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[LOGO OF WALBRO CORPORATION]
May 4, 1999
Dear Fellow Stockholder:
I am pleased to report that on April 27, 1999, our company entered into an
agreement to be acquired by TI Group plc ("TI Group"). The consideration to be
received is $20.00 cash per share of common stock which represents an
approximate 70% premium to the Company's stock price at the day before
signing.
Our Board of Directors carefully considered many factors when it decided to
recommend TI Group's offer. These factors are more fully described in the
enclosed Schedule 14D-9. After careful consideration, our Board of Directors
unanimously recommends that you accept TI Group's offer and tender your shares
to TI Group.
Accompanying this letter is:
1. a copy of our Solicitation/Recommendation Statement on Schedule 14D-
9.
2. TI Group's Offer to Purchase and related materials, including a
Letter of Transmittal for use in tendering shares.
We urge you to read the enclosed materials carefully.
Our management and directors thank you for the support you have given the
Company.
On behalf of the Board of Directors,
Sincerely,
Frank E. Bauchiero
President and
Chief Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
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Solicitation/Recommendation Statement Pursuant
to Section 14(d)(4) of the Securities Exchange Act of 1934
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WALBRO CORPORATION
(Name of Subject Company)
WALBRO CORPORATION
(Names of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.50 PER SHARE (INCLUDING THE
ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK)
(Title of Class of Securities)
931154108
(Cusip Number of Class of Securities)
DANIEL L. HITTLER
Chief Administrative Officer
1227 Centre Road
Auburn Hills, Michigan 48326
(248) 377-1800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of the Person(s) Filing Statement)
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With a Copy to:
Howard S. Lanznar, Esq.
David J. Kaufman, Esq.
Katten Muchin & Zavis
525 West Monroe
Suite 1600
Chicago, Illinois 60661-3693
(312) 902-5200
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Item 1. Security and Subject Company.
Walbro Corporation, a Delaware corporation (the "Company"), is the subject
company. The principal executive offices of the Company are located at 1227
Centre Road, Auburn Hills, Michigan 48326. The title of the class of equity
securities to which this Statement relates is the common stock, par value
$0.50 per share (the "Common Stock"), of the Company, including the associated
rights to purchase Series A Junior Participating Preferred Stock (the
"Rights") issued pursuant to the Rights Agreement, dated as of June 30, 1998,
as amended on April 27, 1999 (the "Rights Agreement"), between the Company and
Harris Trust and Savings Bank, as Rights Agent (the "Rights Agent").
References herein to the "Shares" mean shares of the Common Stock and shall,
unless the context requires otherwise, include the Rights.
Item 2. Tender Offer of the Bidder.
The Offer. This Statement relates to a tender offer by TI Automotive
Systems, Inc., a Delaware corporation ("Offeror"), which is an indirect wholly
owned subsidiary of TI Group plc, a company organized under the laws of
England and Wales ("TI Group"), to purchase all of the outstanding Shares at a
purchase price of $20.00 per share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer
to Purchase dated May 4, 1999 (the "Offer to Purchase") and the related Letter
of Transmittal (which together with the Offer to Purchase and any amendments
or supplements thereto constitute the "Offer"). The Offer is disclosed in the
Tender Offer Statement on Schedule 14D-1, dated May 4, 1999 (the "Schedule
14D-1") as filed by TI Group and Offeror with the Securities and Exchange
Commission. The Schedule 14D-1 indicates that the principal executive offices
of TI Group are located at 50 Curzon Street, London, W1Y 7PN, England and the
principal executive offices of Offeror are located at 375 Park Avenue -- Suite
222, New York, New York 10152.
The Offer is being made pursuant to an Agreement and Plan of Merger among
Offeror, TI Group and the Company, dated as of April 27, 1999, as amended by
the First Amendment thereto dated May 3, 1999 (the "Merger Agreement"). A copy
of the Merger Agreement and the First Amendment thereto are filed as Exhibits
1 and 2, respectively, to this Solicitation/Recommendation Statement on
Schedule 14D-9 (this "Schedule 14D-9") and is incorporated herein by reference
in their entirety. Pursuant to the Merger Agreement, following the
consummation of the Offer, upon the satisfaction or waiver of certain
conditions, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Offeror will be merged with and into the Company (the "Merger" and,
together with the Offer, the "Transaction"), with the Company surviving the
Merger (the Company following the Merger is sometimes referred to as the
"Surviving Corporation"). In the Merger, the holders of Shares as of the
effective time of the Merger will receive an amount in cash equal to the Offer
Price. The shares of common stock of Offeror outstanding immediately prior to
the Merger shall be converted into shares of Common Stock of the Surviving
Corporation.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above, and incorporated herein
by reference.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in Annex A attached to this Schedule 14D-9 and
incorporated herein by reference.
Purpose of the Offer; Plans for the Company; the Merger.
Purpose. The purpose of the Offer is to acquire for cash as many
outstanding Shares as possible as a first step in acquiring the entire equity
interest in the Company.
If Offeror acquires over 50% of the outstanding Shares pursuant to the
Offer, it will have the vote necessary under Delaware law and the Company's
Restated Certificate of Incorporation to approve the Merger. Under the DGCL,
if Offeror owns at least 90% of the outstanding Shares, the Merger may be
effected without the vote of
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the Company's stockholders or the approval of the Company's Board of
Directors. Therefore, if at least approximately 7,819,465 Shares (or such
greater number as may be necessary if options are exercised) are acquired
pursuant to the Offer or otherwise, Offeror will be able to and intends to
effect the Merger without a meeting of holders of Shares.
The Merger Agreement
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit 1 to
this Schedule 14D-9 and is incorporated herein by reference. The Merger
Agreement should be read in its entirety for a more complete description of
the matters summarized below.
The Merger Agreement provides that upon the terms and subject to the
conditions set forth in the Merger Agreement and in accordance with the DGCL,
Offeror will be merged into the Company. Upon consummation of the Merger (the
"Effective Time"), each then outstanding Share (other than Shares held in the
Company's treasury or Shares beneficially owned by TI Group or Offeror or
Shares, if any, that are held by stockholders who properly exercise and
perfect appraisal rights pursuant to Section 262 of the DGCL), shall, by
virtue of the Merger and without any action on the part of the Company, TI
Group, Offeror or the holder thereof, be converted into the right to receive,
without interest, the Offer Price.
Conditions to the Merger. The obligations of the Company, Offeror and TI
Group to effect the Merger are subject to the satisfaction of certain
conditions set forth in the Merger Agreement, including (i) the purchase by
Offeror, TI Group or their affiliates of Shares pursuant to the Offer, (ii)
the receipt of stockholder approval, if required, (iii) that no statute, rule
or regulation shall have been enacted or promulgated by any federal, state,
local or foreign court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory authority or administrative agency (a
"Governmental Entity") which prohibits the consummation of the Merger, and
there shall be no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the Merger, and (iv) that clearance from the
appropriate agencies pursuant to the HSR Act (as defined below) shall have
been obtained or the waiting period thereby shall have expired or been
terminated.
