book-Entry Confirmations with respect to Shares (or
Rights, if available) are actually received by the Depositary. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE
PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT.
TENDER CONSTITUTES AN AGREEMENT. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering Holder and the Purchaser on the terms and subject to the
conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including, but not limited to, time of receipt) and acceptance for
payment of any tendered Shares pursuant to any of the procedures described above
will be determined by the Purchaser, in its sole discretion, whose determination
will be final and binding on all parties. The Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or if the acceptance for payment of, or payment for, such Shares
may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also
reserves the absolute right, in its sole discretion, to waive any of the
conditions of the Offer (subject to the terms of the Merger Agreement) or any
defect or irregularity in any tender with respect to Shares of any particular
Holder, whether or not similar defects or irregularities are waived in the case
of other Holders. No tender of Shares will be deemed to have been validly made
until all defects and irregularities have been cured or waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
APPOINTMENT AS PROXY. By executing a Letter of Transmittal (or delivering
an Agent's Message) as set forth above, a tendering Holder irrevocably appoints
each designee of the Purchaser as such Holder's attorney-in-fact and proxy, with
full power of substitution, to vote in such manner as such attorney-in-fact and
proxy (or any substitute thereof) shall deem proper in its sole discretion, and
to otherwise act (including pursuant to written consent) to the full extent of
such Holder's rights with respect to the Shares tendered by such Holder and
accepted for payment by the Purchaser (and any and all dividends, distributions,
rights or other securities issued or issuable in respect of such Shares on or
after May 19, 1999). All such proxies shall be considered coupled with an
interest in the tendered Shares and shall be irrevocable. This appointment will
be effective if, when, and only to the extent that, the Purchaser accepts such
Shares for payment pursuant to the Offer. Upon such acceptance for payment, all
prior proxies given by such Holder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given (and, if given, will not be deemed effective). The designees of the
Purchaser will, with respect to the Shares and other securities for which the
appointment is effective, be empowered to exercise all voting and other rights
of such Holder as they in their sole discretion may deem
9
<PAGE>
proper at any annual, special, adjourned or postponed meeting of the Company's
stockholders, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise all rights (including,
without limitation, all voting rights) with respect to such Shares and receive
all dividends and distributions.
BACKUP WITHHOLDING. UNDER UNITED STATES FEDERAL INCOME TAX LAW, THE AMOUNT
OF ANY PAYMENTS MADE BY THE DEPOSITARY TO HOLDERS (OTHER THAN CORPORATE AND
CERTAIN OTHER EXEMPT HOLDERS) PURSUANT TO THE OFFER MAY BE SUBJECT TO BACKUP
WITHHOLDING TAX AT A RATE OF 31%. TO AVOID SUCH BACKUP WITHHOLDING TAX WITH
RESPECT TO PAYMENTS PURSUANT TO THE OFFER, A NON-EXEMPT, TENDERING U.S. HOLDER
(AS DEFINED IN SECTION 5-- "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES") MUST PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY UNDER PENALTY OF PERJURY THAT SUCH HOLDER IS
NOT SUBJECT TO BACKUP WITHHOLDING TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES
WITH RESPECT TO A HOLDER OR IF A HOLDER FAILS TO DELIVER A COMPLETED SUBSTITUTE
FORM W-9 TO THE DEPOSITARY OR OTHERWISE ESTABLISH AN EXEMPTION, THE DEPOSITARY
IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH HOLDER. SEE SECTION
5--"CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" OF THIS OFFER TO
PURCHASE AND THE INFORMATION SET FORTH UNDER THE HEADING "IMPORTANT TAX
INFORMATION" CONTAINED IN THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 23, 1999, or
at such later time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
Holders are entitled to withdrawal rights as described in this Section
4--"Withdrawal Rights". Any such delay will be an extension of the Offer to the
extent required by law.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares, if different from that of the person who tendered such
Shares. If Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Certificates, the serial numbers shown on such Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless such Shares have been
tendered for the account of an Eligible Institution. Shares tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3--"Procedures for
Tendering Shares", may be withdrawn only by means of the withdrawal procedures
made available by the Book-Entry Transfer Facility, must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with the Book-Entry Transfer
Facility's procedures.
Withdrawals of tendered Shares may not be rescinded without the Purchaser's
consent and any Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, which determination will be final and
binding. None of Parent, the Purchaser, the Depositary, the Information Agent,
the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
10
<PAGE>
Any Shares properly withdrawn may be re-tendered at any time prior to the
Expiration Date by following any of the procedures described in Section
3--"Procedures for Tendering Shares".
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The receipt of
cash for Shares pursuant to the Offer or the Merger by a U.S. Holder (defined
below) will be a taxable transaction for United States federal income tax
purposes and may also be a taxable transaction under applicable state, local or
foreign tax laws. For purposes of this discussion, a "U.S. Holder" is a
beneficial owner of Shares who for United States federal income tax purposes is
(i) a citizen or resident of the United States; (ii) a corporation or
partnership organized in or under the laws of the United States or any State
thereof (including the District of Columbia); (iii) an estate the income of
which is subject to United States federal income taxation regardless of its
source; or (iv) a trust if such trust has validly elected to be treated as a
United States person for United States federal income tax purposes or a trust
(a) the administration over which a United States court can exercise primary
supervision and (b) all of the substantial decisions of which one or more United
States persons have the authority to control.
In general, a U.S. Holder will recognize gain or loss for United States
federal income tax purposes equal to the difference, if any, between the amount
realized from the sale of Shares and such U.S. Holder's adjusted tax basis in
such Shares. Assuming that the Shares constitute a capital asset in the hands of
the U.S. Holder, such gain or loss will be capital gain or loss. In the case of
a noncorporate U.S. Holder, the maximum marginal United States federal income
tax rate applicable to such gain will be lower than the maximum marginal United
States federal income tax rate applicable to ordinary income if such U.S.
Holder's holding period for such Shares exceeds one year.
The foregoing discussion may not be applicable to certain types of holders,
including holders who acquired Shares pursuant to the exercise of stock options
or otherwise as compensation, holders that are not U.S. Holders and holders that
are otherwise subject to special tax rules, such as financial institutions,
insurance companies, dealers or traders in securities or currencies, tax-exempt
entities, persons that hold Shares as a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for tax purposes and persons that have a
"functional currency" other than the United States dollar.
BACKUP WITHHOLDING TAX. As noted in Section 3--"Procedures for Tendering
Shares", a Holder (other than an "exempt recipient", including a corporation, a
non-U.S. Holder that provides appropriate certification and certain other
persons (if the payor does not have actual knowledge that such certificate is
false)) that receives cash in exchange for Shares may be subject to United
States federal backup withholding tax at a rate equal to 31%, unless such Holder
provides its taxpayer identification number and certifies that such Holder is
not subject to backup withholding tax by submitting a completed Substitute Form
W-9 to the Depositary. Accordingly, each U.S. Holder should complete, sign and
submit the Substitute Form W-9 included as part of the Letter of Transmittal in
order to avoid the imposition of such backup withholding tax.
The United States federal income tax discussion set forth above is included
for general information and is based upon income tax laws, regulations, rulings
and decisions now in effect, all of which are subject to change (possibly
retroactively). HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE SPECIFIC TAX CONSEQUENCES OF THE OFFER TO THEM, INCLUDING THE APPLICATION
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND STATE, LOCAL AND FOREIGN TAX LAWS.
11
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on
the Nasdaq National Market under the symbol "FCWI". The following table sets
forth, for the periods indicated, the high and low sales prices per Share as
reported by the Dow Jones News Service:
<TABLE>
<CAPTION>
HIGH LOW
----- ---------
<S> <C> <C>
1997:
Quarter ended 3/31/97.......................................................... 21 1/4 13 3/4
Quarter ended 6/30/97.......................................................... 19 1/2 11
Quarter ended 9/30/97.......................................................... 20 1/2 14
Quarter ended 12/31/97......................................................... 15 5/8 11
1998:
Quarter ended 3/31/98.......................................................... 15 7/8 9 1/4
Quarter ended 6/30/98.......................................................... 16 13 3/4
Quarter ended 9/30/98.......................................................... 16 1/2 10 5/8
Quarter ended 12/31/98......................................................... 13 1/4 9 5/8
1999:
Quarter ended 3/31/99.......................................................... 16 11
Period 4/1/99 through 5/24/99.................................................. 24 1/8 12 9/16
</TABLE>
On May 18, 1999, the last full trading day prior to the public announcement
of the Offer, the reported closing sales price of the Common Stock on the Nasdaq
National Market was $18 5/8 per share of Common Stock. On May 24, 1999, the last
full trading day prior to the date of this Offer to Purchase, the last reported
sales price of the Common Stock on the Nasdaq National Market was $23 13/16 per
share. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
As of May 24, 1999, no dividends had ever been paid on the shares of Common
Stock. The Merger Agreement prohibits the Company from declaring or paying any
dividends until the effective date of the Merger.
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
THE COMPANY. The information concerning the Company contained in this Offer
to Purchase, including financial information, has been taken from or is based
upon publicly available documents and records on file with the Commission and
other public sources. Neither Parent nor the Purchaser assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to Parent
or the Purchaser.
The Company provides managed dental benefits in the upper Midwest, including
the metropolitan areas of Chicago, Milwaukee, Detroit, Indianapolis and St.
Louis. As of December 31, 1998 the Company provided managed care and
indemnity/PPO products to approximately 644,900 employees and dependents.
Approximately 2,425 general dentists and specialists participate in the
Company's managed care and PPO network. The Company is a Delaware corporation.
The address of the Company's principal executive offices is 444 North Wells
Street, Suite 600, Chicago, Illinois 60610. The telephone number of the Company
at such offices is (312) 644-1800.
12
<PAGE>
FIRST COMMONWEALTH, INC.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been excerpted or derived
from the financial statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1998 and its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999. More comprehensive financial information
is included in these reports and other documents filed by the Company with the
Commission. The financial information that follows is qualified in its entirety
by reference to these reports and other documents, including the financial
statements and related notes contained therein. These reports and other
documents may be inspected at, and copies may be obtained from, the same places
and in the manner set forth under "--Available Information".
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------- --------------------
1998 1997 1996(1) 1999 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AND OPERATING
DATA)
CONSOLIDATED STATEMENT OF INCOME DATA:
Subscriber revenue......................................... $ 64,170 $ 56,594 $ 44,099 $ 16,738 $ 15,615
Benefit coverage expenses.................................. 42,731 37,932 27,873 10,837 10,450
--------- --------- --------- --------- ---------
Gross margin............................................... 21,439 18,662 16,226 5,901 5,165
Selling, general and administrative expense................ 15,496 13,550 12,273 4,136 3,772
--------- --------- --------- --------- ---------
Operating income........................................... 5,943 5,112 3,953 1,765 1,393
Interest income, net....................................... 693 495 642 182 144
--------- --------- --------- --------- ---------
Income before income taxes................................. 6,636 5,607 4,595 1,947 1,537
Provision for income taxes................................. 2,645 2,284 1,864 735 624
--------- --------- --------- --------- ---------
Net income................................................. $ 3,991 $ 3,323 $ 2,731 $ 1,212 $ 913
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Basic earnings per share................................... $ 1.10 $ 0.92 $ 0.79 $ 0.33 $ 0.25
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted earnings per share................................. $ 1.07 $ 0.89 $ 0.76 $ 0.32 $ 0.24
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SELECTED OPERATING DATA:
Members at end of period:
Managed Care............................................. 482,200 450,400 341,600 446,900 473,900
Indemnity/PPO............................................ 75,600 65,300 56,200 80,000 72,000
Fee Income............................................... 87,100 76,600 34,000 154,000 83,700
--------- --------- --------- --------- ---------
Total Members.......................................... 644,900 592,300 431,800 680,900 629,600
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
CONSOLIDATED BALANCE SHEET DATA (AT END OF PERIOD):
Total current assets....................................... $ 20,252 $ 16,554 $ 21,023 $ 25,589 $ 19,137
Total assets............................................... 38,076 31,895 34,454 40,607 34,386
Total current liabilities.................................. 10,181 8,325 14,331 11,396 9,740
Total liabilities.......................................... 10,357 8,573 14,498 11,592 10,137
Stockholders' equity....................................... 27,719 23,323 19,956 29,015 24,249
</TABLE>
- ------------------------
(1) Reflects results of the acquisition of Smileage Dental Services, Inc. from
July 18, 1996. Balance sheet data (but not income or operating data) as of
December 31, 1996 includes amounts relating to Champion Dental Services,
Inc., which was acquired as of December 31, 1996.
13
<PAGE>
CERTAIN PROJECTED FINANCIAL DATA OF THE COMPANY. Prior to entering into the
Merger Agreement, Parent conducted a due diligence review of the Company and in
connection with such review received certain non-public information provided by
the Company, including certain projected financial data (the "Projections") for
the years ending December 31, 1999, 2000, 2001, 2002 and 2003. The Company does
not in the ordinary course publicly disclose projections and the Projections
were not prepared with a view to public disclosure. The Company has advised
Parent and the Purchaser that the Projections were prepared by the Company's
management based on numerous assumptions including, among others, projections of
revenues, operating income, benefits and other expenses, depreciation and
amortization, capital expenditure and working capital requirements. The
Projections do not give effect to the Offer or the potential combined operations
of Parent and the Company. Such information is set forth below in this Offer to
Purchase for the limited purpose of giving the Holders access to financial
projections prepared by the Company's management that were made available to
Parent and the Purchaser in connection with the Merger Agreement and the Offer.
FIRST COMMONWEALTH, INC.
SELECTED PROJECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Subscriber revenue........................... $ 69,185 $ 80,443 $ 95,539 $ 113,124 $ 133,343
Benefit coverage expenses.................... 45,126 52,994 63,702 76,317 90,683
Gross margin................................. 24,059 27,499 31,837 36,807 42,660
Operating income............................. 7,294 8,696 10,414 12,547 14,972
Net Income................................... 4,975 5,897 7,022 8,411 9,990
</TABLE>
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed herein, including, but not limited to the
Projections, are forward-looking statements that involve risks and
uncertainties. Forward-looking statements include the information set forth
above in "Certain Projected Financial Data for the Company".
While presented with numerical specificity, the Projections were not
prepared by the Company in the ordinary course and are based upon a variety of
estimates and hypothetical assumptions which may not be accurate, may not be
realized, and are also inherently subject to significant business, economic and
competitive uncertainties and contingencies, all of which are difficult to
predict, and most of which are beyond the control of the Company. Accordingly,
there can be no assurance that any of the Projections will be realized and the
actual results for the fiscal years ending December 31, 1999, 2000, 2001, 2002
and 2003 may vary materially from those shown above.
In addition, the Projections were not prepared in accordance with generally
accepted accounting principles, and neither the Company's nor Parent's
independent accountants have examined or compiled any of the Projections or
expressed any conclusion or provided any other form of assurance with respect to
the Projections and accordingly assume no responsibility for the Projections.
The Projections were prepared with a limited degree of precision, and were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections, which would
require a more complete presentation of data than as shown above. The inclusion
of the Projections herein should not be regarded as a representation by Parent
and the Purchaser or any other person that the projected results will be
achieved. The Projections should be read in conjunction with the historical
financial information of the Company included above. None of Parent, the
Purchaser, or any other person assumes any responsibility for the accuracy or
validity of the foregoing Projections. Forward-looking statements also include
those preceded by, followed by or that include the words "believes", "expects",
"anticipates" or similar expressions. Such statements should be viewed with
caution.
14
<PAGE>
AVAILABLE INFORMATION. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters is required
to be disclosed in reports filed with the Commission. These reports and other
information should be available for inspection at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection and copying
at prescribed rates at regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Electronic filings
filed through the Commission's Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR"), including those made by or in respect of the Company, are
publicly available through the Commission's home page on the Internet at
http://www.sec.gov.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
THE PURCHASER. The Purchaser, a newly incorporated Delaware corporation,
has not conducted any business other than in connection with the Offer and the
Merger Agreement. All of the issued and outstanding shares of capital stock of
the Purchaser are beneficially owned by Parent. The principal address of the
Purchaser is c/o The Guardian Life Insurance Company of America, 201 Park Avenue
South, New York, New York 10003. The telephone number of the Purchaser at such
office is
(212) 598-8000.
PARENT. Parent is a corporation organized and existing under the laws of
New York. Parent offers, directly or through its subsidiaries, life insurance,
disability income protection, equity investments, annuity products and a range
of trust services to individuals. Parent also offers personal insurance products
tailored to the needs of business owners, and a comprehensive range of employee
benefits, including group life insurance, medical and dental coverage, vision
care and group disability income protection. In addition, Parent offers business
owners profit sharing and executive benefits plans, as well as funding vehicles
for qualified retirement plans and individual retirement accounts. The principal
executive offices of Parent are located at 201 Park Avenue South, New York, New
York 10003. The telephone number of Parent at such office is (212) 598-8000.
At the end of 1997, Parent ranked fifth among mutual companies in individual
life insurance in force and among the top 11 mutual companies in assets. Parent
is ranked number 205 on the Fortune 500. Parent had total consolidated assets of
$25.9 billion as of December 31, 1998. It has consistently earned high ratings
from each of the major rating agencies and has a nationwide field force of more
than 3,100 career agents. Parent employs over 5,000 people in its New York
offices and at four regional offices in Bethlehem, Pennsylvania; Appleton,
Wisconsin; Spokane, Washington and Norwell, Massachusetts.
During the last five years, none of Parent, the Purchaser or, to the best of
their knowledge, any of the persons listed in Schedule I hereto (i) has been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Except as described in this Offer to Purchase (i) none of Parent, the
Purchaser or, to the best of their knowledge, any of the persons listed in
Schedule I to this Offer to Purchase, or any associate or majority-owned
subsidiary of Parent or the Purchaser, beneficially owns or has any right to
acquire, directly or indirectly, any equity securities of the Company and (ii)
none of Parent, the Purchaser or, to the best of
15
<PAGE>
their knowledge, any of the persons or entities referred to above or any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in such equity securities during the past 60 days. The Purchaser
and Parent disclaim beneficial ownership of any Shares owned by any pension
plans of Parent or the Purchaser or any affiliate of Parent or the Purchaser.
Except as described in this Offer to Purchase, none of Parent, the Purchaser
or, to the best of their knowledge, any of the persons listed in Schedule I to
this Offer to Purchase has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since January 1, 1995, none of Parent, the
Purchaser or to the best of their knowledge, any of the persons listed on
Schedule I hereto has had any business relationship or transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the Commission
applicable to the Offer. Except as set forth in this Offer to Purchase, since
January 1, 1995, there have been no contacts, negotiations or transactions
between any of Parent, the Purchaser or any of their subsidiaries or, to the
best knowledge of Parent, or the Purchaser, any of the persons listed in
Schedule I to this Offer to Purchase, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
FINANCIAL INFORMATION. As a New York mutual insurance company, Parent is
not subject to the information and reporting requirements of the Exchange Act
and is not required to file reports and other information with the Commission
relating to its business, financial condition and other matters. However, Parent
reports financial and other information to the New York Department of Insurance
on at least an annual basis and is subject to periodic reviews by that
Department. Information should be on file and available for inspection at the
offices of the New York Department of Insurance, 25 Beaver Street, New York, New
York 10004 (Telephone: (212) 480-4934).
Set forth below are certain financial data relating to Parent. Additional
financial information is included in other documents filed by Parent with the
New York Department of Insurance. The financial information summary set forth
below is qualified in its entirety by reference to such other documents which
have been filed with the New York Department of Insurance, including the
financial information and related notes contained therein, which are
incorporated herein by reference. These documents may be inspected at and copies
may be obtained from the offices of the New York Department of Insurance in the
manner set forth above.
16
<PAGE>
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------- MARCH 31,
1996 1997 1998 1999
---------- ---------- ---------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.......................... $ 5,417.0 $ 7,218.9 $ 6,187.6 $ 1,476.1
Net income.............................. 153.5 266.4 109.4 6.6
BALANCE SHEET DATA:
Investments............................. 11,268.7 13,443.5 14,855.6 15,585.1
Total assets............................ 12,102.0 14,352.3 15,786.3 16,626.1
Policy and contract liabilities......... 9,480.1 10,748.8 11,908.7 12,266.0
Total liabilities....................... 10,923.9 12,949.2 14,230.9 15,121.6
Policyholders' surplus.................. 1,178.1 1,403.0 1,555.4 1,504.6
</TABLE>
9. SOURCE AND AMOUNT OF FUNDS. The Offer is not conditioned upon any
financing arrangements. The amount of funds required by the Purchaser to
purchase all of the outstanding Shares pursuant to the Offer and to pay related
fees and expenses is expected to be approximately $102 million. The Purchaser
will obtain such funds from Parent and/or one or more of its affiliates, which
will obtain such funds from existing cash and marketable securities.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") place restrictions on the amount of
credit that may be extended for the purposes of purchasing margin stock,
including if such credit is secured directly or indirectly by margin stock. The
Purchaser believes that the financing of the acquisition of the Shares will be
in full compliance with, or not subject to, the margin regulations.
10. BACKGROUND OF THE OFFER. In March 1998, members of the respective
senior managements of Parent and the Company met to discuss the possibility of
Parent and the Company entering into a joint marketing arrangement. During the
second quarter of 1998, Parent and the Company explored various potential joint
marketing efforts without success and these discussions between the parties were
terminated by mutual agreement in June 1998.
In early March 1999, Jackson W. Smart, Jr., a Director of the Company,
contacted a Director of Parent with whom he was acquainted, and requested a
meeting to discuss a potential acquisition of the Company by Parent. Mr. Smart's
request was directed to the attention of the senior management of Parent, which
indicated that it would be interested in discussing a potential acquisition of
the Company. Subsequent to Mr. Smart's approach, further discussions were held
between the senior management of each of Parent and the Company and a meeting
between the parties was arranged for March 8, 1999, in New York.
On March 8, 1999, members of the senior management of each of Parent and the
Company attended a meeting in New York during which Parent indicated its
potential interest in acquiring the Company and requested further information
regarding the Company's business and operations. Based on this expression of
interest, Parent and the Company executed a confidentiality agreement.
Thereafter, the Company made available to Parent certain limited information
regarding its business and operations.
In telephone conversations following the meeting of March 8, 1999, members
of the senior management of Parent continued to discuss the potential
acquisition of the Company with members of the senior management of the Company.
During this period, Parent retained Salomon Smith Barney as its financial
advisor, and White & Case LLP as its legal advisor, with respect to a potential
acquisition of the Company.
17
<PAGE>
On March 24, 1999, Parent and the Company entered into the Confidentiality
Agreement (as defined herein). Subsequently, William Blair & Company, acting on
behalf of the Company, delivered a letter to the Parent setting forth the
procedures to be followed by parties interested in a potential acquisition of
the Company and provided Parent with additional confidential business and
financial information regarding the Company. On April 5, 1999, members of
Parent's senior management, Salomon Smith Barney and White & Case attended
meetings with representatives of the Company and William Blair & Company in
Chicago. During these meetings, members of Parent's senior management and
representatives of Parent met with Messrs. Multhauf and Mulligan and other
members of the senior management of the Company and had the opportunity to
discuss the Company and its business with the Company's senior management.
During the period from April 7, 1999, through April 14, 1999,
representatives of Parent and the Company had periodic discussions regarding the
parameters of a potential transaction between the parties.
On April 14, 1999, Parent delivered to William Blair & Company a
preliminary, non-binding indication of interest in acquiring all of the
outstanding shares of capital stock of the Company at a price of $20.00 per
Share in cash. Parent's indication of interest required an exclusive negotiation
period during which Parent and the Company would endeavor to negotiate the terms
of an acquisition of the Company by Parent and stated that the indication of
interest expressed therein would expire on April 17, 1999, at 5:00 p.m. Eastern
Standard Time, unless it was signed and returned to Parent by the Company prior
to such time.
On April 16, 1999, representatives of William Blair & Company advised Parent
that the Company would not grant Parent the exclusive negotiation period it
required and inquired whether, in light of this decision, Parent nonetheless
wished to continue to participate in the bidding process. On April 22, 1999,
representatives of Parent advised the representatives of William Blair & Company
that, notwithstanding the termination date in its letter, Parent wished to
continue to participate. On April 23, 1999, Parent was notified that it had been
selected as a final bidder and was invited to conduct further due diligence with
respect to the Company.
On April 27, and April 28, 1999, members of the senior management of Parent
and representatives of its financial, accounting and legal advisors conducted a
due diligence review of the Company at the offices of Sidley & Austin, counsel
to the Company, in Chicago. On the first day of these meetings members of the
senior management of Parent and representatives of its legal and financial
advisors met with Messrs. Multhauf and Mulligan and other members of the senior
management of the Company and received presentations regarding various aspects
of the business of the Company. During the period from April 29, to May 11,
1999, representatives of Salomon Smith Barney and White & Case had various
follow-up telephone conversations and other communications with representatives
of William Blair & Company and Sidley & Austin in which confirmation of certain
due diligence matters was sought. Additionally, during this period,
representatives of the Company delivered to Parent copies of proposed forms of
Merger Agreement and Stockholder Agreement to be entered into in connection with
any potential transaction between Parent and the Company
On May 6, 1999, Gary Lenderink, Senior Vice President of Parent, and
Herschel Reich, Vice President, Group Health Care of Parent, met in Chicago with
Messrs. Multhauf and Mulligan to discuss Messrs. Multhauf's and Mulligan's views
regarding the Company's business and plans and the possibilities inherent in a
potential business combination between Parent and the Company.
On May 12, 1999, Parent delivered to William Blair & Company a letter in
which Parent offered, subject to the conditions contained in such letter, to
acquire all of the outstanding shares of Common Stock at a price of $23.50 per
Share in cash. The offer was to be accomplished by means of a cash tender offer,
to be followed by a merger in which each Share outstanding would be converted
into the right to receive $23.50 in cash. Parent's comments on the draft Merger
Agreement and Stockholder Agreement reflecting its required changes to these
documents were included with such letter.
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On May 13, 1999, representatives of William Blair & Company contacted
representatives of Salomon Smith Barney to discuss certain aspects of Parent's
offer, including Parent's intentions with respect to the retention of the
Company's management. As a result of this conversation, Parent delivered to
William Blair & Company a letter clarifying certain aspects of Parent's letter
of May 12, 1999, and reiterating Parent's desire to retain senior management
and, in particular, Messrs. Multhauf and Mulligan, after the consummation of any
potential acquisition.
On May 14, 1999, representatives of William Blair & Company contacted
representatives of Salomon Smith Barney and advised them that Parent should, at
this point, submit its best and final offer. After consultation with its
financial advisors, Parent determined to raise its bid and delivered to William
Blair & Company a letter in which it agreed to increase its offer to $25.00 per
Share in cash. Thereafter, representatives of William Blair & Company contacted
representatives of Salomon Smith Barney and advised them that the Company was
prepared to accept Parent's revised offer, subject to the negotiation of a
merger agreement and related transaction documents.
On May 17, and May 18, 1999, members of senior management of Parent and
representatives of its financial and legal advisors met in Chicago with members
of the senior management of the Company and representatives of its legal and
financial advisors to discuss certain provisions of the Merger Agreement and the
Stockholder Agreements and related transaction structure. The Merger Agreement
and the Stockholder Agreements were revised to reflect such discussions. See
Section 11--"Purpose of the Offer; Plans for the Company; Certain Agreements".
During this period, representatives of Parent met with Messrs. Multhauf and
Mulligan regarding the terms of their continued employment with the Company
after its acquisition by Parent and delivered non-binding letters to Messrs.
Multhauf and Mulligan outlining the parties' expectations with respect to their
future terms of employment.
Parent is informed that on the evening of May 18, 1999, the Board of
Directors of the Company met and approved Parent's offer, the Merger and the
Merger Agreement. Early in the moring of May 19, 1999, the Merger Agreement and
the Stockholder Agreements were executed by Parent, the Purchaser and the
Company and Messrs. Multhauf and Mulligan.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; CERTAIN AGREEMENTS.
PURPOSE OF THE OFFER. The purpose of the Offer is to enable Parent to
acquire as many outstanding Shares as possible as a first step in acquiring the
entire equity interest in the Company. The purpose of the Merger is for Parent
to acquire all Shares not purchased pursuant to the Offer. Upon consummation of
the Merger, the Company will become a direct wholly owned subsidiary of Parent.
The Offer is being made pursuant to the Merger Agreement.
Under the DGCL, the approval of the Company's Board of Directors and the
affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. The Company's Board of Directors has
unanimously (i) determined that the Merger is advisable and that the terms of
the Offer and the Merger are fair to and in the best interests of the Company
and the Holders, (ii) approved the Offer, the Merger and the Merger Agreement
and (iii) recommended that the Holders accept the Offer and (if required by
applicable law or otherwise) approve the Merger Agreement and the Merger. Unless
the Merger is consummated pursuant to the "short-form" merger provisions under
Section 253 of the DGCL described below (in which case no vote of the Holders is
required), the only remaining required corporate action of the Company is the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby by the affirmative vote of the holders of a majority of the Shares.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby if such
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action is required by the DGCL. However, under the DGCL, if the Purchaser
acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding
Shares, the Purchaser will be able to approve the Merger without a vote of the
Company's stockholders. Accordingly, if the Purchaser acquires at least 90% of
the outstanding Shares, it will have sufficient voting power to cause the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby without a vote of the Company's stockholders. In such event, Parent, the
Purchaser and the Company have agreed in the Merger Agreement to take, at the
request of the Purchaser, all necessary and appropriate action to cause the
Merger to become effective without a meeting of the Company's stockholders. If,
however, the Purchaser does not acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise and a vote of the Company's stockholders is
required under the DGCL, a significantly longer period of time would be required
to effect the Merger.
If the Purchaser purchases Shares pursuant to the Offer, the Merger
Agreement provides that the Purchaser will be entitled to designate
representatives to serve on the Board of Directors of the Company in proportion
to the Purchaser's ownership of Shares following such purchase. The Purchaser
expects that such representation would permit the Purchaser to exert substantial
influence over the Company's conduct of its business and operations.
PLANS FOR THE COMPANY. Subject to certain matters described below, it is
currently expected that, initially following the Merger, the business and
operations of the Company will generally continue as they are currently being
conducted. Parent currently intends to cause the Company's operations to
continue to be run and managed by, amongst others, the Company's existing
executive officers. Parent will continue to evaluate all aspects of the
business, operations, capitalization and management of the Company during the
pendency of the Offer and after the consummation of the Offer and the Merger and
will take such further actions as it deems appropriate under the circumstances
then existing. Parent intends to seek additional information about the Company
during this period. Thereafter, Parent intends to review such information as
part of a comprehensive review of the Company's business, operations,
capitalization and management.
As a result of the Offer, the interest of Parent in the Company's net book
value and net earnings will be in proportion to the number of Shares acquired in
the Offer. If the Merger is consummated, Parent's interest in such items and in
the Company's equity generally will equal 100% and Parent and its subsidiaries
will be entitled to all benefits resulting from such interest, including all
income generated by the Company's operations and any future increase in the
Company's value. Similarly, Parent will also bear the risk of losses generated
by the Company's operations and any future decrease in the value of the Company
after the Merger. Subsequent to the Merger, current stockholders of the Company
will cease to have any equity interest in the Company, will not have the
opportunity to participate in the earnings and growth of the Company after the
Merger and will not have any right to vote on corporate matters. Similarly,
stockholders will not face the risk of losses generated by the Company's
operations or decline in the value of the Company after the Merger.
The Shares are currently traded on the Nasdaq National Market. Following the
consummation of the Merger, the Shares will no longer be quoted on the Nasdaq
National Market and the registration of the Shares under the Exchange Act will
be terminated. Accordingly, after the Merger there will be no publicly-traded
equity securities of the Company outstanding and the Company will no longer be
required to file periodic reports with the Commission. See Section 13--"Effect
of the Offer on the Market for the Shares; Exchange Act Registration". It is
expected that, if Shares are not accepted for payment by the Purchaser pursuant
to the Offer and the Merger is not consummated, the Company's current
management, under the general direction of the Board of Directors, will continue
to manage the Company as an ongoing business.
Except as otherwise discussed in this Offer to Purchase, Parent has no
present plans or proposals that would result in any extraordinary corporate
transaction, such as a merger, reorganization, liquidation involving the Company
or any of its subsidiaries, or sale or transfer of a material amount of assets
of the Company or any of its subsidiaries or in any other material changes to
the Company's capitalization,
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dividend policy, corporate structure, business or composition of the Board of
Directors or the management of the Company except that Parent intends to review
the composition of the boards of directors (or similar governing bodies) of the
Company and its subsidiaries and to cause the election to such boards of
directors (or similar governing bodies) of certain of its representatives.
MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH HAS BEEN FILED
WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE MERGER AGREEMENT
MAY BE INSPECTED AT, AND COPIES MAY BE OBTAINED FROM, THE SAME PLACES AND IN THE
MANNER SET FORTH IN SECTION 7--"CERTAIN INFORMATION CONCERNING THE COMPANY".
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that the obligation of the Purchaser to consummate the Offer and
to accept for payment and to pay for any Shares tendered pursuant to the Offer
shall be subject to only those conditions set forth herein. The Purchaser may
waive any of the conditions set forth in Section 14--"Conditions of the Offer"
in its sole discretion; PROVIDED, that, without the prior written consent of the
Company, the Purchaser shall not (i) waive the Minimum Condition, (ii) reduce
the number of Shares subject to the Offer, (iii) reduce the Offer Price, (iv)
extend the Offer if all of the Offer conditions are satisfied or waived, (v)
change the form of consideration payable in the Offer, or (vi) amend, add or
waive any term or condition of the Offer in any manner that would adversely
affect the Company or its stockholders in any material respect. Notwithstanding
the foregoing sentence, the Purchaser may, without the consent of the Company,
extend the Offer (i) if at the then scheduled expiration date of the Offer any
of the conditions to the Purchaser's obligation to accept Shares for payment
shall not have been satisfied or waived, until the fifth business day after the
date the Purchaser reasonably believes to be the earliest date on which such
conditions will be satisfied, (ii) for any period required by any rule,
regulation, interpretation or position of the Commission or its staff applicable
to the Offer, and (iii) for an aggregate period of not more than ten business
days (for all such extensions) notwithstanding the satisfaction of all
conditions to the Offer. The Merger Agreement provides that if at any scheduled
expiration date of the Offer, the Minimum Condition, the Insurance Regulatory
Condition or the HSR Condition shall not have been satisfied, but at such
scheduled expiration date each of the other conditions set forth in Section 14--
"Conditions of the Offer" shall then be satisfied, at the request of the
Company, the Purchaser shall extend the Offer from time to time, subject to the
right of Parent, the Purchaser or the Company to terminate the Merger Agreement
pursuant to the terms thereof. Parent and the Purchaser have further agreed
that, in the event the Purchaser wishes to terminate the Offer solely by reason
of the existence of a banking moratorium or suspension of payments in respect of
banks in the United States in accordance with clause (i) of the second sentence
of Section 14--"Conditions of the Offer", the Purchaser shall first extend the
Offer for a minimum period of ten days, it being understood that, if at the end
of such ten day period, a banking moratorium or suspension of payments in
respect of banks in the United States shall be in effect, the Purchaser shall
then be entitled to terminate the Offer under the provisions of clause (i) of
the second sentence of Section 14--"Conditions of the Offer", PROVIDED, that the
Purchaser shall not be required to extend the Offer more than once pursuant to
this requirement. Notwithstanding anything to the contrary contained herein or
in the Merger Agreement, Parent, the Purchaser and the Company have further
agreed that, in the event that upon any scheduled expiration date of the Offer
(or any extension thereof), (x) all conditions to the Offer set forth in Section
14--"Conditions of the Offer" have been satisfied and (y) for a period of five
consecutive trading days prior to the expiration of the Offer (or any extension
thereof), the average of the daily closing values of the S&P Index for such five
trading days shall reflect a decline in excess of 25% as compared to the closing
value of the S&P Index on the close of business on the trading day next
preceding the date of the Merger Agreement, then the Purchaser shall be entitled
to extend the Offer for a period not to exceed eight trading days.
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Pursuant to the terms of the Merger Agreement, the Company has approved of
and consented to the Offer and has represented (a) that its Board of Directors
has unanimously (i) determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Company's stockholders and declared
that the Merger is advisable, (ii) recommended that the Company's stockholders
accept the Offer and approve and adopt the Merger Agreement and approve the
Merger, and (iii) taken all action necessary to render Section 203 of the DGCL
and the Rights Agreement inapplicable to the Offer and the Merger; and (b)
William Blair & Company has delivered to the Board of Directors of the Company
its written opinion that the consideration to be received by the Holders in the
Offer and the Merger is fair, from a financial point of view, to such Holders,
subject to the assumptions and qualifications contained in such opinion.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the DGCL, the Purchaser shall be
merged with and into the Company on the later of the date the Certificate of
Merger is accepted for recording or such later time established by the
Certificate of Merger (such date, the "Effective Time"). The filing of the
Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver of the conditions to the Merger. Following the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will continue as the surviving corporation (the "Surviving Corporation").
At the Effective Time each issued and outstanding Share (including the
associated Rights), (other than Shares held by any wholly owned subsidiary of
the Company or in the treasury of the Company, or by Parent, the Purchaser or
any other wholly owned subsidiary of Parent, which Shares will cease to be
outstanding and be cancelled and retired and none of which shall receive any
payment with respect thereto, and other than Shares, if any, held by Holders who
perfect their appraisal rights under the DGCL) will by virtue of the Merger and
without any action by the holders thereof, be converted into the right to
receive $25.00 in cash payable to the Holder thereof, without interest thereon
(the "Merger Consideration"). In addition, at the Effective Time, each issued
and outstanding share of the capital stock of the Purchaser will be converted
into and become one fully paid and nonassessable share of common stock of the
Surviving Corporation.
The Merger Agreement provides that in the event that the Purchaser shall
acquire at least 90 percent of the outstanding Shares, the Company, Parent and
the Purchaser shall take all necessary action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer, without a
meeting of the stockholders of the Company, in accordance with Section 253 of
the DGCL.
The Merger Agreement provides that the respective obligations of Parent and
the Purchaser, on the one hand, and the Company, on the other hand, to effect
the Merger are subject to the fulfillment, at or prior to the Effective Time, of
each of the following conditions: (i) if approval of the Merger by the holders
of the Common Stock is required by applicable law, the Merger shall have been
approved by the requisite vote of such holders; (ii) no domestic (federal, state
or local), foreign or supranational court, commission, governmental body,
regulatory or administrative agency, authority or tribunal (each a "Governmental
Entity") or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree or injunction which prohibits or has the effect of prohibiting the
consummation of the Merger; PROVIDED, HOWEVER, that each of the parties to the
Merger Agreement shall use their reasonable best efforts to have any such order,
decree or injunction vacated; (iii) the Purchaser shall have accepted for
payment and paid for the Shares properly tendered pursuant to the Offer in an
amount sufficient to satisfy the Minimum Condition; PROVIDED, HOWEVER, that this
condition will be deemed waived with respect to the obligations of Parent and
the Purchaser if the Purchaser fails to accept for payment and pay for any
Shares pursuant to the Offer in violation of the terms of the Merger Agreement
or the Offer; and (iv) the applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION. The Merger Agreement provides that, at the Effective
Time, the directors and officers of the Purchaser immediately
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prior to the Effective Time shall be the directors and officers of the Surviving
Corporation. In addition, the Certificate of Incorporation (as amended to change
the name of the Purchaser to "First Commonwealth, Inc.") and Bylaws of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
COMPANY STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, promptly
following the purchase of Shares pursuant to the Offer if approval of the Merger
by the stockholders of the Company is required by applicable law, the Company
shall call a meeting of its stockholders (the "Stockholder Meeting") for the
purpose of voting upon the Merger and shall take all action necessary or
advisable to obtain stockholder approval of the Merger. The Stockholder Meeting
shall be held as soon as practicable following the purchase of Shares pursuant
to the Offer and the Company will, through its Board of Directors, subject to
the Merger Agreement, recommend to its stockholders the approval of the Merger.
The record date for the Stockholder Meeting shall be a date subsequent to the
date Parent or the Purchaser becomes a record holder of Shares purchased
pursuant to the Offer.
The Company has agreed that, if stockholder approval of the Merger is
required by applicable law, the Company will, as soon as practicable following
the expiration of the Offer, prepare and file a preliminary Proxy Statement with
the Commission and will use its reasonable best efforts to respond to any
comments of the Commission or its staff and to cause the Proxy Statement to be
cleared by the Commission. The Company has agreed to take all such action as may
be necessary or advisable to obtain the necessary approvals by its stockholders
of the Merger, the Merger Agreement and the transactions contemplated thereby.
Parent has agreed to cause all Shares purchased pursuant to the Offer and all
other Shares owned by Parent, the Purchaser or any other subsidiary of Parent to
be voted in favor of the approval of the Merger.
BOARD REPRESENTATION. The Merger Agreement provides that promptly upon the
Purchaser having acquired a majority of the Shares on a fully diluted basis, the
Purchaser shall be entitled to designate such number of directors on the Board
of Directors of the Company as will give the Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, a percentage of all directors rounded up
to the nearest whole number equal to the percentage of the outstanding Shares
then owned by the Purchaser, and the Company shall, at such time, cause the
Purchaser's designees to be so elected by its existing Board of Directors;
PROVIDED, HOWEVER, that in the event that the Purchaser's designees are so
elected to the Board of Directors of the Company, until the Effective Time such
Board of Directors shall have at least three directors who are directors on the
date of the Merger Agreement and who are not officers of the Company (the
"Independent Directors"); and PROVIDED, FURTHER, that, in such event, if the
number of Independent Directors shall be reduced below three for any reason
whatsoever, the remaining Independent Directors or Director shall designate a
person or persons to fill such vacancy or vacancies, each of whom shall be
deemed to be an Independent Director for purposes of the Merger Agreement or, if
no Independent Directors then remain, the other directors shall designate three
persons to fill such vacancies who shall not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or any
of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of the Merger Agreement. In connection with the
foregoing, the Company will promptly increase the size of the Company's Board of
Directors, or remove or cause the resignation of sufficient directors to enable
the Purchaser's designees to be elected or appointed to, and to constitute a
majority of the directors on, the Company's Board of Directors as provided
above.
Subject to applicable law, the Company has agreed to take all action
requested by Parent that is reasonably necessary to effect any such election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company has agreed to make such mailing with the
mailing of the Schedule 14D-9 (provided that the Purchaser shall have provided
to the Company on a timely basis all
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information required to be included in the Information Statement with respect to
the Purchaser's designees).
INTERIM OPERATIONS. The Merger Agreement provides that except as otherwise
expressly contemplated by the Merger Agreement or as described in the Company's
disclosure letter (the "Company Disclosure Letter") delivered concurrently with
the delivery of the Merger Agreement, during the period from the date of the
Merger Agreement through the Effective Time, the Company shall, and shall cause
its subsidiaries to, in all material respects carry on their respective
businesses in, and not enter into any material transaction other than in
accordance with, the regular and ordinary course and, to the extent consistent
therewith, use its reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers and
others having business dealings with them. Without limiting the generality of
the foregoing, and, except as otherwise expressly contemplated by the Merger
Agreement or as described in the Company Disclosure Letter, the Company shall
not, and shall not permit any of its subsidiaries to, without the prior written
consent of Parent: (a) (x) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to stockholders of the Company in
their capacity as such, other than dividends payable to the Company declared by
any of the Company's subsidiaries, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its capital stock or
(z) purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities; (b)
issue, deliver, sell, pledge, dispose of or otherwise encumber any shares of its
capital stock, any other voting securities or equity equivalent or any
securities convertible into or exchangeable or exercisable for, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or equity equivalent (other than, in the case of the
Company, the issuance of Shares during the period from the date of the Merger
Agreement through the Effective Time upon the exercise of employee stock options
to purchase Shares ("Stock Options") outstanding on May 19, 1999), in accordance
with their current terms or enter into any agreement or contract with respect to
the sale or issuance of any of its securities; (c) amend its charter or bylaws
or the Rights Agreement; (d) acquire or agree to acquire by merging or
consolidating with, or by purchasing assets of or equity in, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (other than in the ordinary course of business consistent
with past practice); (e) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any of its assets that are material, individually
or in the aggregate, to the Company and its subsidiaries taken as a whole; (f)
incur any indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or guarantee any debt securities of others,
except for borrowings or guarantees incurred in the ordinary course of business
consistent with past practice for working capital purposes, or make any loans,
advances or capital contributions to, or investments in, any other person or
entity, other than to the Company or any wholly owned subsidiary of the Company
and other than in the ordinary course of business consistent with past practice;
(g) alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any subsidiary of the
Company or adopt any plan with respect to any of the foregoing; (h) grant any
severance or termination pay not currently required to be paid under existing
severance plans, enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or, other than in the ordinary course of business,
enter into or amend any employee benefit plan (including without limitation, the
Company's 1995 Long-Term Incentive Plan and 1987 Statutory-Nonstatutory Stock
Option Plan (collectively, the "Stock Option Plans")), or enter into or amend
any employment or consulting agreement; (i) enter into any contract or
commitment with respect to capital expenditures with a value in excess of, or
requiring expenditures by the Company and its subsidiaries in excess of,
$100,000, individually, or enter into contracts or commitments with respect to
capital expenditures with a value in excess of, or requiring expenditures by the
Company and its subsidiaries in excess of,
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$500,000, in the aggregate; (j) except to the extent required under existing
employee and director benefit plans, agreements or arrangements as in effect on
the date of the Merger Agreement, increase the compensation or fringe benefits
of any of its directors, officers or employees provided that, with respect to
employees that are not executive officers or directors, the Company may increase
compensation associated with promotions and regular reviews in the ordinary
course of business consistent with past practice; (k) agree to the settlement of
any material claim or litigation; (l) make or rescind any material tax election
or settle or compromise any material tax liability; (m) except as required by
applicable law or generally accepted accounting principles, make any material
change in its method of accounting; (n) except as required under the Stock
Option Plans and as otherwise provided in the Merger Agreement, accelerate the
payment, right to payment or vesting of any bonus, severance, profit sharing,
retirement, deferred compensation, stock option, insurance or other compensation
or benefits; (o) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (A) of any such
claims, liabilities or obligations in the ordinary course of business and
consistent with past practice or (B) of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) contained in documents filed with the
Commission by the Company; (p) enter into any agreement, understanding or
commitment that restrains, limits or impedes the Company's or any of its
subsidiaries' ability to compete with or conduct any business or line of
business, including, but not limited to, geographic limitations on the Company's
or any of its subsidiaries' activities; (q) materially modify, amend or
terminate any material contract to which it is a party or waive any of its
material rights or claims except in the ordinary course of business consistent
with past practice; or (r) agree, in writing or otherwise, to take any of the
foregoing actions; PROVIDED, HOWEVER, that the Merger Agreement provides that
nothing set forth in the foregoing clauses (a) through (r) shall be deemed to
prohibit the Company from making such expenditures as it deems reasonably
necessary to complete its Year 2000 readiness plan as disclosed to the Parent.
NO SOLICITATION. The Merger Agreement provides as follows:
(a) The Company and its affiliates (as such term is defined under Rule 12b-2
under the Exchange Act) and each of their respective officers, directors,
employees, financial advisors, attorneys and other advisors, representatives and
agents shall immediately cease any discussions or negotiations which may be
ongoing with third parties with respect to any Takeover Proposal (as defined
below). The Company shall not, nor shall it permit any of its affiliates (as
defined under Rule 12b-2 under the Exchange Act) to, nor shall it authorize or
permit any officer, director or employee of or any financial advisor, attorney
or other advisor, representative or agent of, the Company or any of its
affiliates to, (i) solicit, facilitate, initiate or encourage the submission of,
any Takeover Proposal (including, without limitation, the taking of any action
which would make the Rights Agreement or Section 203 of the DGCL inapplicable to
a Takeover Proposal), (ii) enter into any agreement with respect to any Takeover
Proposal or enter into any arrangement, understanding or agreement requiring it
to abandon, terminate or fail to consummate the Merger or any other transaction
contemplated by the Merger Agreement or (iii) participate in any way in any
discussions or negotiations regarding, or furnish to any person or legal entity
(other than Parent or the Purchaser) any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
PROVIDED, HOWEVER, that prior to acceptance for payment of Shares pursuant to
the Offer, in response to an unsolicited Takeover Proposal and in compliance
with its obligations under paragraph (d) below, the Company may participate in
discussions or negotiations with or furnish information (pursuant to a
confidentiality agreement with terms not more favorable to such third party than
the terms of the Confidentiality Agreement described below) to any third party
which makes a Superior Proposal (as defined below) if the Board of Directors
believes (based on the written advice of independent, outside,
nationally-recognized, legal counsel) that failing to take such action would
constitute a breach of its fiduciary duties.
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For purposes of the Merger Agreement, "Takeover Proposal" means (i) any
inquiry, proposal or offer from any person or entity relating to any direct or
indirect acquisition or purchase of a substantial amount of assets of the
Company or any of its subsidiaries or of over 15% of any class of equity
securities of the Company or any of its subsidiaries, (ii) any tender offer or
exchange offer that, if consummated, would result in any person or entity
beneficially owning 15% or more of any class of equity securities of the Company
or any of its subsidiaries or (iii) any merger, consolidation, business
combination, sale of all, or substantially all, of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries; and "Superior Proposal" means a BONA FIDE proposal made by a
third party to acquire all outstanding Shares pursuant to a tender offer or a
merger or purchase of all of the assets of the Company (w) on terms which a
majority of the disinterested members of the Board of Directors of the Company
determines in its good faith reasonable judgment (based on the written advice of
William Blair & Company and independent, outside, nationally-recognized, legal
advisors) to be more favorable to the Company and its stockholders than the
transactions contemplated by the Merger Agreement, (x) for which financing is
then available (it being understood that financing evidenced by highly confident
letters and similar letters shall not be considered "available"), (y) which is
not subject to any financing or due diligence condition and (z) which, in the
written opinion of William Blair & Company, is more favorable to the Company's
stockholders from a financial point of view than the transactions contemplated
by the Merger Agreement (as they may be modified pursuant to the provisions of
the Merger Agreement described in clause (d)(iii) under "--Termination").
(b) Except as set forth in paragraph (c) below, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or the
Purchaser, the approval or recommendation by such Board of Directors or such
committee of the Offer, the Merger or the Merger Agreement, or (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
cause the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Takeover Proposal.
(c) Notwithstanding anything to the contrary in the Merger Agreement, prior
to the acceptance for payment of Shares pursuant to the Offer, the Company may
recommend to its stockholders a Takeover Proposal and in connection therewith
withdraw or modify its approval or recommendation of the Offer or the Merger if
(1) a third party makes a Superior Proposal, (2) all the conditions to the
Company's right to terminate the Merger Agreement in accordance with the
provisions thereof have been satisfied (including the satisfaction of certain
waiting periods and the payment of certain fees as further described in clause
(d)(iii) under "--Termination") and (3) simultaneously with such withdrawal,
modification or recommendation, the Merger Agreement is terminated in accordance
with the termination provisions thereof.
(d) On the date of receipt thereof, if possible, but no later than 12 hours
after receipt thereof, the Company shall advise Parent in writing of any request
for information or any Takeover Proposal, or any inquiry, proposal, discussions
or negotiation with respect to any Takeover Proposal, the terms and conditions
of such request, Takeover Proposal, inquiry, proposal, discussion or negotiation
and the Company shall promptly provide to Parent copies of any written materials
received by the Company in connection with any of the foregoing, and the
identity of the person or entity making any such Takeover Proposal or such
request, inquiry or proposal or with whom any discussion or negotiations are
taking place. The Company shall keep Parent fully informed of the status and
details (including amendments or proposed amendments) of any such request or
Takeover Proposal and keep Parent fully informed as to the details of any
information requested of or provided by the Company and as to the details of all
discussions or negotiations with respect to any such request, takeover proposal
or inquiry. The Company shall promptly provide to Parent any non-public
information concerning the Company provided to any other person or entity in
connection with any Takeover Proposal which was not previously provided to
Parent.
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(e) Nothing contained in the Merger Agreement shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by the
Exchange Act or from making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors of the Company (based upon
written advice of independent, outside, nationally-recognized, legal advisors),
such disclosure is required by applicable state or federal securities laws or is
necessary in order to comply with its fiduciary duties to the Company's
stockholders under applicable law.
(f) The Company shall request each person or entity which, prior to the date
of the Merger Agreement, has executed a confidentiality agreement in connection
with its consideration of acquiring the Company or any portion thereof to return
all confidential information heretofore furnished to such person or entity by or
on behalf of the Company.
THIRD PARTY STANDSTILL AGREEMENTS. The Merger Agreement provides that,
during the period from May 19, 1999, through the Effective Time, (i) the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its subsidiaries is a
party (other than any involving Parent), and (ii) the Company shall enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States, or any state thereof, having
jurisdiction.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. The Merger
Agreement provides that, from and after the Effective Time, Parent will, and
will cause the Surviving Corporation to, indemnify and hold harmless all past
and present officers, directors, employees and agents of the Company and of its
subsidiaries to the full extent such persons may be indemnified by the Company
pursuant to the Company's Certificate of Incorporation and Bylaws as in effect
as of the date of the Merger Agreement for acts and omissions occurring at or
prior to the Effective Time and shall advance reasonable expenses incurred by
such persons in connection with defending any action arising out of such acts or
omissions, provided that the Company receives reasonable affirmations and
undertakings from such persons to repay all amounts advanced if it should be
ultimately determined that such person was not entitled to indemnification.
In addition, Parent has agreed to provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, for the benefit of the Company's current directors and officers,
an insurance and indemnification policy that provides coverage for events
occurring at or prior to the Effective Time that is no less favorable than the
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for such
insurance in excess of 1.25 times the last annual premium paid prior to the date
of the Merger Agreement, but in such case shall purchase as much such coverage
as possible for such amount.
OPTIONS. Pursuant to the Merger Agreement, the Company shall (i) terminate
the Stock Option Plans and any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
the Company or any of its subsidiaries (collectively "Stock Incentive Plans"),
immediately prior to the Effective Time without prejudice to the holders of
Stock Options (as hereinafter defined), (ii) grant no additional Stock Options,
and (iii) amend, immediately prior to the Effective Time, the provisions of any
other Company Benefit Plan providing for the issuance, transfer or grant of any
Shares, or any interest in respect of any Shares, to provide no continuing
rights to acquire, hold, transfer, or grant any Shares or any interest in any
Shares.
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In addition, immediately upon the consummation of the Offer, provided that a
"Change of Control" has occurred under the terms of the Stock Incentive Plans,
all outstanding Stock Options previously granted under the Stock Incentive Plans
shall become fully exercisable and vested, and the Stock Options shall be
cancelled by the Company, and the holders thereof shall receive a cash payment
(the "Cash Payment") from the Company in an amount (if any) equal to the number
of Shares subject to such option multiplied by the difference (if positive)
between the exercise price per Share covered by the option and the highest per
share price offered to stockholders of the Company in the Offer. The Company
shall request such holders to acknowledge the cancellation of all Stock Options
held by such holders, including any Stock Options as to which the exercise price
equals or exceeds such price per share. The Company shall deliver to Parent
within five business days of the date of the Merger Agreement a true and
complete list of Stock Options which are outstanding as of the date of the
Merger Agreement, together with detailed calculations of the Cash Payments
relating to such Stock Options had the Effective Time occurred on the date of
delivery thereof. The Company shall update such list and such calculations as
of, and deliver such update to Parent on, the date that is two business days
prior to the Effective Time, such updated list and calculations made as if the
Effective Time would occur on such date. Except as otherwise contemplated in the
Merger Agreement, any then-outstanding stock appreciation rights or limited
stock appreciation rights issued by the Company or any subsidiary of the Company
shall be cancelled immediately prior to the Effective Time without any payment
therefor. The Company shall ensure that neither it nor any of its subsidiaries
is or will be bound by any Stock Options, other options, warrants, rights or
agreements which would entitle any person or entity, other than Parent or it
subsidiaries, to own any Shares or to receive any payment in respect thereof.
CERTAIN EMPLOYEE BENEFITS. Pursuant to the Merger Agreement, until at least
December 31, 1999, Parent shall maintain employee benefits and programs for
retirees, officers and employees of the Company and its subsidiaries that are no
less favorable in the aggregate than those being provided to such retirees,
officers and employees on the date of the Merger Agreement (it being understood
that Parent will not be obligated to continue any one or more employee benefits
or programs); provided that the Company shall not be obligated to continue any
Stock Incentive Plan or provide any other incentive plan or benefits in lieu
thereof. For purposes of eligibility to participate in and vesting in all
benefits provided to retirees, officers and employees, retirees, officers and
employees of the Company and its subsidiaries will be credited with years of
service with the Company and its subsidiaries and years of service with prior
employers to the extent service with prior employers is taken into account under
plans of the Company. Amounts paid before the Effective Time by retirees,
officers and employees of the Company under any medical plans of the Company
shall after the Effective Time be taken into account in calculating balances for
deductibles and maximum out-of-pocket limits applicable under the medical plan
of Parent for the plan year during which the Effective Time occurs as if such
amounts had been paid under such medical plan of Parent.
In addition, the Merger Agreement provides that after the Effective Time,
Parent shall cause the Company to maintain for 1999, without modification or
amendment, except as set forth in the Merger Agreement, its Management Bonus
Plan for all covered employees.
Parent has agreed that it will maintain the Company's standard severance
policy as in effect on the date of the Merger Agreement for a period of at least
two years from the Effective Time and that Parent will honor or cause to be
honored all employment, severance and similar agreements with the Company's
officers and employees to the extent that executed copies of such agreements
have been delivered to Parent or are disclosed in the documents filed by the
Company with Commission or were otherwise disclosed to Parent. Parent and its
subsidiaries have agreed that they will provide reasonable and customary
outplacement services to officers of the Company and its subsidiaries who are
terminated by the Company as a result of, or within two years following, the
Merger, which outplacement services provided to such officer shall include
one-on-one counseling and assistance.
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AGREEMENT TO USE REASONABLE BEST EFFORTS. Pursuant to the Merger Agreement
and subject to the terms and conditions thereof, each of the Company, Parent and
the Purchaser shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger, and the other transactions contemplated by the Merger Agreement,
including (a) obtaining all necessary actions or non-actions, waivers, consents
and approvals from all Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities,
including without limitation, all filings under the HSR Act, and the filing of a
Form A application and/or other documents as may be required with the Arizona,
Illinois, Indiana, Wisconsin, Missouri and Michigan Departments of Insurance and
the approval thereof by the Directors of Insurance of such Departments of
Insurance, and any other required filings with or approvals by state agencies
regulating corporations or insurance companies applicable to the transactions
contemplated thereby, and the taking of all reasonable steps as may be necessary
to obtain an approval or waiver from or to avoid an action or proceeding by any
Governmental Entity, (b) obtaining all necessary consents, approvals or waivers
from third parties, (c) defending any lawsuits or other legal proceedings,
whether judicial or administrative, challenging the Merger Agreement or the
consummation of the transactions contemplated thereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (d) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by
the Merger Agreement.
YEAR 2000 COMPLIANCE. The Merger Agreement provides that, prior to the
Effective Time, Parent and its representatives shall have the right, during
normal business hours, and at other reasonable times upon request, to have full
and complete access to the Company's hardware, information systems and all
software material to the business, finances or operations of the Company
("Software") for the purpose of assisting the Company in assessing, developing,
executing and testing the Company's Year 2000 readiness plan. In connection
therewith, the Company agreed to cause its officers, employees and agents to
fully cooperate with the representatives of Parent and to provide them with all
information, data, records, documents and any other material which they may
request relating to the Company's hardware, Software and information systems.
The Company has agreed to seriously consider any and all recommendations made by
Parent or its representatives relating to the Company's Year 2000 readiness plan
and to take full advantage of Parent's resources and expertise in connection
therewith.
In addition, the Merger Agreement provides that if Parent reasonably
determines that there exists any material deficiency in the Company's Year 2000
readiness plan, the Company shall take such action as Parent reasonably requests
as necessary to cure such deficiency. As part of this process, the Company and
Parent shall establish a joint Year 2000 readiness steering committee which
shall consider and make recommendations relating to the Company's Year 2000
readiness plan (the "Committee"), which shall consist of three representatives
from the Company and up to three representatives designated by Parent. The
Committee shall meet as often as may be necessary for the purpose of ensuring
that the Company is assessing, developing, executing and testing the Company's
Year 2000 readiness plan in a timely and effective manner. If the members of the
Committee do not by majority vote agree on or prior to July 13, 1999 that the
Company's Year 2000 readiness plan is or will be implemented on a timely and
effective manner in all material respects, the Company and Parent shall
designate a third party consultant which is mutually acceptable to both the
Company and Parent to assess and make recommendations with respect to the
Company's Year 2000 readiness plan (the "Consultant"). If the Consultant
identifies any material deficiency in the Company's Year 2000 readiness plan,
the Company agrees to follow the recommendations of Consultant which are
reasonably requested by Parent.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, corporate authority, capital
structure, financial statements, public filings, litigation, compliance with
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applicable laws, consent and approvals, employee benefit plans, brokers' or
finders' fees, state takeover statutes, voting requirements, taxes, intellectual
property, Year 2000 compliance and the absence of any material adverse changes
in the Company since December 31, 1998.
The Company also represented that the Board of Directors had taken all
necessary action to amend the Rights Agreement to (a) render the Rights
Agreement inapplicable with respect to the Offer, the Merger and the other
transactions contemplated by the Merger Agreement and (b) ensure that (x)
neither Parent nor the Purchaser nor any of their Affiliates (as defined in the
Rights Agreement) or Associates (as defined in the Rights Agreement) is
considered to be an Acquiring Person (as defined in the Rights Agreement) and
(y) the provisions of the Rights Agreement, including the occurrence of a
Distribution Date (as defined in the Rights Agreement), are not and shall not be
triggered by reason of the announcement or consummation of the Offer, the Merger
or the consummation of any of the other transactions contemplated by the Merger
Agreement.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after any approval by the stockholders of
the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent or the Purchaser:
(i) if, prior to the purchase of Shares pursuant to the Offer, the
Company has breached in any material respect any representation,
warranty, covenant or other agreement contained in the Merger Agreement
which (x) would give rise to the failure of a condition set forth in
clause (d) or (e) of the Offer conditions set forth in the second
sentence of Section 14--"Conditions of the Offer", (y) cannot or has not
been cured prior to fifteen (15) days after the giving of written notice
of such breach to the Company and (z) has not been waived by Parent
pursuant to the provisions of the Merger Agreement; or
(ii) if the Offer is terminated or expires in accordance with its
terms without the Purchaser having purchased any Shares thereunder due to
an occurrence which results in a failure to satisfy any one or more of
the conditions set forth set forth in Section 14--"Conditions of the
Offer", unless any such failure shall have been caused by or resulted
from the breach by Parent or the Purchaser in any material respect of
their respective representations and warranties in the Merger Agreement
or the failure of Parent or the Purchaser to perform in any material
respect any covenant or agreement of either of them contained in the
Merger Agreement; or
(iii) it shall have been publicly disclosed, or Parent shall have
otherwise learned, that beneficial ownership (determined for the purposes
of this paragraph (b)(iii) as set forth in Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of the outstanding Shares has been
acquired by any person, entity or group (as defined in Section 13(d)(3)
under the Exchange Act); or
(c) by the Company:
(i) if Parent or the Purchaser shall have (x) terminated the Offer or
(y) failed to pay for any Shares pursuant to the Offer on or prior to the
Termination Date, unless, in the case of (x) or (y), such termination or
failure shall have been caused by the failure of the Company to satisfy
the conditions to the Offer set forth in clauses (d) or (e) set forth in
the second sentence of Section 14--"Conditions of the Offer"; or
(ii) if the Offer has not been timely commenced in accordance with
the terms of the Merger Agreement; or
(iii) if, prior to the purchase of Shares pursuant to the Offer,
Parent or the Purchaser has breached in any material respect any
representation, warranty, covenant or other agreement
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contained in the Merger Agreement which cannot be or has not been cured
within fifteen (15) days after the giving of written notice to Parent or
the Purchaser (other than any matters that, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (as defined
below) with respect to Parent or the Purchaser); or
(d) by either Parent or the Company:
(i) if the Effective Time has not occurred on or prior to the close
of business on the date which is 120 days after the date of the Merger
Agreement (the "Termination Date"); PROVIDED, HOWEVER, that the
Termination Date shall be the date which is 180 days after the date of
the Merger Agreement if the Regulatory Condition has not been satisfied
but all other conditions set forth in Section 14--"Conditions of the
Offer" have been satisfied on the date which is 120 days after the date
of the Merger Agreement; PROVIDED, FURTHER, that the right to terminate
the Merger Agreement pursuant to this clause shall not be available (y)
to Parent if the Purchaser or any affiliate of the Purchaser acquires
Shares pursuant to the Offer, or (z) to any party whose failure to
fulfill any material obligation of the Merger Agreement or other material
breach of the Merger Agreement has been the cause of, or resulted in, the
failure of the Effective Time to have occurred on or prior to the
aforesaid date; or
(ii) if any court of competent jurisdiction or any governmental,
administrative or regulatory authority, agency or body shall have issued
an order, decree or ruling or taken any other action permanently
restricting, enjoining, restraining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and nonappealable; or
(iii) if a Superior Proposal is received by the Company and the Board
of Directors of the Company believes (based on the written advice of
independent outside nationally recognized legal counsel) that a failure
to terminate the Merger Agreement and enter into an agreement to effect
the Superior Proposal would constitute a breach of its fiduciary duties;
PROVIDED, HOWEVER, that the Company may not terminate the Merger
Agreement pursuant to this paragraph (d)(iii) unless and until (x) five
(5) business days have elapsed following delivery to Parent of a written
notice of such determination by the Board of Directors and during such
five (5) business day period the Company has fully cooperated with Parent
including, without limitation, informing Parent of the terms and
conditions of such Superior Proposal, and the identity of the person or
entity making such Superior Proposal, with the intent of enabling both
parties to agree to a modification of the terms and conditions of the
Merger Agreement so that the transactions contemplated hereby may be
effected; (y) at the end of such five (5) business day period the
Takeover Proposal continues to constitute a Superior Proposal and the
Board of Directors of the Company continues to believe (and has again
been advised in writing by independent outside nationally recognized
legal counsel) that a failure to terminate the Merger Agreement and enter
into an agreement to effect the Superior Proposal would constitute a
breach of its fiduciary duties; and (iii) (x) prior to such termination,
Parent has received all fees as set forth in the Merger Agreement and
described below under "--Payment of Certain Fees and Expenses upon
Termination" by wire transfer in same day funds and (y) simultaneously
with such termination the Company enters into a definitive acquisition,
merger or similar agreement to effect the Superior Proposal.
The Merger Agreement provides that, in the event of termination of the
Merger Agreement by either Parent or the Company pursuant to the provisions
described above, the Merger Agreement will become void and there shall be no
liability thereunder on the part of the Company, Parent or the Purchaser or
their respective officers or directors (except for breach of the Merger
Agreement and the survival of certain provisions relating to broker's and
finder's fees, fees and expenses and confidential information).
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PAYMENT OF CERTAIN FEES AND EXPENSES UPON TERMINATION. Except as provided
in the next succeeding sentence, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such costs and expenses, except as expressly set
forth in the Merger Agreement. If the Merger Agreement is terminated (i) by
Parent in accordance with paragraph (b)(ii) under the heading "--Termination"
hereof because of the occurrence of any of the events set forth in clauses (d),
(e) or (f) of the second sentence of Section 14--"Conditions of the Offer"; (ii)
Parent or the Company, as the case may be, in accordance with paragraph (b)(i)
or paragraph (d)(iii) under the heading "--Termination"; or (iii) by Parent,
pursuant to any provision of the Merger Agreement other than those described in
the preceding clauses (i) and (ii) of this sentence, or, except to the extent
that the termination of the Merger Agreement is the result of a breach by Parent
or the Purchaser in any material respect of its representations, warranties or
covenants in the Merger Agreement, by the Company pursuant to paragraph (d)(i)
or paragraph (d)(ii) under the heading "--Termination" if, in any such case
described in this clause (iii) of this sentence, (x) a Takeover Proposal has
been made after the date of the Merger Agreement and (y) within twelve (12)
months of the date of such termination, the Company shall enter into an
Acquisition Agreement with any person or entity other than Parent or any of its
affiliates, then the Company shall (except as required to be paid earlier in
accordance with paragraph (d)(iii) set forth under "--Termination") on the
business day next succeeding the date of termination (or in the case of a
termination pursuant to clause (iii) of this sentence, the business day next
succeeding the execution of such agreement), (A) reimburse Parent in immediately
available funds for the Expenses of Parent and the Purchaser, not to exceed $1.5
million, and (B) pay to Parent in immediately available funds an amount equal to
$3.9 million.
For the purposes of the Merger Agreement, "Expenses" means the documented
and reasonable out-of-pocket fees and expenses incurred or paid by or on behalf
of Parent or the Purchaser in connection with the Offer, the Merger or the
consummation of any of the transactions contemplated by this Agreement,
including, but not limited to, all filing fees, printing fees and reasonable
fees and expenses of law firms, commercial banks, investment banking firms,
accountants, experts and consultants to Parent.
STOCKHOLDER AGREEMENTS
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE STOCKHOLDER
AGREEMENTS. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
STOCKHOLDER AGREEMENTS, EACH OF WHICH IS INCORPORATED HEREIN BY REFERENCE AND A
COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE
14D-1. THE STOCKHOLDER AGREEMENTS MAY BE INSPECTED AT, AND COPIES MAY BE
OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH IN SECTION
7--"CERTAIN INFORMATION CONCERNING THE COMPANY".
Throughout this section any reference to "the Stockholder" shall be a
reference to either of Mr. Multhauf and Mr. Mulligan, as the context may
require, each of whom is party to a Stockholder Agreement. The Stockholder
Agreements have identical terms and cover the Shares which each Stockholder owns
beneficially and of record, together with any other shares of capital stock of
the Company of which such Stockholder acquires beneficial ownership after May
19, 1999 and during the term of the Stockholder Agreement (the "Subject
Shares"). As of May 18, 1999, Mr. Multhauf beneficially owned 329,788 Shares (or
approximately 8.2% of the Shares on a fully-diluted basis) and Mr. Mulligan
beneficially owned 367,287 Shares (or approximately 9.1% of the Shares on a
fully-diluted basis).
THE COVENANTS. Pursuant to the Stockholder Agreement, the Stockholder has
agreed: (i) so long as the Merger Agreement has not been terminated, to tender
pursuant to the Offer, and not withdraw, the Subject Shares; (ii) at any
stockholders meeting (or at any adjournment thereof) or in any other
circumstances upon which a vote, consent or other approval with respect to the
Merger or the Merger Agreement is sought, to vote (or cause to be voted) the
Subject Shares in favor of the Merger, the approval and adoption of the Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement; (iii) at any meeting of
stockholders of the Company (or at any adjournment thereof) or in any other
circumstances upon which a vote, consent or other
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approval is sought, other than with respect to the Merger or Merger Agreement,
to vote (or cause to be voted) the Subject Shares (a) against any merger
agreement or merger, consolidation, combination, sale, lease or transfer of all
or substantially all of the assets of the Company, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any subsidiary of the Company or any other Takeover Proposal (as defined under
the heading "--Merger Agreement--No Solicitation"); (b) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or the Stockholder Agreement; or (c) against the
following actions (other than the Merger and the transactions contemplated by
the Merger Agreement): (1) any change in a majority of the persons who
constitute the Board of Directors of the Company; (2) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or its subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by the Stockholder Agreement and the
Merger Agreement; (iv) except as provided in paragraph (i) above, not to (a)
sell, transfer, pledge, encumber, assign or otherwise dispose of (including by
gift) (collectively, "Transfer"), or enter into any contract, option or other
arrangement (including any profit-sharing arrangement) with respect to any
Transfer of the Subject Shares to any person (other than Parent) or (b) enter
into any voting arrangement, whether by proxy, voting agreement or otherwise, in
relation to the Subject Shares and not to commit or agree to take any of the
foregoing actions; (v) not to, and not to permit any affiliate, director,
officer, employee, investment banker, attorney or other advisor or
representative of the Stockholder to, (a) directly or indirectly solicit,
initiate or encourage the submission of, any Takeover Proposal or (b) directly
or indirectly participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes or
may reasonably be expected to lead to, any Takeover Proposal; (vi) to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with Parent in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement; (vii) to waive any rights of appraisal or
rights to dissent from the Merger that the Stockholder may have; and (viii) not
to request that the Company register the transfer (book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Subject
Shares, unless such transfer is made in compliance with the Stockholder
Agreement or the Merger Agreement.
Each Stockholder Agreement provides that the Stockholder has made the
covenants and agreements contained therein in the Stockholder's capacity as a
stockholder of the Company and that nothing contained therein shall limit the
Stockholder's ability, to the extent the Stockholder is a director of the
Company and is acting in such capacity, to discharge the Stockholder's fiduciary
duties as a director of the Company under applicable law based on the advice of
independent, outside, nationally recognized legal counsel (which may be counsel
to the Company).
REPRESENTATIONS AND WARRANTIES. In each Stockholder Agreement, the relevant
Stockholder has made customary representations and warranties to Parent with
respect to, among other things, ownership of, and capacity with respect to the
Subject Shares, legal capacity to enter into the Stockholder Agreement and
absence of liens in respect of the Subject Shares.
TERMINATION. Pursuant to the Stockholder Agreement, the obligations of the
Stockholder under such Stockholder Agreement terminate upon the earlier of (i)
the date which is 180 days after the date of termination of the Merger Agreement
or (ii) the Effective Time.
RIGHTS AGREEMENT
THE FOLLOWING IS A SUMMARY DESCRIPTION OF THE RIGHTS AGREEMENT. THE SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT AND THE
AMENDMENTS THERETO WHICH ARE INCORPORATED HEREIN
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BY REFERENCE AND COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS EXHIBITS
TO THE SCHEDULE 14D-1. THE RIGHTS AGREEMENT MAY BE INSPECTED AT, AND COPIES MAY
BE OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH IN SECTION
7--"CERTAIN INFORMATION CONCERNING THE COMPANY".
On October 20, 1995, the Board of Directors of the Company declared a
dividend of one preferred stock purchase right (a "Right") for each outstanding
share of Common Stock of the Company. The dividend was paid to holders of record
of the Common Stock on November 16, 1995, the effective date of the Company's
initial public offering registration statement (the "Record Date"). Each Right
entitles the holder thereof (except as described below) to purchase from the
Company one one-hundredth of a share of the Series A Junior Participating
Preferred Stock, $.001 par value (the "Preferred Shares"), of the Company at a
price (the "Exercise Price") of $40.00 per one one-hundredth of a Preferred
Share, subject to adjustment. The terms of the Rights are set forth in the
Stockholders Rights Agreement dated as of November 1, 1995, as amended (the
"Rights Agreement") between the Company and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agent"). The Company has amended the Rights
Agreement to render the Rights Agreement inapplicable with respect to the Offer,
the Merger and the other transactions contemplated by the Merger Agreement. All
undefined capitalized terms used in the discussion below are used as defined in
the Rights Agreement.
The Rights associated with the Common Stock outstanding as of the Record
Date currently are evidenced solely by the stock certificates for such Common
Stock. The Rights will separate from the Common Stock upon the earlier to occur
of (i) 10 Business Days after the first public announcement that any Person
(other than an Exempt Person (as hereinafter defined)) has become an Acquiring
Person (as hereinafter defined) and (ii) 10 Business Days (or such other
Business Day as may be determined by action of the Board prior to the time that
any Person shall become an Acquiring Person (as hereinafter defined) after the
commencement by any Person (other than an Exempt Person) of, or the first public
announcement of its intention to commence, a tender or exchange offer if, upon
the consummation thereof, such Person would be the Beneficial Owner of 15% or
more of the outstanding shares of Common Stock (the earlier of the dates
specified in clauses (i) and (ii) being hereinafter called the "Distribution
Date"). Notwithstanding the foregoing or any provision to the contrary in the
Rights Agreement, a Distribution Date shall not occur by reason of the execution
of the Merger Agreement, the announcement of the Offer, the consummation of the
Offer, the consummation of the Merger, or any other transaction contemplated by
the Merger Agreement. After the Distribution Date, the Rights will be evidenced
solely by separate certificates and will trade independently from the Common
Stock.
An "Acquiring Person" is any Person who or which, together with its
Affiliates and Associates, has acquired 15% or more of the shares of Common
Stock then outstanding, but does not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan or other compensation
program or arrangement of the Company or of any such Subsidiary or (iv) any
Person holding shares of Common Stock for or pursuant to the terms of any such
plan, program or arrangement (the Persons specified in clauses (i) through (iv)
being herein collectively called "Exempt Persons"). Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," has become so
inadvertently, and such Person divests as promptly as practicable a sufficient
number of shares of Common Stock so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be an "Acquiring
Person." Notwithstanding anything in the Rights Agreement to the contrary,
neither Parent, nor any of its Affiliates or Associates, including but not
limited to, the Purchaser, is or shall be deemed to be an Acquiring Person as a
result of (i) the execution and delivery of the Merger Agreement, or (ii) any
action taken by Parent, the Purchaser or any of their Affiliates, Associates or
shareholders in accordance with the provisions of the Merger Agreement,
including, without limitation, the initiation or consummation of the Offer or
the consummation of the Merger in accordance with the provisions of the Merger
Agreement. Notwithstanding the foregoing, upon termination of the Merger
Agreement in accordance with its terms, the preceding sentence shall become null
and void and of no further force or effect.
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A "Share Acquisition Date" is the first date on which there is a public
announcement, such as a press release or a filing with the Securities and
Exchange Commission, by the Company or an Acquiring Person that an Acquiring
Person has become such. The Second Amendment to the Rights Agreement provides
that a Share Acquisition Date shall not occur by reason of the execution of the
Merger Agreement, the announcement of the Offer, the consummation of the Offer,
the consummation of the Merger, or any other transaction contemplated by the
Merger Agreement. Notwithstanding the foregoing, upon termination of the Merger
Agreement in accordance with its terms, the preceding sentence shall become null
and void and of no further force or effect.
The Rights Agreement provides that, until the Distribution Date (or the
earlier redemption or expiration of the Rights), the Rights may be transferred
only with the associated shares of Common Stock. Until the Distribution Date (or
the earlier redemption or expiration of the Rights), stock certificates for
Common Stock issued after the Record Date, either upon transfer of outstanding
shares or original issuance of additional shares of Common Stock, will contain a
legend incorporating the Rights Agreement by reference. Until the Distribution
Date (or the earlier redemption or expiration of the Rights), the surrender for
transfer of any stock certificate for shares of Common Stock, with or without
such legend and whether or not a copy of this Summary of Rights is attached
thereto, will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such stock certificate.
As soon as practicable after the Distribution Date, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to the holders of
record of the Common Stock as of the Close of Business on the Distribution Date,
which thereafter will constitute the sole evidence of the Rights. Each share of
Common Stock issued by the Company after the Record Date and prior to the
earlier redemption or expiration of the Rights, including any shares of Common
Stock issued by reason of the exercise of any option, warrant, right (other than
the Rights) or conversion or exchange privilege (however evidenced) issued by
the Company prior to the Distribution Date, will be accompanied by a Right
(unless the Board expressly provides to the contrary at the time of issuance of
any such option, warrant, right or privilege), and Rights Certificates
evidencing such Rights will be issued at the same time as the stock certificates
for the associated shares of Common Stock.
The Rights are not exercisable until the Distribution Date. Moreover, the
time when the Rights may be exercised is restricted as described in the next
paragraph. The Rights will expire on the tenth anniversary of the Record Date
(the "Final Expiration Date"), unless the Final Expiration Date is extended or
unless the Rights are earlier redeemed or exchanged by the Company, in each case
as described below.
In the event that any Person becomes an Acquiring Person (a "Section
11(a)(ii) Event" as defined in the Rights Agreement), proper provision will be
made so that the registered holder of each Right (other than Rights Beneficially
Owned as described in the next sentence) will thereafter have the right to
receive, upon exercise thereof, the number of shares of Common Stock which, at
the time of the occurrence of such event, will have a market value equal to two
times the then current Exercise Price. After the occurrence of the event
described in the preceding sentence, all Rights which are, or (under certain
circumstances specified in the Rights Agreement) were, Beneficially Owned by a
Restricted Person or specified transferees therefrom will be or become void.
Under no circumstances may a Right be exercised after the occurrence of either
such event unless the Company's right to redeem the Rights (as described below)
has expired. The Second Amendment to the Rights Agreement provides that a
Section 11(a)(ii) Event shall not occur by reason of the execution of the Merger
Agreement, the announcement of the Offer, the consummation of the Offer, the
consummation of the Merger, or any other transaction contemplated by the Merger
Agreement. Notwithstanding the foregoing, upon termination of the Merger
Agreement in accordance with its terms, the preceding sentence shall become null
and void and of no further force or effect.
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If, on or after the date on which any Person has become an Acquiring Person,
any of the following transactions (each a "Section 13 Event" as defined in the
Rights Agreement) occur: (i) the Company merges into or consolidates with an
Interested Stockholder (as hereinafter defined) or, unless all holders of the
Company's outstanding shares of Common Stock are treated the same, another
Person (with limited designated exceptions); (ii) an Interested Stockholder or,
unless all holders of the Company's outstanding shares of Common Stock are
treated the same, another Person (with limited designated exceptions) merges
into the Company and either (A) all or part of the outstanding shares of Common
Stock of the Company are converted into capital stock or other securities of any
other Person (or the Company), cash and/or other property or (B) such shares
remain outstanding, unconverted and unchanged; or (iii) the Company sells or
transfers 50% or more of its consolidated assets or earning power to an
Interested Stockholder (as hereinafter defined) or, unless all holders of the
Company's outstanding shares of Common Stock are treated the same, another
Person (with limited designated exceptions); proper provision will be made so
that the registered holder of each Right (other than Rights which have become
void) will thereafter have the right (the "Flip-Over Right") to receive, upon
exercise thereof, the number of common shares of the acquiror (or of another
Person affiliated therewith) which, at the time of consummation of such
transaction, will have a market value equal to two times the then current
Exercise Price. An "Interested Stockholder" is any Restricted Person or any
Affiliate or Associate of any other Person in which such Restricted Person has
an interest, or any Person acting, directly or indirectly, on behalf of or in
concert with any such Restricted Person. The Second Amendment to the Rights
Agreement provides that a Section 13 Event shall not occur by reason of the
execution of the Merger Agreement, the announcement of the Offer, the
consummation of the Offer, the consummation of the Merger, or any other
transaction contemplated by the Merger Agreement. Notwithstanding the foregoing,
upon termination of the Merger Agreement in accordance with its terms, the
preceding sentence shall become null and void and of no further force or effect.
The Second Amendment to the Rights Agreement provides that a Triggering
Event (which is defined in the Rights Agreement to be any Section 11(a)(ii)
Event or any Section 13 Event) shall not occur by reason of the execution of the
Merger Agreement, the announcement of the Offer, the consummation of the Offer,
the consummation of the Merger, or any other transaction contemplated by the
Merger Agreement. Notwithstanding the foregoing, upon termination of the Merger
Agreement in accordance with its terms, the preceding sentence shall become null
and void and of no further force or effect.
The Exercise Price payable, the number and kind of shares of capital stock
issuable upon exercise of the Rights and the number of Rights outstanding are
subject to adjustment from time to time to prevent dilution (i) in the event of
a dividend payable in Preferred Shares on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to the holders of
the Preferred Shares of certain options, warrants or rights to subscribe for or
purchase Preferred Shares at a price, or securities convertible into or
exchangeable for Preferred Shares with a conversion or exchange price, less than
the then Fair Market Value of the Preferred Shares or (iii) upon the
distribution to the holders of the Preferred Shares of cash, securities,
evidences of indebtedness or other property (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or options, warrants or
rights (other than those referred to in clause (ii) above).
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a dividend on the Common Stock payable in shares of
Common Stock or a subdivision, combination or reclassification of the Common
Stock occurring, in any such case, prior to the Distribution Date.
With certain specified exceptions, no adjustment in the Exercise Price will
be made until the cumulative adjustments required equal at least 1% of the
Exercise Price. The Company is not required to issue fractional Preferred Shares
(other than fractions which are multiples of one one-hundredth of a Preferred
Share), but in lieu thereof the Company would be required to make a cash payment
based on the Fair Market Value of the Preferred Shares on the trading day
immediately preceding the date of exercise.
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The Preferred Shares receivable upon exercise of the Rights will not be
redeemable. Each Preferred Share will entitle the holder thereof to receive a
preferential quarterly dividend equal to 100 times the aggregate per share
amount of all cash dividends, plus 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends and other distributions (other than
in shares of Common Stock), declared on the Common Stock during such quarter,
adjusted to give effect to any dividend on the Common Stock payable in shares of
Common Stock or any subdivision, combination or reclassification of the Common
Stock (a "Dilution Event"). Each Preferred Share will entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Company, voting together as a single class with the holders of the Common Stock
and the holders of any other class of capital stock having general voting
rights, adjusted to give effect to any Dilution Event. In the event of
liquidation of the Company, the holder of each Preferred Share will be entitled
to receive a preferential liquidation payment equal to 100 times the aggregate
per share amount to be distributed to the holders of the Common Stock, adjusted
to give effect to any Dilution Event, plus an amount equal to accrued and unpaid
dividends and distributions on such Preferred Share, whether or not declared, to
the date of such payment. In the event of any merger, consolidation or other
transaction in which the outstanding shares of Common Stock of the Company are
exchanged for or converted into other capital stock, securities, cash and/or
other property, each Preferred Share will be similarly exchanged or converted
into 100 times the per share amount applicable to the Common Stock, adjusted to
give effect to any Dilution Event.
Because of the nature of the dividend, voting, liquidation and other rights
accorded to each Preferred Share, the value of the one one-hundredth of a
Preferred Share receivable upon the exercise of each Right should approximate
the value of one share of Common Stock.
At any time prior to the earliest of (i) 10 Business Days after the first
public announcement that any Person (other than an Exempt Person) has become an
Acquiring Person, (ii) the occurrence of any transaction which permits the
exercise of the Flip-Over Right and (iii) the Final Expiration Date, the Board
may redeem the Rights in whole, but not in part, at the redemption price of $.01
per Right, adjusted to give effect to any Dilution Event (the "Redemption
Price"). The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board, in its sole discretion, may
establish. After the redemption period has expired, the Company's right of
redemption may be reinstated, under the circumstances specified in the Rights
Agreement, if either (i) the Person who became an Acquiring Person shall reduce,
in one or a series of related transactions not involving the Company or any
Subsidiary or the occurrence of any transaction which permits the exercise of
the Flip-Over Right, its Beneficial Ownership of the outstanding shares of
Common Stock to less than 10% of such outstanding shares or (ii) in connection
with any transaction which permits the exercise of the Flip-Over Right, which
does not involve an Interested Stockholder and in which all holders of the
Common Stock are treated the same. Immediately after action by the Board
directing the redemption of the Rights, the option to exercise the Rights will
terminate, and thereafter each registered holder of the Rights will only be
entitled to receive the Redemption Price therefor.
At any time after any Person has become an Acquiring Person and prior to the
time that any Person (other than an Exempt Person), together with its Affiliates
and Associates, has become the Beneficial Owner of 50% or more of the
outstanding shares of Common Stock, the Board may direct that all or any part of
the outstanding Rights (other than Rights which have become void) be exchanged
for shares of Common Stock at the exchange rate of one share of Common Stock (or
one one-hundredth of a Preferred Share or of another share of capital stock of
the Company having equivalent rights, preferences and privileges) per Right,
adjusted to give effect to any Dilution Event.
Prior to the Distribution Date, the terms of the Rights and the Rights
Agreement may be supplemented or amended by the Board in any manner. From and
after the Distribution Date, the Rights may be supplemented or amended by the
Board, without the approval of the holders of the Rights, in certain respects
which do not adversely affect, as determined by the Board, the interests of such
holders; PROVIDED, HOWEVER, that the Rights Agreement cannot be amended to
lengthen (i) any time period unless such
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lengthening is for the benefit of the holders of the Rights or (ii) any time
period relating to when the Rights may be redeemed if at such time the Rights
are not then redeemable.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
CONFIDENTIALITY AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE CONFIDENTIALITY AGREEMENT, DATED AS OF
MARCH 24, 1999, BETWEEN THE PARENT AND THE COMPANY (THE "CONFIDENTIALITY
AGREEMENT"). THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
CONFIDENTIALITY AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS
AN EXHIBIT TO THE SCHEDULE 14D-1. THE CONFIDENTIALITY AGREEMENT CAN BE INSPECTED
AT, AND COPIES MAY BE OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH
IN SECTION 7--"CERTAIN INFORMATION CONCERNING THE COMPANY".
Pursuant to the Confidentiality Agreement, Parent has agreed, among other
things, (i) except as required by law, to keep all information furnished by the
Company or its Representatives (as defined below), whether oral or written and
regardless of the manner in which it is furnished ("Proprietary Information"),
confidential and not to disclose or reveal any Proprietary Information to any
person other than Representatives participating in the evaluation of a potential
transaction, (ii) not to use Proprietary Information for any purpose other than
in connection with its evaluation of a potential transaction or the consummation
of a transaction and (iii) except as required by law or pursuant to a listing
agreement with an exchange or the Nasdaq Stock Market, not to disclose to any
person the fact that the Proprietary Information exists or has been made
available or certain other facts.
"Proprietary Information" does not include information which (i) is or
becomes generally available to the public other than as a result of disclosure
by Parent or its directors, officers, employees, advisors (including financial
advisors, accountants and counsel) and affiliates (collectively,
"Representatives"), (ii) was available to Parent on a nonconfidential basis
prior to its disclosure by the Company or its Representatives or (iii) becomes
available to Parent on a nonconfidential basis from a person other than the
Company or its Representatives who is not or should not be reasonably known by
Parent to be bound by a confidentiality agreement with the Company or any of its
Representatives and is otherwise not or should reasonably not be known to be
under an obligation to the Company or any of its Representatives not to transmit
the information to another party.
Parent has also agreed that during any time during the eighteen-month period
following the date of the Confidentiality Agreement, unless specifically
requested in writing by the Company, it will not, among other things, (i)
acquire or seek to acquire beneficial ownership of any of the assets, business
or securities of the Company, or any rights or options to acquire such
ownership, (ii) solicit proxies with respect to any matter from stockholders of
the Company, (iii) initiate, induce or attempt to induce any person to initiate
any stockholder proposal or tender offer for any securities of the Company, any
change of control of the Company or the convening of any stockholders' meeting
of the Company or (iv) seek or propose to influence or control the management of
the Company.
Both Parent and the Company (each, a "Party" and, collectively, the
"Parties") have agreed that, for a period of one year from the date of the
Confidentiality Agreement, neither Party will hire or solicit for employment, or
any consulting or independent contractor relationship, any of each other's
employees.
EMPLOYMENT ARRANGEMENTS
THE FOLLOWING IS A SUMMARY OF CERTAIN MATERIAL TERMS OF THE EMPLOYMENT
LETTERS (AS DEFINED HEREIN). THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH AGREEMENTS WHICH ARE INCORPORATED HEREIN BY REFERENCE AND
COPIES OF WHICH HAVE BEEN FILED WITH THE COMMISSION AS EXHIBITS TO THE SCHEDULE
14D-1.
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In connection with the Merger Agreement, Parent and each of Messrs. Multhauf
and Mulligan (each, an "Executive") entered into a non-binding letter agreement
(each, an "Employment Letter") relating to the possible terms of their
employment following the consummation of the Merger. The Employment Letters
contain identical terms. In each Employment Letter, Parent agreed that,
effective upon the consummation of the Merger, it will cause the Company to
offer to the Executive employment as a senior officer of the Company on
substantially the terms set forth therein. Each of Parent and the Executive
agreed to use their reasonable best efforts to negotiate in good faith a
definitive employment agreement on such terms, and Parent agreed to use its
reasonable best efforts to cause the Company to enter into such employment
agreement as promptly as possible and in no event later than the date on which
the transactions contemplated by the Merger Agreement are consummated. Each
Employment Letter also provides that Parent and the Executive are not bound by
the provisions of the Employment Letter unless and until a definitive employment
agreement is executed.
Each Employment Letter contemplates that the definitive employment agreement
would include (i) a base annual salary of $225,000; (ii) an annual
performance-related bonus of up to 100 percent of the base annual salary (with
the first year annual bonus guaranteed at 100 percent); (iii) the Executive's
participation in a long-term incentive compensation plan to be negotiated among
the parties; (iv) the continuation of the Executive's employee benefits at their
current level, the provision of life insurance and certain deferred compensation
arrangements to be negotiated among the parties; (v) an agreement by the
Executive not to compete directly or indirectly with Parent, the Company or any
of Parent's affiliates, subsidiaries or business partners, with respect to any
dental insurance, dental HMO/PPO indemnity or other dental coverage arrangement
for a period of three years after termination of employment; and (vi) in the
event of termination without cause, severance payments of two years base annual
salary plus the average of the bonus paid to the Executive during the two years
prior to such termination.
12. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement
provides the Company shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of Parent: (i) declare, set aside or pay any
dividends on, or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to
stockholders of the Company in their capacity as such, other than dividends
payable to the Company declared by any of the Company's subsidiaries, (ii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the preceding paragraphs except as
permitted, required or specifically contemplated by the Merger Agreement and
nothing herein shall constitute a waiver by Parent or the Purchaser of any of
its rights under the Merger Agreement or a limitation of remedies available to
Parent or the Purchaser for any breach of the Merger Agreement, including
termination thereof.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION.
MARKET FOR SHARES. The purchase of Shares pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Shares held by the
public.
STOCK QUOTATION. The Shares are traded on the Nasdaq National Market.
According to published guidelines of the Nasdaq National Market, the Shares
might no longer be eligible for quotation on the Nasdaq National Market if,
among other things, either (i) the number of Shares publicly held was less than
750,000, there were fewer than 400 holders of round lots, the aggregate market
value of publicly held Shares was less than $5,000,000, net tangible assets were
less than $4,000,000 and there were fewer than
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two registered and active market makers for the Shares, or (ii) the number of
Shares publicly held was less than 1,100,000, there were fewer than 400 holders
of round lots, the aggregate market value of publicly held Shares was less than
$15,000,000, and either (x) the Company's market capitalization was less than
$50,000,000 or (y) the total assets and total revenue of the Company for the
most recently completed fiscal year or two of the last three most recently
completed fiscal years did not exceed $50,000,000, and there were fewer than
four registered and active market makers. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10 percent of the Shares
are not considered as being publicly held for this purpose. According to the
Company, as of May 18, 1999, there were 142 holders of record of Shares (not
including beneficial holders of Shares in street name), and as of May 18, 1999,
there were 3,730,135 Shares outstanding. If the Common Stock were to be
delisted, the associated Rights would be delisted as well.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or through Nasdaq or other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of shareholders and/or the aggregate market value of the Shares
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration of the
shares under the Exchange Act and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by 300 or more holders of record.
Termination of registration under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a
proxy statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings, the related requirement of furnishing an annual report
to stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended, may be impaired or eliminated. The Purchaser
intends to seek to cause the Company to apply for termination of registration of
the Shares under the Exchange Act as soon after the completion of the Offer as
the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities," as such
term is defined under the regulations of the Federal Reserve Board, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of the Common Stock. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. In
any event, the Shares will cease to be "margin securities" if registration of
the Common Stock under the Exchange Act is terminated.
14. CONDITIONS OF THE OFFER. Notwithstanding any other term of the Offer or
the Merger Agreement, the Purchaser shall not be required to accept for payment
or pay for, subject to any applicable rules and
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regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), any Shares not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Shares unless (i) there shall have been validly tendered and
not withdrawn prior to the expiration of the Offer a number of Shares which
would represent at least a majority of the outstanding Shares on a fully diluted
basis, (ii) any waiting period under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall have expired or been terminated and (iii) all
necessary filings with the Arizona, Illinois, Indiana, Wisconsin, Missouri and
Michigan Departments of Insurance ("DOI") shall have been completed and, to the
extent required, each of the DOI shall have issued a final order (which order
shall not have been stayed or enjoined) approving, exempting or otherwise
authorizing consummation of the Offer and the Merger and all other transactions
contemplated by the Merger Agreement. Furthermore, notwithstanding any other
term of the Offer or the Merger Agreement, the Purchaser shall not be required
to commence the Offer or accept for payment or to pay for any Shares not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer if at any time on or after the date of the Merger Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exist or shall occur and remain in effect:
(a) there shall be threatened, instituted or pending any action or
proceeding by any Governmental Entity, domestic or foreign, or by any other
person or entity, domestic or foreign, before any court of competent
jurisdiction or Governmental Entity, domestic or foreign, (i) challenging or
seeking to, or which could reasonably be expected to make illegal, impede or
otherwise directly or indirectly restrain or prohibit the Offer or the
Merger or seeking to obtain material damages in connection therewith, (ii)
seeking to prohibit or materially limit the ownership or operation by Parent
or the Purchaser of all or any material portion of the business or assets of
the Company and its subsidiaries taken as a whole or to compel Parent or the
Purchaser to dispose of or hold separately all or any material portion of
the business or assets of Parent and its subsidiaries taken as a whole or
the Company and its subsidiaries taken as a whole, or seeking to impose any
limitation on the ability of Parent or the Purchaser to conduct its business
or own such assets, (iii) seeking to impose limitations on the ability of
Parent or the Purchaser effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares
acquired or owned by Parent or the Purchaser on all matters properly
presented to the Company's stockholders, (iv) seeking to require divestiture
by Parent or the Purchaser of any Shares or (v) otherwise directly or
indirectly relating to the Offer or the Merger and which would reasonably be
expected to have a Material Adverse Effect (as defined below) on the Company
or Parent or the value of the Shares;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended or issued and applicable to (i)
Parent, the Purchaser, the Company or any subsidiary of any of them or (ii)
the Offer or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or to the Merger, which would reasonably be
expected to directly or indirectly, result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change shall have occurred that would reasonably be expected to
have a Material Adverse Effect on the Company;
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(d) any of the representations or warranties made by the Company in the
Merger Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any such representations and warranties that are
not so qualified shall be untrue or incorrect in any material respect, in
each case as of the date of the Merger Agreement and the scheduled
expiration date of the Offer, except (i) for changes specifically permitted
by the Merger Agreement and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date;
(e) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) the Company's Board of Directors or any committee thereof shall have
withdrawn, or shall have modified or amended in a manner adverse to Parent
or the Purchaser, the approval, adoption or recommendation, as the case may
be, of the Offer, the Merger or the Merger Agreement, or approved or
recommended, or announced a neutral position with respect to, any merger,
consolidation, other business combination, sale of material assets, takeover
proposal or other acquisition of Shares other than the Offer and the Merger
or, upon request by Parent, shall fail to reaffirm its approval and
recommendation of the Offer, the Merger or the Merger Agreement;
(g) it shall have been publicly disclosed, or the Purchaser shall have
otherwise learned, that beneficial ownership (determined for the purposes of
this paragraph (g) as set forth in Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of the Shares has been acquired by any person or entity
or group (as defined in Section 13(d)(3) under the Exchange Act);
(h) the average of the closing values of the S&P Index for the twelve
consecutive trading days immediately preceding the scheduled expiration of
the Offer (or any extension thereof) shall reflect a decline in excess of
25% from the closing value of the S&P Index on the close of business on the
trading day next preceding the date of the Merger Agreement;
(i) there shall have occurred a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States; or
(j) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payment.
"Material Adverse Change" or "Material Adverse Effect" when used with
respect to the Company, means (i) any change or effect, either individually or
in the aggregate, that is or may be materially adverse to the business, assets,
liabilities, properties, condition (financial or otherwise), or results of
operations of all or any material part of the Company and its subsidiaries taken
as a whole or (ii) any change or effect, either individually or in the
aggregate, which would reasonably be expected to materially impair the ability
of the Company to perform its obligations under the Merger Agreement.
The foregoing conditions may be waived by the Purchaser, in whole or part,
at any time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
GENERAL. Except as otherwise disclosed herein, neither Parent nor the
Purchaser is aware of (i) any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by the acquisition of Shares by the Purchaser
pursuant to the Offer, Merger or otherwise or (ii) any approval or other action
by any governmental, administrative or regulatory agency or authority, domestic
or foreign, that would be required for the acquisition or ownership of Shares by
the Purchaser as contemplated herein. Should any
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such approval or other action be required, the Purchaser currently contemplates
that it would seek such approval or action. The Purchaser's obligation under the
Offer to accept for payment and pay for Shares is subject to certain conditions.
See Section 14--"Conditions of the Offer". While, except as described in this
Offer to Purchase, the Purchaser does not currently intend to delay the
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
action, if needed, would be obtained or would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company, Parent or the Purchaser or that certain parts of the businesses of the
Company, Parent or the Purchaser might not have to be disposed of in the event
that such approvals were not obtained or any other actions were not taken.
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to the date the interested stockholder became
an interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became an interested stockholder. The Company has represented to
Parent and the Purchaser in the Merger Agreement that the Board of Directors of
the Company has taken all action (including appropriate approvals of the Board
of Directors of the Company) necessary to exempt Parent, its subsidiaries, their
affiliates, the Merger, the Merger Agreement, the Stockholder Agreements and the
transactions contemplated thereby from Section 203 of the DGCL.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of holders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Based on representations made by the Company in the Merger Agreement, the
Purchaser does not believe that any state takeover statutes apply to the Offer.
Neither Parent nor the Purchaser has currently complied with any state takeover
statute or regulation. The Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
the Purchaser may not be obligated to accept for payment any Shares tendered.
See Section 14--"Conditions of the Offer".
APPRAISAL RIGHTS. No appraisal rights are available to Holders in
connection with the Offer.
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However, if the Merger is consummated, a Holder will have certain rights
under Section 262 of the DGCL to dissent and demand appraisal of, and payment in
cash for the fair value of, such Holder's Shares. Those rights, if the statutory
procedures are complied with, could lead to a judicial determination of the fair
value (excluding any value arising from the Merger) required to be paid in cash
to dissenting stockholders for their Shares. Any judicial determination of the
fair value of Shares could be based upon considerations other than or in
addition to the Offer Price and the market value of the Shares, including asset
values and the investment value of the Shares. The value so determined could be
more or less than the Offer Price. Failure to follow the steps required by
Section 262 of the DGCL for perfecting appraisal rights may result in the loss
of those rights.
If a Holder who demands appraisal under Section 262 of the DGCL fails to
perfect, or effectively withdraws or loses, its right to appraisal, as provided
in the DGCL, the Shares of such Holder will be converted into the Merger
Consideration in accordance with the Merger Agreement. A Holder may withdraw his
demand for appraisal by delivering to the Purchaser a written notice withdrawing
such demand for appraisal and accepting the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING HOLDERS DOES NOT PURPORT TO
BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY HOLDERS DESIRING TO
EXERCISE ANY AVAILABLE APPRAISAL RIGHTS.
The preservation and exercise of appraisal rights require strict adherence
to the applicable provisions of the DGCL. The provisions of Section 262 of the
DGCL are complex and technical in nature. Holders desiring to exercise their
appraisal rights may wish to consult counsel, since the failure to comply
strictly with these provisions will result in the loss of their appraisal
rights.
GOING PRIVATE TRANSACTIONS. Rule 13e-3 under the Exchange Act is applicable
to certain "going private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger, unless, among other things, the
Merger is completed more than one year after termination of the Offer. If
applicable, Rule 13e-3 would require, among other things, that certain financial
information regarding the Company and certain information regarding the fairness
of the Merger and the consideration offered to stockholders of the Company
therein be filed with the Commission and disclosed to stockholders of the
Company prior to consummation of the Merger.
REGULATORY APPROVALS.