Termination of the Merger Agreement. According to its terms, the Merger
Agreement may be terminated at any time prior to the Effective Time, whether
before or after approval of the Merger Agreement by the stockholders of the
Company, by the mutual consent of TI Group and the Company. In addition the
Merger Agreement may be terminated by either TI Group or the Company if (i)
(x) the Offer shall have expired without any Shares being purchased therein or
(y) Offeror shall not have accepted for payment all Shares tendered pursuant
to the Offer by September 30, 1999; provided that the right to terminate the
Merger Agreement under (x) or (y) is not available to any party whose failure
to fulfill any obligation under the Merger Agreement is the cause of, or
resulted in, the failure of TI Group or Offeror to purchase the Shares
pursuant to the Offer on or prior to such date or (ii) if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
which permanently restrains, enjoins or otherwise prohibits the acceptance for
payment of, or payment for, Shares pursuant to the Offer or Merger and such
order, decree, ruling or other action shall have become final and non-
appealable. The Merger Agreement may be terminated by TI Group if, among other
things, (i) prior to the purchase of Shares pursuant to the Offer, the Company
shall have breached any representation, warranty, covenant or other agreement
contained in the Merger Agreement (with certain exceptions) which (A) would
give rise to the failure of one of the conditions to the Offer which requires
the truth or performance thereof as of certain specified dates and (B) cannot
be or has not been cured, in all material respects, within 30 days after the
giving of written notice to the Company; (ii) if there has been a material
breach of the provisions of the Merger Agreement described below under "--
Acquisition Proposal" which, if capable of being cured, has not been cured
within 10 days; or (iii) if the Board of Directors of the Company has
withdrawn or modified in a manner adverse to TI Group or Offeror its approval
or recommendation of the Offer, the Merger Agreement or the Merger or the
Board of Directors of the Company has approved or recommended any Acquisition
Transaction (as defined below) or the Company shall have entered into any
agreement or agreement in principle with respect to any Acquisition
Transaction. The Merger Agreement may be terminated by the Company, among
other
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reasons upon execution by it of a definitive agreement for a merger,
consolidation or other business combination involving the Company or any of
its subsidiaries or with respect to the acquisition of beneficial ownership of
all or any significant part of the assets or capital stock of the Company (an
"Acquisition Transaction"), that the Board of Directors of the Company shall
have decided to recommend to the Company's stockholders after it has
reasonably concluded, after consultation with its outside independent legal
counsel and a nationally recognized investment bank, that such transaction is
more favorable to the stockholders of the Company from a financial point of
view than the Offer and the Merger and that its failure to make such
recommendation and terminate the Merger Agreement could violate its fiduciary
duties under applicable law (a "Superior Proposal") provided (A) it has
complied with all provisions of the Merger Agreement governing conduct of the
Company with respect to offers or proposals for Acquisition Transactions,
including the notice provisions therein, (B) that it has paid or made
arrangement reasonably satisfactory to TI Group to pay promptly (and in any
event within five (5) business days of the termination of the Merger
Agreement) the Termination Expenses (as defined below) and (C) it shall have
provided to TI Group at least five (5) business days' prior written notice
that the Board intends to terminate the Merger Agreement, specifying the
material terms and conditions of such Acquisition Transaction. In connection
with the foregoing, the Company has agreed in the Merger Agreement that it
will (X) not enter into a binding agreement with respect to an Acquisition
Transaction until at least the sixth business day after it has provided the
notice to TI Group required by the Merger Agreement, (Y) consider in good
faith any offer made by TI Group during that period, and (Z) notify TI Group
promptly if its intention to enter into such an agreement shall change at any
time after such notification. The Company may also terminate the Merger
Agreement if TI Group or Offeror shall have breached in any material respect
any of their respective representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach cannot be or has
not been cured, in all material respects, within 30 days after the giving of
written notice to TI Group or Offeror, as applicable.
Fees and Expenses. The Company shall immediately pay to TI Group (x) the
amount of $11.0 million and (y) all actual documented out-of-pocket expenses
reasonably incurred by TI Group and Offeror in connection with the Merger
Agreement and the Merger in an amount not to exceed $2.0 million (the
"Termination Expenses") if the Merger Agreement is terminated: (1) by the
Company if it executes an agreement for an Acquisition Transaction that it has
decided to recommend to the Company's stockholders after it has concluded that
such transaction constitutes a Superior Proposal, (2) by TI Group if (i) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to TI Group or Offeror its approval or recommendation of the Offer,
the Merger or the Merger Agreement, or approved or recommended any Acquisition
Transaction or (ii) the Company shall have entered into any agreement or
agreement in principle with respect to any Acquisition Transaction, if within
six (6) months after such termination an Acquisition Transaction shall be
consummated or (3) by either the Company or TI Group (if such party is
entitled to terminate the Merger Agreement pursuant to the terms thereof) if
(i) the Offer shall have expired without any Shares being purchased therein or
(ii) Offeror shall not have accepted for payment all Shares tendered pursuant
to the Offer by September 30, 1999 and (a) within six (6) months thereafter
there shall be publicly announced another Acquisition Transaction or prior
thereto any person shall have acquired beneficial ownership of at least 30% of
the outstanding Shares (the "Termination Date") and (b) an Acquisition
Transaction shall be consummated prior to the Termination Date or any person
shall have acquired beneficial ownership of at least 30% of the outstanding
Shares, as the case may be. In the event that the Merger Agreement is
terminated by TI Group due to a breach by the Company of the provisions
described below under "--Acquisition Proposal", the Company shall immediately
pay TI Group the Termination Expenses. In the event that the Company becomes
obligated to make the payment described in the preceding sentence and another
Acquisition Transaction is consummated within six (6) months after termination
by TI Group, the Company shall also pay to TI Group $11.0 million. The Company
shall immediately pay to TI Group the Termination Expenses if the Merger
Agreement is terminated by TI Group due to breach of any representation,
warranty, covenant or other agreement by the Company which cannot be or has
not been cured within 30 days of notice thereof if the breach thereof is due
solely to the Company's intentional or bad faith acts. Upon receipt of such
payments, TI Group shall not be entitled to and shall waive the right to seek
damages or other amounts or remedies from the Company for breach of, or
otherwise in connection with, the Merger Agreement other than in the case of
termination by TI Group as
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described in the preceding sentence. If the Company fails to promptly pay such
amount, and, in order to obtain such payment, TI Group or Offeror commences a
suit which results in a judgment against the Company for the fee set forth
above, the Company shall pay to TI Group or Offeror its reasonable cost and
expenses (including reasonable attorneys' fees) in connection with such suit.
Amendment of the Merger Agreement. Subject to the applicable provisions of
the DGCL, the Merger Agreement may be amended by written action taken by the
Company, TI Group and Offeror at any time prior to the Effective Time.
Treatment of Convertible Trust Preferred Securities and Options. The Merger
Agreement also provides that each holder of an outstanding option, warrant or
commitment to purchase any capital stock or other equity interest of the
Company (other than holders of the Convertible Trust Preferred Securities of
Walbro Capital Trust (the "Preferred Securities")) (each, an "Option") shall
be entitled to receive at or after the Effective Time, upon surrender of such
option for cancellation, cash equal to the positive difference, if any,
between the Offer Price less the exercise price of each such Option multiplied
by the number of Shares covered by such Option. From and after the Effective
Time each holder of Preferred Securities shall have the right to convert its
Preferred Securities only into the amount of cash provided for by the terms of
the Preferred Securities after giving effect to any adjustment in the
conversion price provided for by such terms which is $26.40 per Preferred
Security. Upon consummation of the Merger, Parent will cause to be delivered
to each holder of Preferred Securities, the notice required by the terms of
the Indenture related thereto.
Indemnification of Officers and Directors. The Merger Agreement provides
that from and after the Effective Time, the Surviving Corporation will cause
to be maintained in effect the Company's existing directors' and officers'
liability insurance for a period of six (6) years after the Effective Time;
provided the Surviving Corporation may substitute therefor other policies of
at least the same coverage amounts and which contain terms and conditions not
less advantageous (other than to a de minimus extent) to the beneficiaries of
the current policies, provided that such substitution may not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided further that the Surviving Corporation is not
required to pay an annual premium in excess of 200% of the last annual premium
paid by the Company prior to the date of the Merger Agreement and if the
Surviving Corporation is unable to obtain the required insurance, it is
required to obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount. The Merger Agreement also provides that,
after the Effective Time, TI Group will indemnify each present and former
director or officer of the Company and each of its subsidiaries against all
losses, claims, damages, costs, expenses (including attorneys' fees and
expenses), liabilities or judgments, fines or amounts that are paid in
settlement as a result of or in connection with any threatened or actual
action, suit or proceeding based on or arising out of the fact that such
person is or was a director or officer of the Company or any of its
subsidiaries or out of or in connection with activities in such capacity,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based on, or arising out of, or pertaining to, the Merger
Agreement or the transactions contemplated thereby, in each case to the
fullest extent a corporation is permitted to do so under the DGCL and to the
fullest extent provided in the by-laws or Certificate of Incorporation of the
Company and its subsidiaries in effect on the date of the Merger Agreement.
Treatment of Employee Benefits. TI Group has agreed in the Merger Agreement
that, as soon as administratively practicable after the Effective Time, it
will cause all employees of the Company then actually at work to be covered
under employee benefit and fringe benefit plans that are no less favorable
than those that TI Group maintains for its similarly situated employees. TI
Group has also agreed that the Company will honor all obligations under
employee benefit plans and all employment agreements entered into by the
Company prior to the date of the Merger Agreement.