(A) ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain mergers and
acquisitions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer is
subject to the HSR Act requirements.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
and Report Form under the HSR Act by Parent, which Parent will submit as soon as
reasonably possible. Accordingly, the waiting period under the HSR Act will
expire at 11:59 P.M., New York City time, on the fifteenth calendar day
following filing of the Notification and Report Form by Parent, unless early
termination of the waiting period is granted or Parent receives a request for
additional information or documentary material prior thereto. If either the FTC
or the Antitrust Division were to request additional information or documentary
material from Parent prior to the expiration of the 15-day waiting period, the
waiting period would be extended and would expire at 11:59 P.M., New York City
time, on the tenth calendar day after the date of substantial compliance by
Parent with such request. Thereafter, the waiting period could be extended only
by court order or by consent of Parent. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the purchase of and
payment for Shares pursuant to the Offer will be deferred until 10 days after
the request is substantially complied with unless the waiting period is
terminated sooner by the FTC or the Antitrust Division (and assuming all of the
other Offer
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conditions have been satisfied or waived). See Section 2--"Acceptance for
Payment and Payment for Shares". Only one extension of such waiting period
pursuant to a request for additional information or documentary material is
authorized by the rules promulgated under the HSR Act, except by court order or
by consent. Although the Company is required to file certain information and
documentary material with the Antitrust Division and the FTC in connection with
the Offer, neither the Company's failure to make such filings nor a request to
the Company from the Antitrust Division or the FTC for additional information or
documentary material will extend the waiting period. However, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing these issues and may
agree to delay consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, either the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by the Purchaser or divestiture
of substantial assets of Parent, the Company or any of their respective
subsidiaries. State attorneys general may also bring legal action under the
antitrust laws, and private parties may bring such action under certain
circumstances. Parent and the Purchaser believe that the acquisition of Shares
by the Purchaser will not violate the antitrust laws. Nevertheless, there can be
no assurance that a challenge to the Offer on antitrust grounds will not be made
or, if a challenge is made, what the result will be. See Section 14--"Conditions
of the Offer" for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
(B) INSURANCE REGULATION. The Company is engaged in the business of
insurance through its wholly owned subsidiaries domiciled in Arizona, Illinois,
Missouri and Wisconsin (the "Subsidiary Jurisdictions"). Pursuant to the
insurance laws of each of the Subsidiary Jurisdictions, a person seeking to
acquire voting securities, such as the Shares, in an amount that would result in
such person controlling, directly or indirectly, a domestic insurer must,
together with any person ultimately controlling such person, file a Form A
application with the State Insurance Commissioner seeking the Commissioner's
prior approval of the proposed acquisition of the controlling interest in the
domestic insurer. The insurance laws of each of the Subsidiary Jurisdictions
presume a "controlling interest" triggering the Form A filing requirement to be
reached upon acquisition of ownership of 10% or more of the voting securities of
a domestic insurer or of any person that controls the domestic insurer. By
virtue of the Purchaser's proposed acquisition of all of the Company's Shares,
the Purchaser and Parent are subject to the Form A filing requirement in each of
the Subsidiary Jurisdictions, and, accordingly, have filed or will be filing a
Form A application with the Insurance Commissioner of each Subsidiary
Jurisdiction.
Generally, in each of the Subsidiary Jurisdictions, a Form A filing triggers
a statutory or regulatory requirement governing public hearings on Form A
applications as well as a statutory period within which the Insurance
Commissioner's approval or disapproval of the Form A application must be
rendered. The period within which a public hearing must be held or a decision on
the Form A application rendered may not commence until the Insurance
Commissioner deems the Form A filing to be complete. The Insurance Commissioner
has discretion to require the Purchaser and Parent to furnish additional
information before the Form A filing is deemed complete.
In Arizona, the filing of a Form A application triggers the requirement of a
mandatory public hearing, which must be held within 30 days after the Form A
filing is deemed complete. The Insurance Commissioner's decision on the Form A
application must be rendered within 30 days following conclusion of the hearing.
The Form A application will be approved unless it is determined that: the
transaction is contrary to law; the transaction is inequitable to the
shareholders of the involved domestic insurer; the transaction would
substantially reduce security and service to policyholders of the involved
domestic insurer; after the change of control the domestic insurer would not
satisfy the requirements for the reissuance of a certificate
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of authority for the lines of business for which it is currently licensed; the
transaction would substantially lessen competition in insurance in the state;
the financial condition of any acquiror would jeopardize the financial stability
of the insurer or prejudice the interests of its policyholders; the acquiror's
plans or proposals to liquidate the insurer, sell its assets or merge it with
any person or make any other material change in its business structure or
management, are unfair and unreasonable to policyholders and are not in the
public interest; the competence, experience and integrity of those persons who
would control the operation of the insurer are such that it would not be in the
interest of its policyholders and of the public to permit the acquisition of
control; or the acquisition is likely to be hazardous or prejudicial to the
insurance buying public.
In Illinois, the filing of a Form A application that is deemed by the
Insurance Commissioner to be complete triggers a 60-day period within which a
public hearing may be held, if deemed necessary by the Insurance Commissioner.
If a public hearing is held, the Insurance Commissioner's decision on the Form A
application must be rendered within 30 days following conclusion of the hearing.
The Form A application must be disapproved unless it is determined that: after
the change of control the domestic insurer would satisfy the requirements for
the reissuance of a certificate of authority for the lines of business for which
it is currently licensed; the transaction would not substantially lessen
competition in insurance in the state or tend to create a monopoly; the
financial condition of any acquiror would not jeopardize the financial stability
of the insurer or the interests of its policyholders; the acquiror's plans or
proposals to liquidate the insurer, sell its assets or merge it with any person
or make any other material change in its business structure or management, are
fair and reasonable to policyholders; and the competence, experience and
integrity of those persons who would control the operation of the insurer are
such that it would be in the best interests of its policyholders and of the
public to permit the acquisition of control.
In Missouri, the filing of a Form A application triggers the requirement of
a mandatory public hearing, which must be held within 30 days after the Form A
filing is deemed complete. The Insurance Commissioner's decision on the Form A
application must be rendered within 30 days following conclusion of the hearing.
The Form A application will be approved unless it is determined that: after the
change of control the domestic insurer would not satisfy the requirements for
the reissuance of a certificate of authority for the lines of business for which
it is currently licensed; the transaction would substantially lessen competition
in insurance in the state; the financial condition of any acquiror would
jeopardize the financial stability of the insurer or prejudice the interests of
its policyholders; the acquiror's plans or proposals to liquidate the insurer,
sell its assets or merge it with any person or make any other material change in
its business structure or management, are unfair and unreasonable to
policyholders and are contrary to the public interest; the competence,
experience and integrity of those persons who would control the operation of the
insurer are such that it would to be in the interest of its policyholders and of
the public to permit the acquisition of control; or the acquisition is likely to
be hazardous or prejudicial to the insurance buying public.
In Wisconsin, the filing of a Form A application triggers a public hearing
pursuant to the Insurance Commissioner's plenary regulatory authority, which
will be held within 30 days after the Form A filing is deemed complete. The
Insurance Commissioner's decision on the Form A application generally is
rendered within 30 days following conclusion of the hearing. The Form A
application will be approved if it is determined that: the transaction is not
contrary to law; the transaction is not contrary to the interests of the
insureds of the involved domestic insurer or of the Wisconsin insureds of any
involved nondomestic insurer; and after the change of control the domestic
insurer would be able to satisfy the requirements for the reissuance of a
certificate of authority for the lines of business for which it is currently
licensed.
The Company also transacts business in the States of Indiana and Michigan.
The Purchaser and Parent have determined that no Form A filing is required in
the States of Indiana and Michigan; however, informational filings will be made
in both jurisdictions, and, pursuant to plenary regulatory authority, the
Insurance Commissioner of either or both jurisdictions may request additional
information or documentation from the Purchaser and Parent with respect to the
proposed acquisition of control of the Company.
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16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
Parent and the Purchaser have engaged Salomon Smith Barney as the Dealer
Manager in connection with the Offer and as financial advisor to Parent in
connection with its proposed acquisition of the Company. Salomon Smith Barney
will receive reasonable and customary compensation for their services as Dealer
Manager and financial advisor, as the case may be, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the United States federal securities laws. Salomon Smith
Barney has rendered various investment banking and other advisory services to
Parent and its affiliates and is expected to render such services, for which it
has received and will continue to receive customary compensation from Parent and
its affiliates. In the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade or hold the securities of the Company for their
own account or for the account of customers and, accordingly, may at any time
hold a long or short position in such securities.
The Purchaser and Parent have also retained First Chicago as the Depositary.
The Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the United
States federal securities laws.
In addition, the Purchaser and Parent have retained Morrow & Co., Inc. to
act as the Information Agent in connection with the Offer. The Information Agent
will receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the United States federal securities laws.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
the Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering material to their customers.
17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, the Purchaser will make a good faith effort to comply
with such state statute or seek to have such statute declared inapplicable to
the Offer. If, after such good faith effort, the Purchaser cannot comply with
any such state statute, the Offer will not be made to (and tenders will not be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by the Dealer Manager or one or more registered brokers
or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Parent and the Purchaser have filed with the Commission the Schedule 14D-1,
together with exhibits, pursuant to Section 14(d)(1) of the Exchange Act and
Rule 14d-3 promulgated thereunder, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected at, and copies
may be obtained from, the same places and in the manner set forth in Section
7--"Certain Information Concerning the Company" (except that they will not be
available at the regional offices of the Commission).
FLOSS ACQUISITION CORP.
May 25, 1999
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SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA AND
FLOSS ACQUISITION CORP.
1. BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA.
Set forth below is the name, present principal occupation or employment and
material occupations, positions, offices or employments for the past five years
of each member of the Board of Directors and each executive officer of The
Guardian Life Insurance Company of America ("Guardian"). The principal address
of Guardian and, unless indicated below, the current business address for each
individual listed below is 201 Park Avenue South, New York, New York 10003,
Telephone: 212-598-8000. Each such person is, unless indicated below, a citizen
of the United States.
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
-------------------- --- ------------------------------------------------------------
<S> <C> <C>
Richard Edward Cavanagh...................... 52 Director of Guardian; President and Chief Executive Officer
of the Conference Board since 1995; Executive Dean of
Harvard University 1987-1995.
Kay Knight Clarke............................ 60 Director of Guardian; President of Templeton, Ltd. since
1995; President, Micromarketing Division of Advo-System
1990-1995.
Martin Joseph Cleary......................... 63 Director of Guardian; Vice Chairman of the Richard E. Jacobs
Co. since January 1998; President and Chief Operating
Officer of the Richard E. Jacobs Co. since August 1981.
James Earnest Daley.......................... 58 Director of Guardian; Executive Vice President and Chief
Financial Officer of Electronic Data Systems since 1999;
Co-Chairman and Vice Chairman of Price Waterhouse LLP
1963-1998; Director of USWEB Corporation since 1998;
Director of WDB Insurance, Ltd. 1991-1998.
Philip Howard Dutter......................... 73 Director of Guardian; Self-employed Management Consultant.
Arthur Vincent Ferrara....................... 68 Director of Guardian; Chairman of the Board and Chief
Executive Officer of Guardian 1993-1995.
Leo Richard Futia............................ 79 Director of Guardian.
Edward Konrad Kane........................... 70 Director of Guardian since February 1987; Executive Vice
President of Guardian since February 1998; Senior Vice
President of Guardian February 1997 to February 1998; Senior
Vice President and General Counsel of Guardian February 1989
to February 1997.
Noah Noel Langdale, Jr....................... 79 Director of Guardian; President Emeritus, Georgia State
University since 1989.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
-------------------- --- ------------------------------------------------------------
Fred Beverly Morrison........................ 72 Director of Guardian; Real Estate Consultant since January
1989.
<S> <C> <C>
Joseph Dudley Sargent........................ 62 Director, President and Chief Executive Officer of Guardian
since January, 1996. President of Guardian January 1993 to
January 1996.
John Arthur Somers........................... 55 Director of Guardian; Executive Vice President of Teachers
Insurance & Annuity Association since March 1996; Senior
Vice President of Teachers Insurance & Annuity Association
since December 1981.
Barry Francis Sullivan....................... 68 Director of Guardian; Vice Chairman of Sithe Energies, Inc.
since November 1995; Chief Operating Officer of the New York
City Board of Education November 1994 to October 1995;
President and Chief Executive Officer of NYC Partnership
January 1994 to October 1995.
William Clements Warren...................... 90 Director of Guardian; Partner, Roberts & Holland since 1959.
Peter Lounsbery Hutchings.................... 55 Executive Vice President and Chief Financial Officer of
Guardian since 1987.
Frank Joseph Jones........................... 60 Executive Vice President and Chief Investment Officer of
Guardian since 1991.
John Matthew Smith........................... 63 Executive Vice President, Equity Products of Guardian since
1998; Executive Vice President Equities and Group Pensions
of Guardian 1995-1997; Senior Vice President of Guardian
1968-1994.
Dennis James Manning......................... 52 Executive Vice President of Guardian since January, 1999;
Senior Vice President, Individual Markets and Group Pensions
of Guardian June to December 1998; Senior Vice President,
Chief Marketing Officer of Guardian January 1998 to May
1998; Senior Vice President, Corporate Marketing of Guardian
September 1996 to December 1997; General Agent of Guardian
April 1996 to August 1996; Career Development Manager of
Guardian March 1994 to March 1996.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF FLOSS ACQUISITION CORP.
Set forth below is the name, present principal occupation or employment and
material occupations, positions, offices or employments for the past five years
of each director and executive officer of Floss Acquisition Corp ("Floss"). Each
person identified below has held his position since the formation of Floss on
May 12, 1999. The principal address of Floss is c/o The Guardian Life Insurance
Company of America, 201 Park Avenue South, New York, New York 10003, Telephone
(212) 598-8000. The current business address for each individual listed below is
c/o The Guardian Life Insurance Company of America, 201 Park
I-2
<PAGE>
Avenue South, New York, New York 10003, Telephone: 212-598-8000. Each such
person is, unless indicated below, a citizen of the United States. Directors are
identified by an asterisk.
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
-------------------- --- ------------------------------------------------------------
<S> <C> <C>
Gary B. Lenderink*........................... 48 President of Floss; Senior Vice President, Group Insurance
of Guardian since January 1998; Vice President, Group
Insurance of Guardian June 1997 to December 1997; Vice
President, Group Pensions of Guardian January 1995 to June
1997; Vice President, Group Marketing of Guardian July 1992
to January 1995.
Herschel Reich*.............................. 35 Vice President, Dental Plans of Floss; Vice President, Group
Health Care of Guardian since 1997; Vice President, Group
Dental of Guardian 1996 to 1997; Second Vice President,
Group Dental of Guardian 1994 to 1996.
Joseph A. Caruso*............................ 46 Vice President and Secretary of Floss; Vice President and
Corporate Secretary of Guardian since 1996; Second Vice
President and Corporate Secretary of Guardian January 1995
to March 1996; Corporate Secretary of Guardian 1992 to 1995.
</TABLE>
3. OWNERSHIP OF SHARES BY DIRECTORS AND EXECUTIVE OFFICERS.
To the best knowledge of The Guardian Life Insurance Company of America and
Floss Acquisition Corp., none of the persons listed on this Schedule I
beneficially owns or has a right to acquire directly or indirectly any Shares,
and none of the persons listed on this Schedule I has effected any transactions
in the Shares during the past 60 days.
I-3
<PAGE>
Copies of the Letter of Transmittal, properly completed and duly signed,
will be accepted. The Letter of Transmittal, Certificates and any other required
documents should be sent by each Holder or such Holder's broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of the
addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT COURIER:
FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF
NEW YORK NEW YORK NEW YORK
c/o Securities Transfer and Corporate Actions Corporate Actions
Reporting Services Inc. Suite 4660 Suite 4680
Attn: Corporate Actions P.O. Box 2569 14 Wall Street, 8th Floor
100 William Street, Galleria Jersey City, NJ 07303-2569 New York, NY 10005
New York, NY 10038
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
as set forth below. Additional copies of this Offer to Purchase, the Letter of
Transmittal, or other related tender offer materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
The Information Agent for the Offer is:
[LOGO]
445 Park Avenue
5th Floor
New York, New York 10022
Call Collect (212) 754-8000
Toll Free: (800) 566-9061
Bankers and Brokerage Firms, Please Call: (800) 662-5200
Stockholders, Please Call: (800) 566-9061
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY, INC.
Seven World Trade Center
31st Floor
New York, New York 10048
(800) 228-8264
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
FIRST COMMONWEALTH, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 25, 1999
BY
FLOSS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
--------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 23, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT COURIER:
FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF
NEW YORK NEW YORK NEW YORK
c/o Securities Transfer and Corporate Actions Corporate Actions
Reporting Services Inc. Suite 4660 Suite 4680
Attn: Corporate Actions P.O. Box 2569 14 Wall Street, 8th Floor
100 William Street, Galleria Jersey City, NJ 07303-2569 New York, NY 10005
New York, NY 10038
</TABLE>
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of certificates
representing shares of common stock, par value $.001 per share, including the
associated preferred stock purchase rights (together, the "Shares") (such
holders of Shares, collectively, the "Holders"). If you hold Shares in
book-entry form, you may tender your Shares by book-entry transfer to the
account maintained by the Depositary at The Depository Trust Company ("DTC")
(the "Book-Entry Transfer Facility"), along with an Agent's Message (as defined
in the Offer to Purchase), pursuant to the procedures set forth in Section
3--"Procedures for Tendering Shares" of the Offer to Purchase. Holders who
tender Shares by book-entry transfer are referred to herein as "Book-Entry
Holders" and other Holders are referred to herein as "Certificate Holders."
Holders whose certificates evidencing Shares (the "Certificates") are not
immediately available or who cannot deliver their Certificates and all other
documents required hereby to the Depositary on or prior to the Expiration Date
(as defined in Section 1--"Terms of the Offer" of the Offer to Purchase), or who
cannot comply with the book-entry transfer procedures on a timely basis, may
nevertheless tender their Shares according to the guaranteed delivery procedure
set forth in Section 3--"Procedures for Tendering Shares" of the Offer to
Purchase. See Instruction 2 of this Letter of Transmittal. DELIVERY OF DOCUMENTS
TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARES TENDERED
ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE EVIDENCED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES TENDERED.........
<CAPTION>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Need not be completed by Book-Entry Holders.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any Certificate(s)
delivered to the Depositary are being tendered. See Instruction 4.
<CAPTION>
- ------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) _________________________________________
Window Ticket Number (if any) ___________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ___________________________
DTC Account Number (if delivered by Book-Entry Transfer) ________________
Transaction Code Number _________________________________________________
/ / CHECK HERE IF TENDER IS BEING MADE IN RESPECT OF LOST OR MUTILATED
SECURITES. SEE INSTRUCTION 9.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Floss Acquisition Corp. (the "Purchaser"),
a Delaware corporation and a wholly owned subsidiary of The Guardian Life
Insurance Company of America, a New York corporation ("Parent"), the
above-described shares of Common Stock, par value $.001 per share, including the
associated preferred stock purchase rights (together, the "Shares"), of First
Commonwealth, Inc., a Delaware corporation (the "Company"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated May 25, 1999
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase as they may be
amended from time to time, constitute the "Offer"). The undersigned understands
that the Purchaser reserves the right to assign to an affiliate of Parent the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but the undersigned further understands that any such assignment will not
relieve the Purchaser of its obligations under the Offer and that any such
assignment will in no way prejudice the rights of tendering Holders to receive
payment for the Shares validly tendered and accepted for payment pursuant to the
Offer.
Subject to, and effective upon acceptance for payment of, and payment for,
the Shares tendered herewith in accordance with the terms of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Purchaser, all right, title and interest
in and to all of the Shares that are being tendered hereby and any and all
dividends, distributions, rights, or other securities issued or issuable in
respect of such Shares on or after May 19, 1999 (collectively, "Distributions"),
and irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all
Distributions with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (a) transfer
ownership of such Shares and all Distributions, together with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchaser,
(b) present such Shares and all Distributions for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares and all Distributions, all in accordance
with the terms and subject to the conditions of the Offer as set forth in the
Offer to Purchase.
The undersigned hereby irrevocably appoints each designee of the Purchaser
as such attorney-in-fact and proxy of the undersigned, with full power of
substitution, to vote in such manner as each such attorney-in-fact and proxy (or
any substitute thereof) shall deem proper in its sole discretion, and to
otherwise act (including pursuant to written consent) to the full extent of the
undersigned's rights with respect to the Shares and all Distributions tendered
hereby and accepted for payment by the Purchaser prior to the time of such vote
or action. All such proxies shall be considered coupled with an interest in the
tendered Shares and shall be irrevocable and are granted in consideration of,
and are effective upon, the acceptance for payment of such Shares and all
Distributions by the Purchaser in accordance with the terms of the Offer. Such
acceptance for payment by the Purchaser shall revoke, without further action,
any other proxy or power of attorney granted by the undersigned at any time with
respect to such Shares and all Distributions and no subsequent proxies or powers
of attorney will be given (or, if given, will not be deemed effective) with
respect thereto by the undersigned. The designees of the Purchaser will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights as they in their sole discretion may deem
proper at any annual, special, adjourned or postponed meeting of the Company's
stockholders, by written consent or otherwise, and the Purchaser reserves the
right to require that, in order for Shares or any Distributions to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise all rights (including,
without limitation, all voting rights and rights of conversion) with respect to
such Shares and receive all dividends and distributions.
4
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares and all
Distributions tendered hereby and that, when the same are accepted for payment
by the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment, and transfer of the Shares and all Distributions
tendered hereby. In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of the Purchaser any and all Distributions in
respect of the Shares tendered hereby, accompanied by appropriate documentation
of transfer and, pending such remittance or appropriate assurance thereof, the
Purchaser shall be entitled to all rights and privileges as owner of any such
Distributions and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Subject to the withdrawal rights set forth in Section 4--"Withdrawal Rights" of
the Offer to Purchase, the tender of the Shares and related Distributions hereby
made is irrevocable.
The undersigned understands that tenders of the Shares pursuant to any of
the procedures described in Section 3--"Procedures for Tendering Shares" of the
Offer to Purchase and in the instructions hereto will constitute the
undersigned's acceptance of the terms and conditions of the Offer. The
Purchaser's acceptance for payment of such Shares will constitute a binding
agreement between the undersigned and the Purchaser upon the terms and subject
to the conditions set forth in the Offer. The undersigned recognizes that under
certain circumstances set forth in the Offer to Purchase, the Purchaser may not
be required to accept for payment any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Certificates not
tendered or not accepted for payment in the name(s) of the registered holder(s)
appearing under "Description of Shares Tendered." Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the check for the
purchase price and/or return any Certificates not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price and/or
issue any Certificates not so tendered or accepted for payment in the name of,
and deliver said check and/or return such certificates to, the person or persons
so indicated. The undersigned recognizes that the Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name of the registered holder thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
5
<PAGE>
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificate(s) not tendered or not purchased and
the check for the purchase price of Shares purchased are to be issued in the
name of someone other than the undersigned.
Issue check and Certificate(s) to:
Name(s): ___________________________________________________________________
____________________________________________________________________________
PLEASE TYPE OR PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________________ *
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREWITH)
__________________________________________________________________________
* SIGNATURE GUARANTEE REQUIRED
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Certificate(s) not tendered or not purchased and
the check for the purchase price of Shares purchased are to be sent to
someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail check and Certificate(s) to:
Name(s): ___________________________________________________________________
____________________________________________________________________________
PLEASE TYPE OR PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
____________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREWITH)
- -----------------------------------------------------
6
<PAGE>
IMPORTANT
ALL HOLDER(S) MUST SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
Signature(s) of Holder(s): _____________________________________________________
Date: ____________________________________________, 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted with
this Letter of Transmittal. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or other
person acting in a fiduciary or representative capacity, please provide the
following information and see Instruction 5.)
Name(s): _______________________________________________________________________
(Please Print)
Capacity (Full Title): _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
- ----------------------------------------
(Daytime Area Code and Telephone No.)
- ----------------------------------------
(Tax Identification and Social Security No.)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE BELOW.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Security Transfer Agents Medallion
Program, The New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on
this Letter of Transmittal need not be guaranteed (a) if this Letter of
Transmittal is signed by the registered holder(s) of the Shares tendered
herewith and such registered holder(s) have not completed the box entitled
either "Special Payment Instructions" or "Special Delivery Instructions" on this
Letter of Transmittal or (b) if such Shares are tendered for the account of an
Eligible Institution. See Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be used if Certificates are to
be forwarded herewith. Certificates evidencing all physically tendered Shares
along with this Letter of Transmittal or a copy thereof, properly completed and
duly executed with any required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein on or prior to the Expiration Date (as
defined in Section 1--"Terms of the Offer" of the Offer to Purchase). Shares
held through DTC must be tendered to the Depositary by means of delivery of an
Agent's Message (as more fully described in the Offer to Purchase).
Holders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary on
or prior to the Expiration Date or who cannot complete the procedures for
book-entry transfer on a timely basis may nevertheless tender their Shares by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedure set forth in Section 3--"Procedures for
Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form provided by the Purchaser, must be received by the Depositary on or prior
to the Expiration Date; and (iii) Certificates, as well as a Letter of
Transmittal, properly completed and duly executed with any required signature
guarantees, and all other documents required by this Letter of Transmittal must
be received by the Depositary within three trading days on Nasdaq Stock Market's
National Market after the date of execution of such Notice of Guaranteed
Delivery.
If Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal (or copy thereof)
must accompany each such delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARES, CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING HOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
SUCH DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Holders, by execution of this
Letter of Transmittal or a copy hereof, waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided under "Description of Shares
Tendered" is inadequate, the Certificate numbers and/or the number of Shares
should be listed on a separate schedule and attached hereto.
8
<PAGE>
4. PARTIAL TENDERS (APPLICABLE TO HOLDERS OF SHARE CERTIFICATES ONLY). If
fewer than all the Shares evidenced by any Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such cases, new Certificate(s)
evidencing the remainder of the Shares that were evidenced by Certificate(s)
delivered to the Depositary will be sent to the person signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holders of the Shares
tendered hereby, the signatures must correspond with the names as written on the
face of the Certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of the Shares.
If this Letter of Transmittal or any Certificate or stock power is signed by
a trustee, executor, administrator, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and evidence satisfactory to the Depositary and
the Purchaser of such person's authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares transmitted hereby, no endorsements of certificates or separate stock
powers are required unless payment is to be made to, or Certificates evidencing
the Shares not tendered or purchased are to be issued in the name of, a person
other than the registered holder(s). Signatures on such Certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the Shares tendered hereby, the Certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
such Certificate(s). Signatures on such Certificates or stock powers must be
guaranteed by an Eligible Institution.
6. TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the
Purchaser will pay or cause to be paid any transfer taxes with respect to the
transfer and sale of purchased Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price of any Shares purchased is to be made
to or, in the circumstances permitted hereby, if Certificates for the Shares not
tendered or purchased are to be registered in the name of, any person other than
the registered holder, or if tendered Certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any transfer taxes (whether imposed on the registered holder or such
person) payable on account of the transfer to such person will be deducted from
the purchase price if satisfactory evidence of the payment of such taxes, or
exemption therefrom, is not submitted.
9
<PAGE>
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price is to be issued in the name of, and/or Certificates for the Shares not
tendered or not accepted for payment are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check and/or such
Shares are to be mailed to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from, the Information Agent or the Dealer
Manager at their respective addresses set forth on the back cover of the Offer
to Purchase or from your broker, dealer, commercial bank or trust company.
9. LOST OR DESTROYED COMMON STOCK CERTIFICATES. If any Certificates have
been lost or destroyed, the Holder should promptly notify the Company's transfer
agent, First Chicago Trust Company of New York. The Holder will then be
instructed as to the procedure to be followed in order to replace the relevant
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Certificates have
been followed.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a tendering Holder may be
subject to backup withholding tax at a rate of 31% with respect to payments by
the Depositary pursuant to the Offer unless such Holder (i) is a corporation or
other "exempt recipient" and, if required, establishes its exemption from backup
withholding, (ii) provides its correct taxpayer identification number ("TIN"),
certifies that it is not currently subject to backup withholding and otherwise
complies with applicable requirements of the backup withholding rules, or (iii)
certifies as to its non-United States status. Completion of a Substitute Form
W-9, in the case of a U.S. Holder, provided in this Letter of Transmittal should
be used for this purpose. Failure to provide such Holder's TIN on the Substitute
Form W-9, if applicable, may subject the tendering Holder (or other payee) to a
$50 penalty imposed by the Internal Revenue Service ("IRS"). More serious
penalties may be imposed for providing false information which, if willfully
done, may result in fines and/or imprisonment. The box in part 3 of the
Substitute Form W-9 may be checked if the tendering Holder (or other payee) is
required to submit a Substitute Form W-9 and has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is so checked and the Depositary is not provided with a TIN by the
time of payment, the Depositary will withhold 31% on all such payments of the
Offer Price until a TIN is provided to the Depositary. In order for a foreign
Holder to qualify as an exempt recipient, that Holder should submit an IRS Form
W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting to
that Holder's exempt status. Such forms can be obtained from the Depositary.
Failure to provide the information on the form may subject tendering Holders to
31% United States federal income tax withholding on the payment of the purchase
price of cash pursuant to the Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A COPY HEREOF TOGETHER WITH
CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
11
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<C> <S> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- ----------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1-PLEASE PROVIDE YOUR Social Security Number
FORM W-9 TIN IN THE BOX AT RIGHT AND or
CERTIFY BY SIGNING AND DATING Employer Identification Number:
BELOW
--------------------------------------------------------------------------------
DEPARTMENT OF THE PART 2-If you are exempt from backup PART 3-If you are awaiting TIN, check
TREASURY withholding, please check the box: / / box: / /
INTERNAL REVENUE SERVICE
--------------------------------------------------------------------------------
PAYER'S REQUEST FOR PART 4-Certification-Under penalties of perjury, I certify that:
TAXPAYER (1) The number shown on this form is my correct Taxpayer Identification Number
IDENTIFICATION NUMBER (or I am waiting for a number to be issued to me), AND
("TIN") AND (2) I am not subject to backup withholding because (i) I am exempt from backup
CERTIFICATION withholding, or (ii) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (iii) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS-You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
under-reporting interest or dividends on your tax return.
--------------------------------------------------------------------------------
SIGNATURE DATE
NAME (Please Print)
ADDRESS
CITY, STATE AND ZIP CODE
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable cash payments made to me thereafter will be withheld until I
provide a taxpayer identification number.
Signature: _________________________________________ Date:___________________
12
<PAGE>
The Information Agent for the Offer is:
[LOGO]
445 Park Avenue
New York, New York 10022
Call Collect: (212) 754-8000
Toll Free: (800) 566-9061
Banks and Brokerage Firms, please call:
(800) 662-5200
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY INC.
Seven World Trade Center
31st Floor
New York, New York 10048
(800) 228-8264
13
<PAGE>
7 WORLD TRADE CENTER
[LOGO]
31ST FLOOR
NEW YORK, NEW YORK
10048
(212) 783-7000
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
FIRST COMMONWEALTH, INC.
AT
$25.00 NET PER SHARE OF COMMON STOCK
BY
FLOSS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
---------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 23, 1999 UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
May 25, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Floss Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of The Guardian Life Insurance
Company of America, a New York corporation ("Parent"), to act as Dealer Manager
in connection with the Purchaser's offer to purchase all of the issued and
outstanding shares of Common Stock, par value $.001 per share, including the
associated preferred stock purchase rights (together, the "Shares"), of First
Commonwealth, Inc., a Delaware corporation (the "Company"), at a price of $25.00
per Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which, as they may be amended
and supplemented from time to time, together constitute the "Offer"), copies of
which are enclosed herewith. Please furnish copies of the enclosed materials to
those of your clients for whose accounts you hold Shares in your name or in the
name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated May 25, 1999.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Copies of the Letter of Transmittal may be used
to tender Shares.
3. A letter to stockholders of the Company from Christopher C.
Multhauf, Chairman of the Board and Chief Executive Officer of the Company,
and David W. Mulligan, President and Chief Operating Officer of the Company,
together with a Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company and mailed
to stockholders of the Company.
<PAGE>
4. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if the procedures for tendering Shares set forth in the Offer to
Purchase cannot be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, JUNE 23, 1999, UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The Offer Price is $25.00 per Share, net to the seller in cash,
without interest thereon, as set forth in the Introduction to the Offer to
Purchase.
2. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer a number of Shares which represent at least a majority of the
outstanding Shares on a fully diluted basis, (ii) the satisfaction of the
Insurance Regulatory Condition (as defined in the Offer to Purchase) and
(iii) the satisfaction of the HSR Condition (as defined in the Offer to
Purchase). The Offer is also conditioned upon the satisfaction of certain
other terms and conditions described in the Offer to Purchase. See the
Introduction, Section 1--"Terms of the Offer" and Section 14--"Conditions of
the Offer" of the Offer to Purchase.
3. The Offer is being made for all of the issued and outstanding
Shares.
4. Tendering holders whose Shares are registered in their own name and
who tender directly to First Chicago Trust Company of New York, as
Depositary (the "Depositary") will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. However, federal income tax backup withholding at a
rate of 31% may be required, unless an exemption is available or unless the
required tax identification information is provided. See the "Important Tax
Information" section contained in the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, June 23, 1999, unless the Offer is extended.
6. The Board of Directors of the Company has unanimously (i) determined
that the Merger is advisable and that the terms of the Offer and the Merger
(as defined below) are fair to and in the best interests of the Company and
the holders of Shares ("Holders") (ii) approved the Offer, the Merger and
the Merger Agreement (as defined below) and (iii) recommended that the
Holders accept the Offer and (if required by applicable law or otherwise)
approve the Merger Agreement and the Merger.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of May 19, 1999 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that, promptly upon
consummation of the Offer, Parent will cause the Purchaser to be merged with
and into the Company (the "Merger").
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of
2
<PAGE>
(i) certificates evidencing such Shares (the "Certificates"), along with a
properly completed and duly executed Letter of Transmittal (or a copy
thereof), including any required signature guarantees, or (ii) if such
Shares are held in book-entry form, timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's
account at The Depository Trust Company along with an Agent's Message (as
defined in the Offer to Purchase), pursuant to the procedures set forth in
Section 3--"Procedures for Tendering Shares" of the Offer to Purchase and
(iii) any other documents required by the Letter of Transmittal.
Accordingly, payment may not be made to all tendering holders at the same
time depending upon when the Certificates are actually received by the
Depositary.
In order to take advantage of the Offer (i) a duly executed and properly
completed Letter of Transmittal (and any required signature guarantee or other
required documents) or an Agent's Message in the case of Shares held in
book-entry form should be sent to the Depositary and (ii) Certificates
representing the tendered Shares or a timely Book-Entry Confirmation should be
delivered to the Depositary in accordance with the instructions set forth in the
Letter of Transmittal and the Offer to Purchase.
If a Holder wishes to tender, but it is impracticable for such Holder to
forward such Holder's Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section
3--"Procedures for Tendering Shares" of the Offer to Purchase.
Neither Parent nor the Purchaser will pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of Shares pursuant to the
Offer (other than the Dealer Manager, the Depositary and the Information Agent
as described in the Offer to Purchase). The Purchaser will, however, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Purchaser
will pay or cause to be paid any transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Salomon Smith Barney Inc., the Dealer Manager for the Offer, at 7 World Trade
Center, 31st Floor, New York, New York 10048, telephone number (800) 228-8264 or
to Morrow & Co., Inc., the Information Agent for the Offer, at 445 Park Avenue,
5th Floor, New York, New York 10022, telephone number (212) 754-8000 (call
collect) or (800) 662-5200.
Requests for copies of the enclosed materials may also be directed to the
Dealer Manager or to the Information Agent at the above addresses and telephone
numbers.
Very truly yours,
SALOMON SMITH BARNEY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, PARENT, THE COMPANY, THE
DEALER MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS),
OF
FIRST COMMONWEALTH, INC.
AT
$25.00 NET PER SHARE OF COMMON STOCK,
BY
FLOSS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
-----------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, JUNE 23, 1999 UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
May 25, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated May 25,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
they may be amended and supplemented from time to time, together constitute the
"Offer") relating to the offer by Floss Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of The Guardian Life
Insurance Company of America ("Parent"), a New York corporation, to purchase all
of the issued and outstanding shares of Common Stock, par value $.001 per share,
including the associated preferred stock purchase rights (together, the
"Shares"), of First Commonwealth, Inc., a Delaware corporation (the "Company"),
at a price of $25.00 per Share, net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US
FOR YOUR ACCOUNT.
Accordingly, we request instruction as to whether you wish to have us tender
on your behalf any or all of the Shares held by us for your account pursuant to
the terms and conditions set forth in the Offer.
Please note the following:
1. The Offer Price is $25.00 per Share, net to the seller in cash,
without interest thereon, as set forth in the Introduction to the Offer to
Purchase.
2. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer a number of Shares which represent at least a majority of the
outstanding Shares on a fully diluted basis, (ii) the satisfaction of the
Insurance Regulatory Condition (as defined in the Offer to Purchase) and
(iii) the satisfaction of the HSR Condition (as defined in the Offer to
Purchase). The Offer is also conditioned upon the satisfaction of certain
other terms and conditions described in the Offer to Purchase. See the
Introduction, Section 1--"Terms of the Offer" and Section 14--"Conditions of
the Offer" of the Offer to Purchase.
3. The Offer is being made for all of the issued and outstanding
Shares.
<PAGE>
4. Tendering holders whose Shares are registered in their own name and
who tender directly to First Chicago Trust Company of New York, as
Depositary, (the "Depositary") will not be obligated to pay brokerage fees,
commissions or, except as otherwise set forth in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. However, United States federal backup withholding tax
at a rate equal to 31% may be withheld, unless an exemption is available or
unless the required tax identification information is provided. See the
"Important Tax Information" section contained in the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 MIDNIGHT, NEW
YORK CITY TIME, on WEDNESDAY, JUNE 23, 1999, unless the Offer is extended.
6. The Board of Directors of the Company has unanimously (i) determined
that the Merger (as defined herein) is advisable and that the terms of the
Offer and the Merger are fair to and in the best interests of the Company
and the holders of Shares (the "Holders"), (ii) approved the Offer, the
Merger and the Merger Agreement (as defined herein) and (iii) recommended
that the Holders accept the Offer and (if required by applicable law or
otherwise) approve the Merger Agreement and the Merger.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of May 19, 1999 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that, promptly upon
consummation of the Offer, Parent will cause the Purchaser to be merged with
and into the Company (the "Merger").
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) certificates evidencing such
Shares (the "Certificates"), along with a properly completed and duly
executed Letter of Transmittal (or a copy thereof), including any required
signature guarantees, or (ii) if such Shares are held in book-entry form,
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, along with an Agent's
Message (as defined in the Offer to Purchase) pursuant to the procedures set
forth in Section 3-- "Procedures for Tendering Shares" of the Offer to
Purchase, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering holders
at the same time depending upon when the Certificates are actually received
by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account please so instruct us by completing, executing and returning to us the
instruction form set forth herein. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified below. An envelope
to return your instructions to us is enclosed. YOUR INSTRUCTIONS SHOULD BE
FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF
PRIOR TO THE EXPIRATION DATE.
The Purchaser is not aware of any state in the United States where the
making of the Offer is prohibited by administrative or judicial action pursuant
to any valid state statute. If the Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such state
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the Holders in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Purchaser by
Salomon Smith Barney Inc. or one or more registered brokers or dealers which are
licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
FIRST COMMONWEALTH, INC.
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase, dated May 25, 1999, and the related Letter of Transmittal (which, as
they may be amended and supplemented from time to time, together constitute the
"Offer") in connection with the offer by Floss Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of The Guardian Life
Insurance Company of America, a New York corporation, to purchase all of the
issued and outstanding shares of Common Stock, par value $.001 per share,
including the associated preferred stock purchase rights (together, the
"Shares"), of First Commonwealth, Inc., a Delaware corporation, at a price of
$25.00 per Share, net to the seller in cash, without interest thereon.
The undersigned hereby instructs you to tender to the Purchaser the number
of Shares indicated below (or if no number is indicated below, all Shares) which
are held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Offer.
Number of Shares to be Tendered*: _______________________
Date: ___________________________________________________
SIGN HERE
Signature(s): ____________________________________________________
Print Name(s): ___________________________________________________
__________________________________________________________________
Print Address(es): _______________________________________________
__________________________________________________________________
Area Code and Telephone Number(s): _______________________________
Taxpayer Identification or Social Security Number(s): ____________
This form must be returned to the brokerage firm maintaining your account.
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<PAGE>
GUARDIAN NEWS
FOR IMMEDIATE RELEASE
WEDNESDAY, MAY 19, 1999
CONTACT: MIKE AZZI AT THE GUARDIAN CONTACT: DAVID MULLIGAN AT
212.598.1523 FIRST COMMONWEALTH
[email protected] 312.832.8611
[email protected]
GUARDIAN AGREES TO ACQUIRE FIRST COMMONWEALTH, INC.
PURCHASE OF MIDWESTERN DENTAL CARRIER TO MAKE GUARDIAN LEADING DENTAL HMO
PROVIDER
NEW YORK, NY - The Guardian Life Insurance Company of America and First
Commonwealth, Inc. (NASDAQ/FCWI) have entered into a definitive merger agreement
under which Guardian has agreed to acquire all of the outstanding shares of
First commonwealth's capital stock for $25.00 per share in cash, announced Gary
Lenderink, Senior Vice President, Group Insurance for Guardian and Christopher
Multhauf, Chairman and Chief Executive Officer of First Commonwealth. Once
completed, the acquisition is expected to accelerate Guardian's plans to extend
its managed dental HMO business nationally.
The agreement, which was unanimously approved by First Commonwealth's Board of
Directors, provides that Guardian's wholly-owned subsidiary, Floss acquisition
Corp., will launch a tender offer for all of First Commonwealth's outstanding
capital stock. Concurrently with the execution and delivery of the merger
agreement, Christopher Multhauf and David Mulligan, the President and Chief
Operating Officer of First Commonwealth, have entered into an agreement to
tender all their shares of common stock into Floss Acquisition Corp.'s tender
offer. Messrs. Multhauf and Mulligan own in the aggregate approximately 18% of
First Commonwealth's outstanding shares.
"This merger is an ideal fit for Guardian," said Lenderink. "Our group insurance
business strategy is to broaden the employee benefits portfolio we offer to
small and midsize employers. The business combination allows us to broaden our
dental benefit product line as well as to strengthen our presence in the
Midwest. First Commonwealth is a highly-regarded firm that shares our emphasis
on first-quality service. We look forward to working with First Commonwealth's
management team, their dedicated employees and especially their network of
dentists."
Christopher Multhauf, Chairman of First Commonwealth said, "We are thrilled to
be associated with Guardian, a well respected brand in the industry, and look
forward to contributing to Guardian's continued success in the dental care
arena." David Mulligan, First Commonwealth's President said, "as a Guardian
subsidiary, we and our employees are excited about the
<PAGE>
GUARDIAN AGREES TO ACQUIRE FIRST COMMONWEALTH, INC.
opportunities to not continue to serve our existing customers in Chicago,
Milwaukee, St. Louis and Detroit, but to speed up our expansion into other
markets;"
Both companies are leaders in their respective industries. Guardian, ranked 202
on THE FORTUNE 500 with $27 billion in consolidated assets, offer a full range
of financial products and serviced in addition to dental benefits, including
individual and group life and disability income insurance health care, pensions,
401 (k) plans and asset-accumulation products. First Commonwealth has been
listed as one of the top 200 small businesses in the United States by FORBES
magazine, and is the Midwest's largest dental managed care organization.
Guardian, headquartered in New York City, is one of the nation's largest
financial services groups with 3.2 million covered employees and dependents
and in excess of $650 million in dental revenues in 1998. Guardian's current
product offerings include both dental indemnity and dental PPO services
worldwide. Its dental PPO network contracts with over 26,000 dentists in 40
states; dental HMO capabilities are available in California and Florida. The
acquisition would permit Guardian to expand its dental products portfolio to
include dental HMOs in five additional states and, with its expansion plans,
make it one of the few carriers who will offer employers a full range of
dental care options nationwide.
Based in Chicago, First Commonwealth is a leading dental managed care carrier,
operating in Illinois, Missouri, Michigan, Wisconsin and Indiana. In additional
to dental managed care plans.
One of the nation's oldest and largest mutual insurers, Guardian employs over
5,000 people nationwide in its New York corporate office and four regional
offices in Bethlehem, PA, Appleton WI, Spokane, WA and Norwell, MA. More than
2,000 Guardian agents distribute Guardian products nationwide. More information
on Guardian can be obtained on the World Wide Web at: WWW.THEGUARDIAN.COM.
Salomon Smith Barney acted as financial advisor to Guardian and William Blair
acted as First Commonwealth's financial advisor.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated May 25,
1999, and the related Letter of Transmittal and any amendments or supplements
thereto and is being made to all holders of Shares. The Purchaser is not aware
of any state or jurisdiction where the making of the Offer or the acceptance of
Shares is prohibited by any applicable law. If the Purchaser becomes aware of
any state or jurisdiction where the making of the Offer or the acceptance of
Shares is not in compliance with any applicable law, the Purchaser will make a
good faith effort to comply with such law. If, after such good faith effort, the
Purchaser cannot comply with such law, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state or
jurisdiction. In any state or jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Purchaser by Salomon Smith
Barney Inc. or one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
First Commonwealth, Inc.
at
$25.00 Net Per Share
by
Floss Acquisition Corp.
A Wholly Owned Subsidiary of
The Guardian Life Insurance
Company of America
Floss Acquisition Corp., a Delaware corporation (the "Purchaser"), and a wholly
owned subsidiary of The Guardian Life Insurance Company of America, a New York
corporation ("Parent"), is offering to purchase all of the issued and
outstanding shares of common stock, par value $.001 per share, including the
associated preferred stock purchase rights (together, the "Shares"), of First
Commonwealth, Inc., a Delaware corporation (the "Company"), at a price of $25.00
per Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase dated May 25, 1999 (the "Offer to Purchase"), and in the related Letter
of Transmittal (which, as they may be amended and supplemented from time to
time, together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JUNE 23, 1999, UNLESS THE OFFER IS EXTENDED.
<PAGE>
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of Shares which represent at least a majority of the outstanding Shares
on a fully diluted basis (the "Minimum Condition"), (ii) the receipt of all
insurance regulatory approvals necessary for the acquisition of control of the
Company and its subsidiaries and (iii) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). The Offer is also conditioned upon the
satisfaction of certain other terms and conditions described in Section 14 of
the Offer to Purchase.
The Company has informed the Purchaser that, as of May 18, 1999, there were
3,730,135 Shares issued and outstanding and stock options issued under the
Company's stock option plans covering 305,240 Shares (of which stock options
covering 303,240 Shares have exercise prices of less than $25.00 per Share). As
a result, as of such date, the Minimum Condition would be satisfied if at least
2,017,688 Shares are validly tendered and not properly withdrawn prior to the
expiration of the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
May 19, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the
Company. The Merger Agreement provides that, promptly upon consummation of the
Offer, Parent will cause the Purchaser to be merged with and into the Company
(the "Merger"). At the effective time of the Merger (the "Effective Time"),
except for (a) Shares which are held by any wholly owned subsidiary of the
Company or in the treasury of the Company, or which are held by Parent or any
subsidiary of Parent (including the Purchaser), all of which shall cease to be
outstanding and shall be canceled and retired and none of which shall receive
any payment with respect thereto and (b) Shares held by holders of common stock
(the "Holders") exercising their rights to dissent in accordance with Delaware
law, each Share issued and outstanding immediately prior to the Effective Time
and all rights in respect thereof shall, by virtue of the Merger and without any
action on the part of the Holder, forthwith cease to exist and be converted into
and represent the right to receive an amount in cash equal to $25.00, without
interest. The Merger Agreement is more fully described in Section 11 of the
Offer to Purchase. Under Delaware law, if the Purchaser acquires, pursuant to
the Offer or otherwise, at least 90% of the issued and outstanding Shares, the
Purchaser will be able to approve and effect the Merger without a vote of the
Company's stockholders. If, however, the Purchaser does not acquire at least 90%
of the issued and outstanding Shares, pursuant to the Offer or otherwise, a vote
of the Company's stockholders to effect the Merger is required under Delaware
law and a longer period of time will be required to effect the Merger as
described in Section 11 of the Offer to Purchase.
Parent has also entered into Stockholder Agreements, dated as of May 19, 1999,
with each of Christopher C. Multhauf, the Chairman of the Board of Directors and
Chief Executive Officer of the Company and the record and beneficial owner of
329,788 Shares (or approximately 8.2% of the Shares outstanding on a fully
diluted basis), and David W. Mulligan, the President, Secretary and Chief
Operating Officer and the record and
<PAGE>
beneficial owner of 367,287 Shares (or approximately 9.1% of the Shares
outstanding on a fully diluted basis). Each of Messrs. Multhauf and Mulligan has
agreed (i) to irrevocably tender pursuant to the Offer (and not withdraw) all of
his Shares and (ii) with respect to certain questions put to Holders for a vote,
to vote his Shares in accordance with the terms and conditions of the
Stockholders Agreement to which he is a party. The Board of Directors of the
Company has unanimously (i) determined that the Merger is advisable and that the
terms of the Offer and the Merger are fair to and in the best interests of the
Company and the Holders, (ii) approved the Offer, the Merger and the Merger
Agreement and (iii) recommended that the Holders accept the Offer and (if
required by applicable law or otherwise) approve the Merger Agreement and the
Merger. Tendering Holders whose Shares are registered in their own name and who
tender directly to the Depositary will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Upon the
terms and subject to the conditions of the Offer, payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering Holders for the
purpose of receiving payments from the Purchaser and transmitting payments to
such tendering Holders whose Shares have been accepted for payment. In all
cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) the certificates evidencing such
Shares or timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in Section
2 of the Offer to Purchase), pursuant to the procedures set forth in Section 3
of the Offer to Purchase, (ii) the Letter of Transmittal (or a copy thereof),
properly completed and duly executed with any required signature guarantees, or
an Agent's Message (as defined in Section 2 of the Offer to Purchase) in
connection with a book-entry transfer and (iii) any other documents required to
be included with the Letter of Transmittal under the terms and subject to the
conditions of the Letter of Transmittal and the Offer to Purchase. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser, regardless of any delay in making such payment or extension of the
Expiration Date.
The term "Expiration Date" shall mean 12:00 midnight, New York City time, on
Wednesday, June 23, 1999, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire. Subject to the terms of the Merger
Agreement and to the applicable rules and regulations of the Securities and
Exchange Commission (the "Commission") and to applicable law, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including upon the occurrence of any of the events specified in Section 14
of the Offer to
<PAGE>
Purchase, by giving notice of such extension to the Depositary and by making a
public announcement thereof.
Subject to the applicable rules and regulations of the Commission and to
applicable law, the Purchaser also expressly reserves the right, in its sole
discretion (subject to the terms of the Merger Agreement), at any time and from
time to time (i) to delay acceptance for payment of, or, regardless of whether
such Shares were theretofore accepted for payment, payment for, any Shares (a)
if any applicable waiting period (or extension thereof) under the HSR Act has
not expired or been terminated, (b) if any applicable waiting period under the
Applicable Insurance Regulations (as defined in the Offer to Purchase) has not
expired or been terminated or (c) in order to comply in whole or in part with
any other applicable law, (ii) to terminate the Offer and not accept for payment
any Shares if any of the conditions referred to in Section 14 of the Offer to
Purchase are not satisfied or any of the events specified in Section 14 of the
Offer to Purchase have occurred and (iii) subject to the terms of the Merger
Agreement, to waive any condition or otherwise amend the Offer in any respect by
giving oral or written notice of such delay, termination, waiver or amendment to
the Depositary and by making a public announcement thereof, provided however,
that, subject to the terms of the Merger Agreement, without the prior written
consent of the Company, the Purchaser will not (i) waive the Minimum Condition,
(ii) reduce the number of Shares subject to the Offer, (iii) reduce the Offer
Price, (iv) extend the Offer if all of the conditions set forth in Section 14 of
the Offer to Purchase are satisfied or waived, (v) change the form of
consideration payable in the Offer, or (vi) amend, add or waive any term or
condition of the Offer in any manner that would adversely affect the Company or
its stockholders in any material respect.
During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the right of a tendering
Holder to withdraw such Holder's Shares. Any such extension, delay, termination,
waiver or amendment will be followed, as promptly as practicable, by a public
announcement thereof by no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require
that material changes be promptly disseminated to holders in a manner reasonably
designed to inform them of such changes) and without limiting the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
will have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to the Dow Jones News
Service or as otherwise may be required by applicable law.
Except as otherwise provided below, tenders of Shares made pursuant to the Offer
are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date and, unless theretofore accepted for payment
by the Purchaser pursuant to the Offer, may also be withdrawn at any time after
July 23, 1999, or at such later time as may apply if the Offer is extended. For
a withdrawal to be effective, a written, telegraphic or facsimile notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth below. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder of the Shares, if different
<PAGE>
from that of the person who tendered such Shares. If certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase), unless such
Shares have been tendered for the account of an Eligible Institution. Shares
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 of the Offer to Purchase may be withdrawn only by means of the
withdrawal procedures made available by the Book-Entry Transfer Facility, must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and must otherwise comply with the
Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded without the Purchaser's
consent, and any Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, which determination will be final and
binding. None of Parent, the Purchaser, the Depositary, the Information Agent,
the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. Any Shares
properly withdrawn may be re-tendered at any time prior to the Expiration Date
by following any of the procedures described in Section 3 of the Offer to
Purchase.
The Company has provided the Purchaser with the Company's shareholder lists and
security position listings in respect of the Shares for the purpose of
disseminating the Offer to Purchase, the Letter of Transmittal and other
relevant materials to the Holders. The Offer to Purchase, the Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares whose names appear on the Company's list of holders of the Shares and
will be furnished, for subsequent transmittal to beneficial owners of Shares, to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's list of holders
of the Shares, or, where applicable, who are listed as participants in the
security position listing of The Depository Trust Company.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
under the Exchange Act is contained in the Offer to Purchase and is incorporated
herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain important
information that should be read carefully before any decision is made with
respect to the Offer. Requests for copies of the Offer to Purchase, the related
Letter of Transmittal and other tender offer materials may be directed to the
Information Agent as set forth below, and copies will be furnished promptly at
the Purchaser's expense. Questions or requests for assistance may be directed to
the Information Agent or the Dealer Manager as set forth below.
The Information Agent for the Offer is:
MORROW & CO., INC.
<PAGE>
445 Park Avenue, 5th Floor
New York, New York 10022
Banks and Brokerage Firms Call: (800) 662-5200
Shareholders Please Call: (800) 566-9061
The Dealer Manager for the Offer is:
Salomon Smith Barney
7 World Trade Center
31st Floor
New York, New York 10048
(800) 228-8264
May 25, 1999
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE IN
ANY DOUBT AS TO THE ACTION TO BE TAKEN, YOU SHOULD SEEK YOUR OWN FINANCIAL
ADVICE IMMEDIATELY FROM YOUR OWN APPROPRIATELY AUTHORIZED INDEPENDENT FINANCIAL
ADVISOR.
IF YOU HAVE SOLD OR TRANSFERRED ALL OF YOUR REGISTERED HOLDINGS OF SHARES (AS
DEFINED BELOW), PLEASE FORWARD THIS DOCUMENT AND ALL ACCOMPANYING DOCUMENTS TO
THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR TRANSFER WAS
EFFECTED, FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE.
NOTICE OF GUARANTEED DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
FOR TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
FIRST COMMONWEALTH, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED MAY 25, 1999
BY
FLOSS ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
As set forth under Section 3--"Procedures for Tendering Shares" in the Offer
to Purchase dated May 25, 1999, and any supplements or amendments thereto (the
"Offer to Purchase"), this form (or a copy hereof) must be used to accept the
Offer (as defined in the Offer to Purchase) if (i) certificates (the
"Certificates") representing shares of common stock, par value $.001 per share,
together with the associated preferred stock purchase rights (together, the
"Shares") of First Commonwealth, Inc., a Delaware corporation (the "Company"),
are not immediately available, (ii) if the procedures for book-entry transfer
cannot be completed on a timely basis, or (iii) time will not permit
Certificates and all other required documents to reach First Chicago Trust
Company of New York (the "Depositary") prior to the Expiration Date (as defined
in Section 1--"Terms of the Offer" of the Offer to Purchase). This Notice of
Guaranteed Delivery may be delivered by hand, by mail or by overnight courier to
the Depositary and must include a signature guarantee by an Eligible Institution
(as defined in Section 3--"Procedures for Tendering Shares" of the Offer to
Purchase) in the form set forth herein. See the guaranteed delivery procedures
described in the Offer to Purchase under Section 3--"Procedures for Tendering
Shares".
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT COURIER:
FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF FIRST CHICAGO TRUST COMPANY OF
NEW YORK NEW YORK NEW YORK
c/o Securities Transfer and Corporate Actions Corporate Actions
Reporting Services Inc. Suite 4660 Suite 4680
Attn: Corporate Actions P.O. Box 2569 14 Wall Street, 8th Floor
100 William Street, Galleria Jersey City, NJ 07303-2569 New York, NY 10005
New York, NY 10038
</TABLE>
FOR INFORMATION:
Fax: (201) 222-4720 or (201) 222-4721
Confirmation of Fax: (201) 222-4707
<PAGE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee a
signature. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
LADIES AND GENTLEMEN:
THE UNDERSIGNED HEREBY TENDERS TO FLOSS ACQUISITION CORP., A DELAWARE
CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA, A NEW YORK CORPORATION, UNDER THE TERMS AND SUBJECT TO THE
CONDITIONS SET FORTH IN THE OFFER TO PURCHASE AND THE RELATED LETTER OF
TRANSMITTAL, RECEIPT OF EACH OF WHICH IS HEREBY ACKNOWLEDGED, THE NUMBER OF
SHARES INDICATED BELOW PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES DESCRIBED
IN THE OFFER TO PURCHASE UNDER SECTION 3--"PROCEDURES FOR TENDERING SHARES".
NAME OF RECORD HOLDER(S): ______________________________________________________
________________________________________________________________________________
ADDRESS(ES): ___________________________________________________________________
________________________________________________________________________________
AREA CODE(S) AND TEL. NO(S).: __________________________________________________
SIGNATURE(S): __________________________________________________________________
DATE: __________________________________________________________________________
NUMBER OF SHARES: ______________________________________________________________
CERTIFICATE NUMBER(S) (IF AVAILABLE): __________________________________________
IF SHARES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, CHECK BOX:
/ / THE DEPOSITORY TRUST COMPANY
ACCOUNT NUMBER: ________________________________________________________________
2
<PAGE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution, hereby guarantees that the
undersigned will deliver to the Depositary, at one of its addresses set forth
above, the Certificates representing the Shares tendered hereby, in proper form
for transfer, together with a properly completed and duly executed Letter of
Transmittal or with any required signature guarantees and any other required
documents, all within three Nasdaq National Market trading days (as defined in
Section 3--"Procedures for Tendering Shares" of the Offer to Purchase) after the
date hereof.
<TABLE>
<S> <C>
Name of Firm: Authorized Signature:
Name:
Address: Title:
(Zip Code)
Area Code and Tel. No.: Date:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY;
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
5. Adult and minor The adult or, if the
(joint account) minor is the only
contributor, the
minor(1)
6. Account in the name The ward, minor, or
of guardian or incompetent
committee for a person(3)
designated ward,
minor or incompetent
person
7. a. The usual The grantor-
revocable savings trustee(1)
trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is
not a legal or
valid trust under
State law
8. Sole proprietorship The owner(4)
account
- -----------------------------------------------------
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- -----------------------------------------------------
9. A valid trust, Legal entity (Do not
estate, or pension furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, The organization
charitable, or
educational
organization account
12. Partnership account The partnership
held in the name of
the business
13. Association, club, The organization
or other tax-exempt
organization
14. A broker or The broker or
registered nominee nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you do not know your
number, obtain Form SS-5. Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees that may be exempted from backup withholding on payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest to you.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding.
FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE
FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a tax-payer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA,
FLOSS ACQUISITION CORP.
AND
FIRST COMMONWEALTH, INC.
Dated as of May 19, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I THE OFFER
Section 1.1 The Offer........................................................2
Section 1.2 Company Actions..................................................4
ARTICLE II THE MERGER
Section 2.1 The Merger.......................................................6
Section 2.2 Effective Time...................................................6
Section 2.3 Effects of the Merger............................................6
Section 2.4 Certificate of Incorporation and Bylaws; Directors and
Officers........................................................6
Section 2.5 Conversion of Securities.........................................6
Section 2.6 Exchange of Certificates.........................................7
Section 2.7 Dissenting Shares................................................9
Section 2.8 Merger Without Meeting of Stockholders...........................9
Section 2.9 No Further Ownership Rights in Shares; Closing of Company
Transfer Books..................................................9
Section 2.10 Further Assurances..............................................10
Section 2.11 Closing.........................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 3.1 Organization, Standing and Power; Capitalization and
Ownership of Sub...............................................10
Section 3.2 Authority; Non-Contravention....................................11
Section 3.3 Offer Documents and Proxy Statement.............................13
Section 3.4 Financing.......................................................13
Section 3.5 Brokers.........................................................13
Section 3.6 Business of Sub.................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization, Standing and Power................................14
Section 4.2 Capital Structure...............................................14
Section 4.3 Subsidiaries. ..................................................15
Section 4.4 Other Interests. ...............................................15
Section 4.5 Authority; Non-Contravention....................................16
Section 4.6 SEC Documents and Financial Statements..........................17
Section 4.7 Offer Documents and Proxy Statement.............................18
Section 4.8 Absence of Certain Events.......................................18
Section 4.9 Litigation......................................................19
Section 4.10 Compliance with Applicable Law..................................20
Section 4.11 Employee Plans. ................................................20
Section 4.12 Employment Relations and Agreement. ............................22
Section 4.13 Contracts.......................................................23
Section 4.14 Rights Agreement................................................23
Section 4.15 State Takeover Statutes; Certain Charter Provisions.............23
Section 4.16 Taxes...........................................................24
Section 4.17 Intellectual Properties.........................................26
i
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Section 4.18 Voting Requirements.............................................27
Section 4.19 Year 2000.......................................................27
Section 4.20 Brokers.........................................................27
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger...........28
Section 5.2 No Solicitation.................................................31
Section 5.3 Third Party Standstill Agreements...............................33
ARTICLE VI ADDITIONAL AGREEMENTS
Section 6.1 Company Stockholder Approval; Proxy Statement...................34
Section 6.2 Access to Information...........................................35
Section 6.3 Fees and Expenses...............................................36
Section 6.4 Stock Options...................................................37
Section 6.5 Reasonable Best Efforts.........................................38
Section 6.6 Public Announcements............................................38
Section 6.7 Indemnification; Directors and Officers Insurance...............38
Section 6.8 Employee Benefits...............................................39
Section 6.9 Employee Agreements, Stay Bonuses, Etc..........................40
Section 6.10 Board Representations...........................................40
Section 6.11 State Takeover Laws.............................................41
Section 6.12 Rights Agreement................................................41
ARTICLE VII CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger......42
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination.....................................................43
Section 8.2 Effect of Termination...........................................45
Section 8.3 Amendment.......................................................45
Section 8.4 Waiver..........................................................46
ARTICLE IX GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties..................46
Section 9.2 Notices.........................................................46
Section 9.3 Interpretation..................................................47
Section 9.4 Counterparts....................................................47
Section 9.5 Entire Agreement; No Third-Party Beneficiaries..................47
Section 9.6 Governing Law...................................................48
Section 9.7 Assignment......................................................48
Section 9.8 Severability....................................................48
Section 9.9 Enforcement of this Agreement...................................48
Section 9.10 Incorporation of Exhibits.......................................48
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EXHIBIT A -- Conditions of the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 19, 1999 (this
"Agreement"), among The Guardian Life Insurance Company of America, a New York
corporation ("Parent"), Floss Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and First Commonwealth, Inc., a
Delaware corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent pursuant to a
tender offer (the "Offer") by Sub for all of the outstanding shares of Common
Stock, par value $.001 per share (the "Common Stock"), together with associated
Rights (as defined below) (the shares of Common Stock and associated Rights are
referred to herein as "Shares"), of the Company at a price of $25.00 per share,
net to the seller in cash, followed by a merger (the "Merger") of Sub with and
into the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has unanimously
adopted resolutions determining that the Offer and the Merger are fair to and in
the best interests of the holders of Shares and declaring the advisability of
the Offer and the Merger and recommending that the Company's stockholders accept
the Offer and approve and adopt this Agreement and approve the Merger and the
other transactions contemplated hereby;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent is entering into a Stockholder Agreement (the "Stockholder
Agreement") with each of Christopher C. Multhauf and David W. Mulligan
(collectively, "Stockholders") pursuant to which Stockholders have agreed, among
other things, (i) to tender all of the Shares that Stockholders now own or
hereafter acquire (the "Stockholder Shares"), and (ii) with respect to certain
questions put to stockholders of the Company for a vote, to vote the Stockholder
Shares, in each case, in accordance with the terms and conditions of the
Stockholder Agreement; and
WHEREAS, pursuant to the Merger, each issued and outstanding Share
not owned directly or indirectly by Parent or the Company will be converted into
the right to receive the per share consideration paid pursuant to the Offer.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than May 25, 1999,
Sub shall, and Parent shall cause Sub to, commence, within the meaning of Rule
14d-2 under the Exchange Act (as hereinafter defined), the Offer. The initial
expiration date of the Offer shall be June 23, 1999. The obligation of Sub to,
and of Parent to cause Sub to, commence the Offer and accept for payment, and
pay for, any Shares tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A, any of which may be waived by Parent or Sub
in their sole discretion; provided that, without the prior written consent of
the Company, Sub shall not (i) waive the Minimum Condition (as defined in
Exhibit A), (ii) reduce the number of Shares of Common Stock subject to the
Offer, (iii) reduce the price per Share to be paid pursuant to the Offer, (iv)
extend the Offer if all of the Offer conditions are satisfied or waived, (v)
change the form of consideration payable in the Offer, or (vi) amend, add or
waive any term or condition of the Offer (including the conditions set forth on
Exhibit A) in any manner that would adversely affect the Company or its
stockholders in any material respect. Notwithstanding the foregoing, Sub may,
without the consent of the Company, extend the Offer (i) if at the then
scheduled expiration date of the Offer any of the conditions to Sub's obligation
to accept for payment and pay for shares of Common Stock shall not have been
satisfied or waived, until the fifth business day after the date Sub reasonably
believes to be the earliest date on which such conditions will be satisfied;
(ii) for any period required by any rule, regulation, interpretation or position
of the SEC (as hereinafter defined) or its staff applicable to the Offer; or
(iii) for an aggregate period of not more than ten business days (for all such
extensions) notwithstanding the satisfaction of all conditions to the Offer.
Parent and Sub agree that if at any scheduled expiration date of the Offer, the
Minimum Condition or the Regulatory Condition (as defined in Exhibit A) shall
not have been satisfied, but at such scheduled expiration date each of the other
conditions set forth in Exhibit A shall then be satisfied, at the request of the
Company, Sub shall extend the Offer from time to time, subject to the right of
Parent, Sub or the Company to terminate this Agreement pursuant to the terms
hereof. Parent and Sub further agree that in the event Sub wishes to terminate
the Offer solely by reason of the condition described in clause
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(i) of Exhibit A, Sub shall first extend the Offer for a minimum period of ten
days, it being understood that, if at the end of such ten day period, a banking
moratorium or suspension of payments in respect of banks in the United States
shall be in effect, Sub shall then be entitled to terminate the Offer under the
provisions of clause (i) of Exhibit A, provided, that Sub shall not be required
to extend the Offer more than once pursuant to this sentence. Notwithstanding
anything to the contrary contained herein, the parties further agree that, in
the event that upon any scheduled expiration date of the Offer (or any extension
thereof), (x) all conditions to the Offer set forth in Exhibit A to this
Agreement have been satisfied and (y) for a period of five consecutive trading
days prior to the expiration of the Offer (or any extension thereof), the
average of the daily closing values of the Standard & Poor's Index of 500
Industrial Companies (the "S&P Index") for such five trading days shall reflect
a decline in excess of 25% as compared to the closing value of the S&P Index on
the close of business on the trading day next preceding the date of the Merger
Agreement, then Sub shall be entitled to extend the Offer for a period not to
exceed eight trading days. Subject to the terms and conditions of the Offer set
forth in Exhibit A, Sub shall, and Parent shall cause Sub to, pay for all Shares
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer, which shall contain
(included as an Exhibit) or incorporate by reference an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents therein pursuant to which the Offer will be made, together with
any supplements or amendments thereto, the "Offer Documents"). The Company and
its counsel shall be given an opportunity to review and comment upon the Offer
Documents prior to the filing thereof with the SEC. The Offer Documents shall
comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), and on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
the Offer Documents shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or Sub with respect to information supplied by the Company in writing, expressly
for inclusion in the Offer Documents. Each of Parent, Sub and the Company agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have
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<PAGE>
become false or misleading in any material respect, and each of Parent and Sub
further agrees to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of shares
of Common Stock, in each case as and to the extent required by applicable
federal securities laws. Parent and Sub agree to provide the Company and its
counsel in writing with copies of any written comments Parent, Sub or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents.
(c) Prior to or concurrently with the expiration of the Offer,
Parent shall provide or cause to be provided to Sub all of the funds necessary
to purchase any Shares that Sub becomes obligated to purchase pursuant to the
Offer.
Section 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
by unanimous vote, has (i) duly adopted resolutions approving this Agreement,
the Offer and the Merger, determining that the Merger is advisable and that the
terms of the Offer and Merger are fair to, and in the best interests of, the
Company's stockholders and unanimously recommending that the Company's
stockholders accept the Offer and approve the Merger and approve and adopt this
Agreement and (ii) taken all other applicable action necessary to render (x)
Section 203 of the General Corporation Law of the State of Delaware and other
state takeover statutes and (y) the Stockholders Rights Agreement dated as of
November 1, 1995 between the Company and First Chicago Trust Company of New
York, as amended as of December 15, 1998 (as further amended to date, the
"Rights Agreement") inapplicable to the Offer and the Merger. The Company
represents that its Board of Directors has received the written opinion of
William Blair & Company, L.L.C. that the proposed consideration to be received
by the holders of Shares pursuant to the Offer and the Merger is fair to such
holders from a financial point of view. The Company has been advised that each
of its directors and executive officers intends to tender pursuant to the Offer
all Shares owned of record and beneficially by him or her except to the extent
such tender would violate applicable securities laws.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9"), and shall mail the Schedule 14D-9 to the
stockholders of the Company. Subject to the terms of this Agreement, the
Schedule 14D-9 shall contain the recommendation described in paragraph (a) of
this Section 1.2. To the extent practicable, the Company shall cooperate with
Parent and Sub in mailing or otherwise disseminating the Schedule 14D-9 with the
appropriate Offer Documents to the Company's stockholders.
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<PAGE>
Parent and Sub and their counsel shall be given an opportunity to review and
comment upon the Schedule 14D-9 prior to the filing thereof with the SEC. The
Schedule 14D-9 shall comply as to form in all material respects with the
requirements of the Exchange Act and, on the date filed with the SEC and on the
date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circum stances under which they were made, not
misleading, except that no representation is made by the Company with respect to
infor mation supplied by Parent or Sub in writing expressly for inclusion in the
Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to provide
copies thereof to Parent and Sub so that they may be disseminated to the holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Company agrees to provide Parent and Sub and their counsel
in writing with any comments the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Parent and Sub with mailing labels containing the
names and addresses of the record holders of Shares as of a recent date and of
those persons or entities becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security position listings
and computer files and all other information in the Company's possession or
control regarding the beneficial owners of Shares, and shall furnish to Parent
and Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent and Sub
may reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent and Sub and each of their affiliates and
associates shall hold in confidence the information contained in any of such
labels, lists and files, will use such information only in connection with the
Offer and the Merger, and, if this Agreement is terminated, will promptly
deliver to the Company all copies of such information then in their possession.
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<PAGE>
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Sub shall be merged with and into the Company
at the Effective Time (as hereinafter defined). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the DGCL.
Section 2.2 Effective Time. The Merger shall become effective when
the Certificate of Merger or, if applicable, the Certificate of Ownership and
Merger (each, the "Certificate of Merger"), executed in accordance with the
relevant provisions of the DGCL, are accepted for record by the Secretary of
State of the State of Delaware. When used in this Agreement, the term "Effective
Time" shall mean the later of the date and time at which the Certificate of
Merger is accepted for record or such later time established by the Certificate
of Merger. The filing of the Certificate of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger set
forth herein.
Section 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL.
Section 2.4 Certificate of Incorporation and Bylaws; Directors and
Officers. (a) The Certificate of Incorporation, as in effect immediately prior
to the Effective Time, of Sub shall be amended to change the name of Sub to
"First Commonwealth, Inc." and, as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or applicable law. The Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or the
Certificate of Incorporation and applicable law.
(b) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation as of the Effective Time.
Section 2.5 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of any stockholder of
the Company:
(a) All Shares that are held in the treasury of the Company or by
any wholly owned Subsidiary (as hereinafter defined) of the Company and
any Shares
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<PAGE>
owned by Parent, Sub or any other wholly owned Subsidiary of Parent shall
be cancelled and no consideration shall be delivered in exchange therefor.
(b) Each Share issued and outstanding immediately prior to the
Effective Time (other than shares to be cancelled in accordance with
Section 2.5(a) and other than Dissenting Shares (as defined in Section
2.7)) shall be converted as of the Effective Time into the right to
receive from the Surviving Corporation in cash, without interest, the per
Share consideration in the Offer (the "Merger Consideration"). All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and each holder of a certificate or
certificates (the "Certificates") representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration.
(c) Each issued and outstanding share of the capital stock of Sub
shall be converted into and become as of the Effective Time one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.6 Exchange of Certificates. (a) Paying Agent. Parent and
the Company shall authorize a commercial bank or trust company having net
capital of not less than $100 million (or one or more other persons or entities
as shall be reasonably acceptable to Parent and the Company) to act as paying
agent hereunder (the "Paying Agent") for the payment of the Merger Con
sideration upon surrender of Certificates. All of the fees and expenses of the
Paying Agent shall be borne by Parent.
(b) Parent and Sub to Provide Funds. Parent shall take all steps
necessary to enable and cause the Sub to deposit in trust with the Paying Agent
concurrently with or prior to the Effective Time cash in an amount necessary to
pay for all of the Shares pursuant to Section 2.5 and the amount required in
connection with the Stock Options pursuant to Section 6.4. Such amount shall
hereinafter be referred to as the "Exchange Fund."
The Exchange Fund shall be invested by the Paying Agent as directed
by Parent in direct obligations of the United States, obligations for which the
full faith and credit of the United States is pledged to provide for the payment
of principal and interest, commercial paper rated of the highest quality by
Moody's Investors Services, Inc. or Standard & Poor's Ratings Group or
certificates of deposit, bank repurchase agreements or bankers' acceptances of a
commercial bank having at least $100,000,000 in assets (collectively "Permitted
Investments") or
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<PAGE>
in money market funds which are invested in Permitted Investments, and any net
earnings with respect thereto shall be paid to Parent as and when requested by
Parent. The Paying Agent shall, pursuant to irrevocable instructions, make the
payments referred to in Section 2.5 hereof out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose except as otherwise agreed
to by Parent.
If the amount of cash in the Exchange Fund is insufficient to pay
all of the amounts required to be paid pursuant to Sections 2.5 or 6.4, Parent
from time to time after the Effective Time shall take all steps necessary to
enable and cause the Surviving Corporation to deposit in trust additional cash
with the Paying Agent sufficient to make all such payments.
(c) Exchange Procedures. As soon as practicable after the Effective
Time, the Paying Agent shall mail to each holder of record of a Certificate,
other than Parent, the Company and any Subsidiary of Parent or the Company, (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon actual
delivery of the Certificates to the Paying Agent and shall be in a form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.5, and the Certificates so
surrendered shall forthwith be cancelled. No interest will be paid or will
accrue on the cash payable upon the surrender of any Certificate. If payment is
to be made to a person or entity other than the person or entity in whose name
the Certificate so surrendered is registered, it shall be a condition of payment
that such Certificate shall be properly endorsed or otherwise in proper form for
transfer and that the person or entity requesting such payment shall pay any
transfer or other taxes required by reason of such Certificate or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.6, each
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing any Shares owned by Parent or any Subsidiary of
Parent) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the amount of cash, without interest,
into which the Shares theretofore represented by such Certificate shall have
been converted pursuant to Section 2.5. Notwithstanding the foregoing, none of
the Paying Agent, the Surviving Corporation or
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any party hereto shall be liable to a former stockholder of the Company for any
cash or interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for six months after the Effective
Time shall be repaid to the Surviving Corporation (including, without
limitation, all interest and other income received by the Paying Agent in
respect of all such funds). Thereafter, persons or entities who prior to the
Merger held Shares shall look only to the Surviving Corporation (subject to the
terms of this Agreement, abandoned property, escheat and other similar laws) as
general creditors thereof with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them, without interest.
Section 2.7 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such Shares who have
properly exercised appraisal rights with respect thereto in accordance with
Delaware law (the "Dissenting Shares") will not be exchangeable for the right to
receive the Merger Consideration, and holders of such Shares will be entitled to
receive payment of the appraised value of such Shares in accordance with the
provisions of Delaware law unless and until such holders fail to perfect or
effectively withdraw or lose their rights to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such Shares will thereupon be treated
as if they had been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon. The Company will give Parent and Sub prompt notice of any
demands received by the Company for appraisals of Shares. The Company shall give
Parent and Sub (A) prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related instruments received
by the Company, and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal. The Company will not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal or settle or offer to settle any such
demand.
Section 2.8 Merger Without Meeting of Stockholders. Notwithstanding
the foregoing, in the event that Sub, or any other direct or indirect subsidiary
of Parent, shall acquire at least 90 percent of the outstanding Shares, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of the
Offer without a meeting of stockholders of the Company, in accordance with
Section 253 of the DGCL.
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Section 2.9 No Further Ownership Rights in Shares; Closing of
Company Transfer Books. At and after the Effective Time, each holder of a
Certificate shall cease to have any rights as a stockholder of the Company,
except for, in the case of a holder of a Certificate (other than shares to be
cancelled pursuant to Section 2.5 hereof and other than Dissenting Shares), the
right to surrender his or her Certificate in exchange for payment of the Merger
Consideration or, in the case of a holder of Dissenting Shares, to perfect his
or her right to receive payment for his or her shares pursuant to Delaware law
if such holder has validly perfected and not withdrawn his or her right to
receive payment for his or her shares, and no transfer of Shares shall be made
on the stock transfer books of the Surviving Corporation. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.10 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such Constituent Corporations, all such other acts and things
necessary, desirable or proper, consistent with the terms of this Agreement (as
in effect immediately prior to the acceptance of Shares in the Offer, or as
thereafter amended in accordance with Section 8.3), to vest, perfect or confirm
its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of such Constituent Corporation and
otherwise to carry out the purposes of this Agreement.
Section 2.11 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of White &
Case LLP, 1155 Avenue of the Americas, New York, New York 10036, at 10:00 a.m.,
local time, on the second business day after the day on which the last of the
conditions set forth in Article VII hereof shall have been fulfilled or waived
or at such other time and place as Parent and the Company shall agree.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 3.1 Organization, Standing and Power; Capitalization and
Ownership of Sub. Each of Parent and Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now being conducted. The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of which
are validly issued and outstanding, fully paid and nonassessable and are owned
by Parent free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, charges or other encumbrances of
any nature or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided under applicable
Federal or State securities laws) ("Liens").
Section 3.2 Authority; Non-Contravention. Each of Parent and Sub has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and (assuming the valid authorization,
execution and delivery of this Agreement by the Company) constitutes a valid and
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally and by general equitable principles.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Parent or Sub under, any provision of (i) the Certificate of
Incorporation or Bylaws of Parent or Sub, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or Sub or
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(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of their respective properties or assets,
other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, or Liens that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Parent or
Sub or prevent the consummation of any of the transactions contemplated hereby.
No filing or registration with, or authorization, consent or approval of, any
domestic (federal, state or local), foreign or supranational court, commission,
governmental body, regulatory or administrative agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent and Sub
or is necessary for the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the Exchange Act, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iii) the filing of a Form A Statement Regarding the Acquisition
of Control of a Domestic Insurer and/or other documents as may be required with
the Arizona, Illinois, Indiana, Wisconsin, Missouri and Michigan Departments of
Insurance and the approval thereof by the Directors of Insurance of such
Departments of Insurance ("DOI"), and any other required filings with or
approvals by state agencies regulating corporations or insurance companies
applicable to the transactions contemplated hereby (collectively, such filings
and approvals are referred to as the "Insurance Approvals"), (iv) such filings
and approvals as may be required under the Hart-Scott-Rodino Improvements Act of
1976, as amended (the "HSR Act"), (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states or the Nasdaq
National Market, and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent or Sub or prevent the consummation of any of
the transactions contemplated hereby. Except as disclosed by Parent to the
Company in writing prior to the date of this Agreement, to the knowledge of the
Parent, there are no controversies, examinations, actions, suits, proceedings,
investigations, claims, or issues raised by the DOI in the States of Arizona,
Illinois, Indiana, Wisconsin, Missouri or Michigan involving Parent or any of
its Subsidiaries which would reasonably be expected to, directly or indirectly,
prevent the Offer or the Merger or delay the Effective Time beyond 180 days
after the date of this Agreement. For purposes of this Agreement (a) "Material
Adverse Change" or "Material Adverse Effect" means, (i) when used with respect
to the Company, any change or effect,
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either individually or in the aggregate, that is or may be materially adverse to
the business, assets, liabilities, properties, condition (financial or
otherwise), or results of operations of all or any material part of the Company
and its Subsidiaries taken as a whole or (ii) when used with respect to Parent,
Sub or the Company, as the case may be, any change or effect, either
individually or in the aggregate, which would reasonably be expected to
materially impair the ability of Parent, Sub or the Company, as the case may be,
to perform their respective obligations hereunder, and (b) "Subsidiary" means
any corporation, partnership, joint venture or other legal entity of which (i)
Parent or the Company or any of their respective Subsidiaries, as the case may
be, is a general partner or (ii) Parent or the Company, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
Section 3.3 Offer Documents and Proxy Statement. The Offer Documents
will comply in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. The written information
supplied or to be supplied by Parent and Sub expressly for inclusion in the
Proxy Statement, the Schedule 14D-9 and the information statement filed by the
Company in connection with the offer pursuant to Rule 14f-1 promulgated under
the Exchange Act (the "Information Statement"), together with any amendments or
supplements to any of the foregoing will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made, in light of the circumstances
under which they are made, not misleading. Notwithstanding the foregoing, no
representation or warranty is made with respect to any information with respect
to the Company or its officers, directors and affiliates provided to Parent or
Sub by the Company in writing for inclusion in the Offer Documents or amendments
or supplements thereto. If at any time prior to the purchase of Shares pursuant
to the Offer there shall occur any event with respect to Parent, its officers
and directors or any of its Subsidiaries which is required to be described in
the Offer Documents, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of the Company.
Section 3.4 Financing. Parent has all of the funds necessary to
consummate the Offer and the Merger and the transactions contemplated hereby on
a timely basis and to pay any and all of its related fees and expenses.
Section 3.5 Brokers. No broker, investment banker or
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other person or entity, other than Salomon Smith Barney, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub.
Section 3.6 Business of Sub. Sub was organized solely for the
purpose of acquiring the Company and engaging in the transactions contemplated
by this Agreement and has not engaged in any business since it was incorporated
which is not in connection with the acquisition of the Company and this
Agreement. During the period from the date of this Agreement through the date on
which Shares are purchased in accordance with the Offer, Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization, Standing and Power. The Company and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company has made available to Parent and Sub complete and
correct copies of the Second Restated Certificate of Incorporation and By-Laws
of the Company and the comparable governing documents of each of its
Subsidiaries, in each case as amended to the date of this Agreement. Other than
as set forth in Section 4.1 of the Company's disclosure letter (the "Company
Disclosure Letter") delivered concurrently with the delivery of this Agreement,
the respective certificates of incorporation and by-laws or other organizational
documents of the Subsidiaries of the Company do not contain any provision
limiting or otherwise restricting the ability of the Company to control such
Subsidiaries in any material respect.
Section 4.2 Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of fifteen
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million (15,000,000) shares of Common Stock and one million (1,000,000) shares
of preferred stock, par value $.001 per share ("Preferred Stock"). At the close
of business on May 18, 1999, (i) 3,730,135 shares of Common Stock were issued
and outstanding, all of which were validly issued, fully paid and nonassessable
and free of preemptive rights, (ii) 740 shares of Common Stock were held in the
treasury of the Company or by Subsidiaries of the Company and (iii) 413,389
shares of Common Stock were reserved for future issuance pursuant to the
Company's 1995 Long-Term Incentive Plan and 1987 Statutory-Nonstatutory Stock
Option Plan (collectively, the "Stock Option Plans"). No shares of Preferred
Stock are outstanding. A total of 150,000 shares of Preferred Stock have been
designated as Series A Junior Participating Preferred Stock ("Series A Preferred
Stock"), in connection with the Rights Agreement. As of the date of this
Agreement, except (i) as set forth above, (ii) for the rights to purchase Series
A Preferred Stock ("Rights") pursuant to the Rights Agreement and (iii) as set
forth in the Company SEC Documents (as hereinafter defined), no shares of
capital stock or other voting securities of the Company were issued, reserved
for issuance or outstanding. The Company does not have any outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter ("Voting
Debt"). As of the date of this Agreement, except for stock options covering not
in excess of 305,240 shares of Common Stock issued under the Stock Option Plans,
there are no outstanding or authorized options, warrants, calls, rights or
subscriptions, claims of any character, obligations, convertible or exchangeable
securities or other commitments, contingent or otherwise, to which the Company
is a party or by which it is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement (each an
"Issuance Obligation").
Section 4.3 Subsidiaries. Exhibit 21 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, as filed with the SEC, is a
true, accurate and correct list of all of the Subsidiaries of the Company. All
of the outstanding capital stock of, or ownership interests in, each Subsidiary
of the Company is owned by the Company, directly or indirectly. All of the
shares of capital stock of each Subsidiary are validly existing, fully paid and
non-assessable. Except as set forth in the Company SEC Documents or Section 4.3
of the Company Disclosure Letter, no Subsidiary of the Company has outstanding
Voting Debt and no Subsidiary of the Company is bound by, obligated under, or
party to an Issuance Obligation with respect to any security of the Company or
any Subsidiary of the Company.
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Except as set forth in the Company SEC Documents or Section 4.3 of the Company
Disclosure Letter, all of such capital stock or ownership interest is owned by
the Company, directly or indirectly, free and clear of all Liens.
Section 4.4 Other Interests. Except for the Company's interest in
its Subsidiaries, investments in ordinary course consistent with past practice,
and as set forth in the Company SEC Documents or Section 4.4 of the Company
Disclosure Letter, neither the Company nor its Subsidiaries owns directly or
indirectly any interest or investment (whether equity or debt) in, nor is the
Company or any of its Subsidiaries subject to any obligation or requirement to
provide for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in, any corporation, partnership, joint
venture, business, trust or entity.
Section 4.5 Authority; Non-Contravention. The Board of Directors of
the Company has unanimously approved the Merger Agreement and the transactions
contemplated thereby (including, but not limited to the Offer and the Merger),
declared the Merger advisable and fair to and in the best interests of the
holders of Shares and the Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of the Merger by
the stockholders of the Company (if required), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the approval of the Merger by the stockholders of the
Company (if required). This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub) constitutes a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
that such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights,
generally, and by general equitable principles. Except as set forth in the
Company SEC Documents or Section 4.5 of the Company Disclosure Letter, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries under, any provision of (i)
the Certificate of Incorporation or Bylaws of the Company (true and complete
copies of which as of the date hereof have been delivered to Parent) or any
provision of the comparable
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charter or organization documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (ii) or (iii), any such conflicts, violations, defaults, rights,
or Liens that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company, or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for (i) in connection or in compliance with the provisions of the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) the Insurance Approvals, (iv) such filings and approvals as may be
required under the HSR Act, (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states or the Nasdaq
National Market, and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company or prevent the consummation of any of
the transactions contemplated hereby. Except as disclosed in Section 4.5 of the
Company Disclosure Letter, to the knowledge of the Company, there are no
controversies, examinations, actions, suits, proceedings, investigations,
claims, or issues raised by the DOI in the States of Arizona, Illinois, Indiana,
Wisconsin, Missouri or Michigan involving the Company or any of its Subsidiaries
which would reasonably be expected to, directly or indirectly, prevent the Offer
or the Merger or delay the Effective Time beyond 180 days after the date of this
Agreement.
Section 4.6 SEC Documents and Financial Statements. (a) Since
November 16, 1995, the Company has filed with the SEC all documents required to
be filed under the Securities Act of 1933, as amended (including the rules and
regulations promulgated thereunder) (the "Securities Act"), and the Exchange Act
(such documents, together with any exhibits, schedules, amendments or
supplements thereto, and any information incorporated by reference therein, the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or
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the Exchange Act, as the case may be, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Company SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by the
rules applicable to Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and changes in financial position for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein).
(b) Except as set forth in the Company SEC Documents or Section 4.6
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1998 which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
Section 4.7 Offer Documents and Proxy Statement. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents or the Schedule 14D-9, the
Information Statement, if any, the Proxy Statement, if any, or any amendment or
supplement thereto, will (i) in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times such documents are
filed with the SEC or first published, sent or given to the Company's
stockholders, or (ii) in the case of the Proxy Statement, at the time of the
mailing of the Proxy Statement and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur which is required
to be described in an amendment of, or a supplement to, the Proxy Statement, the
Information Statement, the Schedule 14D-9 or the Offer Documents,
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such event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. Prior to the filing of such amendment or supplement
with the SEC, a copy thereof shall be delivered to Parent and its counsel, who
shall have the opportunity to comment on such amendment or supplement. The Proxy
Statement and the Schedule 14D-9 will comply as to form in all material respects
with the requirements of the Exchange Act.
Section 4.8 Absence of Certain Events. Since December 31, 1998, the
Company and its Subsidiaries have operated their respective businesses only in
the ordinary course consistent with historical practices and, except as
disclosed in the Company SEC Documents or Section 4.8 of the Company Disclosure
Letter, there has not occurred (i) any event, occurrence or conditions which,
individually or in the aggregate, would be reasonably likely to have, a Material
Adverse Effect on the Company; (ii) any entry into or any commitment or
transaction that, individually or in the aggregate, would be reasonably likely
to have, a Material Adverse Effect on the Company; (iii) any change by the
Company or any of its Subsidiaries in its accounting methods, principles or
practices; (iv) any amendments or changes in the Certificate of Incorporation or
Bylaws of the Company; (v) any revaluation by the Company or any of its
Subsidiaries of any of their respective assets, including, without limitation,
write-offs of accounts receivable, other than in the ordinary course of the
Company's and its Subsidiaries' businesses consistent with past practices; (vi)
any damage, destruction or loss which resulted in or is reasonably likely to
result in a Material Adverse Effect on the Company; (vii) any event pursuant to
which the Company or any of its Subsidiaries has incurred any material
liabilities (direct, contingent or otherwise) or engaged in any material
transaction or entered into any material agreement outside the ordinary course
of business; (viii) any increase in the compensation of any officer of the
Company or any of its Subsidiaries or any general salary or benefits increase to
the employees of the Company or any of its Subsidiaries other than in the
ordinary course of business; or (ix) any declaration, setting aside or payment
of any dividend or other distribution with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company. Except as set
forth in the Company SEC Documents or Section 4.8 of the Company Disclosure
Letter, since December 31, 1998, neither the Company nor any of its Subsidiaries
has taken any action specified in Section 5.1 of this Agreement.
Section 4.9 Litigation. Except as disclosed in Section 4.9 of the
Company Disclosure Letter, there are no investigations, actions, suits or
proceedings pending against
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the Company or its Subsidiaries or, to the knowledge of the Company, threatened
against the Company or its Subsidiaries (or any of their respective properties,
rights or franchises), at law or in equity, or before or by any federal or state
commission, board, bureau, agency, regulatory or administrative instrumentality
or other Governmental Entity or any arbitrator or arbitration tribunal, that
would be reasonably likely to have a Material Adverse Effect on the Company,
and, to the knowledge of the Company, no development has occurred with respect
to any pending or threatened action, suit or proceeding that would be reasonably
likely to result in a Material Adverse Effect on the Company or would prevent or
delay the consummation of the transactions contemplated hereby. Neither the
Company nor any of its Subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding which would reasonably be expected to have
a Material Adverse Effect on the Company.
Section 4.10 Compliance with Applicable Law. (a) The Company and its
Subsidiaries hold, and at all required times have held, all permits, licenses,
variances, exceptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company and its Subsidiaries are, and at all times have been, in compliance with
the terms of the Company Permits, except where the failure so to comply would
not have a Material Adverse Effect on the Company. The businesses of the Company
and its Subsidiaries are not being, and have not been, conducted in violation of
any law, ordinance or regulation of any Governmental Entity except for
violations or possible violations which individually or in the aggregate do not
and would not reasonably be expected to have a Material Adverse Effect on the
Company. Except as set forth in Section 4.10 of the Company Disclosure Letter,
no investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company, threatened, nor, to the knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which would not reasonably be expected to have a Material Adverse Effect
on the Company.
(b) The Company has made all required filings under applicable
insurance holding company statutes in each jurisdiction where such filings are
required, except for such jurisdictions in which the failure to make such
filings would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
Section 4.11 Employee Plans. (a) Each Company Benefit Plan (as
defined below) (and each related trust agreement or
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insurance contract) is in compliance with its terms and with all contractual
obligations and all obligations under applicable federal, state and local laws,
rules and regulations (domestic and foreign), other than where the failure to so
comply or perform would not be reasonably likely to have, a Material Adverse
Effect on the Company. All contributions and other payments required to be made
by the Company and its Subsidiaries to any Company Benefit Plan or Multiemployer
Plans (as defined below), prior to the date hereof have been made, other than
where the failure to so contribute or make payments would not be reasonably
likely to have, a Material Adverse Effect on the Company, and all accruals or
contributions required to be made under any Company Benefit Plan or
Multiemployer Plan have been made. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or proceeding
pending, threatened or anticipated (other than routine claims for benefits)
against or relating to any Company Benefit Plan or against the assets of any
Company Benefit Plan, which would be reasonably likely to have, a Material
Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
has communicated generally to employees or specifically to any employee
regarding any future increase of benefit levels (or future creations of new
benefits) with respect to any Company Benefit Plan beyond those reflected in the
Company Benefit Plans, which benefit increases or creations, either individually
or in the aggregate, would be reasonably likely to have, a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries presently
sponsors, maintains, contributes to, nor is the Company or its Subsidiaries
required to contribute to, nor has the Company or any of its Subsidiaries ever
sponsored, maintained, contributed to, or been required to contribute to, any
employee pension benefit plan within the meaning of section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
multiemployer plan within the meaning of section 3(37) or 4001(a)(3) of ERISA a
("Multiemployer Plan"), other than the Company's 401(k) plan which is qualified
under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code").
No Company Benefit Plan provides for post-employment or retiree welfare
benefits, except to the extent required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code. Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any other "disqualified person"
or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section
3(14) of ERISA, respectively) has engaged in any transactions in connection with
any Company Benefit Plan that would reasonably be expected to result in the
imposition of a penalty pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA, or a tax pursuant to Section 4975 of the Code, except
where the imposition of such penalties, damages or taxes would not reasonably be
expected to result in a Material Adverse Effect on the Company.
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(b) Neither the Company nor any of its Subsidiaries has incurred,
nor has any event occurred which has imposed or is reasonably likely to impose
upon the Company or any of its Subsidiaries, any withdrawal liability (partial
or complete) in respect of any Multiemployer Plan, which withdrawal liability
has not been satisfied or discharged in full or which, either individually or in
the aggregate, would be reasonably likely to cause, a Material Adverse Effect on
the Company.
(c) The execution, delivery and performance of this Agreement and
the transactions contemplated hereby will not result in the imposition of any
federal excise tax with respect to any Company Benefit Plan.
(d) Except as set forth in Section 4.11 of the Company Disclosure
Letter, no payment or benefit which will or may be made by the Company or any of
its Subsidiaries with respect to any of their employees under any Company
Benefit Plan in effect on the date hereof will be characterized as an "excess
parachute payment" within the meaning of section 280G(b)(1) of the Code.
(e) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workers' compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, including, but not limited to, any "employee benefit
plan" within the meaning of section 3(3) of ERISA and (ii) "Company Benefit
Plan" means any employee pension benefit plan and any Plan, other than a
Multiemployer Plan, established by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributes or has contributed
(including any such Plans not now maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries does not now
contribute, but with respect to which the Company or any of its Subsidiaries has
or may have any liability).
Section 4.12 Employment Relations and Agreement. (a) Except as would
not reasonably be expected to have a Material Adverse Effect on the Company or
as disclosed in Section 4.12(a) of the Company Disclosure Letter, (i) each of
the Company and its Subsidiaries is, and at all times has been, in compliance in
all material respects with all federal, state or other applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice; (ii) no unfair labor practice complaint against the Company or
any of its Subsidiaries is pending before the National Labor Relations Board;
(iii) there is no labor strike, dispute, slowdown or stoppage actually
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pending or threatened against or involving the Company or any of its
Subsidiaries, (iv) no representation question exists respecting the employees of
the Company or any of its Subsidiaries; (v) no grievance exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (vi) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries; and (vii) the Company and its Subsidiaries taken as a whole have
not experienced any material labor difficulty during the last three years.
(b) Except for Employment Agreements and similar agreements,
executed copies of which, as amended, have been delivered to Parent, and as set
forth in the Company SEC Documents or Section 4.12(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has any written, or, to
the knowledge of the Company, any oral, employment or severance agreement with
any other person. The executed copies of the Employment Agreements and similar
agreements previously delivered to Parent are true and correct and such
agreements have not since been amended, modified or rescinded except to the
extent disclosed to Parent.
Section 4.13 Contracts. Except as filed as Exhibits to Company SEC
Documents or as set forth in Section 4.13 of the Company Disclosure Letter,
neither the Company nor its Subsidiaries is a party to, or has any obligation
under, any contract or agreement which contains any covenant currently or
prospectively limiting the freedom of the Company, any of its Subsidiaries or
any of their respective affiliates to engage in any line of business or to
compete with any entity. Subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity, all contracts and agreements to which the Company or any
of its Subsidiaries is a party or by which any of their respective assets is
bound are valid and binding, in full force and effect and enforceable against
the parties thereto in accordance with their respective terms, other than such
failures to be so valid and binding, in full force and effect or enforceable
which, would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on the Company. There is not under any such
contract or agreement any existing default, or event which, after notice or
lapse of time, or both, would constitute a default, by the Company or any of its
Subsidiaries, or to the Company's knowledge, any other party, except to the
extent such default would not reasonably be expected to have a Material Adverse
Effect on the Company.
Section 4.14 Rights Agreement. The Company and the Board of
Directors of the Company have taken all necessary action to amend the Rights
Agreement (subject only to the execution of
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such amendment by the Rights Agent, which execution the Company shall cause to
take place prior to the commencement of the Offer) to (a) render the Rights
Agreement inapplicable with respect to the Offer, the Merger and the other
transactions contemplated by this Agreement and (b) ensure that (x) neither
Parent nor Sub nor any of their Affiliates (as defined in the Rights Agreement)
or Associates (as defined in the Rights Agreement) is considered to be an
Acquiring Person (as defined in the Rights Agreement) and (y) the provisions of
the Rights Agreement, including the occurrence of a Distribution Date (as
defined in the Rights Agreement), are not and shall not be triggered by reason
of the announcement or consummation of the Offer, the Merger or the consummation
of any of the other transactions contemplated by this Agreement. The Company has
delivered to Parent a complete and correct copy of the Rights Agreement as
amended and supplemented to the date of this Agreement.
Section 4.15 State Takeover Statutes; Certain Charter Provisions.
The Board of Directors of the Company has, to the extent such statute is
applicable, taken all action (including appropriate approvals of the Board of
Directors of the Company) necessary to exempt Parent, its Subsidiaries, their
affiliates, the Merger, this Agreement, the Stockholder Agreements and the
transactions contemplated hereby and thereby from Section 203 of the DGCL. No
other state takeover statutes and no charter or bylaw provisions are applicable
to the Merger, this Agreement, the Stockholder Agreements and the transactions
contemplated hereby and thereby.
Section 4.16 Taxes. (a) The Company and each Subsidiary (i) has
timely filed or will timely file all material Tax Returns required to be filed
on or before the Effective Time, which returns are or will be true and complete
in all material respects; (ii) the Company and each Subsidiary has timely paid
or will timely pay, or has adequately disclosed or will adequately disclose, and
has fully provided or will fully provide for as a liability on the financial
statements of the Company and its Subsidiaries in accordance with generally
accepted accounting principles, consistently applied, all material Taxes which
are due and payable with respect to all taxable years or periods that end on or
before the Effective Time and, with respect to any taxable year or period
beginning before and ending after the Effective Time, the portion of such
taxable year or period ending on and including the Effective Time
("Pre-Effective Periods"), and the Company and each Subsidiary has withheld or
collected all material Taxes they were required to withhold and collect, and
have timely paid to the proper authorities such Taxes withheld or collected to
the extent due and payable.
(b) Except as set forth in the Company Disclosure Letter, (i)
neither the Company nor any Subsidiary has waived any statute of limitations in
respect of material Taxes of the
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Company or any Subsidiary; (ii) the Tax Returns referred to in clause (i) of
Section 4.16(a) have been reviewed by the Internal Revenue Service or any other
appropriate taxing authority; and (iii) no issues have been raised by the
relevant taxing authority in connection with such review of the Tax Returns
through a notice or any other correspondence from any taxing authority, and
neither the Company nor any of its Subsidiaries is subject to an audit,
examination, action, suit, proceeding, investigation or claim regarding Taxes
("Tax Controversy") by the appropriate taxing authorities of any nation, state,
province or locality that is currently pending (or scheduled as of the Effective
Time to be conducted) or that has been threatened by any such authority
regarding Taxes; and (iv) all deficiencies asserted or assessments made as a
result of any such Tax Controversy concerning the Tax Returns referred to in
Section 4.16(a) by a taxing authority have been paid in full; and (vii) no liens
or security interests arising in connection with a failure (or alleged failure)
to pay any Taxes have attached to any of the Company's or any of its
Subsidiaries' assets. The Company has delivered to Parent correct and complete
copies of all United States federal, state and all foreign income Tax Returns
(to the extent filed as of the date hereof or, if not filed, correct and
complete copies of extensions thereof), examination reports, statements of
deficiencies assessed against or agreed to by the Company and any of its
Subsidiaries, or any other similar correspondence from a taxing authority,
relating to taxable years 1996, 1997 and 1998.
(c) For purposes of this Agreement (i) "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means any federal, state, local, foreign or
other income, gross receipts, profits, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer, stamp, severance, capital gains, capital stock or
excise tax, or any other tax, levy custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority and shall include any liability
for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity with respect to Taxes, and (ii) "Tax
Return" means any return, form, report or similar statement required to be filed
with respect to any Tax (including any schedules, related or supporting
information), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(d) Except as set forth in the Company Disclosure Letter, none of
the Company or any of its Subsidiaries has agreed to any extension of time with
respect to Tax assessment or deficiency.
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(e) Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has been included in any "consolidated,"
"unitary" or "combined" Tax Return provided for under the law of the United
States, any foreign jurisdiction or any state, province or locality with respect
to Taxes for any taxable period for which the statute of limitations has not
expired.
(f) Except as set forth in the Company Disclosure Letter, there are
no tax sharing, allocation, indemnification or similar agreements in effect as
between the Company or its Subsidiaries or any predecessor or affiliate thereof
and any other party under which Parent or Sub, the Company or its Subsidiaries
could be liable for Taxes or other claims of any party.
(g) No election under Section 341(f) of the Code has been made or
shall be made prior to the Effective Time to treat the Company or its
Subsidiaries as a consenting corporation, as defined in Section 341 of the Code.
(h) Neither the Company nor any of its Subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(i) Neither the Company nor any of its Subsidiaries has been
required to include in income any adjustments pursuant to section 481 of the
Code by reason of a voluntary change in accounting method initiated by the
Company or any of its Subsidiaries, and the Internal Revenue Service has not
initiated or proposed any such adjustment or change in accounting period.
Section 4.17 Intellectual Properties. (a) The Company exclusively
owns, without restrictions, or is licensed to use, the worldwide rights to all
material patents, trademarks, trade names, service marks, copyrights together
with any registrations and applications therefor, Internet domain names, net
lists, schematics, inventories, technology, trade secrets, proprietary
information, know-how, computer software programs or applications including,
without limitation, all object and source codes and tangible or intangible
proprietary information or material that in any material respect are used in the
business of the Company and any of its Subsidiaries as currently conducted (the
"Company Intellectual Property"). Section 4.17 of the Company Disclosure Letter
sets forth: (i) all material patents, trademarks, trade names, service marks,
registered copyrights, and any applications therefor in any nation included in
the Company Intellectual Property; and (ii) all material licenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use
any Company Intellectual Property and includes the identities of the parties
thereto, a description of the
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nature and subject matter thereof, the applicable royalty and the term thereof.
Neither the Company nor any of its Subsidiaries is, or as a result of the
execution, delivery or performance of the Company's obligations hereunder will
be, in violation of, or lose any rights pursuant to, any license or agreement
set forth in Section 4.17 of the Company Disclosure Letter, except as would not
reasonably be expected to have a Material Adverse Effect on the Company.