Composition of the Board of Directors. The Merger Agreement provides that
promptly upon the purchase of and payment for any Shares by TI Group or any of
its subsidiaries which represents at least a majority of the outstanding
Shares (on a fully diluted basis), TI Group shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by TI Group
pursuant to
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this sentence) multiplied by the percentage that the number of Shares so
accepted for payment bears to the total number of Shares then outstanding. In
furtherance thereof, the Company shall upon request of Offeror, promptly
either increase the size of its Board of Directors or secure the resignation
of such number of its incumbent directors, or both, as is necessary to enable
TI Group's designees to be so elected to the Company's Board, and shall take
all actions available to the Company to cause TI Group's designees to be so
elected. At such time, the Company shall, if requested by TI Group, also cause
persons designated by TI Group to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company's Board of
Directors on each committee of the Company's Board of Directors. TI Group is
required to use its best efforts to cause the Company to have at least one
independent director until the Effective Time, including, but not limited to,
retaining one of the Company's current directors.
Acquisition Proposal. The Company has agreed that neither it nor any of its
affiliates nor any of their respective directors, officers, employees, agents
or representatives shall, directly or indirectly, solicit or initiate or
knowingly facilitate or encourage (including by way of furnishing or
disclosing non-public information) any inquiries or the making of any proposal
with respect to an Acquisition Transaction, or negotiate, explore or otherwise
engage in discussions with any person (other than TI Group and its
representatives) with respect to any Acquisition Transaction or which may lead
to a proposal for an Acquisition Transaction, or enter into any agreement,
arrangement or understanding with respect to any such Acquisition Transaction
or which would require it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by the Merger Agreement, or which
may cause the Board of Directors of the Company to withdraw, modify or amend
its recommendation that the Company's stockholders accept the Offer, tender
their Shares to Offeror or approve and adopt the Merger Agreement and the
Merger; provided, however, that the Company may, in response to a bona fide
unsolicited proposal from a third party regarding an Acquisition Transaction,
(x) furnish information to and engage in discussions and negotiations with
such third party (subject to such third party entering into a confidentiality
agreement with the Company containing terms substantially similar to the
Confidentiality Agreement between the Company and TI Group), but only if the
Board of Directors of the Company reasonably determines in good faith, after
consultation with its outside independent counsel and a nationally recognized
investment bank, that such unsolicited proposal could reasonably lead to a
Superior Proposal and that failing to take such action could violate the
Board's fiduciary duties under applicable law and (y) take and disclose to the
Company's stockholders any proposal, and make related filings with the SEC, as
required by Rule 14e-3 and 14d-9 under the Exchange Act.
Covenants. The Merger Agreement also contains certain other restrictions as
to the conduct of business by the Company pending the Merger, as well as
representations and warranties of each of the parties customary in
transactions of this kind.
Appraisal Rights. Holders of Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, each holder of
Shares who has neither voted in favor of the Merger nor consented thereto in
writing will be entitled to an appraisal by the Delaware Court of Chancery of
the fair value of such holder's Shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid. In determining such fair value, the
Delaware Court of Chancery may consider all relevant factors. The value so
determined could be more or less than the consideration to be paid in the
Offer and the Merger. Any judicial determination of the fair value could be
based upon considerations other than or in addition to the market value of the
Shares, including, among other things, asset values and earning capacity.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such holder's right to
appraisal as provided in the DGCL, the Shares of such stockholder will be
converted into the right to receive the Offer Price in accordance with the
Merger Agreement. A stockholder may withdraw his demand for appraisal by
delivery to TI Group of a written withdrawal of such holder's demand for
appraisal and acceptance of the Merger.
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The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
Rights Agreement. Set forth below is a summary description of the Rights as
filed with the Company's Registration Statement on Form 8-A dated July 8, 1998
relating to the Rights:
On June 24, 1998, the Board of Directors of the Company declared a dividend
of one Right for each outstanding share of Common Stock. The dividend was
payable on July 17, 1998 (the "Record Date") to the stockholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share (each, a "Preferred Share"), of the
Company at a price of $45 per one one-hundredth of a Preferred Share (the
"Purchase Price"), subject to adjustment.
The description and terms of the Rights are set forth in the Rights
Agreement.
Until the earlier of (i) the close of business on the tenth day after the
first public announcement by the Company or an Acquiring Person (as defined
below) that a person or group of affiliated or associated persons have
acquired beneficial ownership of 15% or more of the outstanding Common Stock
(other than the Company, its majority-owned subsidiaries, and certain other
related persons ("Excluded Persons")) (an "Acquiring Person") (with certain
exceptions), or (ii) the close of business on the tenth business day (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person becomes an Acquiring Person) following the
commencement of, or the first public announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by such person or group (other than by Excluded Persons)
of 15% or more of such outstanding Common Stock (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced by the
Common Stock certificates, will be transferable only by the transfer of the
Common Stock associated with such Rights and any transfer of the Common Stock
(including a transfer to the Company) will constitute a transfer of the
associated Rights.
Until the Distribution Date (or earlier redemption or expiration of the
Rights), new Common Stock certificates issued after the Record Date, upon
transfer or new issuance of Common Stock, will contain a legend incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Common Stock outstanding as of the Record Date, even without
such notation will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of the Common
Stock as of the close of business on the Distribution Date and such separate
Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on June 30, 2008 (the "Rights Expiration Date"), unless the Rights
Expiration Date is extended or unless the Rights are redeemed earlier by the
Company, in each case, as described below.
If a person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right (other than those described in the
next sentence) will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the Purchase Price of the
Right. All Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be
void.
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At any time after the first date of public announcement by the Company or
an Acquiring Person than an Acquiring Person has become such (a "Shares
Acquisition Date"), if (i) the Company is the surviving corporation in a
merger with any other company or entity, (ii) the Company is acquired in a
merger or other business combination transaction, (iii) 50% or more of the
Company's consolidated assets or earning power are sold or (iv) an Acquiring
Person engages in certain "self-dealing" transactions with the Company, each
holder of an outstanding Right (other than those whose Rights have become
void) will thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price of the Right, that number of shares of common
stock of the surviving or acquiring company or the Acquiring Person, as the
case may be, which at the time of such transaction will have a market value of
two times the Purchase Price of such Right.
At any time after a person or group becomes an Acquiring Person (other than
Excluded Persons), the Board of Directors of the Company may exchange the
Rights (other than Rights owned by an Acquiring Person which have become
void), in whole or in part, without any additional payment, for Common Stock
at an exchange ratio of one share of Common Stock (or of a share of a class or
series of the Company's preferred shares having equivalent rights, preferences
and privileges), per Right (subject to adjustment). The foregoing right of
exchange shall not be available at any time after any person or group and
their affiliates and associates (other than Excluded Persons) becomes the
beneficial owner of 50% or more of the Common Stock.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion
price, less than the then-current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends or dividends
payable in Preferred Shares) or of subscription rights or warrants (other than
those referred to above). With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price.
At any time prior to the time that any person or group becomes an Acquiring
Person, the Board of Directors of the Company may redeem all, but not less
than all, of the Rights at a price of $.01 per Right (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 of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Any of the provisions of the Rights may be amended by the Board of
Directors of the Company prior to the time that any person or group becomes an
Acquiring Person. After the time that any person or group becomes an Acquiring
Person, the provisions of the Rights Agreement may be amended by the Board in
order to make changes which do not adversely affect the interests of holders
of Rights (excluding the interests of any Acquiring Person).
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.
On April 27, 1999, the Company amended the Rights Agreement (the "Rights
Agreement Amendment"), which renders the Rights Agreement inapplicable to the
Offer and the Merger by providing, among other things, that neither (a) the
announcement, commencement or consummation of the Offer nor (b) the execution,
delivery or performance of the Merger Agreement or the consummation of the
transactions contemplated thereby will (i) cause TI Group or any of its
affiliates to become an Acquiring Person, (ii) give rise to a Distribution
Date, a
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Shares Acquisition Date or a Triggering Event or (iii) trigger certain other
events specified in the Rights Agreement. Except as expressly provided in the
Rights Agreement Amendment, the Rights Agreement remains in full force and
effect.
Copies of the Merger Agreement and the Rights Agreement Amendment have been
filed as Exhibits to this Schedule 14D-9 and are incorporated herein by
reference. The foregoing descriptions of these documents are qualified in their
entireties by reference to such documents.
Certain Conditions of the Offer.