(b) No claims have been asserted or, to the knowledge of the
Company, are threatened by any person or entity nor does the Company or any of
its Subsidiaries know of any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, use, offer for sale, reproduction,
distribution or modification, of any product or process by the Company or any of
its Subsidiaries infringes or within the six (6) year period immediately prior
to the date hereof has infringed any copyright, trade secret, trademark, patent
or other intellectual property right of any person or entity, (ii) that, if
sustained, might preclude the use by the Company or any of its Subsidiaries of
any Company Intellectual Property, or (iii) challenging the ownership, validity
or enforceability of any of the Company Intellectual Property, except as would
not reasonably be expected to have a Material Adverse Effect on the Company. All
granted and issued patents and all registered trademarks and service marks set
forth in Section 4.17 of the Company Disclosure Letter and all copyrights held
by the Company or any of its Subsidiaries are valid, enforceable and subsisting,
except as would not reasonably be expected to have a Material Adverse Effect on
the Company. To the Company's best knowledge, there has not been and there is
not any unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any person or entity, including, without limitation,
any employee or former employee.
Section 4.18 Voting Requirements. The affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock (voting
as one class, with each share of Common Stock having one (1) vote) entitled to
be cast approving this Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement.
Section 4.19 Year 2000. Section 4.19 of the Company Disclosure
Letter sets forth a summary of the status of the Company's Year 2000 readiness
plan (the "Y2K Readiness Plan"). Upon completion of the Y2K Readiness Plan,
except as set forth in Section 4.19 of the Company Disclosure Letter, to the
knowledge of the Company, all software material to the business, finances or
operations of the Company ("Software"):
(i) shall accurately and completely process
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(including but not limited to calculation, comparison and sequencing, and
including without limitation leap year calculations) date-related data for
dates prior to the year 2000, date-related data for dates after the year
1999, and date-related data for dates both before the year 2000 and after
the year 1999; and
(ii) shall not, as a consequence of the change of centuries or
of the fact that date from more than one century is being processed, cause
an abnormal termination of execution, an endless loop, incorrect values or
invalid results, or otherwise fail to perform accurately and completely
those functions set forth in the associated user documentation.
Section 4.20 Brokers. No broker, investment banker or other person
or entity, other than William Blair & Company, L.L.C., the fees and expenses of
which will be paid by the Company, is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions contem
plated by this Agreement based upon arrangements made by or on behalf of the
Company. A true and correct copy of the engagement letter of William Blair &
Company, L.L.C., as in effect on the date hereof has been delivered to Parent.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by the Company Pending the Merger.
Except as otherwise expressly contemplated by this Agreement or as described in
the Company Disclosure Letter, during the period from the date of this Agreement
through the Effective Time, the Company shall, and shall cause its Subsidiaries
to, in all material respects carry on their respective businesses in, and not
enter into any material transaction other than in accordance with, the regular
and ordinary course and, to the extent consistent therewith, use its reasonable
best efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them. Without limiting the generality of the foregoing, and,
except as otherwise expressly contemplated by this Agreement or as described in
the Company Disclosure Letter, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Parent:
(a) (x) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make
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any payments to stockholders of the Company in their capacity as such,
other than dividends payable to the Company declared by any of the
Company's Subsidiaries, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock or (z) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into or exchangeable or
exercisable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or equity equivalent
(other than, in the case of the Company, the issuance of Shares during the
period from the date of this Agreement through the Effective Time upon the
exercise of Stock Options outstanding (as set forth in Section 4.2) on the
date of this Agreement in accordance with their current terms or enter
into any agreement or contract with respect to the sale or issuance of any
of its securities;
(c) amend its charter or bylaws or the Rights Agreement;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets (other than in the ordinary course of business consistent with
past practice);
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets that are material, individually or
in the aggregate, to the Company and its Subsidiaries taken as a whole;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except for borrowings or guarantees incurred in the
ordinary course of business consistent with past practice for working
capital purposes, or make any loans, advances or capital contributions to,
or investments in, any other person or entity, other than to the Company
or any wholly owned Subsidiary of the Company and other than in the
ordinary course of business consistent with past practice;
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(g) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
Subsidiary of the Company or adopt any plan with respect to any of the
foregoing;
(h) grant any severance or termination pay not currently required to
be paid under existing severance plans or enter into or adopt, or amend
any existing, severance plan, agreement or arrangement or, other than in
the ordinary course of business, enter into or amend any employee benefit
plan (including without limitation, the Stock Option Plans), or enter into
or amend employment or consulting agreement;
(i) enter into any contract or commitment with respect to capital
expenditures with a value in excess of, or requiring expenditures by the
Company and its Subsidiaries in excess of, $100,000, individually, or
enter into contracts or commitments with respect to capital expenditures
with a value in excess of, or requiring expenditures by the Company and
its Subsidiaries in excess of, $500,000, in the aggregate;
(j) except to the extent required under existing employee and
director benefit plans, agreements or arrangements as in effect on the
date of this Agreement, increase the compensation or fringe benefits of
any of its directors, officers or employees provided that, with respect to
employees that are not executive officers or directors, the Company may
increase compensation associated with promotions and regular reviews in
the ordinary course of business consistent with past practice;
(k) agree to the settlement of any material claim or litigation;
(l) make or rescind any material tax election or settle or
compromise any material tax liability;
(m) except as required by applicable law or GAAP, make any material
change in its method of accounting;
(n) except as required under the Stock Option Plans and as otherwise
provided in this Agreement, accelerate the payment, right to payment or
vesting of any bonus, severance, profit sharing, retirement, deferred
compensation, stock option, insurance or other compensation or benefits;
(o) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted,
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contingent or otherwise), other than the payment, discharge or
satisfaction (A) of any such claims, liabilities or obligations in the
ordinary course of business and consistent with past practice or (B) of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) contained in the Company SEC Documents;
(p) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's or any of its Subsidiaries'
ability to compete with or conduct any business or line of business,
including, but not limited to, geographic limitations on the Company's or
any of its Subsidiaries' activities;
(q) materially modify, amend or terminate any material contract to
which it is a party or waive any of its material rights or claims except
in the ordinary course of business consistent with past practice; or
(r) agree, in writing or otherwise, to take any of the foregoing
actions, provided, however, that nothing in this Section 5.1 shall be
deemed as prohibiting the Company from making such expenditure as it deems
reasonably necessary to complete its Y2K Readiness Plan as set forth in
Schedule 4.19 of the Company Disclosure Schedule.
Section 5.2 No Solicitation. (a) The Company and its affiliates (as
such term is defined under Rule 12b-2 under the Exchange Act) and each of their
respective officers, directors, employees, financial advisors, attorneys and
other advisors, representatives and agents shall immediately cease any
discussions or negotiations which may be ongoing with third parties with respect
to any Takeover Proposal (as defined below). The Company shall not, nor shall it
permit any of its affiliates (as defined under Rule 12b-2 under the Exchange
Act) to, nor shall it authorize or permit any officer, director or employee of
or any financial advisor, attorney or other advisor, representative or agent of,
the Company or any of its affiliates to, (i) solicit, facilitate, initiate or
encourage the submission of, any Takeover Proposal (as hereafter defined)
(including, without limitation, the taking of any action which would make the
Rights Agreement or Section 203 of the Delaware General Corporation inapplicable
to a Takeover Proposal), (ii) enter into any agreement with respect to any
Takeover Proposal or enter into any arrangement, understanding or agreement
requiring it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement or (iii) participate in any way in
any discussions or negotiations regarding, or furnish to any person or legal
entity (other than Parent or Sub) any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
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constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that prior to acceptance for payment of Shares pursuant to
the Offer, in response to an unsolicited Takeover Proposal and in compliance
with its obligations under Section 5.2(d) hereof, the Company may participate in
discussions or negotiations with or furnish information (pursuant to a
confidentiality agreement with terms not more favorable to such third party than
the terms of the Confidentiality Agreement) to any third party which makes a
Superior Proposal (as defined below) if the Board of Directors believes (based
on the written advice of independent, outside, nationally-recognized, legal
counsel) that failing to take such action would constitute a breach of its
fiduciary duties. For purposes of this Agreement, "Takeover Proposal" means (i)
any inquiry, proposal or offer from any person or entity relating to any direct
or indirect acquisition or purchase of a substantial amount of assets of the
Company or any of its Subsidiaries or of over 15% of any class of equity
securities of the Company or any of its Subsidiaries, (ii) any tender offer or
exchange offer that, if consummated, would result in any person or entity
beneficially owning 15% or more of any class of equity securities of the Company
or any of its Subsidiaries or (iii) any merger, consolidation, business
combination, sale of all, or substantially all, of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries; and "Superior Proposal" means a bona fide proposal made by a
third party to acquire all outstanding Shares pursuant to a tender offer or a
merger or purchase of all of the assets of the Company (w) on terms which a
majority of the disinterested members of the Board of Directors of the Company
determines in its good faith reasonable judgment (based on the written advice of
William Blair & Company L.L.C. and independent, outside, nationally-recognized,
legal advisors) to be more favorable to the Company and its stockholders than
the transactions contemplated hereby, (x) for which financing is then available
(it being understood that financing evidenced by highly confident letters and
similar letters shall not be considered "available" for purposes of this
Section), (y) which is not subject to any financing or due diligence condition
and (z) which, in the written opinion of William Blair & Company L.L.C., is more
favorable to the Company's stockholders from a financial point of view than the
transactions contemplated hereby, as proposed to be modified by Parent in
accordance with Section 8.1(d)(iii).
(b) Except as set forth in Section 5.2(c), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by such Board of Directors or such committee of the
Offer, the Merger or this Agreement, or (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or
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(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Takeover Proposal.
(c) Notwithstanding anything to the contrary herein, prior to the
acceptance for payment of Shares pursuant to the Offer, the Company may
recommend to its stockholders a Takeover Proposal and in connection therewith
withdraw or modify its approval or recommendation of the Offer or the Merger if
(1) a third party makes a Superior Proposal, (2) all the conditions to the
Company's right to terminate this Agreement in accordance with Section
8.1(d)(iii) hereof have been satisfied (including the expiration of the five (5)
business-day period described therein and the payment of all amounts required
pursuant to Section 6.3 hereof) and (3) simultaneously with such withdrawal,
modification or recommendation, this Agreement is terminated in accordance with
Section 8.1(d)(iii) hereof.
(d) In addition to the obligations of the Company set forth in
paragraphs (a), (b) and (c) of this Section 5.2, on the date of receipt thereof,
if possible, but no later than twelve (12) hours after receipt thereof, the
Company shall advise Parent in writing of any request for information or any
Takeover Proposal, or any inquiry, proposal, discussions or negotiation with
respect to any Takeover Proposal, the terms and conditions of such request,
Takeover Proposal, inquiry, proposal, discussion or negotiation and the Company
shall promptly provide to Parent copies of any written materials received by the
Company in connection with any of the foregoing, and the identity of the person
or entity making any such Takeover Proposal or such request, inquiry or proposal
or with whom any discussion or negotiations are taking place. The Company shall
keep Parent fully informed of the status and details (including amendments or
proposed amendments) of any such request or Takeover Proposal and keep Parent
fully informed as to the details of any information requested of or provided by
the Company and as to the details of all discussions or negotiations with
respect to any such request, takeover proposal or inquiry. The Company shall
promptly provide to Parent any non-public information concerning the Company
provided to any other person or entity in connection with any Takeover Proposal
which was not previously provided to Parent.
(e) Nothing contained in this Section 5.2 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by the
Exchange Act or from making any disclosure to the Company's stockholders if, in
the good faith judgment of the Board of Directors of the Company (based upon
written advice of independent, outside, nationally-recognized, legal advisors),
such disclosure is required by applicable state or Federal securities laws or is
necessary in order to comply with its fiduciary duties to the
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Company's stockholders under applicable law.
(f) Immediately following the execution of this Agreement, the
Company shall request each person or entity which has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring the
Company or any portion thereof to return all confidential information heretofore
furnished to such person or entity by or on behalf of the Company.
Section 5.3 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, (i) the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which the Company or any of its Subsidiaries is a
party (other than any involving Parent), and (ii) the Company shall enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States or any state thereof having
jurisdiction.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Company Stockholder Approval; Proxy Statement. (a)
Promptly following the purchase of Shares pursuant to the Offer if approval of
the Merger by the stockholders of the Company is required by applicable law, the
Company shall call a meeting of its stockholders (the "Stockholder Meeting") for
the purpose of voting upon the Merger and shall take all action necessary or
advisable to obtain stock holder approval of the Merger. The Stockholder Meeting
shall be held as soon as practicable following the purchase of Shares pursuant
to the Offer and the Company will, through its Board of Directors, subject to
this Agreement, recommend to its stockholders the approval of the Merger. The
record date for the Stockholder Meeting shall be a date subsequent to the date
Parent or Sub becomes a record holder of Shares purchased pursuant to the Offer.
(b) If stockholder approval of the Merger is required by applicable
law, the Company will, as soon as practicable following the expiration of the
Offer, prepare and file a preliminary Proxy Statement with the SEC and will use
its reasonable best efforts to respond to any comments of the SEC or its staff
and to cause the Proxy Statement to be cleared by the SEC. The Company will
notify Parent of the receipt of any comments from the SEC or its staff and of
any request by the SEC
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or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. The Company shall give Parent and its counsel the opportunity to review
the Proxy Statement prior to its being filed with the SEC and shall give Parent
and its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company and Parent agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC. As promptly as practicable after the Proxy
Statement has been cleared by the SEC, the Company shall mail the Proxy
Statement to the stockholders of the Company. If at any time prior to the
approval of this Agreement by the Company's stockholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will prepare and mail to its stockholders such an
amendment or supplement.
(c) The Company shall take all such action as may be necessary or
advisable to obtain the necessary approvals by its stockholders of the Merger,
this Agreement and the transactions contemplated hereby.
(d) Parent agrees to cause all Shares purchased pursuant to the
Offer and all other Shares owned by Parent, Sub or any other Subsidiary of
Parent to be voted in favor of the approval of the Merger.
Section 6.2 Access to Information. (a) The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent, and to Parent's
accountants, counsel, financial advisers and other representatives, reasonable
access and permit them to make such inspections as they may reasonably request
during normal business hours during the period from the date of this Agreement
through the Effective Time to all their respective properties, information
systems, books, contracts, commitments and records and, during such period, the
Company shall, and shall cause each of its Subsidiaries to, furnish promptly to
Parent (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state laws and (ii) all other information concerning its business, properties
and personnel as Parent may reasonably request. In no event shall the Company
prior to the purchase of Shares in the Offer, be requested to supply to Parent,
or to Parent's accountants, counsel, financial advisors or other
representatives, any information relating to indications of interest from, or
discussions with, any other
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potential acquirors of the Company which were received or conducted prior to the
date hereof, except to the extent necessary for use in the Offer Documents, the
Schedule 14D-9 and the Proxy Statement. Except as required by law, prior to the
Effective Time Parent will hold, and will cause its affiliates, associates and
representatives to hold, any nonpublic information in confidence in accordance
with the terms of the Confidentiality Agreement dated March 24, 1999. In the
event of termination of this Agreement for any reason, Parent shall promptly
destroy all non-public documents so obtained from the Company or any of its
Subsidiaries and any copies made of such documents for Parent.
(b) The Company agrees that between the date hereof and the
Effective Time, Parent and its representatives shall have the right, during
normal business hours, and at other reasonable times upon request, to have full
and complete access to the Company's hardware, information systems and Software
including without limitation, those identified on Schedule 4.19 for the purpose
of assisting the Company in assessing, developing, executing and testing the
Company's Y2K Readiness Plan. In connection therewith, the Company shall cause
its officers, employees and agents to fully cooperate with the representatives
of Parent and to provide them with all information, data, records, documents and
any other material which they may request relating to the Company's hardware,
Software and information systems. The Company shall seriously consider any and
all recommendations made by Parent or its representatives relating to the
Company's Y2K Readiness Plan and shall take full advantage of the Parent's
resources and expertise in connection therewith. In addition, if the Parent
reasonably determines that there exists any material deficiency in the Company's
Y2K Readiness Plan, the Company shall take such action as the Parent reasonably
requests is necessary to cure such deficiency. As part of this process, the
Company and Parent shall establish a joint Y2K Readiness steering committee
which shall consider and make recommendations relating to the Company's Y2K
Readiness Plan (the "Committee"), which shall consist of three representatives
from the Company and up to three representatives designated by Parent. The
Committee shall meet physically or telephonically as often as may be necessary
for the purpose of ensuring that the Company is assessing, developing, executing
and testing the Company's Y2K Readiness Plan in a timely and effective manner.
If the members of the Committee do not by majority vote agree on or prior to
July 13, 1999 that the Company's Y2K Readiness Plan is or will be implemented on
a timely and effective manner in all material respects, the Company and the
Parent shall designate a third party consultant which is mutually acceptable to
both the Company and Parent to assess and make recommendations with respect to
the Company's Y2K Readiness Plan (the "Consultant"). If the Consultant
identifies any material deficiency in the Company's Y2K Readiness Plan, the
Company agrees to follow the recommendations of Consultant which are reasonably
requested by
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the Parent.
Section 6.3 Fees and Expenses. (a) Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, except as expressly set forth in this Agreement.
(b) If this Agreement is terminated (i) by Parent in accordance with
Section 8.1(b)(ii) hereof because of the occurrence of any of the events set
forth in clauses (d), (e) or (f) of Exhibit A; (ii) Parent or the Company, as
the case may be, in accordance with Sections 8.1(b)(i) or 8.1(d)(iii) hereof; or
(iii) by Parent, pursuant to any provision herein other than those described in
the preceding clauses (i) and (ii) of this paragraph (b), or, except to the
extent the that the termination of this Agreement is the result of a breach by
Parent or Sub in any material respect its representations, warranties or
covenants in this Agreement, by the Company pursuant to Section 8.1(d)(i) or
8.1(d)(ii) if, in any such case described in this clause (iii) of this paragraph
(b), (x) a Takeover Proposal has been made after the date of this Agreement and
(y) within twelve (12) months of the date of such termination, the Company shall
enter into an Acquisition Agreement with any person or entity other than Parent
or any of its affiliates, then the Company shall (except as required to be paid
earlier in accordance with Section 8.1(d)(iii) hereof) on the business day next
succeeding the date of termination (or in the case of a termination pursuant to
clause (iii) of this paragraph (b), the business day next succeeding the
execution of such agreement), (A) reimburse Parent in immediately available
funds for the Expenses of Parent and Sub, not to exceed $1,500,000, and (B) pay
to Parent in immediately available funds an amount equal to $3.9 million.
"Expenses" shall mean documented and reasonable out-of-pocket fees and expenses
incurred or paid by or on behalf of Parent or Sub in connection with the Offer,
the Merger or the consummation of any of the transactions contemplated by this
Agreement, including, but not limited to, all filing fees, printing fees and
reasonable fees and expenses of law firms, commercial banks, investment banking
firms, accountants, experts and consultants to Parent.
Section 6.4 Stock Options. (a) The Company shall (i) terminate the
Stock Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries (collectively "Stock Incentive Plans"),
immediately prior to the Effective Time without prejudice to the holders of
Stock Options (as hereinafter defined), (ii) grant no additional Stock Options
(as hereinafter defined), and (iii) amend, immediately prior to the Effective
Time, the provisions of
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any other Company Benefit Plan providing for the issuance, transfer or grant of
any Shares, or any interest in respect of any Shares, to provide no continuing
rights to acquire, hold, transfer, or grant any Shares or any interest in any
Shares.
(b) Immediately upon the consummation of the Offer, provided that a
"Change of Control" has occurred under the terms of the Stock Incentive Plans,
all outstanding employee stock options, whether or not then fully exercisable or
vested, to purchase Shares (a "Stock Option") heretofore granted under the Stock
Incentive Plans shall become fully exercisable and vested, and the Stock Options
shall be cancelled by the Company, and the holders thereof shall receive a cash
payment (the "Cash Payment") from the Company in an amount (if any) equal to the
number of Shares subject to such option multiplied by the difference (if
positive) between the exercise price per Share covered by the option and the
highest per share price offered to stockholders of the Company in the Offer. The
Company shall request such holders to acknowledge the cancellation of all Stock
Options held by such holders, including any Stock Options as to which the
exercise price equals or exceeds such price per share. The Company shall deliver
to Parent within five business days of the date hereof a true and complete list
of Stock Options which are outstanding as of the date hereof, together with
detailed calculations of the Cash Payments relating to such Stock Options had
the Effective Time occurred on the date of delivery thereof. The Company shall
update such list and such calculations as of, and deliver such update to Parent
on, the date that is two business days prior to the Effective Time, such updated
list and calculations made as if the Effective Time would occur on such date.
Except as otherwise contemplated herein, any then-outstanding stock appreciation
rights or limited stock appreciation rights issued by the Company or any
Subsidiary of the Company shall be cancelled immediately prior to the Effective
Time without any payment therefor. The Company shall ensure that neither it nor
any of its Subsidiaries is or will be bound by any Stock Options, other options,
warrants rights or agreements which would entitle any person or entity, other
than Parent or it Subsidiaries, to own any Shares or to receive any payment in
respect thereof.
Section 6.5 Reasonable Best Efforts. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger, and the other
transactions contemplated by this Agreement, including (a) obtaining all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, including
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without limitation, all filings under the HSR Act, and the Insurance Approvals)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from or to avoid an action or proceeding by any Governmental Entity,
(b) obtaining all necessary consents, approvals or waivers from third parties,
(c) defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (d) executing and delivering any additional instruments
necessary to consummate the transactions contemplated by this Agreement.
Section 6.6 Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or regulation or by obligations pursuant to
any listing agreement with any national securities exchange or the Nasdaq
National Market.
Section 6.7 Indemnification; Directors and Officers Insurance. (a)
From and after the Effective Time, Parent agrees to, and to cause the Surviving
Corporation to, indemnify and hold harmless all past and present officers,
directors, employees and agents of the Company and of its Subsidiaries to the
full extent such persons may be indemnified by the Company pursuant to the
Company's Certificate of Incorporation and Bylaws as in effect as of the date
hereof for acts and omissions occurring at or prior to the Effective Time and
shall advance reasonable expenses incurred by such persons in connection with
defending any action arising out of such acts or omissions, provided that the
Company receives reasonable affirmations and undertakings from such persons to
repay all amounts advanced if it should be ultimately determined that such
person was not entitled to indemnification.
(b) Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, for
the benefit of the Company's current directors and officers, an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; provided, however, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the such insurance in excess of 1.25
times the last annual premium paid prior to the date hereof, but in such case
shall purchase as much such coverage as possible for
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such amount.
Section 6.8 Employee Benefits. (a) Until at least December 31, 1999,
Parent shall maintain employee benefits and programs for retirees, officers and
employees of the Company and its Subsidiaries that are no less favorable in the
aggregate than those being provided to such retirees, officers and employees on
the date hereof (it being understood that Parent will not be obligated to
continue any one or more employee benefits or programs); provided that the
Company shall not be obligated to continue any Stock Incentive Plan or provide
any other incentive plan or benefits in lieu thereof. For purposes of
eligibility to participate in and vesting in all benefits provided to retirees,
officers and employees, retirees, officers and employees of the Company and its
Subsidiaries will be credited with years of service with the Company and its
Subsidiaries and years of service with prior employers to the extent service
with prior employers is taken into account under plans of the Company. Amounts
paid before the Effective Time by retirees, officers and employees of the
Company under any medical plans of the Company shall after the Effective Time be
taken into account in calculating balances for deductibles and maximum
out-of-pocket limits applicable under the medical plan of Parent for the plan
year during which the Effective Time occurs as if such amounts had been paid
under such medical plan of Parent.
(b) After the Effective Time, Parent shall cause the Company to
maintain for 1999, without modification or amendment, its Management Bonus Plan
for all covered employees. Parent agrees that the following principles shall
apply for purposes of determining bonuses for 1999 under the Company's
Management Incentive Plan: (1) only persons who are employees of the Company or
any of its Subsidiaries at December 31, 1999 and who, at such time, are covered
by such plan shall be eligible to receive such bonuses (which shall be paid no
later than March 1, 2000), except that a covered employee whose employment is
terminated prior to December 31, 1999 and meets any of the following conditions
shall be eligible to receive a pro rata portion of the 1999 bonus: (x) those
individuals who are entitled to a severance payment (other than a bonus payment)
under an employment agreement with the Company as a result of such termination;
(y) those individuals who, are entitled to a severance payment under the
Company's severance policy as of May 1, 1999 as a result of such termination;
and (z) those individuals who are entitled to a pro rata portion of the bonus
pursuant to the terms of an employment agreement with the Company, to the extent
provided in such employment agreement; (2) whether any bonuses are payable under
such plan and, if so, the amounts thereof shall be determined as if the
transactions contemplated hereby had not occurred and the Company had remained
an independent, publicly-owned company through December 31, 1999; and (3) the
timing of payment of any bonuses payable pursuant to
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clause (2) above shall be consistent with past practices. Except as otherwise
set forth in an employment agreement, the pro rata portion of an employee's
bonus shall be the amount determined pursuant to the preceding sentence
multiplied by a fraction, the numerator of which shall be the number of days
during 1999 for which such employee was employed by the Company or any of its
Subsidiaries and the denominator of which shall be 365.
Section 6.9 Employee Agreements, Stay Bonuses, Etc. (a) Parent shall
maintain the Company's standard severance policy as in effect on the date hereof
for a period of at least two years from the Effective Time. A true and correct
copy of the Company's severance policy has been provided to the Parent.
(b) Parent shall honor or cause to be honored all employment,
severance and similar agreements with the Company's officers and employees to
the extent that executed copies of such agreements have been delivered to Parent
or are disclosed in the Company SEC Documents or the Company Disclosure Letter.
(c) Parent and its Subsidiaries shall provide reasonable and
customary outplacement services to officers of the Company and its Subsidiaries
who are terminated by the Company as a result of, or within two years following,
the Merger, which outplacement services provided to such officer shall include
one-on-one counseling and assistance.
Section 6.10 Board Representations. Promptly upon Sub having
acquired a majority of the Shares on a fully diluted basis, Sub shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Sub, subject to compliance with Section 14(f) of the
Exchange Act, a percentage of all directors rounded up to the nearest whole
number equal to the percentage of the outstanding Shares then owned by Sub, and
the Company shall, at such time, cause Sub's designees to be so elected by its
existing Board of Directors; provided, however, that in the event that Sub's
designees are so elected to the Board of Directors of the Company, until the
Effective Time such Board of Directors shall have at least three directors who
are directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further that, in such event,
if the number of Independent Directors shall be reduced below three for any
reason whatsoever, the remaining Independent Directors or Director shall
designate a person or persons to fill such vacancy or vacancies, each of whom
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors shall designate
three persons to fill such vacancies who shall not be officers or affiliates of
the Company or any of its subsidiaries, or officers or affiliates of Parent or
any of its subsidiaries, and such persons shall be deemed to be Independent
Directors for
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purposes of this Agreement. Subject to applicable law, the Company shall take
all action requested by Parent that is reasonably necessary to effect any such
election, including mailing to its stockholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, increase the size of the Company's Board
of Directors, or remove or cause the resignation of sufficient directors to
enable Sub's designees to be elected or appointed to, and to constitute a
majority of the directors on, the Company's Board of Directors as provided
above.
Section 6.11 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall take all
such action as may be necessary or advisable to obtain such approvals and take
such actions as are necessary or advisable so that the transactions contemplated
hereby and by the Stockholder Agreements may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby and thereby.
Section 6.12 Rights Agreement. The Company shall not, unless
required to do so by a court of competent jurisdiction, (i) redeem the Rights
(ii) amend (other than to delay the Distribution Date (as defined therein) or to
render the Rights inapplicable to the Offer and the Merger) or terminate the
Rights Agreement prior to the Effective Time without the consent of Parent, or
(iii) take any action which would allow any Person (as such term is defined in
the Rights Agreement) other than Parent or Sub to be the Beneficial Owner (as
such term is defined in the Rights Agreement) of 15% or more of the Common Stock
without causing a Distribution Date (as such term is defined in the Rights
Agreement) or a Triggering Event (as such term is defined in the Rights
Agreement) to occur.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
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(a) Stockholder Approval. If approval of the Merger by the holders
of the Common Stock is required by applicable law, the Merger shall have
been approved by the requisite vote of such holders.
(b) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree or injunction which
prohibits or has the effect of prohibiting the consummation of the Merger;
provided, however, that the Company, Parent and Sub shall use their
reasonable best efforts to have any such order, decree or injunction
vacated.
(c) Purchase of Shares. Sub shall have accepted for payment and paid
for the Shares properly tendered pursuant to the Offer in an amount
sufficient to satisfy the Minimum Condition; provided, however, that this
condition will be deemed waived with respect to the obligations of Parent
and Sub if Sub fails to accept for payment and pay for any Shares pursuant
to the Offer in violation of the terms of this Agreement or the Offer.
(d) HSR Act Waiting Period. The applicable waiting period (and any
extension thereof) under the HSR Act shall have expired or been
terminated.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after any approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by the Parent or Sub:
(i) if, prior to the purchase of Shares pursuant to the Offer,
the Company has breached in any material respect any representation,
warranty, covenant or other agreement contained in this Agreement
which (i) would give rise to the failure of a condition set forth in
clause (d) or (e) of Exhibit A, (ii) cannot or has not been cured
prior to fifteen (15) days after the giving of written notice of
such breach to the Company and (iii) has not been waived by Parent
pursuant to the provisions hereof; or
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(ii) if the Offer is terminated or expires in accordance with
its terms without Sub having purchased any Shares thereunder due to
an occurrence which results in a failure to satisfy any one or more
of the conditions set forth on Exhibit A hereto, unless any such
failure shall have been caused by or resulted from the breach by
Parent or Sub in any material respect of their respective
representations and warranties in this Agreement or the failure of
Parent or Sub to perform in any material respect any covenant or
agreement of either of them contained in this Agreement; or
(iii) it shall have been publicly disclosed, or the Parent
shall have otherwise learned, that beneficial ownership (determined
for the purposes of this paragraph (b)(iii) as set forth in Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding Shares has been acquired by any person, entity or group
(as defined in Section 13(d)(3) under the Exchange Act).
(c) by the Company:
(i) if Parent or Sub shall have (i) terminated the Offer or
(ii) failed to pay for any Shares pursuant to the Offer on or prior to the
Termination Date, unless, in the case of (i) or (ii), such termination or
failure shall have been caused by the failure of the Company to satisfy
the conditions set forth in clauses (d) or (e) of Exhibit A;
(ii) if the Offer has not been timely commenced in accordance
with Section 1.1(a); or
(iii) if, prior to the purchase of Shares pursuant to the
Offer, Parent or Sub has breached in any material respect any
representation, warranty, covenant or other agreement contained in this
Agreement which cannot be or has not been cured within fifteen (15) days
after the giving of written notice to Parent or Sub (other than any
matters that, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect with respect to Parent or Sub); or
(d) by either Parent or the Company:
(i) if the Effective Time has not occurred on or prior to the
close of business on the date which is 120 days after the date of this
Agreement (the "Termination Date"); provided, however, that the
Termination Date shall be the date which is 180 days after the date of
this Agreement if the Regulatory Condition has not been satisfied but all
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other conditions set forth in Exhibit A have been satisfied on the date
which is 120 days after the date of this Agreement; provided, further,
that the right to terminate this Agreement pursuant to this clause shall
not be available (y) to Parent if Sub or any affiliate of Sub acquires
Shares pursuant to the Offer, or (z) to any party whose failure to fulfill
any material obligation of this Agreement or other material breach of this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to have occurred on or prior to the aforesaid date;
(ii) if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall
have issued an order, decree or ruling or taken any other action
permanently restricting, enjoining, restraining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable;
(iii) if a Superior Proposal is received by the Company and
the Board of Directors of the Company believes (based on the written
advice of independent outside nationally recognized legal counsel) that a
failure to terminate this Agreement and enter into an agreement to effect
the Superior Proposal would constitute a breach of its fiduciary duties;
provided, however that the Company may not terminate this Agreement
pursuant to this Section 8.1(d)(iii) unless and until (i) five (5)
business days have elapsed following delivery to Parent of a written
notice of such determination by the Board of Directors and during such
five (5) business day period the Company has fully cooperated with Parent
including, without limitation, informing Parent of the terms and
conditions of such Superior Proposal, and the identity of the person or
entity making such Superior Proposal, with the intent of enabling both
parties to agree to a modification of the terms and conditions of this
Agreement so that the transactions contemplated hereby may be effected;
(ii) at the end of such five (5) business day period the Takeover Proposal
continues to constitute a Superior Proposal and the Board of Directors of
the Company continues to believe (and has again been advised in writing by
independent outside nationally recognized legal counsel) that a failure to
terminate this Agreement and enter into an agreement to effect the
Superior Proposal would constitute a breach of its fiduciary duties; and
(iii) (x) prior to such termination, Parent has received all fees set
forth in Section 6.3 hereof by wire transfer in same day funds and (y)
simultaneously with such termination the Company enters into a definitive
acquisition, merger or similar agreement to effect the Superior Proposal.
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Section 8.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent or Sub or their respective officers or
directors (except as set forth in the last sentence of Section 1.02(c), Section
3.5, Section 4.20, the last two sentences of Section 6.2 and Section 6.3, which
shall survive the termination); provided, however, that nothing contained in
this Section 8.2 shall relieve any party hereto from any liability for any
breach of this Agreement.
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after any approval of the Merger by the stockholders of
the Company but, after the purchase of Shares pursuant to the Offer, no
amendment shall be made which decreases the Merger Consideration or which in any
way materially adversely affects the rights of such stockholders, without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Following the election or appointment of the Sub's designees pursuant to Section
6.10 and prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors then in office shall be required by the Company to (i)
amend or terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights or remedies under this Agreement, (iii) extend the time for
performance of Parent and Sub's respective obligations under this Agreement or
(iv) take any action to amend or otherwise modify the Company's Certificate of
Incorporation or By-Laws.
Section 8.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. None of
the representations and warranties in this
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Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time; provided however, the Section 9.1 shall not limit
any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier (other than United Parcel Service)) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent, to
c/o The Guardian Life Insurance Company of
America
222 Park Avenue South
New York, NY 10003
Attention: Mr. Herschel Reich
Facsimile No.: (212) 253-8583
with copies to:
The Guardian Life Insurance Company of
America
201 Park Avenue South
New York, NY 10003
Attention: Debra R. Smith, Esq.
Facsimile No.: (212) 677-4240
with further copies to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Timothy B. Goodell, Esq.
Facsimile No.: (212) 354-8113
(b) if to the Company, to
First Commonwealth, Inc.
444 North Wells Street
Suite 600
Chicago, IL 60610
Attention: Mr. Christopher C. Multhauf and
Mr. David W. Mulligan
Facsimile No.: 312-832-0065
with a copy to:
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Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq. and
Alfred N. Sacha, Esq.
Facsimile No.: (312) 853-7036
Section 9.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." When the phrase "knowledge of the
Company" is used herein, it shall refer to the actual knowledge of the
individuals set forth in Section 9.3 of the Company Disclosure Schedule. As used
in this Agreement, "business day" shall have the meaning ascribed thereto in
Rule 14d-1(c)(6) under the Exchange Act.
Section 9.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, together
with the Confidentiality Agreement dated March 24, 1999, (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) except for the provisions of Sections 2.5, 6.4, 6.7, 6.8, and 6.9 of
this Agreement, is not intended to confer upon any person or entity other than
the parties any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall
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relieve Parent or Sub of any of its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
Section 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally contemplated to the
fullest extent possible.
Section 9.9 Enforcement of this Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 9.10 Incorporation of Exhibits. The Company Disclosure
Letter and all Exhibits and annexes attached hereto and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if fully
set forth herein.
- 49 -
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Herschel Reich
------------------------------
Name: Herschel Reich
Title: Vice President,
Group Health Care
FLOSS ACQUISITION CORP.
By: /s/ Herschel Reich
------------------------------
Name: Herschel Reich
Title: Vice President,
Dental Plans
FIRST COMMONWEALTH, INC.
By: /s/ Christopher C. Multhauf
------------------------------
Name: Christopher C. Multhauf
Title: Chairman
- 50 -
<PAGE>
EXHIBIT A
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or pay for, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) of the
Exchange Act, any Shares not theretofore accepted for payment or paid for and
may terminate or amend the Offer as to such Shares unless (i) there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
that number of Shares which would represent at least a majority of the
outstanding Shares on a fully diluted basis (the "Minimum Condition"), (ii) any
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer shall have expired or been terminated (the "HSR Condition") and
(iii) all necessary filings with each DOI shall have been completed and, to the
extent required, each of the DOI shall have issued a final order (which order
shall not have been stayed or enjoined) approving, exempting or otherwise
authorizing consummation of the Offer and the Merger and all other transactions
contemplated by this Agreement (the "Insurance Condition") (the HSR Condition
and the Insurance Condition are collectively referred to as the "Regulatory
Condition"). Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to commence the Offer or accept for payment
or to pay for any Shares not theretofore accepted for payment or paid for, and
may terminate or amend the Offer if at any time on or after the date of this
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exist or shall occur and remain in
effect:
(a) there shall be threatened, instituted or pending any action or
proceeding by any Governmental Entity, domestic or foreign, or by any other
person or entity, domestic or foreign, before any court of competent
jurisdiction or Governmental Entity, domestic or foreign, (i) challenging or
seeking to, or which could reasonably be expected to make, illegal, impede or
otherwise directly or indirectly restrain, prohibit the Offer or the Merger or
seeking to obtain material damages in connection therewith, (ii) seeking to
prohibit or materially limit the ownership or operation by Parent or Sub of all
or any material portion of the business or assets of the Company and its
Subsidiaries taken as a whole or to compel Parent or Sub to dispose of or hold
separately all or any material portion of the business or assets of Parent and
its subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole, or seeking to impose any limitation on the ability of Parent or Sub to
conduct its business or own such assets, (iii) seeking to impose limitations on
the ability of Parent or Sub effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares acquired
or owned by Parent or Sub on all matters properly presented to the
- 51 -
<PAGE>
Company's stockholders, (iv) seeking to require divestiture by Parent or Sub of
any Shares or (v) otherwise directly or indirectly relating to the Offer or the
Merger and which would reasonably be expected to have a Material Adverse Effect
on the Company or Parent or the value of the Shares;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended or issued and applicable to (i) Parent,
Sub, the Company or any Subsidiary of any of them or (ii) the Offer or the
Merger, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign, other
than the routine application of the waiting period provisions of the HSR Act to
the Offer or to the Merger, which would reasonably be expected to directly or
indirectly, result in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
(c) any change shall have occurred that would reasonably be expected
to have a Material Adverse Effect on the Company;
(d) any of the representations or warranties made by the Company in
the Merger Agreement that are qualified as to materiality shall be untrue or
incorrect in any respect or any such representations and warranties that are not
so qualified shall be untrue or incorrect in any material respect, in each case
as of the date of the Merger Agreement and the scheduled expiration date of the
Offer, except (i) for changes specifically permitted by the Merger Agreement and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(f) the Company's Board of Directors or any committee thereof shall
have withdrawn, or shall have modified or amended in a manner adverse to Parent
or Sub, the approval, adoption or recommendation, as the case may be, of the
Offer, the Merger or the Merger Agreement, or approved or recommended, or
announced a neutral position with respect to, any merger, consolidation, other
business combination, sale of material assets, takeover proposal or other
acquisition of Shares other than the Offer and the Merger or upon request by
Parent, shall fail to reaffirm its approval and recommendation of the Offer, the
Merger or the Merger Agreement;
(g) it shall have been publicly disclosed, or Sub
- 52 -
<PAGE>
shall have otherwise learned, that beneficial ownership (determined for the
purposes of this paragraph (g) as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the Shares has been acquired by any person or
entity or group (as defined in Section 13(d)(3) under the Exchange Act);
(h) the average of the closing values of the S&P Index for the
twelve consecutive trading days immediately preceding the scheduled expiration
of the Offer (or any extension thereof) shall reflect a decline in excess of 25%
from the closing value of the S&P 500 Index on the close of business on the
trading day next preceding the date of the Merger Agreement;
(i) there shall have occurred a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States; or
(j) the Merger Agreement shall have been terminated in accordance
with its terms;
which, in the reasonable judgment of Sub, makes it inadvisable to proceed with
the Offer or with such acceptance for payment or payment.
The foregoing conditions may be waived by Sub, in whole or part, at
any time and from time to time, in the sole discretion of Sub. The failure by
Sub at any time to exercise any of the foregoing rights will not be deemed a
waiver of any right and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
- 53 -
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 19, 1999 (this "Agreement")
by the undersigned stockholder (the "Stockholder") of First Commonwealth, Inc.,
a Delaware corporation (the "Company"), for the benefit of The Guardian Life
Insurance Company of America, a New York corporation ("Parent").
WHEREAS, Parent, Floss Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("Sub"), and the Company are entering into
an Agreement and Plan of Merger, dated as of May 19, 1999 (the "Merger
Agreement"), providing for a cash tender offer (the "Offer") by Sub for any and
all issued and outstanding shares of the Common Stock, par value $.001 per
share, of the Company ("Company Common Stock") together with associated Rights
(as defined in the Merger Agreement) in consideration of $ 25.00 per share, net
to the seller in cash, payable to the holder thereof, followed by the merger of
the Company and Sub (the "Merger");
WHEREAS, the Stockholder owns beneficially and of record shares of
Company Common Stock (such shares of Company Common Stock, together with any
other shares of capital stock of the Company of which such Stockholder acquires
beneficial ownership after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and in order to
induce Parent to enter into the Merger Agreement the Stockholder has agreed, to
enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Stockholder agrees as follows:
1. Capitalized Terms. Capitalized terms used in this Agreement that
are not defined herein shall have such meanings as set forth in the Merger
Agreement.
2. Covenants of Stockholder. Until the termination of this Agreement
in accordance with Section 4, Stockholder agrees as follows:
(a) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw, the
Subject Shares.
<PAGE>
(b) At any stockholders meeting (or at any adjournment
thereof) or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger or the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares in favor
of the Merger, the approval and adoption of the Merger Agreement and the
approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(c) At any meeting of stockholders of the Company (or at any
adjournment thereof) or in any other circumstances upon which a vote,
consent or other approval is sought, other than with respect to the Merger
or Merger Agreement, the Stockholder shall vote (or cause to be voted) the
Subject Shares (i) against any merger agreement or merger, consolidation,
combination, sale, lease or transfer of all or substantially all of the
assets of the Company, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any Subsidiary of the
Company or any other Takeover Proposal; (ii) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or this Agreement; or (iii) against the
following actions (other than the Merger and the transactions contemplated
by the Merger Agreement); (A) any change in a majority of the persons who
constitute the board of directors of the Company; (B) any change in the
present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or By-laws; (C) any other material change in
the Company's corporate structure or business; or (D) any other action
involving the Company or its subsidiaries which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated
by this Agreement and the Merger Agreement. The Stockholder further agrees
not to commit or agree to take any action inconsistent with the foregoing.
(d) Except as provided in paragraph (a) of this Section 2, the
Stockholder agrees not to (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or
enter into any contract, option or other arrangement (including any
profit-sharing arrangement) with respect to any Transfer of the Subject
Shares to any person (other than Parent) or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, in relation
to the Subject Shares, and agrees not to commit or agree to take any of
the foregoing actions.
<PAGE>
(e) The Stockholder shall not, nor shall the Stockholder
permit any affiliate, director, officer, employee, investment banker,
attorney or other advisor or representative of the Stockholder to, (i)
directly or indirectly solicit, initiate or encourage the submission of,
any Takeover Proposal or (ii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Takeover Proposal.
(f) The Stockholder shall use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with Parent in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the
Merger Agreement.
(g) Waiver of Appraisal Rights. Stockholder hereby irrevocably
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have.
(h) Stop Transfer. Stockholder agrees with, and covenants to,
Parent that Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of the Subject Shares, unless such transfer is
made in compliance with this Agreement or the Merger Agreement.
Stockholder makes the covenants and agreements contained in this
Agreement in Stockholder's capacity as a stockholder of the Company and nothing
contained in this Agreement shall limit the ability of Stockholder, to the
extent Stockholder is a director of the Company and is acting in such capacity,
to discharge Stockholder's fiduciary duties as a director of the Company under
applicable law based upon the advice of independent, outside, nationally
recognized, legal counsel (which may be counsel to the Company).
3. Representations and Warranties of Stockholder. The Stockholder
represents and warrants to Parent as follows:
(a) (i) the Stockholder is the record and beneficial owner of,
and has good and marketable title to, the Subject Shares, (ii) the
Stockholder does not own, of record or beneficially, any shares of capital
stock of the Company other than the Subject Shares and (iii) the
Stockholder has the sole right to vote, the sole power of disposition with
respect to, and the sole power to demand appraisal rights with respect to,
the Subject Shares, and
<PAGE>
none of the Subject Shares is subject to any voting trust, proxy or other
agreement, arrangement or restriction with respect to the voting or
disposition of such Subject Shares, except as contemplated by this
Agreement.
(b) Power; Binding Agreement. Stockholder has the legal
capacity, power and authority to enter into and perform all of
Stockholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by Stockholder will not violate any
other agreement to which Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting trust.
This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against Stockholder in accordance with its terms.
(c) No Encumbrances. The Subject Shares and the certificates
representing such Shares are now held by Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests or agreements, understandings or
arrangements or any other encumbrances whatsoever.
(d) Reliance by Parent. Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into,
the Merger Agreement in reliance upon the Stockholder's execution,
delivery and performance of this Agreement.
4. Termination. The obligations of the Stockholder hereunder shall
terminate upon the earlier of (i) the date which is 180 days after the date of
termination of the Merger Agreement pursuant to Section 8.1 thereof or (ii) the
Effective Time.
5. Further Assurances. Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, proxies, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. Successors, Assigns and Transferees Bound. Any successor,
assignee or transferee (including a successor, assignee or transferee as a
result of the death of the Stockholder, such as an executor or heir) shall be
bound by the terms hereof, and the Stockholder shall take any and all actions
necessary to obtain the written confirmation from such successor, assignee or
transferee that it is bound by the terms hereof.
7. Remedies. The Stockholder acknowledges that money damages would
be both incalculable and an insufficient remedy for
<PAGE>
any breach of this Agreement by it, and that any such breach would cause Parent
irreparable harm. Accordingly, the Stockholder agrees that in the event of any
breach or threatened breach of this Agreement, Parent, in addition to any other
remedies at law or in equity it may have, shall be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance.
8. Submission to Jurisdiction. Each party hereto hereby irrevocably
submits in any suit, action or proceeding arising out of or related to this
Agreement or any of the transactions contemplated hereby or thereby to the
exclusive jurisdiction of the courts of the United States and the jurisdiction
of the courts of the State of Delaware and waive any and all objections to
jurisdiction that they may have under the laws of the State of Delaware or the
United States and any claim or objection that any such court is an inconvenient
forum.
9. Severability. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
10. Amendment. This Agreement may be amended only by means of a
written instrument executed and delivered by each of the Stockholder and Parent.
11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
12. Counterparts. For the convenience of the parties, this Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
13. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by overnight
courier or telecopied (with a confirmatory copy sent by overnight courier) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to
c/o The Guardian Life Insurance Company of
America
222 Park Avenue South
<PAGE>
New York, NY 10003
Attention: Mr. Herschel Reich
Facsimile No.: (212) 253-8583
with a copy to:
The Guardian Life Insurance Company of
America
201 Park Avenue South
New York, NY 10003
Attention: Debra R. Smith, Esq.
Facsimile No.: (212) 677-4240
with further copies to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Timothy B. Goodell, Esq.
Facsimile No.: 212-354-8113
(b) if to the Stockholder, to
Mr. Christopher C. Multhauf
c/o First Commonwealth, Inc.
444 North Wells Street
Suite 600
Chicago, IL 60610
Facsimile No.: 312-832-0065
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq. and
Alfred N. Sacha, Esq.
Facsimile No.: (312) 853-7036
* * * * * *
<PAGE>
IN WITNESS WHEREOF, Stockholder has signed this Agreement as of the
date noted above.
/s/ Christopher C. Multhauf
-----------------------------
Name: Christopher C. Multhauf
Accepted and Agreed to
as of the date noted above:
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Herschel Reich
------------------------
Name: Herschel Reich
Title: Vice President,
Group Health Care
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 19, 1999 (this "Agreement")
by the undersigned stockholder (the "Stockholder") of First Commonwealth, Inc.,
a Delaware corporation (the "Company"), for the benefit of The Guardian Life
Insurance Company of America, a New York corporation ("Parent").
WHEREAS, Parent, Floss Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("Sub"), and the Company are entering into
an Agreement and Plan of Merger, dated as of May 19, 1999 (the "Merger
Agreement"), providing for a cash tender offer (the "Offer") by Sub for any and
all issued and outstanding shares of the Common Stock, par value $.001 per
share, of the Company ("Company Common Stock") together with associated Rights
(as defined in the Merger Agreement) in consideration of $ 25.00 per share, net
to the seller in cash, payable to the holder thereof, followed by the merger of
the Company and Sub (the "Merger");
WHEREAS, the Stockholder owns beneficially and of record shares of
Company Common Stock (such shares of Company Common Stock, together with any
other shares of capital stock of the Company of which such Stockholder acquires
beneficial ownership after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and in order to
induce Parent to enter into the Merger Agreement the Stockholder has agreed, to
enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Stockholder agrees as follows:
1. Capitalized Terms. Capitalized terms used in this Agreement that
are not defined herein shall have such meanings as set forth in the Merger
Agreement.
2. Covenants of Stockholder. Until the termination of this Agreement
in accordance with Section 4, Stockholder agrees as follows:
(a) So long as the Merger Agreement has not been terminated,
the Stockholder shall tender pursuant to the Offer, and not withdraw, the
Subject Shares.
<PAGE>
(b) At any stockholders meeting (or at any adjournment
thereof) or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger or the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares in favor
of the Merger, the approval and adoption of the Merger Agreement and the
approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(c) At any meeting of stockholders of the Company (or at any
adjournment thereof) or in any other circumstances upon which a vote,
consent or other approval is sought, other than with respect to the Merger
or Merger Agreement, the Stockholder shall vote (or cause to be voted) the
Subject Shares (i) against any merger agreement or merger, consolidation,
combination, sale, lease or transfer of all or substantially all of the
assets of the Company, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Company or any Subsidiary of the
Company or any other Takeover Proposal; (ii) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or this Agreement; or (iii) against the
following actions (other than the Merger and the transactions contemplated
by the Merger Agreement); (A) any change in a majority of the persons who
constitute the board of directors of the Company; (B) any change in the
present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or By-laws; (C) any other material change in
the Company's corporate structure or business; or (D) any other action
involving the Company or its subsidiaries which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated
by this Agreement and the Merger Agreement. The Stockholder further agrees
not to commit or agree to take any action inconsistent with the foregoing.
(d) Except as provided in paragraph (a) of this Section 2, the
Stockholder agrees not to (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of (including by gift) (collectively, "Transfer"), or
enter into any contract, option or other arrangement (including any
profit-sharing arrangement) with respect to any Transfer of the Subject
Shares to any person (other than Parent) or (ii) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise, in relation
to the Subject Shares, and agrees not to commit or agree to take any of
the foregoing actions.
<PAGE>
(e) The Stockholder shall not, nor shall the Stockholder
permit any affiliate, director, officer, employee, investment banker,
attorney or other advisor or representative of the Stockholder to, (i)
directly or indirectly solicit, initiate or encourage the submission of,
any Takeover Proposal or (ii) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Takeover Proposal.
(f) The Stockholder shall use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with Parent in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the
Merger Agreement.
(g) Waiver of Appraisal Rights. Stockholder hereby irrevocably
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have.
(h) Stop Transfer. Stockholder agrees with, and covenants to,
Parent that Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of the Subject Shares, unless such transfer is
made in compliance with this Agreement or the Merger Agreement.
Stockholder makes the covenants and agreements contained in this
Agreement in Stockholder's capacity as a stockholder of the Company and nothing
contained in this Agreement shall limit the ability of Stockholder, to the
extent Stockholder is a director of the Company and is acting in such capacity,
to discharge Stockholder's fiduciary duties as a director of the Company under
applicable law based upon the advice of independent, outside, nationally
recognized, legal counsel (which may be counsel to the Company).
3. Representations and Warranties of Stockholder. The Stockholder
represents and warrants to Parent as follows:
(a) (i) the Stockholder is the record and beneficial owner of,
and has good and marketable title to, the Subject Shares, (ii) the
Stockholder does not own, of record or beneficially, any shares of capital
stock of the Company other than the Subject Shares and (iii) the
Stockholder has the sole right to vote, the sole power of disposition with
respect to, and the sole power to demand appraisal rights with respect to,
the Subject Shares, and
<PAGE>
none of the Subject Shares is subject to any voting trust, proxy or other
agreement, arrangement or restriction with respect to the voting or
disposition of such Subject Shares, except as contemplated by this
Agreement.
(b) Power; Binding Agreement. Stockholder has the legal
capacity, power and authority to enter into and perform all of
Stockholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by Stockholder will not violate any
other agreement to which Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting trust.
This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against Stockholder in accordance with its terms.
(c) No Encumbrances. The Subject Shares and the certificates
representing such Shares are now held by Stockholder, or by a nominee or
custodian for the benefit of such Stockholder, free and clear of all
liens, claims, security interests or agreements, understandings or
arrangements or any other encumbrances whatsoever.
(d) Reliance by Parent. Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into,
the Merger Agreement in reliance upon the Stockholder's execution,
delivery and performance of this Agreement.
4. Termination. The obligations of the Stockholder hereunder shall
terminate upon the earlier of (i) the date which is 180 days after the date of
termination of the Merger Agreement pursuant to Section 8.1 thereof or (ii) the
Effective Time.
5. Further Assurances. Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, proxies, documents and other instruments as Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. Successors, Assigns and Transferees Bound. Any successor,
assignee or transferee (including a successor, assignee or transferee as a
result of the death of the Stockholder, such as an executor or heir) shall be
bound by the terms hereof, and the Stockholder shall take any and all actions
necessary to obtain the written confirmation from such successor, assignee or
transferee that it is bound by the terms hereof.
7. Remedies. The Stockholder acknowledges that money damages would
be both incalculable and an insufficient remedy for
<PAGE>
any breach of this Agreement by it, and that any such breach would cause Parent
irreparable harm. Accordingly, the Stockholder agrees that in the event of any
breach or threatened breach of this Agreement, Parent, in addition to any other
remedies at law or in equity it may have, shall be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance.
8. Submission to Jurisdiction. Each party hereto hereby irrevocably
submits in any suit, action or proceeding arising out of or related to this
Agreement or any of the transactions contemplated hereby or thereby to the
exclusive jurisdiction of the courts of the United States and the jurisdiction
of the courts of the State of Delaware and waive any and all objections to
jurisdiction that they may have under the laws of the State of Delaware or the
United States and any claim or objection that any such court is an inconvenient
forum.
9. Severability. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.
10. Amendment. This Agreement may be amended only by means of a
written instrument executed and delivered by each of the Stockholder and Parent.
11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
12. Counterparts. For the convenience of the parties, this Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
13. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by overnight
courier or telecopied (with a confirmatory copy sent by overnight courier) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to
c/o The Guardian Life Insurance Company of
America
222 Park Avenue South
<PAGE>
New York, NY 10003
Attention: Mr. Herschel Reich
Facsimile No.: (212) 253-8583
with a copy to:
The Guardian Life Insurance Company of
America
201 Park Avenue South
New York, NY 10003
Attention: Debra R. Smith, Esq.
Facsimile No.: (212) 677-4240
with further copies to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Timothy B. Goodell, Esq.
Facsimile No.: 212-354-8113
(b) if to the Stockholder, to
Mr. David W. Mulligan
c/o First Commonwealth, Inc.
444 North Wells Street
Suite 600
Chicago, IL 60610
Facsimile No.: 312-832-0065
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq. and
Alfred N. Sacha, Esq.
Facsimile No.: (312) 853-7036
* * * * * *
<PAGE>
IN WITNESS WHEREOF, Stockholder has signed this Agreement as of the
date noted above.
/s/ David W. Mulligan
-----------------------
Name: David W. Mulligan
Accepted and Agreed to
as of the date noted above:
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By: /s/ Herschel Reich
------------------------
Name: Herschel Reich
Title: Vice President,
Group Health Care
<PAGE>
Agreement
This agreement between First Commonwealth, Inc. ("FC") and The Guardian
Life Insurance Company of America ("Company") is dated as of March 24, 1999. FC
is primarily engaged in the dental benefits business (the "Business"). FC has
engaged William Blair and Company ("Blair") to assist it in evaluating possible
business combinations or other transactions relating to the Business (a
"Transaction") involving all or part of FC.
In order to evaluate a possible Transaction, FC may disclose to the
Company, and the Company may disclose to FC, certain information about their
respective properties, employees, finances, businesses and operations (such
party when disclosing such information being the "Disclosing Party" and any such
party receiving such information being a "Receiving Party"). All such
information furnished by a Disclosing Party or its Representatives (as defined
below), whether furnished before or after the date hereof, whether oral or
written, and regardless of the manner in which it is furnished, is referred to
in this agreement as "Proprietary Information".
Proprietary Information does not include, however, information which (a)
is or becomes generally available to the public other than as a result of a
disclosure by a Receiving Party or its Representatives, (b) was available to a
Receiving Party on a nonconfidential basis prior to its disclosure by the
Disclosing Party or its Representatives or ( c) becomes available to a Receiving
Party on a nonconfidential basis from a person other than the Disclosing Party
or its Representatives who is not or should reasonably not be known by Receiving
Party to be bound by a confidentiality agreement with the Disclosing Party or
any of its Representatives and is otherwise not or should reasonably not be
known to be under an obligation to the Disclosing Party or any of its
Representatives not to transmit the information to a Receiving Party. As used in
this agreement, the term "Representative" means, as to any person, such person's
directors, officers, employees, advisors (including, without limitation,
financial advisors, counsel and accountants) and affiliates. As used in this
agreement, (i) the term "person" shall be broadly interpreted to include,
without limitation, any corporation, company, partnership, other entity or
individual, and (ii) the term "affiliate" with respect to a person (the
"original person") is any person that, directly or indirectly, controls the
original person, is controlled by the original person or is under common control
with the original person.
Subject to the immediately succeeding paragraph, unless otherwise
agreed to in writing by the Disclosing Party, each Receiving Party agrees (a)
except as required by law, to keep all Proprietary Information confidential
and not to disclose or reveal any Proprietary Information to any person other
than its Representatives who are actively and directly participating in the
evaluation of a Transaction or who otherwise need to know the Proprietary
Information for the purpose of evaluating a Transaction and to cause those
persons to observe the terms of this agreement, (b) not to use Proprietary
Information for any purpose other than in connection with its evaluation of a
Transaction or the consummation of a Transaction and (c) except as required
by law or pursuant to a listing agreement with any national securities
exchange or the National Association of Securities Dealers, Inc., not to
disclose to any person (other than those of its Representatives who are
actively and directly participating in the evaluation of a Transaction or who
otherwise need to know for the purpose of evaluating a Transaction and, in
the case of its Representatives, whom it will cause to observe the terms of
this agreement) the fact that the Proprietary Information exists or has been
made available, the fact that a Receiving Party is considering a Transaction
or any other transaction involving the Disclosing Party, or that discussions
or negotiations are taking or have taken place concerning a Transaction or
involving the Disclosing Party or any term, condition or other fact relating
to a Transaction or such discussions or negotiations, including, without
limitation, the status thereof. Each Receiving Party will be responsible for
any breach of the terms of this agreement by such Receiving Party or any of
its Representatives.
<PAGE>
In the event that a Receiving Party is requested pursuant to, or required
by, applicable law, regulation or stock exchange rule or by legal process to
disclose any Proprietary Information or any other information concerning the
Disclosing Party or a Transaction, such Receiving Party agrees that it will
provide the Disclosing Party with prompt notice of such request or requirement
in order to enable the Disclosing Party to seek an appropriate protective order
or other remedy, to consult with a Receiving Party with respect to the
Disclosing Party taking steps to resist or narrow the scope of such request or
legal process, or to waive compliance, in whole or in part, with the terms of
this agreement. In the event that no such protective order or remedy is
obtained, or that the Disclosing Party waives compliance with the terms of this
agreement, a Receiving Party will furnish only that portion of any Proprietary
Information which a Receiving Party is advised by counsel is legally required
and will request that confidential treatment will be accorded any Proprietary
Information.
Each party hereto is aware, and will so advise its respective
Representatives who are informed of the matters that are the subject of this
agreement, of the restrictions imposed by the United States securities laws on
the purchase or sale of securities by any person who has received material,
non-public information from the issuer of such securities and on the
communication of such information to any other person when it is reasonably
foreseeable that such other person is likely to purchase or sell such securities
in reliance upon such information.
Each Receiving Party acknowledges that neither the Disclosing Party nor
any of its Representatives make any express or implied representation or
warranty as to the accuracy or completeness of any Proprietary Information, and
each Receiving Party agrees that none of such persons shall have any liability
to such Receiving Party or any of its Representatives relating to or arising
from the use of any Proprietary Information by such Receiving Party or its
Representatives or for any errors therein or omissions therefrom. Each Receiving
Party also agrees that it is not entitled to rely on the accuracy or
completeness of any Proprietary Information and that it shall be entitled to
rely solely on such representations and warranties regarding Proprietary
Information as may be made to it in any final agreement relating to a
Transaction, subject to the terms and conditions of such agreement.
Company agrees that, without the prior written consent of FC, it will not
knowingly for a period of one year from the date hereof directly or indirectly
solicit for employment or consulting or independent contracting relationship, or
enter into an employment, consulting or independent contractor relationship with
any person who is now employed by FC or is an employee of FC at any time during
such one year period. FC agrees that, without the prior written consent of the
Company, it will not knowingly for a period of one year from the date hereof
directly or indirectly solicit for employment or consulting or independent
contracting relationship, or enter into an employment, consulting or independent
contractor relationship with any person who is now employed by the Company or is
an employee of the Company at any time during such one year period. FC and the
Company agree that any employee or representative who is aware of the possible
transaction shall be deemed to act "knowingly" for purposes of this paragraph.
<PAGE>
Unless specifically requested in writing in advance by FC, Company will
not at any time during the eighteen month period following the date hereof (and
Company will not at any time during such period assist or encourage others to):
1. acquire or agree, offer, seek or propose to acquire (or directly or
indirectly request permission to do so), directly or indirectly, alone or
in concert with any other Person, by purchase or otherwise, any ownership,
including, but not limited to, beneficial ownership as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of any of the assets, businesses or securities of FC, or any rights
or options to acquire such ownership (including from any third party);
2. solicit proxies (as such terms are defined in Rule 14a-1 under the
Exchange Act), whether or not such solicitation is exempt under Rule 14a-2
under the Exchange Act, with respect to any matter from holders of any
shares of common stock of FC ("Stock") or any securities convertible into
or exchangeable for or exercisable (whether currently or upon the
occurrence of any contingency) for the purchase of Stock (the Stock and
such other securities being hereinafter collectively called the "Voting
Securities"), or make any communication exempted from the definition of
solicitation by Rule 14a-1(l)(2)(iv) under the Exchange Act;
3. initiate, or induce or attempt to induce any other Person, entity or group
(as defined in Section 13(d)(3) of the Exchange Act) to initiate, any
stockholder proposal or tender offer for any securities of FC, any change
of control of FC or the convening of a stockholders' meeting of FC;
4. otherwise seek or propose (or request permission to propose) to influence
or control the management or policies of FC;
5. enter into any discussions, negotiations, arrangements or understandings
with any other person with respect to any matter described in the
foregoing subparagraphs 1 through 4;
6. request FC (or its directors, officers, employees or agents), directly or
indirectly, to amend or waive any provision of this agreement;
7. take any action inconsistent with any of the foregoing subparagraphs 1
through 6; or
8. take any action with respect to any of the matters described in
subparagraphs 1 through 7 that requires public disclosure.
Company agrees that FC may enforce any of the provisions of this
agreement. In the event that any person receiving Proprietary Information for
the purpose of evaluating a possible business combination with FC receives terms
in 1 through 8 of the preceding paragraph which are materially more favorable
than the terms set forth above, then such more favorable terms shall be
applicable to the Company and FC shall promptly advise Company of such more
favorable terms.
If a party hereto determines that it does not wish to proceed with a
Transaction, it will promptly advise the other parties of that decision. In such
case, or if a Transaction is not consummated by the parties, each Receiving
Party will, upon request from the Disclosing Party, promptly return to the
respective Disclosing Party all copies of Proprietary Information in its
possession or in the possession of any of its Representatives and will not
retain any copies or other reproductions in whole or in part of such material.
All other documents, memoranda, notes, summaries, analyses, extracts,
compilations, studies or
<PAGE>
other material whatsoever prepared by it or any of its Representatives based on
the Proprietary Information will be destroyed and such destruction will be
certified in writing to the other party by an authorized officer supervising
such destruction. Any oral Proprietary Information will continue to be subject
to the terms of this agreement.
Without prejudice to the rights and remedies otherwise available to each
of the parties hereto, each such party shall be entitled to equitable relief by
way of specific performance, injunction or otherwise if the other party or any
of its Representatives breach or threaten to breach any of the provisions of
this agreement.
It is further understood and agreed that no failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
This agreement shall be governed by and construed in accordance with the
laws of the State of Illinois applicable to contracts executed in and to be
performed in that state.
This agreement shall not be assigned by either party, by operation of law
or otherwise, without the prior written consent of the other party.
This agreement contains the entire agreement among the parties concerning
the matters covered hereby, and no modification of this agreement or waiver of
the terms and conditions hereof shall be binding upon a party hereto unless
approved in writing by such parties.
The Guardian Life
Insurance Company of America
By: /s/ Sanford Herman
-----------------------------------------
Name: Sanford Herman, FSA, MAAA
-----------------------------------------
Title: Vice President, Group Pricing & Standards
-----------------------------------------
First Commonwealth, Inc.
By: /s/ Christopher C. Multhauf
-----------------------------------------
Name: Christopher C. Multhauf
-----------------------------------------
Title: Chairman
-----------------------------------------
<PAGE>
STOCKHOLDERS RIGHTS AGREEMENT
DATED AS OF NOVEMBER 1, 1995
BETWEEN
FIRST COMMONWEALTH, INC.
AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
AS RIGHTS AGENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Certain Definitions...............................................1
Section 2. Appointment of Rights Agent.......................................6
Section 3. Issuance of Rights Certificates...................................7
Section 4. Form of Rights Certificates.......................................9
Section 5. Countersignature and Registration................................10
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen
Rights Certificates...............................11
Section 7. Exercise of Rights; Exercise Price;
Expiration Date of Rights.........................11
Section 8. Cancellation and Destruction of Rights
Certificates......................................14
Section 9. Reservation and Availability of
Preferred Shares..................................14
Section 10. Record Date of Preferred Share Ownership........................15
Section 11. Adjustment of Exercise Price, Number
and Kind of Shares and Number of Rights...........16
Section 12. Certificate of Adjusted Exercise Price or
Number of Shares..................................23
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power........................23
Section 14. Fractional Rights and Fractional Shares.........................27
Section 15. Rights of Action................................................27
Section 16. Agreements of Holders of Rights.................................28
Section 17. Rights Certificate Holder Not Deemed a
Stockholder.......................................29
Section 18. Concerning the Rights Agent.....................................29
Section 19. Merger or Consolidation of the Rights
Agent.............................................29
Section 20. Duties of the Rights Agent......................................30
Section 21. Resignation or Removal of the Rights Agent......................32
Section 22. Issuance of New Rights Certificates.............................33
Section 23. Redemption......................................................33
Section 24. Exchange........................................................35
Section 25. Notice to Holders of Rights Certificates
of Certain Events.................................37
Section 26. Other Notices...................................................38
Section 27. Supplements and Amendments......................................38
Section 28. Successors......................................................39
Section 29. Certain Determinations and Actions by
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
the Board.........................................39
Section 30. Benefits of this Agreement......................................40
Section 31. Severability....................................................40
Section 32. Governing Law...................................................40
Section 33. Counterparts....................................................40
Section 34. Descriptive Headings............................................40
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit A - Form of Certificate of Designations of
Series A Junior Participating Preferred
Stock...................................................A-1
Exhibit B - Form of Rights Certificate..............................B-1
Exhibit C - Summary of Rights to Purchase Shares of
Series A Junior Participating Preferred
Stock...................................................C-1
</TABLE>
iii
<PAGE>
STOCKHOLDERS RIGHTS AGREEMENT
Stockholders Rights Agreement dated as of November 1, 1995
(this "Agreement") between First Commonwealth, Inc., a Delaware corporation (the
"Company"), and First Chicago Trust Company of New York (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company desires to
provide all stockholders of the Company with the opportunity to benefit from the
long-term prospects and value of the Company and to ensure that all such
stockholders receive fair and equal treatment in the event of any proposed
takeover of the Company; and
WHEREAS, on October 20, 1995, the Board of Directors of the
Company authorized and declared a dividend of one preferred stock purchase right
(individually a "Right" and collectively the "Rights") for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on the effective date of the Company's initial public offering
registration statement, file no. 33-97426 (the "Record Date"), each Right
representing the right to purchase one one-hundredth of a Preferred Share (as
hereinafter defined) upon the terms and subject to the conditions herein after
set forth, and contemplates that one Right will be issued with respect to each
share of Common Stock which shall become outstanding after the Record Date and
prior to the earlier of the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined), including any shares of Common Stock issued
by reason of the exercise of any option, warrant, right (other than the Rights)
or conversion or exchange privilege contained in any option, warrant, right
(other than the Rights) or convertible or exchangeable security issued by the
Company prior to the Distribution Date, unless the Board (as hereinafter
defined) shall expressly provide to the contrary at the time of issuance of any
such option, warrant, right or convertible or exchangeable security.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For all purposes of
this Agreement, unless the context otherwise requires, the
following terms shall have the respective meanings set forth below:
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan or other compensation program or
arrangement of the Company or of any such
<PAGE>
Subsidiary or (iv) any Person holding such shares of Common Stock for or
pursuant to the terms of any such plan, program or arrangement (the Persons
specified in clauses (i) through (iv) being hereinafter collectively called
"Exempt Persons"). Notwithstanding the preceding sentence, no Person shall
become an "Acquiring Person" as the result of an acquisition by the Company of
shares of its Common Stock which, by reason of reducing the number of its then
outstanding shares of Common Stock, increases the percentage of its then
outstanding shares of Common Stock Beneficially Owned by such Person to 15% or
more; PROVIDED, HOWEVER, that if such Person shall, after such purchase by the
Company, become the Beneficial Owner of any additional shares of Common Stock of
the Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purpose of this Agreement.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2, as in effect on the date of this
Agreement, under the Exchange Act; PROVIDED, HOWEVER, that no director or
officer of the Company shall be deemed an Affiliate or Associate of any other
director or officer of the Company solely as a result of his or her being a
director or officer of the Company.
(c) "BENEFICIAL OWNER" (including the terms "BENEFICIALLY OWN"
and "BENEFICIAL OWNERSHIP"), when used with respect to any Person, shall be
deemed to include any securities which:
(i) such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (determined as
provided in Rule 13d-3, as in effect on the date of this Agreement,
under the Exchange Act);
(ii) such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has:
(A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or
upon the satisfaction of any conditions, or both) pursuant to
any written or oral agreement, arrangement or understanding
(other than customary agreements with and among underwriters
and selling group members with respect to a bona fide public
offering of securities), upon the exercise of any options,
warrants, rights (other than the Rights) or conversion or
exchange privileges or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own: (I) securities
-2-
<PAGE>
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange or (II) securities issuable upon exercise
of the Rights at any time prior to the Distribution Date; or
(B) the right to vote pursuant to any written or oral
agreement, arrangement or understanding; PROVIDED, HOWEVER,
that a Person shall not be deemed the Beneficial Owner of, or
to Beneficially Own, any security otherwise subject to this
item (B) if such agreement, arrangement or understanding to
vote (I) arises solely from a revocable proxy or consent given
to such Person or any of such Person's Affiliates or
Associates in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and
(II) is not also then reportable by such Person on Schedule
13D (or any comparable or successor report then in effect)
under the Exchange Act; or
(C) the right to dispose of pursuant to any written
or oral agreement, arrangement or understanding (other than
customary agreements with and among underwriters and selling
group members with respect to a bona fide public offering of
securities); or
(iii) are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any written or oral agreement, arrangement or
understanding (other than customary agreements with and among
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to item (B) of
subparagraph (ii) of the first paragraph of this definition) or
disposing of any securities of the Company.
Notwithstanding the first paragraph of this definition, no
director or officer of the Company shall be deemed to be the "Beneficial Owner"
of, or to "Beneficially Own," shares of Common Stock or other securities of the
Company beneficially owned by any other director or officer of the Company
solely as a result of his or her being a director or officer of the Company.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of Illinois are
authorized or obligated by law or executive order to close.
-3-
<PAGE>
(f) "CERTIFICATE OF DESIGNATIONS" shall mean the Certificate
of Designations for the Preferred Shares in substantially the form attached
hereto as Exhibit A.
(g) "CLOSE OF BUSINESS" on any given date shall mean 5:00
P.M., Chicago time, on such date or, if such date is not a Business Day, then
5:00 P.M., Chicago time, on the next succeeding Business Day.
(h) "COMMON STOCK," when used with reference to the Company,
shall mean the Common Stock, $.001 par value, of the Company. "Common Stock,"
when used with reference to any Person other than the Company, shall mean the
capital stock with the greatest voting power (or the other equity securities or
equity interests having the power to control or direct management) of such
Person or, if such Person is a Subsidiary of another Person, of the Person which
ultimately controls such first-mentioned Person and which has issued and
outstanding such capital stock, equity securities or equity interests.
(i) "DISINTERESTED DIRECTOR" shall mean (i) any member of the
Board, while such a member, who is not a Restricted Person, or a representative
or nominee of a Restricted Person, and was a member of the Board prior to the
date of this Agreement and (ii) any individual who subsequently becomes a member
of the Board and is not a Restricted Person, or a representative or nominee of a
Restricted Person, if such individual's nomination for election or election to
the Board is recommended or approved by a majority of the Disinterested
Directors then in office.
(j) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3(a).
(k) "EQUIVALENT PREFERRED SHARES" shall have the meaning set
forth in Section 11(b).
(l) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as in effect on the date of this Agreement.
(m) "EXCHANGE RATE" shall have the meaning set forth in
Section 24(a).
(n) "EXEMPT PERSONS" shall have the meaning set forth in the
definition of "Acquiring Person."
(o) "EXERCISE PRICE" shall have the meaning set forth in
Section 7(b).
(p) "FAIR MARKET VALUE" shall have the meaning and be
determined as set forth in Section 11(d).
(q) "FINAL EXPIRATION DATE" shall have the meaning set forth
in Section 7(a).
-4-
<PAGE>
(r) "INTERESTED STOCKHOLDER" shall mean any Restricted Person
or any Affiliate or Associate of any other Person in which such Restricted
Person has an interest, or any Person acting, directly or indirectly, on behalf
of or in concert with any such Restricted Person.
(s) "NASDAQ" shall have the meaning set forth in Section 9(c).
(t) "PERMITTED OFFER" shall mean any tender or exchange offer
for all of the outstanding shares of Common Stock of the Company at a price and
on terms determined, prior to the purchase of shares under such tender or
exchange offer, by at least a majority of the members of the Board who are
Disinterested Directors and who are not officers of the Company to be
appropriate (taking into account all factors which such Disinterested Directors
deem relevant, including, without limitation, prices reasonably obtainable if
the Company or its assets were sold on an orderly basis designed to realize
maximum value) and otherwise in the best interests of the Company and its
stockholders (other than the Person or any Affiliate or Associate thereof on
whose behalf or for whose benefit such tender or exchange offer is being made).
(u) "PERSON" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of any of the foregoing.
(v) "PREFERRED SHARES" shall mean the Series A Junior
Participating Preferred Stock of the Preferred Stock, which series shall have
the powers, preferences and other rights set forth in the Certificate of
Designations.
(w) "PREFERRED STOCK," when used with reference to the
Company, shall mean the Preferred Stock, $.001 par value, of the Company.
(x) "PRINCIPAL PARTY" shall have the meaning set forth in
Section 13(e).
(y) "RECORD DATE" shall have the meaning set forth in the
second recital clause of this Agreement.
(z) "REDEMPTION DATE" shall have the meaning set forth in
Section 7(a).
(aa) "REDEMPTION PRICE" shall have the meaning set forth
in Section 23(a).
(bb) "RESTRICTED PERSON" shall mean an Acquiring Person
or any Affiliate or Associate of an Acquiring Person.
(cc) "RIGHTS" shall have the meaning set forth in the
second recital clause of this Agreement.
-5-
<PAGE>
(dd) "RIGHTS CERTIFICATES" shall mean the certificates
evidencing the Rights after the Distribution Date.
(ee) "SECTION 11(A)(II) EVENT" shall mean any event
described in Section 11(a)(ii).
(ff) "SECTION 13 EVENT" shall mean any transaction
described in Section 13(a).
(gg) "SECURITIES ACT" shall mean the Securities Act of
1933, as amended from time to time.
(hh) "SECURITY" shall have the meaning set forth in
Section 11(d).
(ii) "SHARE ACQUISITION DATE" shall mean the first date on
which there shall be a public announcement (which shall include, without
limitation, any press release or publicly available filing with the Securities
and Exchange Commission or any other federal or state governmental authority or
agency) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(jj) "STOCK" shall have the meaning set forth in Section
11(d).
(kk) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which a majority of the voting power or the other equity
securities or equity interests having the power to control or direct management)
is owned, directly or indirectly, by such Person.
(ll) "SUMMARY OF RIGHTS" shall mean the Summary of Rights to
Purchase shares of Series A Junior Participating Preferred Stock in
substantially the form attached hereto as Exhibit C.
(mm) "TRADING DAY" shall have the meaning set forth in
Section 11(d)(i).
(nn) "TRIGGERING EVENT" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company
hereby appoints the Rights Agent to act as agent for the Company and the holders
of the Rights (which holders, as provided in Section 3, shall, prior to the
Distribution Date, also be the holders of the Common Stock of the Company) in
accordance with the terms and conditions of this Agreement. The Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable. In the event the Company
appoints one or more Co-Rights Agents, the respective obligations and duties of
the Rights Agent and of any Co-Rights Agent shall be as the Company shall
specify in writing. The Rights Agent shall have no duty to supervise, and shall
not be liable for the acts or omissions of, any Co-Rights
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Agent.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earliest of (i) the Close of Business on the
10th Business Day after the Share Acquisition Date (or, if the Share Acquisition
Date shall have occurred prior to the Record Date, the Close of Business on the
10th Business Day after the Record Date) or (ii) the Close of Business on the
10th Business Day (or, anything in Section 27 to the contrary notwithstanding,
such other Business Day as may be determined by action of the Board prior to the
occurrence of any Section 11(a)(ii) Event) after the date of the commencement by
any Person (other than an Exempt Person) of, or the first public announcement of
the intention of any Person (other than an Exempt Person) to commence, a tender
or exchange offer if, upon the consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding (the earliest of the dates specified clauses (i) and (ii) being
hereinafter called the "Distribution Date"), the Rights shall be evidenced and
be transferable only as provided in Section 3(b). As soon as practicable after
the Distribution Date or, in the case of any shares of Common Stock of the
Company which are issued or otherwise become outstanding after the Distribution
Date and prior to the earlier of the Redemption Date and the Final Expiration
Date, including any shares of Common Stock issued by reason of the exercise of
any option, warrant, right (other than the Rights) or conversion or exchange
privilege contained in any option, warrant, right (other than the Rights) or
convertible or exchangeable security issued by the Company prior to the
Distribution Date, unless the Board shall have expressly provided to the
contrary at the time of issuance of any such option, warrant, right or
convertible or exchangeable security, simultaneously with the issuance of stock
certificates for such shares of Common Stock, the Company shall prepare and
execute, the Rights Agent shall countersign and the Company shall deliver or
cause to be delivered (or the Rights Agent shall, if requested, deliver), by
first-class mail, postage prepaid, to each record holder of shares of Common
Stock of the Company as of the Close of Business on the Distribution Date or, in
the case of shares of Common Stock issued or otherwise becoming outstanding
after the Distribution Date (unless otherwise provided with respect thereto as
aforesaid), to each record holder of the shares of Common Stock so being issued
or becoming outstanding at the time of such occurrence, at its last address
shown on the registry books of the transfer agent for the Common Stock of the
Company, one or more Rights Certificates evidencing one Right for each share of
Common Stock of the Company so held, issued or becoming outstanding. As of and
after the Distribution Date, the Rights shall be evidenced solely by the Rights
Certificates.
(b) On the Record Date, or as soon as practicable thereafter,
the Company shall send a copy of the Summary of Rights, by first-class mail,
postage prepaid, to each record holder of shares of Common Stock of the Company
as of the Close of Business on the Record Date, at its last address shown on the
registry books of the transfer agent for the Common Stock of the Company. Until
the Distribution
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Date: no Rights Certificates shall be issued; each stock certificate for shares
of Common Stock of the Company outstanding as of the Record Date, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, shall be deemed also to constitute a certificate for the Rights associated
with the shares represented thereby, together with a copy of the Summary of
Rights attached thereto; and the registered holder of such shares shall also be
the registered holder of the associated Rights. Until the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date, the
surrender for transfer of any such stock certificate, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the shares of Common Stock represented thereby.
(c) Any stock certificate for shares of Common Stock of the
Company which shall be delivered by or on behalf of the Company (including,
without limitation, stock certificates for shares of Common Stock which are
reacquired by the Company and then transferred) after the Record Date and prior
to the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date shall have impressed, printed or written thereon, or otherwise
affixed thereto, the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Stockholders Rights
Agreement dated as of November 1, 1995 (the "Rights Agreement") between
First Commonwealth, Inc. (the "Company") and First Chicago Trust
Company of New York, as Rights Agent, the terms, provisions and
conditions of which are incorporated herein by reference and made a
part hereof. The Rights Agreement is on file at the principal office of
the Company and the principal office of such Rights Agent, and the
Company will mail to the holder of this certificate a copy without
charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Rights (i) may be redeemed at a redemption
price (subject to adjustment) $.01 per Right or (ii) under certain
circumstances, may be exchanged, in whole or in part, for shares of
Common Stock of the Company at an exchange rate (subject to
adjustment) of one share of Common Stock per Right, all as set forth
in the Rights Agreement. Under certain circumstances, as set forth in
the Rights Agreement, Rights Beneficially Owned by a Restricted Person
(as such terms are defined in the Rights Agreement), or by specified
transferees from a Restricted Person, shall be or become void."
Each stock certificate containing the foregoing legend, until
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, shall be deemed also to constitute a certificate for the Rights
associated with the shares represented thereby, and the registered holder of
such shares shall also be the registered holder of the associated Rights. Until
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, the surrender for transfer of any
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such stock certificate shall also constitute the transfer of the Rights
associated with the shares of Common Stock represented thereby. The omission of
the foregoing legend shall not in any manner whatsoever affect the application
or interpretation of Section 7(d).
(d) In the event that the Company shall reacquire any shares
of its Common Stock after the Record Date and prior to the Distribution Date,
the Rights associated with such shares shall be deemed cancelled and retired,
the Company not being entitled to exercise any Rights associated with shares of
its Common Stock which are no longer outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (including the Form of Election to
Purchase and Certification of Status and the Form of Assignment and
Certification of Status to be set forth on the reverse side thereof) shall be in
substantially the form attached hereto as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements set
forth thereon as the Company may deem appropriate and are not inconsistent with
the provisions of this Agreement, or as may be required to conform to customary
practice or to comply with any applicable law or any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed. Subject to Sections 11 and 22, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
(or, in the case of Rights with respect to shares of Common Stock issued or
becoming outstanding after the Record Date, the same date as the stock
certificate evidencing such shares), shall (if the Company shall so require)
indicate the date of countersignature by the Rights Agent and shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share at the Exercise Price as shall be set forth therein, but the number of
such one one-hundredths of a Preferred Share and the Exercise Price shall be
subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights Beneficially Owned by: (i) a Restricted
Person, (ii) a transferee from a Restricted Person who becomes a transferee
after the Acquiring Person becomes such or (iii) a transferee from a Restricted
Person who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from such Acquiring Person (or any Affiliate
or Associate thereof) to holders of equity interests in such Acquiring Person
(or any such Affiliate or Associate) or to any Person with whom such Acquiring
Person (or any such Affiliate or Associate) has any continuing written or oral
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(d), and any Rights Certificate issued pursuant to Section 6, 11 or 22 upon the
transfer, exchange, replacement or adjustment of any other Rights Certificate
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referred to in this sentence, shall have deleted therefrom the second sentence
of the legend on the Form of Rights Certificate attached hereto as Exhibit B
and, in lieu thereof, shall contain the following two sentences:
"The Rights represented by this Rights Certificate are or were
Beneficially Owned by a Restricted Person (as such term is defined in
such Agreement). This Rights Certificate and the Rights represented
hereby shall be or become void under the circumstances specified in
Section 7(d) of such Agreement."
The Company shall give prompt written notice to the Rights
Agent after becoming aware of the existence and identity of any Restricted
Person. The failure to insert the foregoing sentences on any such Rights
Certificate or any defect therein shall not in any manner whatsoever affect the
application or interpretation of Section 7(d). The Company shall specify to the
Rights Agent in writing which Rights Certificates are to be so legended.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President, any of its Vice Presidents
or its Treasurer, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof attested by its
Secretary or any of its Assistant Secretaries, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by an
authorized signatory of the Rights Agent and shall not be valid or obligatory
for any purpose unless so countersigned. In case any officer of the Company who
shall have executed any Rights Certificate or who shall have attested the
Company's seal thereon shall cease to be such officer of the Company before such
Rights Certificate shall have been countersigned by an authorized signatory of
the Rights Agent and issued and delivered by or on behalf of the Company, such
Rights Certificate, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by or on behalf of the Company with the same force and
effect as though the individual who executed such Rights Certificate or who
attested the Company's seal thereon had not ceased to be such officer; and any
Rights Certificate may be executed on behalf of the Company and the Company's
seal may be attested by any individual who, at the actual date of such execution
or attestation, shall be a proper officer of the Company, although at the date
of execution of this Rights Agreement such person was not such an officer.
(b) After the Distribution Date, the Rights Agent shall keep
or cause to be kept, at its principal office, books for registration and
transfer of the Rights Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each Rights Certificate, the date of
each Rights Certificate and (if required by the Company) the date of
countersignature by the Rights Agent.
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SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE
OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES.
(a) Subject to Sections 4(b), 7(d) and 14, at any time after
the Close of Business on the Distribution Date and prior to the Close of
Business on the earlier of the Redemption Date and the Final Expiration Date,
any Rights Certificate (other than any Rights Certificate which shall have been
exchanged pursuant to Section 24) may be transferred, split up, combined or
exchanged for one or more other Rights Certificates, entitling the registered
holder to purchase the same number of one one-hundredths of a Preferred Share
(or after a Triggering Event, the securities, cash and other property
purchasable in lieu thereof) as the Rights Certificate or Rights Certificates
surrendered entitled such registered holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange one or more Rights
Certificates shall make such request in a writing delivered to the Rights Agent,
and shall surrender the Rights Certificates to be transferred, split up,
combined or exchanged, with the Form of Assignment and Certification of Status
on the reverse side thereof duly executed, together with such signature
guarantees and other documentation as the Rights Agent may reasonably request,
at the principal office of the Rights Agent. Thereupon the Company shall prepare
and execute, the Rights Agent shall countersign and the Company shall deliver or
cause to be delivered (or the Rights Agent shall, if requested, deliver) to the
person entitled thereto one or more Rights Certificates as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in the case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them or, in the
case of mutilation, upon surrender to the Rights Agent of the mutilated Rights
Certificate, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, the Company shall
prepare and execute, the Rights Agent shall countersign and the Company shall
deliver or cause to be delivered (or the Rights Agent shall, if requested,
deliver) to the registered holder thereof a new Rights Certificate of like tenor
in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; EXERCISE PRICE;
EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(d), the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein), in whole or in part, at any time after the
Distribution Date and prior to the earliest of (i) the Close of Business on the
tenth anniversary of the Record Date (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in
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Section 23 (the "RedemptionDate") and (iii) the time at which such Rights are
exchanged as provided in Section 24, upon surrender of such Rights Certificate,
with the Form of Election to Purchase and Certification of Status on the reverse
side thereof duly executed, together with such signature guarantees and other
documentation as the Rights Agent may reasonably request, to the Rights Agent at
its principal office, accompanied by payment (as provided in subsection (c) of
this Section 7) of the Exercise Price for each one one-hundredth of a Preferred
Share (or after a Triggering Event, the securities, cash and other property
purchasable in lieu thereof) as to which the surrendered Rights are then being
exercised.
(b) The price (the "Exercise Price") for each one
one-hundredth of a Preferred Share purchased upon exercise of the Rights shall
initially be $40.00, shall be subject to adjustment from time to time as
provided in Sections 11 and 13 and shall be payable in lawful money of the
United States of America in accordance with subsection (c) of this Section 7.
(c) Upon receipt of a Rights Certificate representing then
exercisable Rights, with the Form of Election to Purchase and Certification of
Status on the reverse side thereof duly executed, together with such signature
guarantees and other documentation as the Rights Agent may reasonably request,
accompanied by payment of the Exercise Price for the number of one
one-hundredths of a Preferred Share (or after a Triggering Event, the
securities, cash and other property purchasable in lieu thereof) being
purchased, plus the amount of any applicable transfer tax (as determined by the
Rights Agent) required to be paid by the holder of such Rights Certificate in
accordance with Section 9, by certified or cashier's check or money order
payable to the order of the Company, the Rights Agent shall, subject to the
terms and conditions of this Agreement, thereupon promptly (i) requisition from
any transfer agent for the Preferred Shares (or, if the Rights Agent is such a
transfer agent, make available) stock certificates for the number of one
one-hundredths of a Preferred Share being purchased, the Company hereby
irrevocably authorizing any such transfer agent to comply with all such
requests, (ii) if the Company shall have elected to deposit the Preferred Shares
issuable upon exercise of the Rights with a depository agent, requisition from
the depository agent depository receipts for the number of one one-hundredths of
a Preferred Share being purchased (in which case stock certificates for the
Preferred Shares represented by such depository receipts shall be deposited by
the transfer agent for the Preferred Shares with the depository agent), the
Company hereby irrevocably authorizing any such depository agent to comply with
all such requests, (iii) after a Triggering Event, requisition or obtain from
the appropriate Person or Persons such securities, cash and other property as
may then be purchasable in lieu of Preferred Shares, the Company hereby
irrevocably authorizing all such requests, (iv) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of the issuance of any
fractional share in accordance with Section 14 and (v) promptly after receipt of
such stock certificates, depository receipts, securities, cash and/or other
property, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered (when appropriate) in such name
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or names as may be designated by such registered holder.
(d) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of any Section 11(a)(ii) Event,
any Rights Beneficially Owned by: (i) a Restricted Person, (ii) a transferee
from a Restricted Person who becomes a transferee after the Acquiring Person
becomes such or (iii) a transferee from a Restricted Person who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person (or any Affiliate or Associate
thereof) to holders of equity interests in such Acquiring Person (or any such
Associate or Affiliate) or to any Person with whom such Acquiring Person (or any
such Associate or Affiliate) has any continuing written or oral agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(d)
shall be or become void without any further action; and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise, from and after such first
occurrence. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(d) and Section 4(b) are complied with, but shall
have no liability to any holder of the Rights Certificates or to any other
Person as a result of the Company's failure to make any applicable finding or
determination with respect to any Restricted Person, or any transferee
therefrom.
(e) Notwithstanding subsection (a) of this Section 7, a Right
may be exercised by the holder thereof on or after the Distribution Date and
prior to the receipt of the associated Rights Certificate by notifying the
Rights Agent in writing and furnishing to the Rights Agent such information and
evidence as to such election as the Rights Agent may reasonably request;
PROVIDED, HOWEVER, that the Rights Agent shall not be required to take any of
the actions specified in subsection (c) of this Section 7 until such holder
shall have fully satisfied the applicable requirements specified therein.
(f) Neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to any Rights or Rights
Certificate upon the purported exercise or transfer thereof unless the
registered holder thereof shall have (i) completed and signed the Certification
of Status following the Form of Election to Purchase or the Form of Assignment,
as the case may be, set forth on the reverse side of the Rights Certificate
surrendered for such exercise or transfer and (ii) provided such additional
evidence as to the identity of the Beneficial Owner (or former Beneficial Owner)
thereof or the Affiliates or Associates thereof as the Company shall reasonably
request.
(g) In case the registered holder of any Rights Certificate
shall exercise less than all of the Rights evidenced thereby, then, subject to
the provisions of Section 14, a new Rights Certificate evidencing the Rights
remaining unexercised shall be prepared and executed by the Company and
countersigned and delivered by the Rights Agent to the registered holder of such
surrendered Rights Certificate or to such registered holder's duly authorized
assigns.
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SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS
CERTIFICATES. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form or, if surrendered to the Rights Agent, shall be cancelled by it;
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Agreement. The Company shall deliver to the Rights Agent for
cancellation, and the Rights Agent shall cancel, any other Rights Certificate
purchased or reacquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company
or shall, at the written request of the Company, destroy such cancelled Rights
Certificates and deliver a certificate of the destruction thereof to the
Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED
SHARES.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares,
or any authorized and issued Preferred Shares held in its treasury, the number
of Preferred Shares required to permit the exercise in full of all outstanding
Rights.
(b) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Preferred Shares delivered
upon exercise of the Rights shall, at the time of delivery of the stock
certificates therefor in accordance with Section 7(c) (including the receipt of
payment of the Exercise Price), be duly and validly authorized and issued and
fully paid and nonassessable.
(c) The Company covenants and agrees that it will use its best
efforts to cause, from and after such time as the Rights shall become
exercisable, all Preferred Shares issued or reserved for issuance to be listed,
upon official notice of issuance, on the principal national securities exchange,
if any, on which its Common Stock is listed or, if the principal market for
Common Stock is not on any national securities exchange, to be eligible for
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any successor thereto or other comparable quotation system.
(d) The Company covenants and agrees that it will use its best
efforts to (i) file, as soon as practicable after the occurrence of any Section
11(a)(ii) Event for which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iv),
or as soon as required by law after the Distribution Date, as the case may be, a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing and (iii) cause such registration statement to remain effective
(with a prospectus which at all times meets the requirements of the Securities
Act) until the earliest of (A) the date as of which the Rights are no longer
exercisable for such securities, (B) the Redemption Date and (C) the Final
Expiration
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Date. The Company further covenants and agrees that it will take such
action as may be appropriate under, and which will ensure compliance with, the
securities or "blue sky" laws of such jurisdictions as may be necessary or
appropriate in connection with the exercisability of the Rights. The Company may
temporarily suspend, for not more than 90 days after the applicable date
specified in the first sentence of this subsection (d), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to become effective and to complete such securities or "blue sky" law action.
Upon such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, and the Company
shall also issue a public announcement at such time as the suspension shall no
longer be in effect. Failure of the Company to notify the Rights Agent of any
such suspension shall not affect the effectiveness thereof. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been effected. Until otherwise notified in writing by
the Company, the Rights Agent may assume that each purported exercise of the
Rights is permitted by this Agreement and by applicable law, and the Rights
Agent shall not be liable for acting in reliance upon such assumption.
(e) The Company covenants and agrees that, subject to Section
6, it will pay when due and payable any and all federal and state original issue
or transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Rights or the Rights Certificates or of any stock certificate
for Preferred Shares issued upon exercise of the Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of any Rights Certificate to a Person other than, or
the issuance of any stock certificate for Preferred Shares upon exercise of any
of the Rights represented by such Rights Certificate in a name other than, the
registered holder of such Rights Certificate or to issue or deliver any Rights
Certificate or stock certificate for Preferred Shares upon such transfer or
exercise until any such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender thereof) or until
it has been established to the Company's reasonable satisfaction that no such
tax is due.
(f) After a Triggering Event, the provisions of this Section 9
shall apply, to the extent applicable and appropriate, to all shares of capital
stock and other securities then purchasable upon exercise of the Rights.
SECTION 10. RECORD DATE OF PREFERRED SHARE OWNERSHIP. The
Person in whose name any stock certificate for Preferred Shares is issued upon
exercise of any of the Rights shall for all purposes be deemed to have become
the holder of record of the Preferred Shares represented thereby on, and such
stock certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered to the Rights Agent with proper
payment of the Exercise Price (and all applicable transfer taxes, if any);
PROVIDED, HOWEVER, that if the date of such surrender and payment shall be a
date upon which the registry books of the transfer agent for the
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Preferred Shares are closed, such Person shall be deemed to have become the
record holder of such Preferred Shares on, and such stock certificate shall be
dated, the next succeeding Business Day on which such registry books are open.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF
SHARES AND NUMBER OF RIGHTS. The Exercise Price, the number and kind of shares
of capital stock for which each Right is exercisable and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares into
a greater number of Preferred Shares, (C) combine or consolidate the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of capital stock of any class in a reclassification of the Preferred
Shares (including any such reclassification in connection with a combination or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and in Section 7(d), the Exercise
Price in effect at the Close of Business on the record date for such dividend or
at the effective time of such subdivision, combination, consolidation or
reclassification, and the number and kind of shares of capital stock issuable
upon exercise of the Rights at such date or time, shall be proportionately
adjusted so that the registered holder of each Right exercised after such date
or time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date or time and at a time when the registry books of the transfer agent for the
Preferred Shares were open, such registered holder would have been entitled to
receive by reason of such dividend, subdivision, combination, consolidation or
reclassification; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon the exercise thereof.
If an event shall occur which would require an adjustment under both this
paragraph (i) and paragraph (ii) of this subsection (a), the adjustment provided
for in this paragraph (i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to such paragraph (ii).
(ii) Subject to Section 24, in the event that any Person, either
alone or together with its Affiliates and Associates, shall become an
Acquiring Person, then, in such case and promptly following such
occurrence, proper provision shall be made so that the registered
holder of each Right, except as otherwise provided in Section 7(d),
shall thereafter have the right to receive, upon exercise thereof and
payment of an amount equal to the product determined by multiplying the
then current Exercise Price by the number of one one-hundredths of a
Preferred Share for which such Right was exercisable immediately prior
to such occurrence, in accordance with this Agreement, in lieu of
Preferred Shares, the number of shares of Common Stock determined
dividing such product by 50% of the Fair Market Value (determined as
provided in subsection (d) of this Section 11) of one share of Common
Stock on the date of such occurrence.
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(iii) In the event that there shall not be sufficient authorized and
unissued or treasury shares of Common Stock to permit the exercise in
full of the Rights in accordance with paragraph (ii) of this subsection
(a), the Company shall take all necessary action to authorize and
reserve for issuance such number of additional shares of Common Stock
as may from time to time be required to be issued upon the exercise in
full of all outstanding Rights and, if necessary, shall use its best
efforts to obtain stockholder approval thereof. Notwithstanding the
preceding sentence, if at least a majority of the Disinterested
Directors shall determine that such action is necessary or appropriate
and is not contrary to the best interests of the holders of the Rights,
such Disinterested Directors may cause the Company, in lieu of issuing
shares of Common Stock in accordance with such paragraph (ii), to
distribute, or if a sufficient number of shares of Common Stock cannot
be issued for such purpose in accordance with the provisions hereof,
the Company shall distribute, upon the exercise of each Right, cash,
debt securities, Preferred Shares, other shares of Preferred Stock,
other property or any combination thereof having an aggregate Fair
Market Value (determined as provided in subsection (d) of this Section
11) equal to the Fair Market Value (as so determined) of the number of
shares of Common Stock which otherwise would have been issuable
pursuant to such paragraph (ii). Any such decision by a majority of the
Disinterested Directors must be made and publicly announced within 30
days after the occurrence of any Section 11(a)(ii) Event.
(b) In the event that the Company shall fix a record date for
the making of any distribution to all registered holders of Preferred Shares of
options, warrants or rights entitling them (for a period expiring not later than
45 calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares of capital stock of any class of the Company having the same
(or more favorable) powers, preferences and rights as the Preferred Shares
("Equivalent Preferred Shares"), or securities convertible into or exchangeable
for Preferred Shares or Equivalent Preferred Shares, at a price per Preferred
Share or per Equivalent Preferred Share (or having a conversion or exchange
price per share, in the case of securities convertible into or exchangeable for
Preferred Shares or Equivalent Preferred Shares) less than the Fair Market Value
(determined as provided in subsection (d) of this Section 11) of one Preferred
Share on such record date, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date, plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the
aggregate initial conversion or exchange price, in the case of convertible or
exchangeable securities so to be offered) would purchase at such Fair Market
Value, and the denominator of which shall be the number of Preferred Shares
outstanding on such record date, plus the total number of Preferred Shares
and/or Equivalent Preferred Shares so to be offered (and/or into or for which
the convertible or exchangeable securities so to be offered are
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initially convertible or exchangeable); PROVIDED, HOWEVER, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon the exercise thereof. In case all or part of such subscription price may be
paid in a form other than cash, the value of such non-cash consideration shall
be its Fair Market Value (determined as provided in such subsection (d)).
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any computation provided for in this
subsection (b). The adjustment required by this subsection (b) shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Exercise Price shall be adjusted to the
Exercise Price which would have been in effect if such record date had not been
fixed.
(c) In the event that the Company shall fix a record date for
the making of any distribution to all registered holders of Preferred Shares
(including any such distribution made in connection with a combination or merger
in which the Company is the continuing or surviving corporation) of cash (other
than a regular quarterly cash dividend), options, warrants, rights (other than
those referred to in subsection (b) of this Section 11), securities, evidences
of indebtedness or other property (excluding any dividend payable in Preferred
Shares, but including any dividend payable in other shares of capital stock),
the Exercise Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Fair Market Value (determined
as provided in subsection (d) of this Section 11) of one one-hundredth of a
Preferred Share on such record date, less the Fair Market Value (as so
determined) of the cash, options, warrants, rights, securities, evidences of
indebtedness or other property so to be distributed and properly attributable to
one one-hundredth of a Preferred Share, and the denominator of which shall be
such Fair Market Value of one one-hundredth of a Preferred Share; PROVIDED,
HOWEVER, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon the exercise thereof. The adjustment required by
this subsection (c) shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Exercise
Price shall be adjusted to the Exercise Price which would have been in effect if
such record date had not been fixed.
(d) For the purpose of any computation required under this
Agreement, "Fair Market Value," when used with respect to Preferred Shares or
shares of Common Stock or other capital stock of any class (collectively, a
"Stock"), to any option, warrant, right or other security or evidence of
indebtedness (collectively, a "Security") or to any other property, shall be
determined as provided in this subsection (d):
(i) In the case of any Stock or Security which is publicly
traded, the Fair Market Value on any date shall be deemed to be the
average of the daily closing prices per share of such Stock or per unit
of such Security for the 30 consecutive Trading Days immediately prior
to such date; PROVIDED, HOWEVER,
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that in the event that the Fair Market Value per share of any Stock is
determined during a period commencing after the public announcement by
its issuer of (A) a dividend or distribution on such Stock payable in
shares of such Stock or securities convertible into or exchangeable
for shares of such Stock or (B) a subdivision, combination,
consolidation or reclassification of such Stock, and ending prior to
the expiration of the 30 Trading Days after the ex-dividend date for
such dividend or distribution, or the record date for such
subdivision, combination, consolidation or reclassification, then, in
each such case, the Fair Market Value of such Stock shall be properly
adjusted to take into account "ex-dividend" trading. The closing price
for each day shall be the last sale price, regular way, or, in case no
such sale shall take place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if such Stock or Security is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the principal national securities
exchange on which such Stock or Security is listed or admitted to
trading; or if such Stock or Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the last quoted high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or
any other similar system then in use; or if on any such day no bid for
such Stock or Security is quoted by any such organization, the average
of the closing bid and asked prices, as furnished by a professional
market maker making a market in such Stock or Security selected by the
Board. If during any relevant period no market maker is making a
market in such Stock or Security, its Fair Market Value on a specified
date shall be determined reasonably and with utmost good faith to the
holders of the Rights by the Board; PROVIDED, HOWEVER, that if at the
time of such determination there shall be an Acquiring Person, the
Fair Market Value of such Stock or Security on such date shall be
determined by a nationally recognized investment banking firm selected
by the Board, which determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Company, the
Rights Agent and the holders of the Rights. The term "Trading Day"
shall mean a day on which the principal national securities exchange
on which such Stock or Security is listed or admitted to trading is
open for the transaction of business or, if such Stock or Security is
not listed or admitted to trading on any national securities exchange,
a Business Day.
(ii) In the case of any Stock or Security which is not publicly
traded, the Fair Market Value on any date shall be the fair value per
share of such Stock or per unit of such Security as determined
reasonably and with utmost good faith to the holders of the Rights by
the Board; PROVIDED, HOWEVER, that if at the time of such determination
there shall be an Acquiring Person, the Fair Market Value of such Stock
or Security on such date shall be determined by a nationally recognized
investment banking firm selected by the Board, which determination
shall be
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described in a statement filed with the Rights Agent and shall
be binding on the Company, the Rights Agent and the holders of the
Rights.