Notwithstanding any other provision of the Offer and in addition to (and not
in limitation of) Offeror's right to extend and amend the Offer at any time in
its sole discretion (subject to the provisions of the Merger Agreement),
Offeror shall not be required to accept for payment or, subject to applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange
Act (relating to Offeror's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), and may terminate or
amend the Offer as to any Shares not then paid for if (i) any applicable
waiting period under the HSR Act or any applicable European antitrust law has
not expired or terminated, (ii) approval under any applicable European
antitrust law has not been obtained, (iii) the Minimum Tender Condition has not
been satisfied or (iv) at any time on or after April 27, 1999 and before the
time of acceptance for payment of any such Shares, any of the following events
shall have occurred:
(a) there shall be pending any action, suit, investigation or proceeding
by any Governmental Entity before any court or governmental authority or
agency,
(i) seeking to make illegal, or otherwise directly or indirectly
restrain or prohibit the making of the Offer, or the acceptance for
payment or payment for some of or all the Shares pursuant to the Offer
or the consummation of the Merger or seeking to obtain material damages
in connection with the transactions contemplated by the Merger
Agreement;
(ii) seeking to restrain, prohibit or terminate the Company's or, as
a result of the transactions contemplated by the Merger Agreement, TI
Group's ownership, operation or lease (or that of their respective
subsidiaries or affiliates) of any business, properties or assets which
are material to the business or operation, as such business or
operations are currently conducted, of the Company and its subsidiaries
or of TI Group and its subsidiaries, as the case may be, or to compel
the Company or, as a result of the transactions contemplated by the
Merger Agreement, TI Group or any of their respective subsidiaries or
affiliates to dispose of, cease operating or hold separate any
business, properties or assets that are material to the business or
operations, as such business or operations are currently conducted, of
the Company and its subsidiaries or of TI Group and its subsidiaries;
(iii) seeking to impose limitations on the ability of TI Group or
any of its subsidiaries or affiliates effectively to exercise full
rights of ownership of the Company Common Stock, including, without
limitation, the right to vote any shares acquired or owned by TI Group
or any of its subsidiaries or affiliates on all matters properly
presented to the Company's stockholders;
(iv) seeking to require divestiture by TI Group or any of its
subsidiaries or affiliates of any Company Common Stock;
(b) there shall be in effect any judgment, decree or order of any court
or Governmental Entity, domestic or foreign, or any other legal restraint
that:
(i) makes illegal, or otherwise directly or indirectly restrains or
prohibits the making of the Offer or the acceptance for payment or
payment for some of or all the Shares pursuant to the Offer or the
consummation of the Merger or that imposes or would impose upon the
Company or TI Group or any of their respective subsidiaries or
affiliates material damages in connection with the transactions
contemplated by the Merger Agreement;
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(ii) restrains, prohibits or terminates the Company's or, as a
result of the transactions contemplated by the Merger Agreement, TI
Group's ownership, operation or lease (or that of their respective
subsidiaries or affiliates) of any business, properties or assets which
are material to the business or operation, as such business or
operations are currently conducted, of the Company and its subsidiaries
or of TI Group and its subsidiaries, as the case may be, or compels the
Company or, as a result of the transactions contemplated by the Merger
Agreement, TI Group or any of their respective subsidiaries or
affiliates to dispose of, cease operating or hold separate any
business, properties or assets that are material to the business or
operations, as such business or operations are currently conducted, of
the Company and its subsidiaries or of TI Group and its subsidiaries;
(iii) imposes limitations on the ability of TI Group or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Company Common Stock, including, without limitation,
the right to vote any shares acquired or owned by TI Group or any of
its subsidiaries or affiliates on all matters properly presented to the
Company's stockholders; or
(iv) requires divestiture by TI Group or any of its subsidiaries or
affiliates of any Company Common Stock; or
(c) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or issued or applicable
to the Offer or the Merger, on behalf of a Governmental Entity, or any
other action shall be taken by any Governmental Entity, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act, that is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above; or
(d) there shall have occurred any events or state of circumstances after
April 27, 1999 which, either individually or in the aggregate, would have a
material adverse affect on the Company; or
(e) (i) the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to TI Group or Offeror its approval or
recommendation of the Offer, the Merger or the Merger Agreement, approved
or recommended any Acquisition Transaction, or (ii) the Company shall have
entered into any agreement or agreement in principle with respect to any
Acquisition Transaction; or
(f) any of the representations or warranties of the Company set forth in
the Merger Agreement that is qualified by materiality or material adverse
affect shall not be true or any of the representations or warranties of the
Company set forth in the Merger Agreement that is not so qualified shall
not be true in any material respect, in each case (i) as of the date
referred to in any representation or warranty which addresses matters as of
a particular date, or (ii) as to all other representations and warranties,
as of the date of the Merger Agreement and as of the scheduled expiration
of the Offer; or
(g) the Company shall have failed in any material respect to perform any
obligation or to comply with any agreement or covenant to be performed or
complied with by it under the Merger Agreement; or
(h) any person acquires beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of at least 30% of the outstanding Company Common
Stock (other than any person not required to file a Schedule 13D under the
rules promulgated under the Exchange Act); or
(i) the Merger Agreement shall have been terminated in accordance with
its terms; or
(j) there shall have occurred and be continuing (i) any suspension of,
or limitation on prices for, trading in securities on the NASDAQ or (ii)
any limitation by any governmental authority on the extension of credit by
banks or other lending institutions or banking moratorium or any suspension
of payments in respect of banks, which materially affects the ability of TI
Group or Offeror to pay for the Company Common Stock;
which in the reasonable judgment of TI Group in any such case makes it
inadvisable to proceed with such acceptance for payment or payment.
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The foregoing conditions are for the sole benefit of TI Group and Offeror,
may be asserted by TI Group or Offeror regardless of the circumstances giving
rise to such condition (including any action or inaction by TI Group or
Offeror not in violation of the Merger Agreement) and may be waived by TI
Group or Offeror in whole or in part at any time and from time to time in the
sole discretion of TI Group or Offeror, subject in each case to the terms of
the Merger Agreement. The failure by TI Group or Offeror at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
Potential or Actual Conflicts of Interest
Change of Control Agreements. On January 5, 1999, the Board amended the
Termination and Change of Control Agreements (the "TCOC Agreements") it has
with Frank E. Bauchiero, Michael A. Shope, Daniel L. Hittler, Robert H.
Walpole, Richard H. Whitehead, III, Michael Leopold, Andrew Masterman, Thomas
DeJong, and Melvin Todd (the "Senior Management Team") such that in the event
of a Change of Control during the calendar year 1999, (i) the single sum
payment equal to three times the employee's average compensation of the prior
three calendar years (including incentive bonus) is replaced by an amount
equal to three times the sum of (x) the employee's annual base salary and (y)
a bonus of 75% (100% for Frank E. Bauchiero) of such employee's annual base
salary, (ii) each employee is granted a 30-day period commencing six months
following consummation of a Change of Control (with the exception of Mr.
Bauchiero who is granted a 60-day period commencing two months following
consummation of a Change of Control) (the "TCOC Period"), during which the
employee will be entitled to voluntarily terminate employment with the Company
and be deemed to have terminated employment for good reason, and (iii) Mr.
Bauchiero will receive $2,000,000 in exchange for the cancellation of, or
failure to grant, the option to purchase 350,000 Shares scheduled to be
granted to him under his employment agreement. Because the Merger will
constitute a Change of Control under the TCOC Agreements, if all members of
the Senior Management Team exercise their right to voluntarily terminate
employment with the Company for good reason during the TCOC Period or such
members of the Senior Management Team were terminated by the Surviving
Corporation, the Surviving Corporation would be obligated to make payments in
an aggregate amount of approximately $10,000,000. Although not required to
continue their employment, the Senior Management Team intends to continue with
the Surviving Corporation after consummation of the Merger and consequently
may not be entitled to any payments under the TCOC Agreements.
The amount payable to the employee under the TCOC Agreement is subject to
certain limitations set forth in the Internal Revenue Code. The preceding
discussion relating to the typical Amended TCOC Agreement is qualified in its
entirety by reference to the full text of the original TCOC Agreements filed
as Exhibits 8 through 12 to this Schedule 14D-9, and the text of the model
amendments filed as Exhibits 13 through 15 to this Schedule 14D-9.