(iii) In the case of any property which is not a Stock or a
Security, the Fair Market Value on any date shall be determined
reasonably and with utmost good faith to the holders of Rights by the
Board; PROVIDED, HOWEVER, that if at the time of such determination
there shall be an Acquiring Person, the Fair Market Value of such
property on such date shall be determined by a nationally recognized
investment banking firm selected by the Board, which determination
shall be described in a statement filed with the Rights Agent and shall
be binding on the Company, the Rights Agent and the holders of the
Rights.
(e) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Exercise Price then in effect; PROVIDED, HOWEVER, that any adjustments which
by reason of this subsection (e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest whole cent, to the nearest
one ten-thousandth of a share of Common Stock or other capital stock of any
class (other than Preferred Shares) or to the nearest one one-millionth of a
Preferred Share, as the case may be. Notwithstanding the first sentence of this
subsection (e), any adjustment required by this Section 11 shall be made no
later than the earliest of (i) three years after the date
of the occurrence requiring such adjustment, (ii) the Redemption Date and (iii)
the Final Expiration Date.
(f) If as a result of an adjustment required by any Triggering
Event the holder of any Rights thereafter exercised shall become entitled to
receive any shares of capital stock of any class of the Company (other than
Preferred Shares), the number of such other shares so receivable upon exercise
of any Rights shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as reasonably possible to the provisions with
respect to the Preferred Shares contained in this Section 11, and the provisions
of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply
on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised the option
provided in subsection (i) of this Section 11, upon each adjustment of the
Exercise Price as a result of the calculations required by subsection (b) or (c)
of this Section 11, each Right outstanding immediately prior to the making of
such Exercise Price adjustment shall thereafter evidence the right to purchase,
at the adjusted Exercise Price, the number of one one-hundredths of a Preferred
Share (calculated to the nearest one one-millionth)
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determined by (i) multiplying the number of one one-hundredths of a Preferred
Share purchasable upon exercise of such Right immediately prior to such
adjustment by the Exercise Price in effect immediately prior to such adjustment
and (ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment.
(i) The Company may elect, on or after the date on which any
adjustment of the Exercise Price is required to be made hereunder, to adjust the
number of Rights outstanding in substitution for making an adjustment in the
number of one one-hundredths of a Preferred Share purchasable upon exercise of
each Right. Each Right outstanding after such an adjustment in the number of
Rights shall be exercisable for the same number of one one-hundredths of a
Preferred Share as such Right was exercisable for immediately prior to such
adjustment; but each Right held of record prior to such adjustment shall become
the number of Rights (calculated to the nearest one ten-thousandth) determined
by dividing the Exercise Price in effect immediately prior to the occurrence
requiring the adjustment of the Exercise Price by the Exercise Price in effect
immediately after such adjustment of the Exercise Price. The Company shall make
a prompt public announcement of its election to adjust the number of Rights
outstanding, indicating the record date for the adjustment and, if
known at the time of such announcement, the amount of the adjustment to be made.
Such record date may be the date on which the Exercise Price is required to be
adjusted or any day thereafter, unless the Rights Certificates shall have been
issued, in which case such record date shall be at least 10 days after the date
of such public announcement. If the Rights Certificates shall have been issued,
upon each adjustment of the number of Rights outstanding pursuant to this
subsection (i), the Company shall, as promptly as practicable, cause to be
distributed to each registered holder of the Rights Certificates on such record
date Rights Certificates evidencing, subject to Section 14, the additional
Rights to which such registered holder shall be entitled as a result of such
adjustment; or, at its option, the Company shall cause to be distributed to each
such registered holder, in substitution and replacement for the Rights
Certificates held by such registered holder prior to the date of such
adjustment, but only upon surrender thereof (if so required by the Company), new
Rights Certificates evidencing all the Rights to which such registered holder
shall be entitled after such adjustment. Rights Certificates so distributed
shall be executed and countersigned in the manner provided in Section 5 (and may
designate, at the option of the Company, the adjusted Exercise Price) and shall
be registered in the names of the registered holders of the Rights Certificates
on the record date specified in the aforesaid public announcement.
(j) Irrespective of any adjustment or change in the Exercise
Price or the number of one one-hundredths of a Preferred Share issuable upon
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to designate the Exercise Price and the number of one
one-hundredths of a Preferred Share which were designated in the Rights
Certificates originally issued hereunder.
(k) Before taking any action which would cause an adjustment
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reducing the Exercise Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Exercise Price.
(l) In any case in which this Section 11 shall require an
adjustment of the Exercise Price effective as of the record date for a
particular event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Rights exercised after such record date
of the Preferred Shares (and/or the other shares of capital stock, securities or
other property of the Company, if any) issuable upon such exercise in excess of
the Preferred Shares (and/or the other shares of capital stock, securities or
other property of the Company, if any) issuable upon such exercise on the basis
of the Exercise Price in effect immediately prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such excess
upon the occurrence of such event.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Board shall be entitled to make reductions in the Exercise
Price, in addition to the adjustments expressly required by this Section 11, as
and to the extent that the Board, in its sole discretion, shall determine to be
advisable in order that any dividend on the Preferred Shares payable in
Preferred Shares, any subdivision, combination or consolidation of the Preferred
Shares (by reclassification or otherwise than by payment of dividends in
Preferred Shares) into a greater or lesser number of Preferred Shares, any
issuance of Preferred Shares solely for cash at less than the Fair Market Value
thereof, any issuance solely for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares or any
issuance of options, warrants, rights, securities, evidences of indebtedness or
other property subject to subsection (b) or (c) of this Section 11, hereafter
made by the Company to the holders of the Preferred Shares, shall not be taxable
to such holders.
(n) In the event that the Company shall at any time after the
date of this Agreement and prior to the Distribution Date (i) declare a dividend
on its outstanding shares of Common Stock payable in shares of Common Stock or
(ii) effect a subdivision, combination or consolidation of its outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
dividends in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then, in each such case: (i) the number of one one-hundredths
of a Preferred Share purchasable after such event upon proper exercise of each
Right shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event; and (ii)
each share of Common Stock outstanding immediately after such event shall have
issued with respect to it the same number of Rights which each share
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of Common Stock outstanding immediately prior to such event had issued with
respect to it. The adjustment required by this subsection (n) shall be made
successively whenever such a dividend is declared or such a subdivision,
combination or consolidation is effected.
(o) Except as permitted by Sections 23 and 27, the Company
covenants and agrees that, after the Distribution Date, it will not take, or
permit any of its Subsidiaries to take, any action if at the time such action
would be taken it is reasonably foreseeable that such action would eliminate or
substantially diminish the benefits intended to be afforded by the Rights.
SECTION 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER
OF SHARES. Whenever any adjustment shall be required by Section 11, 13 or 23(g),
the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts requiring such adjustment, (b)
file with the Rights Agent and with each transfer agent for the Preferred Shares
or the Common Stock of the Company a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of the Rights in accordance with
Section 26. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment described therein and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER.
(a) In the event that, on or after the occurrence of any
Section 11(a)(ii) Event, directly or indirectly: (i) the Company shall
consolidate with, or merge with and into, any Interested Stockholder or, if in
such consolidation or merger all holders of the Common Stock of the Company are
not treated the same, any other Person (other than a wholly-owned Subsidiary of
the Company in a transaction not prohibited by Section 11(o)), so that the
Company shall not be the continuing or surviving corporation, (ii) any
Interested Stockholder or, if in such merger all holders of the Common Stock of
the Company are not treated the same, any other Person (other than a
wholly-owned Subsidiary of the Company in a transaction not prohibited by
Section 11(o)) shall merge with and into the Company, so that the Company shall
be the continuing or surviving corporation, and in connection with such merger
either (A) all or part of the outstanding shares of Common Stock of the Company
shall be converted or changed into or exchanged for capital stock or other
securities of any other Person (or the Company), cash and/or other property or
(B) such shares of Common Stock shall remain outstanding, unconverted and
unchanged, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or a series of
related transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any Interested Stockholder or, if in such transaction or transactions the
holders of the Common Stock of the Company are not treated the same, any other
Person or Persons (other than the Company or one or more of its wholly-owned
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Subsidiaries in one or more transactions, each of which is not prohibited by
Section 11(o)), then, in each such case, proper provision shall be made so that
(w) the registered holder of each Right, except as otherwise provided in Section
7(d), shall thereafter have the right to receive, upon exercise thereof and
payment of an amount equal to the product determined by multiplying the then
current Exercise Price by the number of one one-hundredths of a Preferred Share
for which such Right is then exercisable, in accordance with this Agreement, in
lieu of Preferred Shares, the number of freely tradable shares (which shall be
duly authorized, validly issued, fully paid and non-assessable) of Common Stock
of the Principal Party or, in the case of a merger described in clause (ii) of
this sentence in which the Common Stock of the Company shall remain outstanding,
unconverted and unchanged, of the Company, free and clear of all rights of call
or first refusal, liens, encumbrances or other adverse claims, determined by
dividing such product by 50% of the Fair Market Value (determined as provided in
Section 11(d)) of the shares of Common Stock of such Principal Party (or, if
appropriate, the Company) on the date of consummation of such Section 13 Event;
(x) such Principal Party shall thereafter be liable for, and shall assume, by
reason of the consummation of such Section 13 Event, all the obligations and
duties of the Company under this Agreement; (y) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall apply to such Principal Party;
and (z) such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of its shares of Common Stock to
permit exercise of all outstanding Rights in accordance with this subsection (a)
and the distribution of cash, debt securities, shares and other property in
accordance with Section 11(a)(iv))in connection with the consummation of such
Section 13 Event as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably possible, in relation to the
shares of Common Stock thereafter deliverable upon exercise of the Rights.
(b) After the Distribution Date, the Company shall not
consolidate or merge with any other Person (other than a wholly-owned Subsidiary
of the Company in a transaction not prohibited by Section 11(o)), or sell or
otherwise transfer (or permit one or more of its Subsidiaries to sell or
otherwise transfer), in one or a series of related transactions, assets or
earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or one or more of its wholly-owned Subsidiaries in one
or more transactions, each of which is not prohibited by Section 11(o)), if (i)
at the time of or immediately after the consummation of such transaction there
are any options, warrants, rights, conversion or exchange privileges or
securities outstanding or any written or oral agreements, arrangements or
understandings (including provisions contained in the Company's Certificate of
Incorporation or By-laws) in effect which, as a result of the consummation of
such transaction, would eliminate or substantially diminish the benefits
intended to be afforded by the Rights, or (ii) prior to, at the time of or
immediately after the consummation of such transaction the stockholders of the
Person who constitutes, or would constitute, the Principal Party for the purpose
of subsection (a) of this Section 13 shall have received a distribution of
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Rights previously owned by such Person or any of its Affiliates or Associates.
(c) The Company shall not consummate any Section 13 Event
unless prior thereto (i) the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and (ii) the Company, the Principal Party and each other Person who
may become the Principal Party as a result of the consummation of such Section
13 Event shall have executed and delivered to the Rights Agent a supplemental
agreement providing (x) for the implementation of all the terms and conditions
set forth in this Section 13 and (y) that, as soon as practicable after the date
of such Section 13 Event, the Principal Party, at its own expense, shall:
(A) prepare and file a registration statement on an
appropriate form under the Securities Act with respect to the
Rights and the securities purchasable upon exercise thereof,
and use its best efforts to cause such registration statement
to become effective as soon as practicable after such filing
and to remain effective (with a prospectus which at all times
meets the requirements of the Securities Act) until the
earliest of the date as of which the Rights are no longer
exercisable for such securities, the Redemption Date and the
Final Expiration Date;
(B) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise thereof
under the securities or "blue sky" laws of such jurisdictions
as may be necessary or appropriate in connection with the
exercisability of the Rights;
(C) use its best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon
exercise thereof on a national securities exchange or to meet
the eligibility requirements for quotation on NASDAQ; and
(D) deliver to the registered holders of the Rights
historical financial statements for the Principal Party and
each of its Affiliates complying in all material respects with
the requirements for registration of securities on Form 10
under the Exchange Act.
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not apply to a transaction described in clause (i) or
(ii) of subsection (a) thereof if (i) such transaction is consummated with a
Person or Persons who acquired their shares of Common Stock of the Company
pursuant to a Permitted Offer, (ii) the price per share of Common Stock of the
Company provided in such transaction shall not be less than the price per share
of Common Stock of the Company paid to all holders whose shares were purchased
pursuant to such Permitted Offer and (iii)the form of consideration being
offered to the remaining holders of the Common Stock of the Company pursuant to
such transaction is the same as the form of consideration paid
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pursuant to such Permitted Offer. Upon consummation of any transaction
authorized by this subsection (d), all Rights shall expire.
(e) "Principal Party" shall mean: in the case of any
transaction described in clause (i) or (ii) of subsection (a) of this Section
13, the Person which is the issuer of the securities into which shares of Common
Stock of the Company are being converted or changed in such transaction or, if
there shall be more than one such issuer, the issuer having shares of Common
Stock with the greatest aggregate market value; or if no securities are being
issued in such transaction for shares of Common Stock of the Company, the Person
which is the other party to such transaction or, if there shall be more than one
such Person, the Person having shares of Common Stock with the greatest
aggregate market value; and in the case of any transaction described in clause
(iii) of such subsection (a), the Person which is the party receiving the
greatest portion of the assets or earning power sold or otherwise transferred
pursuant to such transaction or transactions; PROVIDED, HOWEVER, that in any
such case (i) if the shares of Common Stock of such Person shall not at the time
of the consummation of such transaction have been continuously registered under
Section 12 of the Exchange Act during the immediately preceding 12-month period,
and such Person shall be a direct or indirect Subsidiary or Affiliate of another
Person the shares of Common Stock of which shall have been so registered,
"Principal Party" shall mean such other Person; and (ii) if such Person shall be
a direct or indirect Subsidiary or Affiliate of more than one other Person, the
shares of Common Stock of two or more of which shall have been so registered,
"Principal Party" shall mean whichever of such other Persons shall have Common
Stock with the greatest aggregate market value; and (iii) if such Person shall
be owned, directly or indirectly, by a joint venture formed by two or more
Persons which are not owned, directly or indirectly, by the same Person, the
rules set forth in clauses (i) and (ii) of this proviso shall apply to each
chain of ownership of any joint venturer as though such joint venture were a
"Subsidiary" of all of such joint venturers, and the Principal Party in each
such chain shall bear the obligations and duties set forth in this Section 13 in
the same proportion as their direct or indirect ownership interest in such
Person bears to the total of such ownership interests.
(f) If, in the case of any transaction described in clause
(iii) of subsection (a) of this Section 13, the Person or Persons to whom assets
or earning power are sold or otherwise transferred are individuals, then, in
lieu of any other payment or distribution required by this Section 13, and the
Company shall require as a condition to such transaction that, such Person or
Persons shall pay to each holder of a Rights Certificate, upon its surrender to
the Rights Agent and in exchange therefor (without requiring any payment by such
holder), cash in the amount determined by multiplying the then current Exercise
Price by the number of one one-hundredths of a Preferred Share for which a Right
is then exercisable.
(g) In no event shall the Rights Agent have any obligations or
duties in respect of any Section 13 Event, except as expressly set forth in this
Agreement. The Rights Agent may rely, and shall be fully protected in relying
upon, a certificate of the
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Company stating that the provisions of this Section 13 have been fulfilled. The
prior written consent of the Rights Agent shall be required in connection with
any supplemental agreement which alters or impairs the rights, obligations,
duties or immunities of the Rights Agent hereunder.
(h) The provisions of this Section 13 shall similarly apply to
successive consolidations, mergers, sales or other transfers. In the event that
any Section 13 Event shall occur at any time after the occurrence of any Section
11(a)(ii) Event, the Rights which have not been theretofore exercised shall
thereafter be exercisable in the manner described in this Section 13.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractional
Rights or to distribute Rights Certificates which evidence fractional Rights. If
the Company shall determine not to issued fractional Rights, the Company shall
pay, in lieu of issuing fractional Rights, to the registered holders of the
Rights with respect to which fractional Rights would otherwise be issuable an
amount in cash equal to the same fraction of the Fair Market Value (determined
as provided in Section 11(d) for the Trading Day immediately prior to the date
on which such fractional Rights would otherwise have been issued) of one Right.
(b) The Company shall not be required to issue fractional
Preferred Shares (other than fractions which are multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute stock
certificates which evidence fractional Preferred Shares (other than fractions
which are multiples of one one-hundredth of a Preferred Share). If the Company
shall determine not to issue fractional Preferred Shares that are not multiples
of one one-hundredth of a Preferred Share, the Company shall pay to the
registered holders of the Rights Certificates at the time Rights represented
thereby are exercised, in lieu of such fractional Preferred Shares, an amount in
cash equal to the same fraction of the Fair Market Value (determined as provided
in Section 11(d) for the Trading Day immediately prior to the date of such
exercise) of one one-hundredth of a Preferred Share.
(c) Each holder of a Right, by accepting the same, expressly
waives such holder's right to receive or exercise any fractional Right or to
receive any fractional Preferred Share upon the exercise of such Right (except
as provided in this Section 14).
SECTION 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement, other than rights of action which the Rights Agent may have
under Sections 18 and 20, are vested in the registered holders of the Rights
Certificates (or, prior to the Distribution Date, the registered holders of the
Common Stock of the Company); and the registered holder of any Rights
Certificate (or, prior to the Distribution Date, of any stock certificate for
shares of such Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior
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to the Distribution Date, of any other stock certificate for shares of Common
Stock), may, on such registered holder's own behalf and for such registered
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such registered holder's right to exercise the Rights evidenced by such Rights
Certificate (or, prior to the Distribution Date, such stock certificate) in the
manner provided in such Rights Certificate and in this Agreement. Without
limiting the generality of the foregoing or any remedies available to the
holders of the Rights, it is specifically acknowledged that the registered
holders of the Rights would not have an adequate remedy at law for any breach of
this Agreement and will be entitled to specific performance of the obligations
and duties under, and injunctive relief against any actual or threatened
violations of the obligations and duties of any Person subject to, this
Agreement.
SECTION 16. AGREEMENTS OF HOLDERS OF RIGHTS. Each holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be
transferable only simultaneously and together with the transfer of shares of
Common Stock of the Company;
(b) after the Distribution Date, the Rights Certificates shall
be transferable on the registry books of the Rights Agent only if surrendered at
the principal office of the Rights Agent, with the Form of Assignment and
Certification of Status on the reverse side thereof duly executed, together with
such signature guarantees and other documentation as the Rights Agent may
reasonably request;
(c) subject to Sections 6 and 7(d), the Company and the Rights
Agent may deem and treat the Person in whose name any Rights Certificate (or,
prior to the Distribution Date, any stock certificate for Common Stock of the
Company) is registered as the absolute owner thereof and of the Rights
represented thereby (notwithstanding any notations of ownership or other writing
on such Rights Certificate or stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or to any other Person because of its
inability to perform any of its obligations or duties under this Agreement by
reason of any applicable law, any preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission or any rule,
regulation or executive order promulgated or enacted by any such governmental
authority prohibiting or otherwise restraining performance of any such
obligation or duty; PROVIDED, HOWEVER, that the Company shall use its best
efforts to have any such injunction, order, decree or ruling lifted or otherwise
overturned as soon as reasonably possible.
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SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to
vote, to receive dividends or other distributions on or to exercise any
preemptive rights with respect to, or shall be deemed for any other purpose to
be the holder of, the Preferred Shares or other shares of capital stock of any
class of the Company which may at the time be issuable upon exercise of the
Rights represented thereby; nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company, or any right to vote
for the election of directors or upon any other matter submitted to stockholders
at any meeting thereof, to give or withhold consent to any corporate action, to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25) or to receive dividends, subscription rights or other
distributions, until the Rights represented by such Rights Certificate shall
have been exercised, in whole or in part, in accordance with the provisions
hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company covenants and agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time on the written request of the Rights Agent, to reimburse it
for all reasonable expenses and counsel fees incurred in connection with the
acceptance and administration of this Agreement and the performance of its
obligations and duties hereunder. The Company also covenants and agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without negligence, bad faith or willful
misconduct on its part, for any action taken, suffered or omitted by it in
connection with the acceptance and administration of this Agreement and the
performance of its obligations and duties hereunder, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of, any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate, stock certificate for Preferred Shares, Common Stock or other
shares of capital stock of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be executed and, where necessary, verified or acknowledged by the proper
Person or Persons.
SECTION 19. MERGER OR CONSOLIDATION OF THE RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stockholder services
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or corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as successor Rights Agent under Section 21. In case at the time any successor
Rights Agent shall succeed to the agency created by this Agreement any of the
Rights Certificates countersigned by its predecessor Rights Agent shall not have
been delivered, such successor Rights Agent may adopt the counter signature of
its predecessor Rights Agent and deliver the Rights Certificates so
countersigned; or in case at such time any of the Rights Certificates shall not
have been countersigned, such successor Rights Agent may countersign such Rights
Certificates either in the name of its predecessor Rights Agent or in the name
of such successor Rights Agent; and in all such cases, such Rights Certificates
shall have the full force and effect provided therein and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver the Rights Certificates so countersigned; or in
case at such time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases, such Rights
Certificates shall have the full force and effect provided therein and in this
Agreement.
SECTION 20. DUTIES OF THE RIGHTS AGENT. The Rights
Agent undertakes the obligations and duties imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
the Rights Certificates (or, prior to the Distribution Date, the stock
certificates for Common Stock of the Company), by accepting the same, shall be
bound, and no implied obligations or duties shall be read into this Agreement
against the Rights Agent:
(a) the Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the written opinion of such legal counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken, suffered or omitted by it in good faith and in accordance
with such opinion;
(b) whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking, suffering or
omitting any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate executed by any one of the
Chairman of the Board, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full and complete authorization and protection to the Rights Agent as
to any action taken, suffered or omitted by it in good faith in reliance upon
such certificate;
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(c) the Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct;
(d) the Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereon) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only;
(e) the Rights Agent shall not be responsible for the validity
of this Agreement or the execution and delivery hereof (except for its due
execution hereof) or for the validity or execution of any Rights Certificate
(except for its countersignature thereon); nor shall the Rights Agent be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall the Rights Agent be
responsible for any change in the exercisability of the Rights (including Rights
becoming void pursuant to Section 7(d)), for any adjustment or change (or for
the manner or method of determining same) in the terms of the Rights (including
any adjustment or change in the Exercise Price or in the number or kind of
shares, securities or other property issuable upon the exercise thereof)
required by Section 11, 13, 23 or 24 or for ascertaining the existence of facts
which would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice, in the
manner provided in Section 12, that such change or adjustment is required); nor
shall the Rights Agent by any act hereunder be deemed to have made any
representation or warranty as to the authorization or reservation of any
Preferred Shares or shares of Common Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any Preferred Shares or
shares of Common Stock will, when issued, be validly authorized and issued and
fully paid and nonassessable;
(f) the Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its obligations and
duties hereunder from any one of the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with its obligations and
duties; and the Rights Agent shall not be liable for any action taken, suffered
or omitted by it in good faith and in accordance with the written instructions
of any such officer or for any delay in acting while waiting for such
instructions;
(h) the Rights Agent and any stockholder, director, officer or
employee
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of the Rights Agent may buy, sell or deal in the Rights or in any other
securities of the Company (including the Preferred Shares and its Common Stock)
or become pecuniarily interested in any transaction in which the Company (or any
of its Subsidiaries) may be interested, or contract with or lend money to the
Company (or any of its Subsidiaries), and may otherwise act as fully and freely
as though it were not the Rights Agent under this Agreement; and nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Company, any of its Subsidiaries or any other entity;
(i) the Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any of its obligations or duties
hereunder either directly or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorney or agent or for any loss to the
Company resulting from any such act, default, neglect or misconduct, provided
the Rights Agent exercised reasonable care in the selection and continued
employment of such attorney or agent;
(j) if, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the Form of Certification of Status
attached to the Form of Election to Purchase or the Form of Assignment, as the
case may be, has either not been completed or indicates an affirmative response
to Question 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to the requested exercise or transfer without first
consulting with the Company; and
(k) no provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its obligations or duties or in the exercise of its
rights or powers hereunder if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured.
SECTION 21. RESIGNATION OR REMOVAL OF THE RIGHTS AGENT. The
Rights Agent or any successor Rights Agent may resign and be discharged from its
obligations and duties under this Agreement upon 30 days' prior notice to the
Company and to each transfer agent for the Preferred Shares and for the Common
Stock of the Company, sent by registered or certified mail, postage prepaid, and
to each registered holder of the Rights Certificates, sent by first-class mail,
postage prepaid. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' prior notice to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent for the Preferred Shares and for
the Common Stock of the Company, sent by registered or certified mail, postage
prepaid, and to each registered holder of the Rights Certificates, sent by
first-class mail, postage prepaid. If the Rights Agent or any successor Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor Rights Agent. If the Company shall fail to
make such appointment within 30 days after giving notice of such removal or
after receiving notice of such resignation or incapacity, either from the
resigning or incapacitated Rights Agent or from the registered holder of any
Rights
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Certificate (who shall, with such notice, submit its Rights Certificate for
inspection by the Company), then the incumbent Rights Agent or the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a successor Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
of America, the State of Delaware, the State of New York or the State of
Illinois (or of any other state so long as such corporation is authorized to do
business as a banking institution in the State of Delaware, the State of New
York or the State of Illinois), be in good standing under the laws of the
jurisdiction of its incorporation, have an office in the State of Delaware, the
State of New York or the State of Illinois, be authorized under such laws to
exercise corporate trust or stock transfer powers, be subject to supervision or
examination by federal or state authority and have at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a corporation described in clause (a) of this
sentence. After its appointment, the successor Rights Agent shall be vested with
the same rights, powers, obligations, duties and immunities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent for
the Preferred Shares and for the Common Stock of the Company, and mail notice
thereof to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or any successor Rights Agent or the appointment of any successor
thereto.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any provision of this Agreement or of the Rights Certificates to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing the Rights in such form as may be approved by the Board to reflect
any adjustment or change in the Exercise Price or in the number or kind of
shares, securities or other property issuable upon exercise of the Rights in
accordance with the provisions of this Agreement; PROVIDED, HOWEVER, that (a) no
such Rights Certificates shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance could create a significant risk
of material adverse tax consequences to the Company or to the Persons to whom
such Rights Certificates would be issued and (b) no such Rights Certificates
shall be issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Board may, at its option, at any time prior to the
earliest of (i) the Close of Business on the 10th Business Day after the Share
Acquisition Date (or, if the Share Acquisition Date shall have occurred prior to
the Record Date, the Close of
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Business on the 10th Business Day after the Record Date), (ii) the occurrence of
any Section 13 Event and (iii) the Final Expiration Date, redeem all, but not
less than all, of the then outstanding Rights at a redemption price of $.01 per
Right, adjusted as provided in subsection (g) of this Section 23 (such
redemption price being hereinafter called the "Redemption Price"); PROVIDED,
HOWEVER, that if the Board shall authorize the redemption of the Rights in the
circumstances set forth in either clause (A) or (B) below, there must be
Disinterested Directors then in office and such authorization shall require the
concurrence of at least a majority of such Disinterested Directors: (A) such
authorization shall occur on or after the date a Person becomes an Acquiring
Person or (B) such authorization shall occur on or after the date of a change
(resulting from a solicitation of either proxies or one or more written
stockholder consents) in a majority of the directors in office at the
commencement of such solicitation if any Person who shall be a participant in
such solicitation has stated (or, if upon the commencement of such solicitation,
at least a majority of the Disinterested Directors shall have determined in good
faith) that such Person (or any of its Affiliates or Associates) intends to
take, or may consider taking, any action which would result in such Person
becoming an Acquiring Person or which would cause the occurrence of a Triggering
Event.
(b) In addition to the right of redemption reserved in the
first sentence of subsection (a) of this Section 23, if there shall be
Disinterested Directors then in office, the Board may redeem, with the
concurrence of at least a majority of the Disinterested Directors, all, but not
less than all, of the then outstanding Rights at the Redemption Price after the
Share Acquisition Date, but prior to the occurrence of any Section 13 Event, if
either (i) the Person who is an Acquiring Person shall have transferred or
otherwise disposed of (either alone or together with its Affiliates and
Associates) such number of shares of Common Stock of the Company, in one or a
series of related transactions not directly or indirectly involving the Company
or any of its Subsidiaries or the occurrence of any Section 13 Event, as shall
result in such Person thereafter being a Beneficial Owner of less than 10% of
the then outstanding shares of Common Stock of the Company, and after such
transfer or other disposition there is no other Acquiring Person, or (ii) in
connection with any Section 13 Event which shall not involve an Interested
Stockholder and in which all holders of the Common Stock of the Company are
treated the same.
(c) Notwithstanding any other provision of this Agreement, the
Rights shall not be exercisable after the first occurrence of any Section
11(a)(ii) Event until such time as the Company's right of redemption under this
Section 23 shall have expired.
(d) In considering whether to redeem the Rights, the Board and
the Disinterested Directors may consider the best long-term and short-term
interests of the Company and its stockholders, including, without limitation,
the effects of the redemption of the Rights upon employees, creditors, suppliers
and customers of the Company or of its Subsidiaries and upon the communities in
which offices or other establishments of the Company and such Subsidiaries are
located and all other pertinent factors. The redemption of the Rights by the
Board may be made effective at
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such time, on such basis and with such conditions as the Board, in its sole
discretion, may establish.
(e) Immediately after action by the Board directing the
redemption of the Rights pursuant to subsection (a) or (b) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights shall terminate, and thereafter each registered holder of
the Rights shall only be entitled to receive the Redemption Price therefor. The
Company shall give prompt written notice to the Rights Agent and prompt public
notice to the holders of the Rights of any such redemption; PROVIDED, HOWEVER,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Within 10 days after action by the Board directing
the redemption of the Rights, the Company shall mail (or cause the Rights Agent
to mail) a notice of redemption to each registered holder of the then
outstanding Rights, at its last address appearing on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock of the Company. Any notice which is mailed
in the manner provided in this subsection (e) shall be deemed given, whether or
not received by the registered holder to whom sent. Each notice of redemption
shall state the method by which payment of the Redemption Price is to be made.
Neither the Company nor any of its Affiliates or Associates may at any time
redeem, acquire or purchase for value any Rights other than in the manner set
forth in this Section 23 and Section 24 or in connection with any purchase of
outstanding shares of its Common Stock prior to the Distribution Date.
(f) The Company may, at its option, pay the Redemption Price
in cash, shares of Common Stock (based on its Fair Market Value (determined as
provided in Section 11(d)) as of the date of redemption) or any other form of
consideration deemed appropriate by the Board.
(g) In the event that the Company shall at any time after the
date of this Agreement (i) declare a dividend on its outstanding shares of
Common Stock payable in shares of Common Stock or (ii) effect a subdivision,
combination or consolidation of its outstanding shares of Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in each
such case, the Redemption Price after such event shall equal the Redemption
Price in effect immediately prior to such event multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event; PROVIDED,
HOWEVER, that such adjustment shall be made only if the amount of the Redemption
Price would be reduced or increased by at least $.001 per Right.
SECTION 24. EXCHANGE.
(a) The Board may, at its option, at any time on or after the
occurrence of any Section 11(a)(ii) Event, exchange all or any part of the then
outstanding and
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exercisable Rights (which shall not include any Rights which have become
void pursuant to Section 7(d)) for shares of Common Stock of the Company at an
exchange rate of one share of Common Stock per Right, appropriately adjusted to
reflect any event specified in clauses (A) through (D), inclusive, of the first
sentence of Section 11(a)(i) or in Section 11(n) occurring after the date hereof
(such exchange rate being hereinafter called the "Exchange Rate"); PROVIDED,
HOWEVER, that the Board shall not be authorized to effect such an exchange at
any time after any Person (other than an Exempt Person), together with the
Affiliates and Associates of such Person, shall have become the Beneficial Owner
of 50% or more of the then outstanding shares of Common Stock of the Company.
(b) Immediately after action by the Board directing the
exchange of any Rights pursuant to subsection (a) of this Section 24, and
without any further action and without any notice, the right to exercise such
Rights shall terminate, and thereafter each registered holder of such Rights
shall only be entitled to receive the number of shares of Common Stock of the
Company which shall equal the number of such Rights held by such registered
holder multiplied by the Exchange Rate then in effect. The Company shall give
prompt written notice to the Rights Agent and prompt public notice to the
holders of the Rights of any such exchange; PROVIDED, HOWEVER, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
exchange. Within 10 days after action by the Board directing the exchange of any
Rights, the Company shall mail (or cause the Rights Agent to mail) a notice of
exchange to each registered holder of such Rights, at its last address appearing
on the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Stock of the Company.
Any notice which is mailed in the manner provided in this subsection (b) shall
be deemed given, whether or not received by the registered holder to whom sent.
Each notice of exchange shall state the method by which the exchange of shares
of Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata among the registered holders of the Rights based upon
the number of Rights held (excluding Rights which shall have become void
pursuant to Section 7(d)); and, in such case, a new Rights Certificate
evidencing the Rights not being exchanged shall be prepared and executed by the
Company and countersigned and delivered by the Rights Agent to the registered
holder of such Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Shares (or Equivalent Preferred Shares)
for shares of Common Stock in effecting an exchange for Rights, at the initial
rate of one one-hundredth of a Preferred Share (or Equivalent Preferred Share)
for each share of Common Stock, appropriately adjusted to reflect any
adjustments in the voting rights of the Preferred Shares pursuant to the
Certificate of Designations attached hereto as Exhibit A, so that the fractional
Preferred Share delivered in lieu of each share of Common Stock shall have the
same voting rights as one share of Common Stock.
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(d) In the event that there shall not be sufficient authorized
and unissued or treasury shares of Common Stock or Preferred Shares (or
Equivalent Preferred Shares) to permit the exchange of Rights directed by the
Board, the Company shall take all necessary action to authorize and reserve for
issuance such number of additional shares of Common Stock or Preferred Shares
(or Equivalent Preferred Shares) as may be required for issuance upon such
exchange and, if necessary, shall use its best efforts to obtain stockholder
approval thereof.
(e) The Company shall not be required to issue fractional
shares of Common Stock in exchange for Rights or to distribute stock
certificates which evidence fractional shares of Common Stock. If the Company
shall determine not to issue fractional shares of Common Stock, the Company
shall pay to the registered holders of the Rights with respect to which such
fractional shares would otherwise be issuable an amount in cash equal to the
same fraction of the Fair Market Value (determined as provided in Section 11(d)
for the Trading Day immediately prior to the date of such exchange) of one share
of Common Stock.
SECTION 25. NOTICE TO HOLDERS OF RIGHTS CERTIFICATES OF
CERTAIN EVENTS.
(a) In the event that at any time after the Distribution Date,
the Company shall propose: (i) to pay any dividend payable in shares of capital
stock of any class of the Company to the holders of Preferred Shares or to make
any other cash distribution to the holders of Preferred Shares (other than a
regular quarterly cash dividend); (ii) to effect any reclassification of the
Preferred Shares (other than a reclassification involving only the subdivision
of the outstanding Preferred Shares); (iii) to make any distribution to the
holders of Preferred Shares described in subsection (b) or (c) of Section 11;
(iv) to effect any Section 13 Event; (v) to pay any dividend on its shares of
Common Stock payable in shares of Common Stock or to effect a subdivision,
combination or consolidation of its outstanding shares of Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock); or (vi) to effect the liquidation, dissolution or winding up of the
Company; then, in each such case, the Company shall give to the Rights Agent and
each registered holder of the Rights, in the manner provided in Section 26,
written notice of such proposed action, which shall specify the record date for
such stock dividend or distribution or the date on which such reclassification,
Section 13 Event, liquidation, dissolution or winding up is expected to occur
(and the date for participation therein by the holders of the Common Stock
and/or Preferred Shares if any such date is to be fixed). Such notice shall be
given, in the case of any action described in clause (i) or (iii) of the
preceding sentence, at least 10 days prior to the record date and, in the case
of any other such action, at least 20 days prior to the date of taking of such
proposed action or the date for participation therein by the holders of
Preferred Shares, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, the
Company shall, as soon as practicable thereafter, give to the Rights Agent and
each registered holder
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of the Rights, in the manner provided in Section 26, written notice of the
occurrence thereof, which notice shall describe such occurrence and its
consequences in reasonable detail.
SECTION 26. OTHER NOTICES. Except as otherwise provided
herein, notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the registered holder of any Rights, Rights Certificate
or stock certificate for shares of Common Stock of the Company to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address shall be filed in writing with the
Rights Agent) as follows:
First Commonwealth, Inc.
444 North Wells Street, Suite 600
Chicago, Illinois 60610
Attention: President
Except as otherwise provided herein, notices or demands
authorized by this Agreement to be given or made by the Company or by the
registered holder of any Rights, Rights Certificate or stock certificate for
shares of Common Stock of the Company to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address shall be filed in writing with the Company) as
follows:
First Chicago Trust Company of New York
525 Washington Boulevard, Suite 4660
Jersey City, New Jersey 07310
Attention: Tenders and Exchanges Administration
Except as otherwise provided herein, notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the registered holder of any Rights, Rights Certificate or stock
certificate for shares of Common Stock of the Company shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such
holder at its last address appearing on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, but subject to the last sentence of this Section 27, the
Company and the Rights Agent, if so directed in writing by the Company, shall
supplement or amend any term, provision or condition of this Agreement, without
the approval of the registered holders of the stock certificates representing
the Common Stock and the Rights. From and after the Distribution Date, but
subject to the last sentence of this Section 27, the Company and the Rights
Agent, if so directed in writing by the Company, shall supplement or amend this
Agreement, without the approval of the registered holders of the Rights (however
represented), in order: (a) to cure any ambiguity, (b) to correct or supplement
any term, provision or condition of this Agreement which may be defective
-38-
<PAGE>
or inconsistent with any other term, provision or condition hereof, (c) to
shorten or lengthen any time period specified herein (except that after the
first occurrence of an event described in either clause (A) or (B) of the
proviso in the first sentence of Section 23(a), there must be Disinterested
Directors then in office and any such shortening or lengthening shall require
the concurrence of at least a majority of such Disinterested Directors) or (d)
to change or supplement one or more of the terms, provisions or conditions
hereof in any manner which the Company may deem necessary or desirable and which
shall not adversely affect, as determined by the Board (with the concurrence of
at least a majority of the Disinterested Directors), the interests of the
holders (other than any Restricted Person or the transferees therefrom specified
in Section 7(d) of the Rights (however represented); PROVIDED, HOWEVER, that
this Agreement may not be supplemented or amended pursuant to clause (c) of this
sentence (i) to lengthen any time period (except as permitted by Section
3(a)(ii)) unless (A) approved by at least a majority of the Disinterested
Directors and (B) such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders (other than any
Restricted Person or the transferees therefrom specified in Section 7(d)) of the
Rights or (ii) to lengthen any time period relating to when the Rights may be
redeemed if at such time the Rights are not then redeemable. Upon the delivery
of a certificate from an appropriate officer of the Company stating that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment; PROVIDED,
HOWEVER, that the Rights Agent shall not be required to execute any supplement
or amendment which affects any of the Rights Agent's rights, powers,
obligations, duties or immunities under this Agreement without its consent. On
and after the Distribution Date, no supplement or amendment shall be made which
changes the Exercise Price, the number of one one-hundredths of a Preferred
Share for which a Right is exercisable, the Redemption Price or the Final
Expiration Date. Prior to the Distribution Date, the interests of the holders of
the Rights shall be deemed coincident with the interests of the holders of the
Common Stock of the Company.
SECTION 28. SUCCESSORS. All of the terms, provisions
and conditions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of
their respective successors and assigns.
SECTION 29. CERTAIN DETERMINATIONS AND ACTIONS BY THE BOARD.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including the determination of
the percentage of such outstanding shares of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i), as in effect on the date hereof, under the Exchange Act. The
Board (or, as and when set forth herein, the Disinterested Directors) shall have
the exclusive power and authority to interpret this Agreement and to exercise
all rights and powers specifically granted to the Board or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to make all determinations
deemed necessary or advisable for such administration, including, without
limitation, a
-39-
<PAGE>
determination to redeem or not to redeem the Rights, to exchange or not to
exchange the Rights or to supplement or amend this Agreement. All such
calculations, determinations, interpretations and exercises (including, for
purposes of clause (b) below, all omissions with respect to the foregoing) which
are done or made by the Board (or the Disinterested Directors) in good faith
shall (a) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other Persons and (b) not subject any director
(including any Disinterested Director) to any liability to the holders of the
Rights or to any other Person.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the registered holders of the stock certificates for
the Common Stock of the Company) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the stock certificates for the Common Stock of the Company).
SECTION 31. SEVERABILITY. If any term, provision or condition
of this Agreement shall be held by a court of competent jurisdiction or other
lawful authority to be invalid, void or unenforceable, the remaining terms,
provisions, and conditions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; PROVIDED,
HOWEVER, that if any such term, provision or condition is held by such court or
authority to be invalid, void or unenforceable and the Board (with the
concurrence of at least a majority of the Disinterested Directors then in
office) shall determine in good faith that severing the same from this Agreement
would adversely affect the purposes or effect of this Agreement, the right of
redemption set forth in Section 23 shall be reinstated and shall not expire
until the Close of Business on the 10th day following the date of such
determination by the Board.
SECTION 32. GOVERNING LAW. This Agreement and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall for all
purposes be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings
of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
FIRST COMMONWEALTH, INC.
By: /s/ CHRISTOPHER C. MULTHAUF
----------------------------------
Name: Christopher C. Multhauf
Title: Chairman of the Board
ATTEST:
By: /s/ DAVID W. MULLIGAN
- ----------------------------
Name: David W. Mulligan
Title: Secretary
FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By: /s/ JOANNE GOROSTIOLA
------------------------------
(Corporate Seal) Name: Joanne Gorostiola
Title: Assistant Vice President
Attest:
By: /s/ ALBERT DIORIO
--------------------------
Name: Albert Diorio
Title: Assistant Vice President
-41-
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
FIRST COMMONWEALTH, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
-------------------------------
First Commonwealth, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that, pursuant to authority conferred upon its Board of
Directors by its Certificate of Incorporation, as amended, and by the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
following resolution was adopted by its Board of Directors at a meeting duly
called and held on October 20, 1995:
RESOLVED, that, pursuant to the authority conferred upon the
Board of Directors of the Corporation (the "Board") by the provisions of the
Certificate of Incorporation, as amended, of the Corporation and by the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, there is hereby created a series of Preferred Stock of the
Corporation, which series shall have the following powers, designations,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, in addition to those
set forth in the Certificate of Incorporation, as amended, of the Corporation:
Section 1. DESIGNATION OF SERIES; NUMBER OF SHARES. The
series of Preferred Stock established hereby shall be designated
the "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the authorized number of shares constituting
the Series A Preferred Stock shall be 150,000. Such number of
authorized shares may be increased or decreased, from time to time,
by resolution of the Board; PROVIDED, HOWEVER, that no such
decrease shall reduce the number of authorized shares of the Series
A Preferred Stock to a number less than the number of shares of the
Series A Preferred Stock then outstanding, plus the number of
shares of the Series A Preferred Stock then reserved for issuance
upon the exercise of any outstanding options, warrants or rights or
the exercise of any conversion or exchange privilege contained in
any outstanding security issued by the Corporation.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
<PAGE>
(a) Subject to the rights of the holders of shares of any
other series of the Preferred Stock (or shares of any other class of capital
stock of the Corporation) ranking senior to the Series A Preferred Stock with
respect to dividends, the holders of shares of the Series A Preferred Stock, in
preference to the holders of shares of Common Stock and of any other class of
capital stock of the Corporation ranking junior to the Series A Preferred Stock
with respect to dividends, shall be entitled to receive, when, as and if
declared by the Board out of funds legally available therefor, quarterly
dividends payable in cash on the first day of March, June, September, and
December in each year (each such date being a "Dividend Payment Date"),
commencing on the first Dividend Payment Date after the initial issuance of a
share or fractional share of the Series A Preferred Stock, in an amount per
share (rounded to the nearest whole cent) equal to 100 times the aggregate per
share amount of all cash dividends, plus 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions (other
than a dividend payable in shares of Common Stock or a distribution in
connection with the subdivision of the outstanding shares of Common Stock, by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Dividend Payment Date or, with respect to the first
Dividend Payment Date, since the initial issuance of a share or fractional share
of the Series A Preferred Stock. The multiple of 100 (the "Dividend Multiple")
set forth in the preceding sentence shall be adjusted from time to time as
hereinafter provided in this paragraph (a). In the event that the Corporation
shall at any time after the effective date of this Certificate of Designations
(i) declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the Dividend Multiple
thereafter applicable to the determination of the amount of dividends per share
which the holders of shares of the Series A Preferred Stock shall be entitled to
receive shall be the Dividend Multiple in effect immediately prior to such event
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The Board shall declare, out of funds legally available
therefor, a dividend or distribution on the Series A Preferred Stock, as
provided in paragraph (a) of this Section 2, immediately after it has declared a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on the
outstanding shares of the Series A Preferred Stock from the Dividend Payment
Date next preceding the date of issuance of such shares, unless such date of
issuance shall be prior to the record date for the first Dividend Payment Date,
in which case dividends on such shares shall begin to accrue and be cumulative
from the date of issuance of such shares, or unless such date of issuance shall
be after the close of business on the record date with respect to any Dividend
Payment Date and on or prior to such
<PAGE>
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue and be cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on shares of the Series A
Preferred Stock in an amount less than the total amount of dividends then
accrued shall be allocated pro rata among such shares. The Board may fix a
record date for the determination of the holders of shares of the Series A
Preferred Stock entitled to receive payment of any dividend or distribution
declared thereon, which record date shall be not more than the number of days
prior to the date fixed for such payment permitted by applicable law.
Section 3. VOTING RIGHTS. In addition to any other voting
rights required by applicable law, the holders of shares of the Series A
Preferred Stock shall have the following voting rights:
(a) Each share of the Series A Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. The multiple of 100 (the "Voting Multiple") set
forth in the preceding sentence shall be adjusted from time to time as
hereinafter provided in this paragraph (a). In the event that the Corporation
shall at any time after the effective date of this Certificate of Designations
(i) declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the Voting Multiple
thereafter applicable to the determination of the number of votes per share to
which the holders of shares of the Series A Preferred Stock shall be entitled
shall be the Voting Multiple in effect immediately prior to such event
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided in this Certificate of
Designations, in any other Certificate of Designations establishing another
series of the Preferred Stock (or any series of any other class of capital stock
of the Corporation) or by applicable law, the holders of the Series A Preferred
Stock, the holders of the Common Stock and the holders of any other class of
capital stock of the Corporation having general voting rights shall vote
together as a single class on all matters submitted to a vote of the
stockholders of the Corporation.
(c) Except as otherwise provided in this Certificate of
Designations or by applicable law, the holders of the Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent provided in paragraph (b) of this Section 3) for the
taking of any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever dividends or other distributions payable on the
Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on outstanding shares
<PAGE>
of the Series A Preferred Stock shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of any class of capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of any class of capital stock of the Corporation ranking on
a parity (either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are accrued and unpaid in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem, purchase or otherwise acquire for consideration any
shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up
of the Corporation) to the Series A Preferred Stock, except that the
Corporation may at any time redeem, purchase or otherwise acquire any
shares of such junior stock in exchange for other shares of any class
of capital stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up of the
Corporation) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
the Series A Preferred Stock or any shares of any class of capital
stock of the Corporation ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up of the Corporation) with
the Series A Preferred Stock, or redeem any shares of such parity
stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board) to the holders of all such
shares upon such terms and conditions as the Board, after taking into
consideration the respective annual dividend rates and the other
relative powers, preferences and rights of the respective series and
classes of such shares, shall determine in good faith will result in
fair and equitable treatment among the respective holders of shares of
all such series and classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of any
class of capital stock of the Corporation unless the Corporation could, under
paragraph (a) of this Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of the Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after such purchase or
acquisition. All such canceled shares shall thereupon become authorized and
unissued shares of Preferred Stock and may be reissued as part of any new series
of the Preferred Stock, subject to the conditions and restrictions on issuance
set forth in the Certificate of Incorporation of the Corporation, as amended
from time to time, in any other Certificate of Designations
<PAGE>
establishing another series of the Preferred Stock (or any series of any other
class of capital stock of the Corporation) or in any applicable law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon
any liquidation (whether voluntary or otherwise), dissolution or winding up of
the Corporation, no distribution shall be made (a) to the holders of shares of
any class of capital stock of the Corporation ranking junior (either as to
dividends or upon liquidation, dissolution or winding up of the Corporation) to
the Series A Preferred Stock unless, prior thereto, the holder of each
outstanding share of the Series A Preferred Stock shall have received an amount
equal to the accrued and unpaid dividends and distributions thereon, whether or
not declared, to the date of such payment, plus an amount equal to an aggregate
amount, subject to adjustment as hereinafter provided in this Section 6, equal
to 100 times the aggregate per share amount to be distributed to the holders of
the Common Stock or (b) to the holders of shares of any class of capital stock
of the Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event that the Corporation shall at any time after the
effective date of this Certificate of Designations (a) declare or pay any
dividend on the Common Stock payable in shares of Common Stock or (b) effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then, in each such case, the aggregate amount per share which the holders of
shares of the Series A Preferred Stock shall thereafter be entitled to receive
pursuant to clause (a)(ii) of the preceding sentence shall be the aggregate
amount per share in effect pursuant to such clause immediately prior to such
event multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In the event that the
Corporation shall be a party to any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are converted or
changed into or exchanged for other capital stock, securities, cash or other
property, or any combination thereof, then, in each such case, each share of the
Series A Preferred Stock shall at the same time be similarly converted or
changed into or exchanged for an aggregate amount, subject to adjustment as
hereinafter provided in this Section 7, equal to 100 times the aggregate amount
of capital stock, securities, cash and/or other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is being
converted or changed or exchanged. In the event that the Corporation shall at
any time after the effective date of this Certificate of Designations (a)
declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the aggregate amount per
share which the holders of shares of the Series A
<PAGE>
Preferred Stock shall thereafter be entitled to receive pursuant to the
preceding sentence shall be the aggregate amount per share in effect pursuant to
such sentence immediately prior to such event multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such event and the denominator of which shall be the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of the Series A
Preferred Stock shall not be redeemable at any time.
Section 9. RANK. Unless otherwise provided in the
Certificate of Designations establishing another series of the Preferred Stock
after the effective date of this Certificate of Designations, the Series A
Preferred Stock shall rank, as to the payment of dividends and the making of any
other distribution of assets of the Corporation, senior to the Common Stock, but
junior to all other series of the Preferred Stock.
Section 10. AMENDMENTS. The Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences and rights of the Series A Preferred Stock so
as to adversely affect any thereof without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of the Series A Preferred
Stock, voting separately as a single class.
Section 11. FRACTIONAL SHARES. Fractional shares of the Series
A Preferred Stock may be issued, but, unless the Board shall otherwise
determine, only in multiples of one one-hundredth of a share. The holder of any
fractional share of the Series A Preferred Stock shall be entitled to receive
dividends, participate in distributions, exercise voting rights and have the
benefit of all other powers, preferences and rights relating to the Series A
Preferred Stock in the same proportion as such fractional share bears to a whole
share.
IN WITNESS WHEREOF, Corporation has caused this Certificate of
Designations to be executed and attested by its duly authorized officers this
__day of____________, 1995.
FIRST COMMONWEALTH, INC.
By:
-----------------------------
(Corporate Seal) Name:
Title:
Attest:
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibit B
FORM
OF
RIGHTS CERTIFICATE
CERTIFICATE NO. R- _________ RIGHTS
_______ Aggregate Number of
Shares of Series A Junior
Participated Preferred Stock
Initially
Purchasable
NOT EXERCISABLE AFTER _______________, 2005 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF FIRST COMMONWEALTH, INC., AT $.01
PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
STOCKHOLDERS RIGHTS AGREEMENT HEREINAFTER MENTIONED. UNDER
CERTAIN CIRCUMSTANCES DESCRIBED IN SUCH AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY A RESTRICTED PERSON (AS SUCH TERM IS
DEFINED IN SUCH AGREEMENT), OR BY SPECIFIED TRANSFEREES FROM A
RESTRICTED PERSON, SHALL BE OR BECOME VOID.
<PAGE>
RIGHTS CERTIFICATE
FIRST COMMONWEALTH, INC.