Vesting of Stock Options. All of the outstanding stock options to purchase
Shares granted by the Company under the Amended and Restated Walbro
Corporation Equity Based Long-Term Incentive Plan, and the Walbro Corporation
Broad-Based Long-Term Incentive Plan (collectively, the "Plans") immediately
vest and become exercisable if approved by the Committee (as that term is
defined therein) upon a "change of control." Pursuant to the Plans, the
Committee has approved the acceleration and the options covered by the Plans
will immediately vest and become exercisable and each individual will receive
the difference between $20.00 per share and the exercise price times the
number of options held and will be cashed out in the Merger. The Plans are
filed as Exhibits 16 and 17, respectively, to this Schedule 14D-9 and are
incorporated herein by reference.
Except as described herein or incorporated herein by reference, to the
knowledge of the Company as of the date hereof, there are no contracts,
agreements, arrangements or understandings or any actual or potential
conflicts of interest between the Company or its affiliates and (i) the
Company, its executive officers, directors or affiliates or (ii) TI Group or
its executive officers, directors or affiliates.
Item 4. The Solicitation or Recommendation.
(a) Recommendation
The Board of Directors of the Company and a disinterested Committee of the
Board of Directors (as required by Section 203 of the DGCL) have unanimously
approved the Merger Agreement, the Offer and the
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Merger and determined that the Offer and the Merger, are fair to, and in the
best interests of, the stockholders of the Company. The Board of Directors
recommends that all holders of Shares accept the Offer and tender their Shares
pursuant to the Offer. The Company expects that all directors will tender the
Shares they own to Offeror.
(b)(i) Background
In April 1998, Sir Christopher Lewinton, Chairman of the Board of Directors
of TI Group, approached Lambert Althaver, the then Chairman and Chief
Executive Officer of the Company, regarding a possible combination between TI
Group and the Company. Sir Christopher subsequently wrote to Mr. Althaver to
outline a non-binding proposal to commence discussions to acquire the Company
at $24.00 per Share. On April 17, 1998, Mr. Althaver resigned his position as
Chairman and Chief Executive Officer and was replaced by Frank E. Bauchiero.
On April 20, 1998, Mr. Bauchiero wrote back to Sir Christopher to reject the
approach, stating that the Company "is in good position to pursue its strategy
independently." Following receipt of Mr. Bauchiero's letter, Sir Christopher
wrote to Mr. Bauchiero and to each of the other directors of the Company
requesting an opportunity for him and William J. Laule, the Chief Executive
Officer of TI Group, to meet with the Board of the Company to explain TI
Group's proposal in detail. No such meeting took place.
In June and July 1998, Sir Christopher and Mr. Bauchiero met in New York
and Detroit, respectively, to discuss the possibility of cooperative
opportunities for the two companies. No decisions were reached or actions
taken as a result of these meetings.
During the Fall of 1998, the Board of Directors met to examine the impact
of short term and long term trends in the automobile manufacturing and
automobile component industries and the Company's short and long term
projected financial outlook. After these meetings the Board of Directors
authorized Mr. Bauchiero to pursue strategic alternatives, including a
possible sale of the Company. In October 1998, the Company engaged Salomon
Smith Barney Inc. ("Salomon Smith Barney") to act as its financial advisor to
assist the Company in its review of strategic alternatives. On November 3,
1998 the Company met with its legal and financial advisors to discuss
potential strategic alternatives, including a possible business combination,
and the timing of such alternatives.
During November 1998, companies, including TI Group, were approached to
determine their level of interest regarding a possible business combination
transaction with the Company. From November 1998 through January 1999 several
of these companies conducted a preliminary due diligence review of certain
legal, financial and operating data of the Company. In January 1999 TI Group
entered into a confidentiality agreement with the Company and thereafter
received an information memorandum and certain other information regarding the
Company. During January 1999 a number of these entities, including TI Group,
submitted indications of interest to the Company and continued their due
diligence review of the Company.
During February 1999 members of senior management of the Company met with
representatives of those entities which had submitted preliminary indications
of interest to discuss business issues and the structure and timing of a
potential business combination transaction.
On March 1, 1999, Sir Christopher wrote to Mr. Bauchiero to identify a
number of areas that TI Group needed additional due diligence information
before it could consider making any proposal to the Board of Directors of the
Company. During early March 1999, the parties suspended negotiations,
primarily as a result of a disagreement with respect to the price and terms of
a potential transaction. On March 3, 1999, TI Group's Board of Directors
determined that TI Group was not in a position to pursue the possible
acquisition of the Company at that time as its representatives had not been
able to complete due diligence to TI Group's satisfaction and had not received
certain financial information it deemed necessary. On March 3, 1999, the
Company received a letter from Sir Christopher which restated TI Group's
position that it was unable to proceed with the transaction based on the
foregoing. During March 1999 Mr. Bauchiero met or talked by telephone with Sir
Christopher on numerous occasions to resume discussions regarding a business
combination transaction.
After further review of the Company's financial information and further due
diligence, Sir Christopher and Mr. Laule wrote a letter to Mr. Bauchiero on
March 19, 1999, informing Mr. Bauchiero that TI Group was not prepared to
proceed at a price which would likely be attractive to the Company.
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On March 22, 1999, Sir Christopher, Mr. Laule and Mr. Bauchiero met to
further discuss the possibility of a business combination. On March 23, 1999,
Sir Christopher wrote a letter to Mr. Bauchiero expressing TI Group's desire
to structure a transaction acceptable to both parties and made a conditional
offer to purchase the assets of the fuel delivery systems business from the
Company. The Company determined that this conditional offer was not in the
best interests of its stockholders. After further discussions internally and
with Warburg Dillon Read LLC, and after receiving, among other things,
assurances from Mr. Bauchiero regarding the ability to obtain the desired
consents from the Company's joint venture partners, on April 5, 1999, TI Group
made a formal offer to purchase the Company in a letter to Mr. Bauchiero from
Sir Christopher.
April 5, 1999
Mr. Frank Bauchiero
Walbro Corporation
1227 Centre Road
Auburn Hills, Michigan 48326
Dear Mr. Bauchiero:
TI Group plc ("TI") is pleased to submit this offer to
Walbro's Board of Directors to acquire Walbro Corporation
("Walbro" or the "Company") in a transaction in which a wholly
owned subsidiary of TI will make a cash tender offer for all
the outstanding common stock of the Company at $20 per share
in cash (the "Consideration"), to be followed by a merger in
which all remaining shares of common stock will be converted
into the right to receive the Consideration. This offer
extends to all options validly exercisable prior to expiration
of the offer and is based on the currently outstanding number
of common shares of approximately 8.7 million and 0.8 million
shares underlying existing options; the total consideration
will not be increased to take into account any further shares
or rights to shares that may be issued prior to completion.
A mark-up of the draft Agreement and Plan of Merger (the
"Agreement") indicating TI's proposed changes will be sent
tomorrow by courier. Subject to finalization of the disclosure
letter and any consequent required amendments to the
Agreement, TI would be prepared to sign the Agreement as
submitted. Our offer is not subject to any financing
contingency and is capable of being met from existing cash
resources and committed credit facilities.
Entering into the Agreement will be conditional upon TI
accomplishing the following three objectives which we have
discussed and which should be achievable, under the direction
of Bill Laule and you, in a two week period beginning on April
8:
1. Information must be readily available for review by TI's
senior management covering the key contacts, including
price and cost information, to confirm the profit and cash
flow projections of Walbro's businesses. It is important we
review these issues in face-to-face meetings between the
senior management of Walbro and TI in Detroit and Europe as
needed. Our team is prepared to begin these meetings on
April 8, and continue through to April 16 to cover all
issues if necessary. At least one representative of our
team would like to visit your plants in Cass City and Caro,
Michigan during this two-week period.
2. Our second objective requires the prior receipt of
irrevocable written consents satisfactory to TI from
Walbro's principal joint venture partners to TI's
acquisition of Walbro, and confirmation that Walbro's
current ownership position in, and rights under, its
material joint ventures will be unaffected by the
acquisition. Such consents, or contract revisions if
required, will also need to permit TI to integrate
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the combined fuel systems businesses of Bundy and Walbro in
order to derive the full benefits of the combination of the
businesses and to meet the needs of our customers on a
global basis. We would expect to meet as soon as possible
with the joint venture partners and the management of the
joint ventures in Detroit, Italy and Japan to assure
ourselves of this. Our team is prepared to proceed as soon
as your office can schedule these meetings.