This certifies that _________________________, or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner, subject to the terms, provisions and
conditions of the Stockholders Rights Agreement dated as of November 1, 1995
(the "Rights Agreement") between First Commonwealth, Inc., a Delaware
corporation (the "Company"), and First Chicago Trust Company of New York (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date and prior to the Close of Business on November __, 2005, at the principal
office of the Rights Agent or its successor as Rights Agent, one one-hundredth
of a fully paid and nonassessable share of Series A Junior Participating
Preferred Stock, $.001 par value (the "Preferred Shares"), of the Company at a
price (the "Exercise Price") of $40.00 per one one-hundredth of a Preferred
Share, upon presentation and surrender of this Rights Certificate with the Form
of Election to Purchase and the related Form of Certification of Status duly
executed, together with such signature guarantees and other documentation as the
Rights Agent may reasonably request. The number of Rights evidenced by this
Rights Certificate (as well as the number of one one-hundredths of a Preferred
Share which may be purchased upon the exercise of each Right) set forth above,
and the Exercise Price set forth above, are the numbers and the Exercise Price
as of November 1, 1995, based on the Preferred Shares as constituted on such
date. As provided in the Rights Agreement, such number of Rights (and/or such
number of one one-hundredths of a Preferred Share) and such Exercise Price are
subject to change and adjustment upon the happening of certain events specified
in the Rights Agreement. Capitalized terms not defined herein have the
respective meanings specified in the Rights Agreement.
From and after the first occurrence of any Section 11(a)(ii)
Event, if the Rights evidenced by this Rights Certificate are Beneficially Owned
by (i) a Restricted Person, (ii) a transferee from a Restricted Person who
becomes a transferee after the Acquiring Person becomes such or (iii) under
certain circumstances specified in the Rights Agreement, a transferee from a
Restricted Person who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such, such Rights shall be or become void, and no
holder hereof shall have any rights whatsoever with respect to such Rights.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are incorporated herein by reference and made a part hereof, to which
Rights Agreement reference is hereby made for a full description of the rights,
powers, obligations, duties and immunities hereunder of the Company, the Rights
Agent and the holders of the Rights Certificates. Under the circumstances set
forth in the Rights Agreement, the exercisability of the Rights represented
hereby may be temporarily suspended. The Rights Agreement is on file at the
principal office of the Company and at the principal office of the Rights Agent,
and a copy will be provided upon written request to the
<PAGE>
Secretary of the Company.
Upon surrender at the principal office of the Rights Agent,
this Rights Certificate, with or without other Rights Certificates, may be
exchanged for one or more Rights Certificates of like tenor and date evidencing
Rights entitling the holder to purchase the same aggregate number of one
one-hundredths of a Preferred Share as the Rights evidenced by the Rights
Certificates so surrendered. If this Rights Certificate shall be exercised in
part, the holder hereof shall be entitled to receive, upon surrender hereof, one
or more Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed, at the direction of
the Board, at a redemption price (subject to adjustment) of $.01 per Right
(payable in cash, shares of Common Stock of the Company or any other form of
consideration deemed appropriate by the Board) or (ii) under certain
circumstances, may be exchanged, in whole or in part, at the direction of the
Board, for shares of Common Stock of the Company or Preferred Shares at an
exchange rate (subject to adjustment) of one share of Common Stock or one
one-hundredth of a Preferred Share per Right.
No fractional Preferred Share will be issued upon the exercise
of any Rights represented hereby (other than fractions which are a multiple of
one one-hundredth of a Preferred Share), but in lieu thereof a cash payment will
be made as provided in the Rights Agreement.
No holder, as such, of this Rights Certificate shall be
entitled to vote, to receive dividends or other distributions on or to exercise
any preemptive rights with respect to, or shall be deemed for any other purpose
to be the holder of, the Preferred Shares or other shares of capital stock of
any class of the Company which may at any time be issuable upon exercise hereof;
nor shall anything contained herein or in the Rights Agreement be construed to
confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company, or any right to vote for the election of directors or upon any
other matter submitted to stockholders at any meeting thereof, to give or
withhold consent to any corporate action, to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement) or
to receive dividends, subscription rights or other distributions, until the
Rights evidenced by this Rights Certificate shall have been exercised, in whole
or in part, in accordance with the provisions of the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
<PAGE>
IN WITNESS WHEREOF, this Rights Certificate has been executed
by the Company by the duly authorized facsimile signature of a proper officer of
the Company and a facsimile of its corporate seal has been imprinted hereon and
duly attested by the duly authorized facsimile signature of a proper officer of
the Company.
Dated as of _______________, ____.
FIRST COMMONWEALTH, INC.
(Corporate Seal) By:
---------------------------------
Name:
Title:
ATTEST:
- ------------------------------
Name:
Title:
Countersigned:
First Chicago Trust Company of New York,
as Rights Agent
By
--------------------------------------
Authorized Signature
<PAGE>
[REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by this Rights Certificate)
To First Commonwealth, Inc.:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the
Preferred Shares (or other securities, cash or property) issuable upon the
exercise of such Rights and requests that certificates for such Preferred Shares
be issued in the name of:
Please insert social security
or other identifying number: ____________________
- ----------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------
If such number of Rights shall not be all the Rights represented by this Rights
Certificate, a new Rights Certificate for the remaining unexercised Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number: ____________________
- ----------------------------------------------------------------
(Please print name and address)
- ----------------------------------------------------------------
Dated: _______________, 19__
---------------------------------------
Signature
<PAGE>
Signature Guaranteed: ________________________________
Signatures must be guaranteed by a participant in a
recognized Signature Guaranty Medallion Program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) this Rights Certificate
----
---- is
----
---- is not
being exercised by or on behalf of a Person who is or was a
Restricted Person (as such term is defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it
----
---- did
----
---- did not
acquire, directly or indirectly, the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became a Restricted Person.
---------------------------------------
Signature
Date: _______________, 19__
<PAGE>
NOTICE
The signature(s) on the foregoing Form of Election to Purchase
and Certification of Status must correspond to the name written upon the face of
this Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the Certification of Status set forth above is
not completed, the Company will deem the Beneficial Owner of the Rights
represented by this Rights Certificate to be a Restricted Person (as such term
is defined in the Rights Agreement), will not honor the Election to Purchase and
will affix a legend to such effect on this Rights Certificate and on any Rights
Certificates issued in exchange for this Rights Certificate.
<PAGE>
[Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate)
FOR VALUE RECEIVED _________________________ hereby
sells, assigns and transfers unto
------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________, 19__
---------------------------------------
Signature
Signature Guaranteed: ________________________________
Signatures must be guaranteed by a participant in a recognized
Signature Guaranty Medallion Program.
<PAGE>
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate
[ ] is
[ ] is not
being sold, assigned or transferred by or on behalf of a Person who
is or was a Restricted Person (as such term is defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge
of the undersigned, it
[ ] did
[ ] did not
acquire, directly or indirectly the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became a Restricted Person.
---------------------------------------
Signature
Date: _______________, 19__
<PAGE>
NOTICE
The signature(s) on the foregoing Form of Assignment and
Certification of Status must correspond to the name written upon the face of
this Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the Certification of Status set forth above is
not completed, the Company will deem the Beneficial Owner of the Rights
represented by this Rights Certificate to be a Restricted Person (as such term
is defined in the Rights Agreement), will not honor the Assignment and will
affix a legend to such effect on this Rights Certificate and any Rights
Certificates issued in exchange for this Rights Certificate.
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
On October 20, 1995, the Board of Directors (the "Board") of
First Commonwealth, Inc., a Delaware corporation (the "Company"), declared a
dividend of one preferred stock purchase right (a "Right") for each outstanding
share of Common Stock, $.001 par value (the "Common Stock"), of the Company. The
dividend is payable on the effective date of the Company's initial public
offering registration statement, file no. 33-97426 (the "Record Date") to the
holders of record of the Common Stock at the Close of Business on such date.
Each Right entitles the holder thereof (except as described below) to purchase
from the Company one one-hundredth of a share of the Series A Junior
Participating Preferred Stock, $.001 par value (the "Preferred Shares"), of the
Company at a price (the "Exercise Price") of $40.00 per one one-hundredth of a
Preferred Share, subject to adjustment. The terms of the Rights are set forth in
the Stockholders Rights Agreement dated as of November 1, 1995 (the "Rights
Agreement") between the Company and First Chicago Trust Company of New York, as
Rights Agent (the "Rights Agent"). Capitalized terms not defined herein have the
respective meanings specified in the Rights Agreement.
DISTRIBUTION DATE; TRANSFER OF RIGHTS
Initially, the Rights associated with the Common Stock
outstanding as of the Record Date will be evidenced solely by the stock
certificates for such Common Stock, with a copy of this Summary of Rights
attached thereto. The Rights will separate from the Common Stock upon the
earliest to occur of (i) 10 Business Days after the first public announcement
that any Person (other than an Exempt Person (as hereinafter defined)) has
become an Acquiring Person (as hereinafter defined) and (ii) 10 Business Days
(or such other Business Day as may be determined by action of the Board prior to
the time that any Person shall become an Acquiring Person (as hereinafter
defined) after the commencement by any Person (other than an Exempt Person) of,
or the first public announcement of its intention to commence, a tender or
exchange offer if, upon the consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the outstanding shares of Common Stock (the
earliest of the dates specified in clauses (i) and (ii) being hereinafter called
the "Distribution Date"). After the Distribution Date, the Rights will be
evidenced solely by separate certificates and will trade independently from the
Common Stock.
An "Acquiring Person" is any Person who or which,
together with its Affiliates and Associates, has acquired 15% or more of the
shares of Common Stock then outstanding, but does not include (i) the Company,
(ii) any Subsidiary of the Company, (iii) any employee benefit plan or other
compensation program or
<PAGE>
arrangement of the Company or of any such Subsidiary or (iv) any Person holding
shares of Common Stock for or pursuant to the terms of any such plan, program or
arrangement (the Persons specified in clauses (i) through (iv) being herein
collectively called "Exempt Persons"). Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," has become so inadvertently, and such
Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," then
such Person shall not be deemed to be an "Acquiring Person."
A "Disinterested Director" is (i) any member of the Board who
is not a Restricted Person (as hereinafter defined), or a representative or
nominee of a Restricted Person, and was a member of the Board prior to the date
of the Rights Agreement and (ii) any individual who subsequently becomes a
member of the Board and is not a Restricted Person, or a representative or
nominee of a Restricted Person, and whose nomination for election to the Board
is recommended or approved by a majority of the Disinterested Directors then in
office. A "Restricted Person" is an Acquiring Person or any Affiliate or
Associate thereof.
The Rights Agreement provides that, until the Distribution
Date (or the earlier redemption or expiration of the Rights), the Rights may be
transferred only with the associated shares of Common Stock. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), stock
certificates for Common Stock issued after the Record Date, either upon transfer
of outstanding shares or original issuance of additional shares of Common Stock,
will contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), the
surrender for transfer of any stock certificate for shares of Common Stock, with
or without such legend and whether or not a copy of this Summary of Rights is
attached thereto, will also constitute the transfer of the Rights associated
with the shares of Common Stock represented by such stock certificate.
As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to the
holders of record of the Common Stock as of the Close of Business on the
Distribution Date, which thereafter will constitute the sole evidence of the
Rights. Each share of Common Stock issued by the Company after the Record Date
and prior to the earlier redemption or expiration of the Rights, including any
shares of Common Stock issued by reason of the exercise of any option, warrant,
right (other than the Rights) or conversion or exchange privilege (however
evidenced) issued by the Company prior to the Distribution Date, will be
accompanied by a Right (unless the Board expressly provides to the contrary at
the time of issuance of any such option, warrant, right or privilege), and
Rights Certificates evidencing such Rights will be issued at the same time as
the stock certificates for the associated shares of Common Stock.
The Rights ARE NOT EXERCISABLE until the Distribution Date.
Moreover, the time when the Rights may be exercised is restricted as described
in the next paragraph.
<PAGE>
The Rights will expire on the tenth anniversary of the Record Date (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case as
described below.
EXERCISE OF RIGHTS UNDER CERTAIN CIRCUMSTANCES
In the event that any Person becomes an Acquiring Person,
proper provision will be made so that the registered holder of each Right (other
than Rights Beneficially Owned as described in the next sentence) will
thereafter have the right to receive, upon exercise thereof, the number of
shares of Common Stock which, at the time of the occurrence of such event, will
have a market value equal to two times the then current Exercise Price. After
the first occurrence of either of the events described in the preceding
sentence, all Rights which are, or (under certain circumstances specified in the
Rights Agreement) were, Beneficially Owned by a Restricted Person or specified
transferees therefrom will be or become void. Under no circumstances may a Right
be exercised after the occurrence of either such event unless the Company's
right to redeem the Rights (as described below) has expired.
If, on or after the date on which any Person has become an
Acquiring Person, any of the following transactions occur: (i) the Company
merges into or consolidates with an Interested Stockholder (as hereinafter
defined) or, unless all holders of the Company's outstanding shares of Common
Stock are treated the same, another Person (with limited designated exceptions);
(ii) an Interested Stockholder or, unless all holders of the Company's
outstanding shares of Common Stock are treated the same, another Person (with
limited designated exceptions) merges into the Company and either (A) all or
part of the outstanding shares of Common Stock of the Company are converted into
capital stock or other securities of any other Person (or the Company), cash
and/or other property or (B) such shares remain outstanding, unconverted and
unchanged; or (iii) the Company sells or transfers 50% or more of its
consolidated assets or earning power to an Interested Stockholder (as
hereinafter defined) or, unless all holders of the Company's outstanding shares
of Common Stock are treated the same, another Person (with limited designated
exceptions); proper provision will be made so that the registered holder of each
Right (other than Rights which have become void) will thereafter have the
right (the "Flip-Over Right") to receive, upon exercise thereof, the number of
common shares of the acquiror (or of another Person affiliated therewith) which,
at the time of consummation of such transaction, will have a market value equal
to two times the then current Exercise Price. An "Interested Stockholder" is any
Restricted Person or any Affiliate or Associate of any other Person in which
such Restricted Person has an interest, or any Person acting, directly or
indirectly, on behalf of or in concert with any such Restricted Person.
ADJUSTMENTS TO EXERCISE PRICE AND STOCK PURCHASABLE UPON EXERCISE
The Exercise Price payable, the number and kind of shares of
capital stock issuable upon exercise of the Rights and the number of Rights
outstanding are subject to adjustment from time to time to prevent dilution (i)
in the event of a dividend
<PAGE>
payable in Preferred Shares on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to the holders of
the Preferred Shares of certain options, warrants or rights to subscribe for or
purchase Preferred Shares at a price, or securities convertible into or
exchangeable for Preferred Shares with a conversion or exchange price, less than
the then Fair Market Value of the Preferred Shares or (iii) upon the
distribution to the holders of the Preferred Shares of cash, securities,
evidences of indebtedness or other property (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or options, warrants or
rights (other than those referred to in clause (ii) above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a dividend on the Common Stock
payable in shares of Common Stock or a subdivision, combination or
reclassification of the Common Stock occurring, in any such case, prior to the
Distribution Date.
With certain specified exceptions, no adjustment in the
Exercise Price will be made until the cumulative adjustments required equal at
least 1% of the Exercise Price. The Company is not required to issue fractional
Preferred Shares (other than fractions which are multiples of one one-hundredth
of a Preferred Share), but in lieu thereof the Company would be required to make
a cash payment based on the Fair Market Value of the Preferred Shares on the
trading day immediately preceding the date of exercise.
TERMS OF PREFERRED SHARES
The Preferred Shares receivable upon exercise of the Rights
will not be redeemable. Each Preferred Share will entitle the holder thereof to
receive a preferential quarterly dividend equal to 100 times the aggregate per
share amount of all cash dividends, plus 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends and other distributions
(other than in shares of Common Stock), declared on the Common Stock during such
quarter, adjusted to give effect to any dividend on the Common Stock payable in
shares of Common Stock or any subdivision, combination or reclassification of
the Common Stock (a "Dilution Event"). Each Preferred Share will entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company, voting together as a single class with the holders
of the Common Stock and the holders of any other class of capital stock having
general voting rights, adjusted to give effect to any Dilution Event. In the
event of liquidation of the Company, the holder of each Preferred Share will be
entitled to receive a preferential liquidation payment equal to 100 times the
aggregate per share amount to be distributed to the holders of the Common Stock,
adjusted to give effect to any Dilution Event, plus an amount equal to accrued
and unpaid dividends and distributions on such Preferred Share, whether or not
declared, to the date of such payment. In the event of any merger, consolidation
or other transaction in which the outstanding shares of Common Stock of the
Company are exchanged for or converted into other capital stock, securities,
cash and/or other property, each Preferred Share will
<PAGE>
be similarly exchanged or converted into 100 times the per share amount
applicable to the Common Stock, adjusted to give effect to any Dilution Event.
Because of the nature of the dividend, voting, liquidation and
other rights accorded to each Preferred Share, the value of the one
one-hundredth of a Preferred Share receivable upon the exercise of each Right
should approximate the value of one share of Common Stock.
REDEMPTION OF RIGHTS
At any time prior to the earliest of (i) 10 Business Days
after the first public announcement that any Person (other than an Exempt
Person) has become an Acquiring Person, (ii) the occurrence of any transaction
which permits the exercise of the Flip-Over Right and (iii) the Final Expiration
Date, the Board may redeem the Rights in whole, but not in part, at the
redemption price of $.01 per Right, adjusted to give effect to any Dilution
Event (the "Redemption Price"); PROVIDED, HOWEVER, that, under certain
circumstances specified in the Rights Agreement, the Rights may not be redeemed
unless there are Disinterested Directors in office and such redemption is
approved by at least a majority of such Disinterested Directors. The redemption
of the Rights may be made effective at such time, on such basis and with such
conditions as the Board, in its sole discretion, may establish. After the
redemption period has expired, the Company's right of redemption may be
reinstated, under the circumstances specified in the Rights Agreement, which
include the concurrence of at least a majority of the Disinterested Directors,
if either (i) the Person who became an Acquiring Person shall reduce, in one or
a series of related transactions not involving the Company or any Subsidiary or
the occurrence of any transaction which permits the exercise of the Flip-Over
Right, its Beneficial Ownership of the outstanding shares of Common Stock to
less than 10% of such outstanding shares or (ii) in connection with any
transaction which permits the exercise of the Flip-Over Right, which does not
involve an Interested Stockholder and in which all holders of the Common Stock
are treated the same. Immediately after action by the Board directing the
redemption of the Rights, the option to exercise the Rights will terminate, and
thereafter each registered holder of the Rights will only be entitled to receive
the Redemption Price therefor.
EXCHANGE OF RIGHTS
At any time after any Person has become an Acquiring Person
and prior to the time that any Person (other than an Exempt Person), together
with its Affiliates and Associates, has become the Beneficial Owner of 50% or
more of the outstanding shares of Common Stock, the Board may direct that all or
any part of the outstanding Rights (other than Rights which have become void) be
exchanged for shares of Common Stock at the exchange rate of one share of Common
Stock (or one one-hundredth of a Preferred Share or of another share of capital
stock of the Company having equivalent rights, preferences and privileges) per
Right, adjusted to give effect to any Dilution Event.
<PAGE>
AMENDMENT OF THE RIGHTS AND THE RIGHTS AGREEMENT
Prior to the Distribution Date, the terms of the Rights and
the Rights Agreement may be supplemented or amended by the Board in any manner.
From and after the Distribution Date, the Rights may be supplemented or amended
by the Board, without the approval of the holders of the Rights, in certain
respects which do not adversely affect, as determined by the Board (with the
concurrence of at least a majority of the Disinterested Directors), the
interests of such holders; PROVIDED, HOWEVER, that the Rights Agreement cannot
be amended to lengthen (i) any time period unless (A) such lengthening is
approved by at least a majority of the Disinterested Directors and (B) such
lengthening is for the benefit of the holders of the Rights or (ii) any time
period relating to when the Rights may be redeemed if at such time the Rights
are not then redeemable.
MISCELLANEOUS
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
<PAGE>
FIRST AMENDMENT TO STOCKHOLDERS RIGHTS AGREEMENT
First Amendment, dated as of December 15, 1998 (the "Amendment"), to
the Stockholders Rights Agreement, dated as of November 1, 1995 (the "Rights
Agreement"), by and between First Commonwealth, Inc., a Delaware corporation
(the "Company"), and First Chicago Trust Company of New York (the "Rights
Agent"). Capitalized terms used in this Agreement shall have the meanings
ascribed to them in the Rights Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company
has directed the Rights Agent to amend the Rights Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. Section 1(i) and 1(t) of the Rights Agreement are hereby deleted in
their entirety and remaining Sections 1(j) through 1(nn) are hereby redesignated
as Sections 1(i) through 1(ll).
2. The first sentence of the legend in Section 3(c) of the
<PAGE>
Rights Agreement is hereby amended to insert a comma after "1995" and to insert
the words "as amended" immediately following such comma.
3. Section 11(a)(iii) of the Rights Agreement is hereby amended to read in
its entirety as follows:
"(iii) In the event that there shall not be sufficient authorized and
unissued or treasury shares of Common Stock to permit the exercise in full
of the Rights in accordance with paragraph (ii) of this subsection (a),
the Company shall take all necessary action to authorize and reserve for
issuance such number of additional shares of Common Stock as may from time
to time be required to be issued upon the exercise in full of all
outstanding Rights and, if necessary, shall use its best efforts to obtain
stockholder approval thereof. Notwithstanding the preceding sentence, if
the Board shall determine that such action is necessary or appropriate and
is not contrary to the best interests of the holders of the Rights, the
Board may cause the Company, in lieu of issuing shares of Common Stock in
accordance with such paragraph (ii), to distribute, or if a sufficient
number of shares of Common Stock cannot be issued for such purpose in
accordance with the provisions hereof, the Company shall distribute, upon
the exercise of each Right, cash, debt securities, Preferred Shares, other
shares of Preferred Stock, other property or any combination thereof
having an aggregate Fair Market Value (determined as provided in
subsection (d) of this Section 11) equal to the Fair Market Value (as so
determined) of the number of shares of Common Stock which otherwise would
have been issuable pursuant to such paragraph (ii). Any such decision by
the Board must be made and publicly announced within 30 days after the
occurrence of any Section 11(a)(ii) Event."
4. Section 13(d) of the Rights Agreement is hereby deleted in its
entirety, and Sections 13(e) through 13(h) are hereby redesignated as Sections
13(d) through 13(g).
5. Sections 23(a) and (b) of the Rights Agreement are hereby amended to
read in their entirety as follows:
<PAGE>
" (a) The Board may, at its option, at any time prior to the earliest of
(i) the Close of Business on the 10th Business Day after the Share
Acquisition Date (or, if the Share Acquisition Date shall have occurred
prior to the Record Date, the Close of Business on the 10th Business Day
after the Record Date), (ii) the occurrence of any Section 13 Event and
(iii) the Final Expiration Date, redeem all, but not less than all, of the
then outstanding Rights at a redemption price of $.01 per Right, adjusted
as provided in subsection (g) of this Section 23 (such redemption price
being hereinafter called the "Redemption Price").
(b) In addition to the right of redemption reserved in the first
sentence of subsection (a) of this Section 23, the Board may redeem all,
but not less than all, of the then outstanding Rights at the Redemption
Price after the Share Acquisition Date, but prior to the occurrence of any
Section 13 Event, if either (i) the Person who is an Acquiring Person
shall have transferred or otherwise disposed of (either alone or together
with its Affiliates and Associates) such number of shares of Common Stock
of the Company, in one or a series of related transactions not directly or
indirectly involving the Company or any of its Subsidiaries or the
occurrence of any Section 13 Event, as shall result in such Person
thereafter being a Beneficial Owner of less than 10% of the then
outstanding shares of Common Stock of the Company, and after such transfer
or other disposition there is no other Acquiring Person, or (ii) in
connection with any Section 13 Event which shall not involve an Interested
Stockholder and in which all holders of the Common Stock of the Company
are treated the same."
6. Section 23(d) of the Rights Agreement is hereby amended to strike and
remove the words "and the Disinterested Directors" from the first sentence
thereof.
7. Section 27 of the Rights Agreement is hereby amended in its entirety to
read as follows:
"Section 27. Supplements and Amendments. Prior to the Distribution
Date, but subject to the last sentence of this Section 27, the Company and
the Rights Agent, if so directed in writing by the Company, shall
supplement or amend any term, provision or condition of this Agreement,
without the approval of the registered holders of the stock certificates
representing the Common Stock and the Rights. From and after the
Distribution Date, but subject to the
<PAGE>
last sentence of this Section 27, the Company and the Rights Agent, if so
directed in writing by the Company, shall supplement or amend this
Agreement, without the approval of the registered holders of the Rights
(however represented), in order: (a) to cure any ambiguity, (b) to correct
or supplement any term, provision or condition of this Agreement which may
be defective or inconsistent with any other term, provision or condition
hereof, (c) to shorten or lengthen any time period specified herein or (d)
to change or supplement one or more of the terms, provisions or conditions
hereof in any manner which the Company may deem necessary or desirable and
which shall not adversely affect, as determined by the Board, the
interests of the holders (other than any Restricted Person or the
transferees therefrom specified in Section 7(d) of the Rights (however
represented); provided, however, that this Agreement may not be
supplemented or amended pursuant to clause (c) of this sentence (i) to
lengthen any time period (except as permitted by Section 3(a)(ii)) unless
such lengthening is for the purpose of protecting, enhancing or clarifying
the rights of, and/or the benefits to, the holders (other than any
Restricted Person or the transferees therefrom specified in Section 7(d))
of the Rights or (ii) to lengthen any time period relating to when the
Rights may be redeemed if at such time the Rights are not then redeemable.
Upon the delivery of a certificate from an appropriate officer of the
Company stating that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment; provided, however, that the Rights Agent shall
not be required to execute any supplement or amendment which affects any
of the Rights Agent's rights, powers, obligations, duties or immunities
under this Agreement without its consent. On and after the Distribution
Date, no supplement or amendment shall be made which changes the Exercise
Price, the number of one one-hundredths of a Preferred Share for which a
Right is exercisable, the Redemption Price or the Final Expiration Date.
Prior to the Distribution Date, the interests of the holders of the Rights
shall be deemed coincident with the interests of the holders of the Common
Stock of the Company."
8. Section 29 of the Rights Agreement is hereby amended to strike and
remove the parenthetical phrase "(or, as and when set forth herein, the
Disinterested Directors)" from the second sentence thereof and to strike and
remove the parenthetical phrases "(or the Disinterested Directors)" and
"(including any Disinterested Director)" from the third sentence thereof.
9. Section 31 of the Rights Agreement is hereby amended to
<PAGE>
strike and remove the parenthetical phrase "(with the concurrence of at least a
majority of the Disinterested Directors then in office)" from the proviso
thereof.
10. Exhibit C to the Rights Agreement is amended and restated in its
entirety in the form attached hereto.
11. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware.
12. This Amendment may be executed in any number of counterparts, and each
of such counterparts shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
13. Except as specifically provided in this Amendment to the Rights
Agreement, this Amendment shall not by implication or otherwise alter, modify,
amend or in any such way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Rights Agreement, all of which are
ratified and affirmed in all respects and shall continue in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Rights Agreement to be duly executed, all as of the date and year first
above written.
FIRST COMMONWEALTH, INC.
By: /s/ David W. Mulligan
-----------------------------------
Name: David W. Mulligan
Title: President
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ Joanne Gorostiola
-----------------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
<PAGE>
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
On October 20, 1995, the Board of Directors (the "Board") of First
Commonwealth, Inc., a Delaware corporation (the "Company"), declared a dividend
of one preferred stock purchase right (a "Right") for each outstanding share of
Common Stock, $.001 par value (the "Common Stock"), of the Company. The dividend
was paid to holders of record of the Common Stock on November 16, 1995, the
effective date of the Company's initial public offering registration statement,
file no. 33-97426 (the "Record Date"). Each Right entitles the holder thereof
(except as described below) to purchase from the Company one one-hundredth of a
share of the Series A Junior Participating Preferred Stock, $.001 par value (the
"Preferred Shares"), of the Company at a price (the "Exercise Price") of $40.00
per one one-hundredth of a Preferred Share, subject to adjustment. The terms of
the Rights are set forth in the Stockholders Rights Agreement dated as of
November 1, 1995, as amended (the "Rights Agreement") between the Company and
First Chicago Trust Company of New York, as Rights Agent (the "Rights Agent").
Capitalized terms not defined herein have the respective meanings specified in
the Rights Agreement.
Distribution Date; Transfer of Rights
Initially, the Rights associated with the Common Stock outstanding
as of the Record Date will be evidenced solely by the stock certificates for
such Common Stock, with a copy of this Summary of Rights attached thereto. The
Rights will separate from the Common Stock upon the earlier to occur of (i) 10
Business Days after the first public announcement that any Person (other than an
Exempt Person (as hereinafter defined)) has become an Acquiring Person (as
hereinafter defined) and (ii) 10 Business Days (or such other Business Day as
may be determined by action of the Board prior to the time that any Person shall
become an Acquiring Person (as hereinafter defined) after the commencement by
any Person (other than an Exempt Person) of, or the first public announcement of
its intention to commence, a tender or exchange offer if, upon the consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the
outstanding shares of Common Stock (the earlier of the dates specified in
clauses (i) and (ii) being hereinafter called the "Distribution Date"). After
the Distribution Date, the Rights will be evidenced solely by separate
certificates and will trade independently from the Common Stock.
An "Acquiring Person" is any Person who or which, together with its
Affiliates and Associates, has acquired 15% or more of the shares of Common
Stock then outstanding, but does not include (i) the Company, (ii) any
Subsidiary of the
<PAGE>
Company, (iii) any employee benefit plan or other compensation program or
arrangement of the Company or of any such Subsidiary or (iv) any Person holding
shares of Common Stock for or pursuant to the terms of any such plan, program or
arrangement (the Persons specified in clauses (i) through (iv) being herein
collectively called "Exempt Persons"). Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," has become so inadvertently, and such
Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," then
such Person shall not be deemed to be an "Acquiring Person."
A "Restricted Person" is an Acquiring Person or any Affiliate or
Associate thereof.
The Rights Agreement provides that, until the Distribution Date (or
the earlier redemption or expiration of the Rights), the Rights may be
transferred only with the associated shares of Common Stock. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), stock
certificates for Common Stock issued after the Record Date, either upon transfer
of outstanding shares or original issuance of additional shares of Common Stock,
will contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), the
surrender for transfer of any stock certificate for shares of Common Stock, with
or without such legend and whether or not a copy of this Summary of Rights is
attached thereto, will also constitute the transfer of the Rights associated
with the shares of Common Stock represented by such stock certificate.
As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to the
holders of record of the Common Stock as of the Close of Business on the
Distribution Date, which thereafter will constitute the sole evidence of the
Rights. Each share of Common Stock issued by the Company after the Record Date
and prior to the earlier redemption or expiration of the Rights, including any
shares of Common Stock issued by reason of the exercise of any option, warrant,
right (other than the Rights) or conversion or exchange privilege (however
evidenced) issued by the Company prior to the Distribution Date, will be
accompanied by a Right (unless the Board expressly provides to the contrary at
the time of issuance of any such option, warrant, right or privilege), and
Rights Certificates evidencing such Rights will be issued at the same time as
the stock certificates for the associated shares of Common Stock.
The Rights are not exercisable until the Distribution Date.
Moreover, the time when the Rights may be exercised is restricted as described
in the next paragraph. The Rights will expire on the tenth anniversary of the
Record Date (the "Final Expiration Date"), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed or exchanged by the Company,
in each case as described below.
<PAGE>
Exercise of Rights Under Certain Circumstances
In the event that any Person becomes an Acquiring Person, proper
provision will be made so that the registered holder of each Right (other than
Rights Beneficially Owned as described in the next sentence) will thereafter
have the right to receive, upon exercise thereof, the number of shares of Common
Stock which, at the time of the occurrence of such event, will have a market
value equal to two times the then current Exercise Price. After the occurrence
of the event described in the preceding sentence, all Rights which are, or
(under certain circumstances specified in the Rights Agreement) were,
Beneficially Owned by a Restricted Person or specified transferees therefrom
will be or become void. Under no circumstances may a Right be exercised after
the occurrence of either such event unless the Company's right to redeem the
Rights (as described below) has expired.
If, on or after the date on which any Person has become an Acquiring
Person, any of the following transactions occur: (i) the Company merges into or
consolidates with an Interested Stockholder (as hereinafter defined) or, unless
all holders of the Company's outstanding shares of Common Stock are treated the
same, another Person (with limited designated exceptions); (ii) an Interested
Stockholder or, unless all holders of the Company's outstanding shares of Common
Stock are treated the same, another Person (with limited designated exceptions)
merges into the Company and either (A) all or part of the outstanding shares of
Common Stock of the Company are converted into capital stock or other securities
of any other Person (or the Company), cash and/or other property or (B) such
shares remain outstanding, unconverted and unchanged; or (iii) the Company sells
or transfers 50% or more of its consolidated assets or earning power to an
Interested Stockholder (as hereinafter defined) or, unless all holders of the
Company's outstanding shares of Common Stock are treated the same, another
Person (with limited designated exceptions); proper provision will be made so
that the registered holder of each Right (other than Rights which have become
void) will thereafter have the right (the "Flip-Over Right") to receive, upon
exercise thereof, the number of common shares of the acquiror (or of another
Person affiliated therewith) which, at the time of consummation of such
transaction, will have a market value equal to two times the then current
Exercise Price. An "Interested Stockholder" is any Restricted Person or any
Affiliate or Associate of any other Person in which such Restricted Person has
an interest, or any Person acting, directly or indirectly, on behalf of or in
concert with any such Restricted Person.
Adjustments to Exercise Price and Stock Purchasable Upon Exercise
The Exercise Price payable, the number and kind of shares of capital
stock issuable upon exercise of the Rights and the number of Rights outstanding
are subject to adjustment from time to time to prevent dilution (i) in the event
of a dividend payable in Preferred Shares on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to the holders of
the Preferred Shares of certain options, warrants or rights to subscribe for or
purchase Preferred Shares at a price, or securities convertible into or
exchangeable for Preferred Shares with a conversion or
<PAGE>
exchange price, less than the then Fair Market Value of the Preferred Shares or
(iii) upon the distribution to the holders of the Preferred Shares of cash,
securities, evidences of indebtedness or other property (other than a regular
quarterly cash dividend or a dividend payable in Preferred Shares) or options,
warrants or rights (other than those referred to in clause (ii) above).
The number of outstanding Rights and the number of one
one-hundredths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a dividend on the Common Stock
payable in shares of Common Stock or a subdivision, combination or
reclassification of the Common Stock occurring, in any such case, prior to the
Distribution Date.
With certain specified exceptions, no adjustment in the Exercise
Price will be made until the cumulative adjustments required equal at least 1%
of the Exercise Price. The Company is not required to issue fractional Preferred
Shares (other than fractions which are multiples of one one-hundredth of a
Preferred Share), but in lieu thereof the Company would be required to make a
cash payment based on the Fair Market Value of the Preferred Shares on the
trading day immediately preceding the date of exercise.
Terms of Preferred Shares
The Preferred Shares receivable upon exercise of the Rights will not
be redeemable. Each Preferred Share will entitle the holder thereof to receive a
preferential quarterly dividend equal to 100 times the aggregate per share
amount of all cash dividends, plus 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends and other distributions (other than
in shares of Common Stock), declared on the Common Stock during such quarter,
adjusted to give effect to any dividend on the Common Stock payable in shares of
Common Stock or any subdivision, combination or reclassification of the Common
Stock (a "Dilution Event"). Each Preferred Share will entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Company, voting together as a single class with the holders of the Common Stock
and the holders of any other class of capital stock having general voting
rights, adjusted to give effect to any Dilution Event. In the event of
liquidation of the Company, the holder of each Preferred Share will be entitled
to receive a preferential liquidation payment equal to 100 times the aggregate
per share amount to be distributed to the holders of the Common Stock, adjusted
to give effect to any Dilution Event, plus an amount equal to accrued and unpaid
dividends and distributions on such Preferred Share, whether or not declared, to
the date of such payment. In the event of any merger, consolidation or other
transaction in which the outstanding shares of Common Stock of the Company are
exchanged for or converted into other capital stock, securities, cash and/or
other property, each Preferred Share will be similarly exchanged or converted
into 100 times the per share amount applicable to the Common Stock, adjusted to
give effect to any Dilution Event.
Because of the nature of the dividend, voting, liquidation and other
rights
<PAGE>
accorded to each Preferred Share, the value of the one one-hundredth of a
Preferred Share receivable upon the exercise of each Right should approximate
the value of one share of Common Stock.
Redemption of Rights
At any time prior to the earliest of (i) 10 Business Days after the
first public announcement that any Person (other than an Exempt Person) has
become an Acquiring Person, (ii) the occurrence of any transaction which permits
the exercise of the Flip-Over Right and (iii) the Final Expiration Date, the
Board may redeem the Rights in whole, but not in part, at the redemption price
of $.01 per Right, adjusted to give effect to any Dilution Event (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board, in its sole
discretion, may establish. After the redemption period has expired, the
Company's right of redemption may be reinstated, under the circumstances
specified in the Rights Agreement, if either (i) the Person who became an
Acquiring Person shall reduce, in one or a series of related transactions not
involving the Company or any Subsidiary or the occurrence of any transaction
which permits the exercise of the Flip-Over Right, its Beneficial Ownership of
the outstanding shares of Common Stock to less than 10% of such outstanding
shares or (ii) in connection with any transaction which permits the exercise of
the Flip-Over Right, which does not involve an Interested Stockholder and in
which all holders of the Common Stock are treated the same. Immediately after
action by the Board directing the redemption of the Rights, the option to
exercise the Rights will terminate, and thereafter each registered holder of the
Rights will only be entitled to receive the Redemption Price therefor.
Exchange of Rights
At any time after any Person has become an Acquiring Person and
prior to the time that any Person (other than an Exempt Person), together with
its Affiliates and Associates, has become the Beneficial Owner of 50% or more of
the outstanding shares of Common Stock, the Board may direct that all or any
part of the outstanding Rights (other than Rights which have become void) be
exchanged for shares of Common Stock at the exchange rate of one share of Common
Stock (or one one-hundredth of a Preferred Share or of another share of capital
stock of the Company having equivalent rights, preferences and privileges) per
Right, adjusted to give effect to any Dilution Event.
Amendment of the Rights and the Rights Agreement
Prior to the Distribution Date, the terms of the Rights and the
Rights Agreement may be supplemented or amended by the Board in any manner. From
and after the Distribution Date, the Rights may be supplemented or amended by
the Board, without the approval of the holders of the Rights, in certain
respects which do not adversely affect, as determined by the Board, the
interests of such holders; provided, however, that the Rights Agreement cannot
be amended to lengthen (i) any time period
<PAGE>
unless such lengthening is for the benefit of the holders of the Rights or (ii)
any time period relating to when the Rights may be redeemed if at such time the
Rights are not then redeemable.
Miscellaneous
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
<PAGE>
SECOND AMENDMENT TO RIGHTS AGREEMENT
Second Amendment, dated as of May 19, 1999 (the "Amendment"), to the
Rights Agreement, dated as of November 1, 1995, as amended by the First
Amendment to the Rights Agreement, dated December 15, 1998 (as amended, the
"Rights Agreement"), by and between First Commonwealth, Inc., a Delaware
corporation (the "Company"), and First Chicago Trust Company of New York (the
"Rights Agent"). Capitalized terms used in this Agreement shall have the
meanings ascribed to them in the Rights Agreement.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has approved an
Agreement and Plan of Merger (the "Merger Agreement"), dated May 19, 1999 among
the Company, The Guardian Life Insurance Company of America, a New York
corporation ("Parent"), and Floss Acquisition Corp., a Delaware corporation
("Sub") and wholly owned subsidiary of Parent;
WHEREAS, the Board of Directors desires to amend the Rights
Agreement to provide that Parent and Sub shall not be deemed to be Acquiring
Persons under the Rights Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company
has directed the Rights Agent to amend the Rights Agreement as hereinafter set
forth;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by inserting the
following at the end of Section 1(a):
Notwithstanding anything in this Agreement to the contrary, neither The
Guardian Life Insurance Company of America, a New York corporation
("Parent"), nor any of its Affiliates or Associates, including but not
limited to, Floss Acquisition Corp., a Delaware corporation ("Sub") and
wholly owned subsidiary of Parent, is or shall be deemed to be an
Acquiring Person as a result of (i) the execution and delivery of the
Agreement and Plan of Merger (the "Merger Agreement"), dated May 19, 1999
between the Company, Parent and Sub, or (ii) any action taken by Parent,
Sub or any of their Affiliates, Associates or shareholders in accordance
with the provisions of the Merger Agreement, including, without
limitation, the initiation or consummation of the Offer (as such term is
defined in the Merger Agreement) or the consummation of the Merger (as
such term is defined in the Merger Agreement) in accordance with the
provisions of the Merger Agreement. Notwithstanding the foregoing, upon
termination of the Merger Agreement in accordance with its terms, the
preceding sentence shall become null and void and of no further force or
effect.
2. Section 1(i) of the Rights Agreement is hereby amended by inserting the
following at the end of Section 1(i):
Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Distribution Date shall not occur by reason of the execution
of the Merger Agreement, the announcement of the Offer, the consummation
of the Offer, the consummation of the Merger, or any other transaction
contemplated by the Merger Agreement.
3. Section 1(cc) of the Rights Agreement is hereby amended by inserting
the following at the end of Section 1(cc):
<PAGE>
Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Section 11(a)(ii) Event shall not occur by reason of the
execution of the Merger Agreement, the announcement of the Offer, the
consummation of the Offer, the consummation of the Merger, or any other
transaction contemplated by the Merger Agreement. Notwithstanding the
foregoing, upon termination of the Merger Agreement in accordance with its
terms, the preceding sentence shall become null and void and of no further
force or effect.
4. Section 1(dd) of the Rights Agreement is hereby amended by inserting
the following at the end of Section 1(dd):
Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Section 13 Event shall not occur by reason of the execution
of the Merger Agreement, the announcement of the Offer, the consummation
of the Offer, the consummation of the Merger, or any other transaction
contemplated by the Merger Agreement. Notwithstanding the foregoing, upon
termination of the Merger Agreement in accordance with its terms, the
preceding sentence shall become null and void and of no further force or
effect.
5. Section 1(gg) of the Rights Agreement is hereby amended by inserting
the following at the end of Section 1(gg):
Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Share Acquisition Date shall not occur by reason of the
execution of the Merger Agreement, the announcement of the Offer, the
consummation of the Offer, the consummation of the Merger, or any other
transaction contemplated by the Merger Agreement. Notwithstanding the
foregoing, upon termination of the Merger Agreement in accordance with its
terms, the preceding sentence shall become null and void and of no further
force or effect.
6. Section 1(ll) of the Rights Agreement is hereby amended by inserting
the following at the end of Section 1(ll):
Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Triggering Event shall not occur by reason of the execution
of the Merger Agreement,
<PAGE>
the announcement of the Offer, the consummation of the Offer, the
consummation of the Merger, or any other transaction contemplated by the
Merger Agreement. Notwithstanding the foregoing, upon termination of the
Merger Agreement in accordance with its terms, the preceding sentence
shall become null and void and of no further force or effect.
7. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware.
8. This Amendment may be executed in any number of counterparts, and each
of such counterparts shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
9. The term "Agreement" as used in the Agreement shall be deemed to refer
to the Agreement as amended hereby, and all references to the Agreement shall be
deemed to include this Amendment. Except as specifically provided in this
Amendment to the Rights Agreement, this Amendment shall not by implication or
otherwise alter, modify, amend or in any such way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Rights
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Rights Agreement to be duly executed, all as of the date and year first
above written.
FIRST COMMONWEALTH, INC.
By: /s/ David W. Mulligan
-----------------------------------
Name: David W. Mulligan
Title: President
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ Joanne Gorostiola
-----------------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
<PAGE>
May 18, 1999
Christopher C. Multhauf
Suite 600
444 N. Wells Street
Chicago, IL 60610
Dear Mr. Mulhauf:
Reference is made to that certain Agreement and Plan of Merger dated
as of May 19, 1999, by and among The Guardian Life Insurance Company of America
("Guardian"), Floss Acquisition Corp. and First Commonwealth, Inc. (the "Merger
Agreement"). Capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed thereto in the Merger Agreement.
Guardian agrees that, effective upon the consummation of the Merger,
it will cause First Commonwealth, Inc. to offer you employment as a senior
officer of First Commonwealth, Inc. on substantially the same terms set forth on
Exhibit A attached hereto. You and Guardian hereby agree that you will use your
reasonable best efforts to negotiate in good faith a definitive Employment
Agreement which will include among other things substantially the terms set
forth in Exhibit A attached hereto. Guardian hereby agrees that, to the extent
that you and Guardian agree upon the terms of such Employment Agreement,
Guardian will use its reasonable best efforts to cause First Commonwealth, Inc.
to enter into such Employment Agreement as promptly as possible and, in no event
later than the date on which the Merger Agreement is consummated.
Unless and until an employment agreement is executed by and between
Guardian and Multhauf, neither party shall be bound by any of the provisions of
this letter.
We look forward to concluding a mutually satisfactory employment
with you.
Very truly yours,
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By /s/ Douglas Kramer
------------------------------
Name: Douglas Kramer
Title: Sr. Vice President Human
Resources
By /s/ Alex Whiteaker
------------------------------
Name: Alex Whiteaker
Title: Assistant Counsel
Acknowledged this Eighteenth
Day of May, 1999
/s/ Christopher C. Multhauf
------------------------------
Christopher C. Multhauf
<PAGE>
Exhibit A
Term Sheet
1. Position: Senior officer of First Commonwealth
2. Base Annual Salary $225,000
3. Annual Bonus: Will vary between $0% - 100% of Base Annual Salary. Target
plan performance shall be 75% Base Annual Salary and shall be based upon
financial performance of First Commonwealth, the components and criteria
for which are subject to further good faith negotiation between the
parties
This Annual Bonus Compensation arrangement will replace upon consummation
of the Merger the existing Management Bonus Plan in effect on the date of
this letter, solely with respect to David W. Mulligan/Christopher C.
Multhauf.
First year Annual Bonus Compensation is guaranteed at 100% without
references to performance criteria.
4. Long Term Incentive Compensation: An award of up to 100% of Base Annual
Salary shall be based upon good performance in relation to criteria and
key indicators to be determined later. Awards in excess of 100% shall be
likewise based upon criteria and measurements which will be in good faith
determined later, but which shall be payable based upon exceptional
performance. Long-Term Compensation shall become vested as follows: 0% in
the first year, 25% in the second year, 50% in the third year, 75% in the
fourth year and 100% in the fifth year, following the award, and shall be
paid in the sixth year.
The Long-Term Compensation payable shall replace the amounts payable to
you under your current employment agreements with First Commonwealth, as
to which you agree not to claim any severance payment(s) prior to the
effective date and time of the Merger, except for the amounts payable to
you under the Incentive/Stay Bonus Agreement dated May 14, 1999 with First
Commonwealth.
It is agreed that the parties shall negotiate in good faith the terms of
the Long-Term Incentive Compensation.
5. Benefits: Employee Benefits currently maintained by First Commonwealth
shall remain in place through 1999, and it is not contemplated that
Benefits will be reduced. In addition, you will be covered by life
insurance with a $500,000 death benefit, and Guardian will match 3% of
your savings against salary. One or more deferred compensation agreement
may be negotiated.
6. Agreement Not to Compete: In the event of a termination of employment,
whether for cause or without cause, you agree not to compete directly or
indirectly with the Guardian,
<PAGE>
First Commonwealth and any of Guardian's affiliates, subsidiaries and
business partners, for a period of three years, with respect to any dental
insurance, dental HMO/PPO indemnity or other dental coverage arrangement,
anywhere in the 50 states of the United States and Puerto Rico. The
non-compete provisions shall extend to any type or form of business in
which you have any interest, directly or indirectly, unless by indirect
ownership of less than 2% of a publicly traded company, limited
partnership or other business entity.
7. Severance. It is agreed that those provisions in your current employment
agreement relating to two years severance pay and benefits shall be
renegotiated and severance pay shall be two years Base Annual Salary,
average of two previous years Bonus and benefits upon termination without
cause.
8. Vacation. It is agreed that you will receive 31 vacation days per year.
9. Disability Insurance. To be negotiated.
<PAGE>
May 18, 1999
David W. Mulligan
Suite 600
444 N. Wells Street
Chicago, IL 60610
Dear Mr. Mulligan:
Reference is made to that certain Agreement and Plan of Merger dated
as of May 19, 1999, by and among The Guardian Life Insurance Company of America
("Guardian"), Floss Acquisition Corp. and First Commonwealth, Inc. (the "Merger
Agreement"). Capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed thereto in the Merger Agreement.
Guardian agrees that, effective upon the consummation of the Merger,
it will cause First Commonwealth, Inc. to offer you employment as a senior
officer of First Commonwealth, Inc. on substantially the same terms set forth on
Exhibit A attached hereto. You and Guardian hereby agree that you will use your
reasonable best efforts to negotiate in good faith a definitive Employment
Agreement which will include among other things substantially the terms set
forth in Exhibit A attached hereto. Guardian hereby agrees that, to the extent
that you and Guardian agree upon the terms of such Employment Agreement,
Guardian will use its reasonable best efforts to cause First Commonwealth, Inc.
to enter into such Employment Agreement as promptly as possible and, in no event
later than the date on which the Merger Agreement is consummated.
Unless and until an employment agreement is executed by and between
Guardian and Mulligan, neither party shall be bound by any of the provisions of
this letter.
We look forward to concluding a mutually satisfactory employment
with you.
Very truly yours,
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By /s/ Douglas Kramer
----------------------------
Name: Douglas Kramer
Title: Sr. Vice President Human
Resources
By /s/ Alex Whiteaker
----------------------------
Name: Alex Whiteaker
Title: Assistant Counsel
Acknowledged this Eighteenth
Day of May, 1999
/s/ David W. Mulligan
----------------------------
David W. Mulligan
<PAGE>
Exhibit A
Term Sheet
1. Position: Senior officer of First Commonwealth
2. Base Annual Salary $225,000
3. Annual Bonus: Will vary between $0% - 100% of Base Annual Salary. Target
plan performance shall be 75% Base Annual Salary and shall be based upon
financial performance of First Commonwealth, the components and criteria
for which are subject to further good faith negotiation between the
parties
This Annual Bonus Compensation arrangement will replace upon consummation
of the Merger the existing Management Bonus Plan in effect on the date of
this letter, solely with respect to David W. Mulligan/Christopher C.
Multhauf.
First year Annual Bonus Compensation is guaranteed at 100% without
references to performance criteria.
4. Long Term Incentive Compensation: An award of up to 100% of Base Annual
Salary shall be based upon good performance in relation to criteria and
key indicators to be determined later. Awards in excess of 100% shall be
likewise based upon criteria and measurements which will be in good faith
determined later, but which shall be payable based upon exceptional
performance. Long-Term Compensation shall become vested as follows: 0% in
the first year, 25% in the second year, 50% in the third year, 75% in the
fourth year and 100% in the fifth year, following the award, and shall be
paid in the sixth year.
The Long-Term Compensation payable shall replace the amounts payable to
you under your current employment agreements with First Commonwealth, as
to which you agree not to claim any severance payment(s) prior to the
effective date and time of the Merger, except for the amounts payable to
you under the Incentive/Stay Bonus Agreement dated May 14, 1999 with First
Commonwealth.
It is agreed that the parties shall negotiate in good faith the terms of
the Long-Term Incentive Compensation.
5. Benefits: Employee Benefits currently maintained by First Commonwealth
shall remain in place through 1999, and it is not contemplated that
Benefits will be reduced. In addition, you will be covered by life
insurance with a $500,000 death benefit, and Guardian will match 3% of
your savings against salary. One or more deferred compensation agreement
may be negotiated.
6. Agreement Not to Compete: In the event of a termination of employment,
whether for cause or without cause, you agree not to compete directly or
indirectly with the Guardian,
<PAGE>
First Commonwealth and any of Guardian's affiliates, subsidiaries and
business partners, for a period of three years, with respect to any dental
insurance, dental HMO/PPO indemnity or other dental coverage arrangement,
anywhere in the 50 states of the United States and Puerto Rico. The
non-compete provisions shall extend to any type or form of business in
which you have any interest, directly or indirectly, unless by indirect
ownership of less than 2% of a publicly traded company, limited
partnership or other business entity.
7. Severance. It is agreed that those provisions in your current employment
agreement relating to two years severance pay and benefits shall be
renegotiated and severance pay shall be two years Base Annual Salary,
average of two previous years Bonus and benefits upon termination without
cause.
8. Vacation. It is agreed that you will receive 31 vacation days per year.
9. Disability Insurance. To be negotiated.