3. It is important that we reach agreement on the continuity
of Walbro's management, and assure ourselves that key
members of your management will remain with the business on
terms acceptable to all parties.
It is our expectation that TI will be granted a reasonable
period of exclusivity to complete the process. We have assumed
that you will approve going forward with this process on
Wednesday, April 7. This offer will expire at close of
business on April 8 Eastern Daylight Time unless exclusivity
is received. During such a period of exclusivity we would
expect to complete these objectives referenced above and
resolve any other outstanding issues. We believe that this
should be achievable in a two week period if our respective
teams work together to achieve this goal.
Although this offer is made with the full knowledge of the
Board of Directors of TI, entering into the definitive
Agreement will be subject to the final approval of TI's Board
at its meeting on April 21. The target date for a public
announcement would be around April 28. The offer is also
contingent upon the expiration of certain waiting periods
under the Hart Scott Rodino Antitrust Improvements Act of
1976, European anti-trust authority approval, the approval of
any other necessary governmental authorities, satisfaction of
the Minimum Condition as defined in the Agreement and other
customary conditions as set out therein. For planning
purposes, we would target completion around the end of May.
This offer is submitted to you on a confidential basis and may
not be shared by the Company or its advisors with any other
party without our prior written consent. The offer will
terminate in the event of unauthorized disclosure by you or
your advisors. By accepting this offer, Walbro also agrees to
confer with TI prior to any public announcement concerning the
fact or circumstances of our discussions.
We and our advisors are prepared to meet with you and your
advisors immediately to move towards expeditious completion of
definitive documentation for this transaction.
Key contacts are:
[Omitted]
To ensure the due diligence process is a success and there are
no communication problems, Bill Laule will base himself in
Detroit as of Thursday, April 8, and will be based there until
April 15/16. This will enable Bill to start discussions with
you and jointly lead this process with you and resolve any
problems in "real time". To enable this to be achieved we need
to be given the "go ahead" by Wednesday, April 7. Bill will
provisionally plan a working supper with you on the 8th in
Detroit and will telephone you to confirm on Wednesday, the
7th.
We very much appreciate the courtesies and cooperation we have
received from the Company during the course of our review and
remain enthusiastic about the opportunities offered by this
transaction. We are convinced that the combination of Walbro
and TI will provide the opportunity to accelerate Walbro's
growth, provide significant career
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opportunities for your management and employees, and create a
world class fuel systems business to serve our global
customers. We look forward to hearing from you and to working
with you towards a rapid and successful conclusion of this
transaction.
Yours sincerely
Sir Christopher Lewinton
On April 7, 1999, at the direction of the Company, representatives of
Salomon Smith Barney contacted representatives of Warburg Dillon Read to
indicate that the Company wished to proceed with TI Group's proposal and to
inquire what additional information regarding the Company TI Group required.
On April 13 and 14, 1999, representatives of TI Group met or had telephonic
conferences with representatives of the Company to conduct further due
diligence, to discuss the terms of the transactions to be proposed to their
respective boards of directors and to negotiate definitive transaction
documents. Contacts between the representatives of TI Group and the Company,
and certain of the Company's joint venture partners continued over the next
two weeks.
On April 19, 1999 the Board of Directors of the Company met in Chicago to
discuss the current state of negotiations with the TI Group. At this meeting,
Salomon Smith Barney presented an overview of the automotive OEM component
industry. Also at this meeting, Katten Muchin & Zavis, counsel to the Company,
presented a draft of the Merger Agreement, discussed its terms, conditions and
timing and discussed the issues for which no agreement had been reached with
TI Group. Representatives from Katten Muchin & Zavis also advised the Board
members of their fiduciary obligations in considering a potential business
combination transaction. Subsequent to these presentations, the Board
discussed the proposed transaction and certain open issues. After such
discussion, the Board directed senior management to continue negotiations with
TI Group and to attempt to resolve the remaining open issues. On Wednesday,
April 21, TI Group's Board met and approved in principle the transaction,
subject to the completion of the negotiation of an acceptable definitive
merger agreement, receipt of satisfactory consents from certain of the
Company's joint venture partners and final approval from a committee of TI
Group's Board consisting of Sir Christopher, Mr. Laule and Martin D. Angle.
On April 24, 1999 the parties and their respective advisors met in London,
England to negotiate the terms of the Merger Agreement, which negotiations
continued until the early morning on April 25, 1999.
On April 26, 1999, the Board of Directors of the Company held a telephonic
meeting, during which Mr. Bauchiero briefed the Board on the current status of
the negotiations and the Board held a discussion regarding certain unresolved
issues. Subsequent to this telephonic Board meeting, the Company and TI Group
and their respective representatives held a conference call to discuss certain
unresolved issues, authorization of the Merger Agreement and the transactions
contemplated thereby, and the timing of the announcement of the Merger.
During the early evening of April 27, 1999, the Board of Directors of the
Company held a telephonic meeting during which Mr. Bauchiero briefed the Board
on what had taken place since the previous meeting. At this meeting, Salomon
Smith Barney made a financial presentation and delivered to the Board its
opinion as to the fairness, from a financial point of view, of the $20.00 per
Share cash consideration to be received in the Offer and the Merger by holders
of Shares (other than TI Group and its affiliates). The Company's counsel
reviewed the terms of the Merger Agreement and reminded the Board members of
their fiduciary duties as previously described at the meeting held on April
19, 1999. The Board asked senior management and the advisers a number of
questions regarding the terms, conditions and timing of the proposed
transaction. After a discussion, the Board of Directors unanimously approved,
among other things, the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement was then executed and publicly announced on April 28,
1999, pursuant to a press release, a copy of which is attached hereto as
Exhibit 18.
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On May 4, 1999, the Offeror commenced the Offer.
(b)(ii) Reasons for the Recommendations
Prior to approving the Merger Agreement and the transactions contemplated
thereby, the Board held meetings beginning in March 1999, and continuing on
April 18, 19, 26 and 27, 1999. At its meeting on April 19, 1999, the Board
considered presentations from, and reviewed the terms and conditions of the
Merger Agreement and the Transaction with senior executive officers of the
Company, and the Company's legal and financial advisors. At this meeting the
Board directed Mr. Bauchiero to continue negotiations with TI Group and,
subject to certain conditions, to attempt to finalize the Merger. At the April
27, 1999 meeting, the Board received final reports from senior management and
its legal and financial advisors, and approved the Merger Agreement. In
reaching the conclusions set forth in paragraph (a) above, the Board of
Directors of the Company considered a number of factors including, without
limitation, the following:
(A) The consideration to be paid in the Offer and the Merger, and in
particular the fact that the $20.00 per Share to be received by the
Company's shareholders in the Offer and the Merger represents an
approximate 111% premium over the average closing market price of $9.47 per
Share for the period from March 26, 1999 through April 26, 1999 (the last
trading day prior to the Board of Directors meeting referred to in
paragraph (a) of this Item 4); and an approximate 70% premium over the
closing market price of $11.75 per Share on April 26, 1999 (the day before
the Merger Agreement was executed);
(B) The Company's financial condition, results of operations, assets,
liabilities, liquidity, business and prospects and industry, economic and
market conditions, including the inherent risks and uncertainties in the
Company's lines of business in each case on a historical, current and
prospective basis;
(C) The fact that the Company had seriously considered pursuing a
transaction with TI Group because it believed that the two companies'
strengths were complementary and that the combination of the two companies
would permit the achievement of certain economies of scale and other
synergies. The Board of Directors ultimately determined, after
consideration of views of senior management, that in its view the
combination of the two companies presented the best available means of
achieving the greatest value for holders of its Shares;
(D) TI Group's intent that after the Merger, the Company would be run as
part of the combined TI Automotive Systems Group, an independent business
unit of TI Group;
(E) Management's analysis of the future prospects of the Company on a
stand alone basis;
(F) The historical and recent market prices for the Shares and potential
future share prices;
(G) The process undertaken by the Company to solicit third party
indications of interest in the possible acquisition of, or business
combination with, the Company;
(H) The opinion of Salomon Smith Barney dated April 27, 1999 to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the $20.00 per Share cash consideration to be
received in the Offer and the Merger by holders of Shares (other than TI
Group and its affiliates) was fair, from a financial point of view, to such
holders. The full text of Salomon Smith Barney's written opinion dated
April 27, 1999, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by Salomon Smith Barney, is
attached hereto as Annex B and is incorporated herein by reference. Salomon
Smith Barney's opinion is directed only to the fairness, from a financial
point of view, of the $20.00 per Share cash consideration to be received in
the Offer and the Merger by holders of Shares (other than TI Group and its
affiliates) and is not intended to constitute, and does not constitute, a
recommendation as to whether any shareholder should tender Shares pursuant
to the Offer. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN
ITS ENTIRETY;
(I) The availability of appraisal rights under Section 262 of the DGCL;
(J) The terms and conditions of the Merger Agreement, including
provisions that (a) although prohibiting the Company and its
representatives from soliciting or initiating submissions of Acquisition
15
<PAGE>
Proposals (as defined in the Merger Agreement), permit the Company and its
representatives to furnish information to, negotiate and otherwise engage
in discussions with, any third party in response to unsolicited proposals,
to the extent the Board reasonably determines in good faith, after
consultation with its outside independent counsel and a nationally
recognized investment bank, that such unsolicited proposal could reasonably
lead to a Superior Proposal (as defined in the Merger Agreement) or that
the failure to do so could violate the fiduciary obligations of the Board,
and (b) permit the Company to terminate the Merger Agreement to accept an
alternative Acquisition Proposal, subject to payment of a termination fee
of $11,000,000 plus reasonable expenses of TI Group and Offeror not to
exceed $2,000,000;
(K) The proposed structure of the Offer and the Merger involving an
immediate cash tender offer followed by a merger for the same consideration
and the fact that there is no financing or due diligence contingency to the
Offer. In this connection, the Board also considered the likelihood that
the proposed acquisition would be consummated, including the likelihood of
satisfaction of the conditions to the Offer and the Merger contained in the
Merger Agreement, and the risks to the Company if the acquisition were not
consummated; and
(L) The recommendation of the Company's management with respect to the
proposed transaction.
The Board evaluated the factors listed above in light of the directors'
knowledge of the business and operations of the Company and in their business
judgment. In view of the variety of factors considered by the Board in
connection with its evaluation of the Merger Agreement and the Transaction,
the Board did not find it practicable to and did not quantify or otherwise
assign relative weight to the specific factors considered in reaching its
determination. In addition, individual members of the Board may have given
different weights to different factors in making their individual
determinations.
Item 5. Persons Retained, Employed or to be Compensated.
The Company has retained Salomon Smith Barney to act as its financial
advisor in connection with the Offer and the Merger. Pursuant to the terms of
Salomon Smith Barney's engagement, the Company has agreed to pay Salomon Smith
Barney an aggregate financial advisory fee based on a percentage of the
aggregate consideration, including liabilities assumed, payable in the Offer
and the Merger. It is currently estimated that the aggregate financial
advisory fee payable to Salomon Smith Barney will be approximately $6 million.
The Company also has agreed to reimburse Salomon Smith Barney for travel and
other out-of-pocket expenses, including the reasonable fees and disbursements
of its legal counsel, and to indemnify Salomon Smith Barney and related
parties against certain liabilities, including liabilities under the federal
securities laws, arising out of Salomon Smith Barney's engagement. Salomon
Smith Barney has in the past provided investment banking services to the
Company unrelated to the Offer and the Merger, for which services Salomon
Smith Barney has received compensation. In the ordinary course of business,
Salomon Smith Barney and its affiliates (including Citigroup Inc. and its
affiliates) may actively trade or hold the securities of the Company and TI
Group 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.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to security holders of the Company on its behalf concerning
the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) To the best of the Company's knowledge, other than the transactions
disclosed in this Item 6, no transactions in Shares have been effected during
the past 60 days by the Company or by an executive officer, director,
affiliate or subsidiary of the Company.
In the past 60 days options were issued to Messrs. Hittler, Whitehead,
Shope, Walpole and DeLong. On March 10, 1999, the Company granted 25,000
options to Daniel L. Hittler at a share exercise price of $9.75; 25,000
options to Richard Whitehead at a share exercise price of $9.75; 25,000
options to Mike Shope at a share
16
<PAGE>
exercise price of $9.75; 15,000 options to Robert H. Walpole at a share
exercise price of $9.75; and 3,500 options to Thomas J. DeJong at a share
exercise price of $9.75 and 5,000 options to Thomas J. DeJong at a share
exercise price of $8.50. All of the aforementioned option grants were made
under the Company's Equity Based Long-Term Incentive Plan.
(b) To the best of the Company's knowledge, all of its executive officers
and directors who own shares intend to tender pursuant to the Offer all Shares
which are owned beneficially or of record by such persons.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as described under Item 3(b), the Company is not presently
engaged in any negotiation in response to the Offer which relates to or would
result in: (i) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 4, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred
to in paragraph (a) of this Item 7.
Item 8. Additional Information to be Furnished.
Section 203 As a Delaware corporation, the Company is subject to Section
203 ("Section 203") of the DGCL. Section 203 would prevent an "Interested
Shareholder" (generally defined as a person beneficially owning 15% or more of
a corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Shareholder unless: (i) before such
person became an Interested Shareholder, the board of directors of the
corporation approved the transaction in which the Interested Shareholder
became an Interested Shareholder or approved the Business Combination, (ii)
upon consummation of the transaction which resulted in the Interested
Shareholder becoming an Interested Shareholder, the Interested Shareholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding for purposes of determining the
number of shares of outstanding stock held by directors who are also officers
and by employee stock ownership plans that do not allow plan participants to
determine confidentially whether to tender shares), or (iii) following the
transaction in which such person became an Interested Shareholder, the
Business Combination is (x) approved by the board of directors of the
corporation and (y) authorized at a meeting of shareholders by the affirmative
vote of the holders of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Shareholder. In accordance with the
provisions of the Company's Restated Certificate of Incorporation and Section
203, the Board of Directors of the Company and a disinterested Committee of
the Board of Directors has approved the Merger Agreement and the Offeror's
acquisition of Shares pursuant to the Offer and the Merger and the
transactions contemplated thereby and, therefore, the restrictions of Section
203 are inapplicable to the Merger and the related transactions.
United States Antitrust Compliance
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Offeror pursuant to the Offer is
subject to such requirements.
Pursuant to the requirements of the HSR Act, TI Group filed the required
Notification and Report Forms (the "Forms") with the Antitrust Division and
the FTC on April 30, 1999, and the Company filed the Forms with such agencies
on April 30, 1999. The statutory waiting period applicable to the purchase of
Shares pursuant
17
<PAGE>
to the Offer is to expire at 11:59 P.M., New York City time, on Saturday, May
15, 1999. However, prior to such date, the Antitrust Division or the FTC may
extend the waiting periods by requesting additional information or documentary
material relevant to the acquisition. If such a request is made, the waiting
period will be extended until 11:59 P.M., New York City time, on the tenth day
after substantial compliance by the Offeror with such request. Thereafter,
such waiting periods can be extended only by court order. A request is being
made pursuant to the HSR Act for early termination of the applicable waiting
period. There can be no assurance, however, that the waiting period will be
terminated early. The Merger Agreement provides that, if by the expiration of
the Offer, the applicable waiting period under the HSR Act shall not have
expired or been terminated, Offeror shall, subject to the terms of the Merger
Agreement, extend the Offer from time to time until such waiting period has
expired or been terminated.
The Antitrust Division and the FTC frequently scrutinize the legality of
transactions under U.S. antitrust laws. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC
could, notwithstanding termination of the waiting period, take such action
under U.S. antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of the Offeror or the Company. Private parties may also
bring legal actions under the antitrust laws. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
European Antitrust Approval. Under Council Regulation (EEC) No. 4064/89,
the Offer and the Merger may not be consummated until the European Commission
has granted its approval thereof. TI Group expects to file the requisite
notification with respect to the Offer and the Merger with the European
Commission on May 7, 1999. Approval will be deemed granted upon it being
established, in terms satisfactory to Offeror, that it is not the intention of
the European Commission to initiate proceedings under Article 6(1)(c) of
Council Regulation (EEC) 4064/89 or to make a referral to a competent
authority under Article 9(1) thereof in connection with the proposed
acquisition of the Company by Offeror or any matter arising therefrom.
Exon-Florio. Under Section 721 of Title VII of the United States Defense
Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and
Competitiveness Act of 1988 ("Exon-Florio"), the President of the United
States is authorized to prohibit or suspend acquisitions, mergers or takeovers
by foreign persons of persons engaged in interstate commerce in the United
States if the President determines, after investigation, that such foreign
persons in exercising control of such acquired persons might take action that
threatens to impair the national security of the United States and that other
provisions of existing law do not provide adequate authority to protect
national security. Pursuant to Exon-Florio, notice of an acquisition by a
foreign person is to be made to the Committee on Foreign Investment in the
United States ("CFIUS"), which is comprised of representatives of the
Departments of the Treasury, State, Commerce, Defense and Justice, the Office
of Management and Budget, the United States Trade Representative's Office and
the Council of Economic Advisors and which has been selected by the President
to administer Exon-Florio, either voluntarily by the parties to such proposed
acquisition, merger or takeover or by any member of CFIUS.
A determination that an investigation is called for must be made within 30
days after notification of a proposed acquisition, merger or takeover is first
filed with CFIUS. Any such investigation must be completed within 45 days of
such determination. Any decision by the President to take action must be
announced within 15 days of the completion of the investigation. Although
Exon-Florio does not require the filing of a notification, nor does it
prohibit the consummation of an acquisition, merger or takeover if
notification is not made, such an acquisition, merger or takeover thereafter
remains indefinitely subject to divestment should the President subsequently
determine that the national security of the United States has been threatened
or impaired. The Company has been informed by Offeror that Offeror does not
believe that the Offer or the Merger threatens to impair the national security
of the United States and that Offeror does not intend to notify CFIUS of the
proposed transaction.
18
<PAGE>
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
1 Agreement and Plan of Merger dated as of April 27, 1999
among TI Group plc, TI Automotive Systems, Inc. and Walbro
Corporation.
2 First Amendment to the Agreement and Plan of Merger dated
as of May 3, 1999 among TI Group plc, TI Automotive
Systems, Inc. and Walbro Corporation.
3 Employment Agreement between Walbro Corporation and Daniel
L. Hittler, dated August 16, 1996, incorporated by
reference to Exhibit 10.23 to the 10-K filed on March 28,
1997.
4 Employment Agreement between Walbro Corporation and
Michael Shope, dated August 16, 1996, incorporated by
reference to Exhibit 10.25 to the 10-K filed on March 28,
1997.
5 Employment Agreement between Walbro Corporation and R.H.
Whitehead III, dated August 16, 1996, incorporated by
reference to Exhibit 10.29 to the 10-K filed on March 28,
1997.
6 Employment Agreement between Walbro Corporation and Robert
H. Walpole, incorporated by reference to Exhibit 10.27 to
the 10-K filed on March 28, 1997.
7 Amended and Restated Employment Agreement between Walbro
Corporation and Frank E. Bauchiero, effective April 17,
1998, incorporated by reference to Exhibit 10.22 to the
10-K filed on April 1, 1999.
8 Termination and Change of Control Agreement between Walbro
Corporation and Daniel L. Hittler, dated August 16, 1996,
incorporated by reference to Exhibit 10.24 to the 10-K
filed on March 28, 1997.
9 Amended and Restated Termination and Change of Control
Agreement between Walbro Corporation and Frank E.
Bauchiero, dated April 17, 1998, incorporated by reference
to Exhibit 10.23 to the 10-K filed on April 1, 1999.
10 Termination and Change of Control Agreement between Walbro
Corporation and Michael Shope, dated August 16, 1996,
incorporated by reference to Exhibit 10.26 to the 10-K
filed on March 28, 1997.
11 Termination and Change of Control Agreement between Walbro
Corporation and R.H. Whitehead, III, dated August 16,
1996, incorporated by reference to Exhibit 10.30 to the
10-K filed on March 28, 1997.
12 Termination and Change of Control Agreement between Walbro
Corporation and Robert H. Walpole, dated August 16, 1996,
incorporated by reference to Exhibit 10.28 to the 10-K
filed on March 28, 1997.
13 First Amendment to the Amended and Restated Termination
and Change of Control Agreement for Frank E. Bauchiero.
14 Model Amendment to the Termination and Change of Control
Agreement (Level I), covering Messrs. Leopold, Shope,
Hittler, Whitehead, Walpole and DeJong
15 Model Amendment to the Termination and Change of Control
Agreement (Level II) covering Messrs. Todd and Masterman
16 Amended and Restated Walbro Corporation Equity Based Long-
Term Incentive Plan, effective as of June 20, 1994,
incorporated by reference to Exhibit 10.2 to the 10-K
filed on April 1, 1999.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
17 Walbro Corporation Broad Based Long-Term Incentive Plan
incorporated by reference to Exhibit 10.33 to the
Company's Registration Statement on Form S-4 filed on
February 5, 1998.
18 Press Release of Walbro Corporation, issued April 28,
1999.
19 Amendment No. 1 to Rights Agreement, dated as of April 27,
1999, between Walbro Corporation and Harris Trust and
Savings Bank.
20 Amendment to the Amended and Restated Walbro Corporation
Equity Based Long-Term Incentive Plan, incorporated by
reference to the Company's Proxy Statement, filed on
March 23, 1999.
</TABLE>
20
<PAGE>
SIGNATURE
After reasonable 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.
Walbro Corporation
/s/ Frank E. Bauchiero
By: _________________________________
Name: Frank E. Bauchiero
Title:Chief Executive Officer and
President
Dated: May 4, 1999
21
<PAGE>
ANNEX A
Information Statement Pursuant to Section 14(f)
of the Securities Exchange Act of 1934
And Rule 14f-1 Thereunder
General
This Information Statement is being mailed on or about May 4, 1999 as part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Walbro Corporation (the "Company"). Capitalized terms used herein
and not otherwise defined shall have the meaning set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by TI Group (the "TI Group Designees")
to the Company's Board of Directors (the "Board"). The Merger Agreement
requires the Company, following the Offeror's purchase of Shares pursuant to
the Offer and upon request of Offeror, to take certain action to cause the TI
Group Designees to be elected to the Board. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 promulgated thereunder. You are urged to
read this Information Statement carefully. You are not, however, required to
take any action in connection with this Information Statement.
The Offer commenced on May 4, 1999 and is scheduled to expire at 12:00
midnight New York City time, on June 10, 1999 unless extended upon the terms
set forth in the Offer to Purchase.
The information contained in this Information Statement concerning TI Group
and Offeror has been furnished to the Company by TI Group. The Company assumes
no responsibility for the accuracy or completeness of such information. To the
best knowledge of the Company, none of the TI Group Designees beneficially
owns any equity securities in the Company.
DESIGNATION OF DIRECTORS
The Merger Agreement provides that, promptly upon the purchase of and
payment for any Company Common Stock by TI Group or any of its subsidiaries
which represents at least a majority of the outstanding Company Common Stock
(on a fully diluted basis), TI Group will be entitled to designate such number
of TI Group Designees rounded up to the next whole number, on the Board as is
equal to the product of the total number of directors on the Board (giving
effect to the directors designated by TI Group) multiplied by the percentage
that the number of Shares so accepted for payment bears to the total number of
Shares then outstanding. The Company has agreed, upon the request of TI Group,
to increase promptly the size of the Board or secure the resignations of such
number of its incumbent directors, or both, as is necessary to enable the TI
Group Designees to be so elected to the Board and shall take all actions
available to the Company to cause the TI Group Designees to be so elected. The
Company has also agreed upon request of TI Group to cause directors designated
by TI Group to constitute at least the same percentage (rounded up to the next
whole number) as such directors represent on the Board on each committee of
the Board. TI Group is required to use its best efforts to cause the Company
to have at least one independent director until the Effective Time, including,
but not limited to, retaining one of the Company's current directors.
It is expected that the TI Group Designees will assume office promptly
following the purchase by TI Group of a majority of the outstanding Shares on
a fully diluted basis pursuant to the terms of the Offer, which purchase
cannot be earlier than June 10, 1999, and that, upon assuming office, the TI
Group Designees together with the continuing directors of the Company will
thereafter constitute the entire Board.
A-1
<PAGE>
TI Group Designees
As of the date of this Information Statement, TI Group has not determined
who will be the TI Group Designees. However, the TI Group Designees will be
selected from among the following persons. Unless otherwise indicated, each
person's business address is 50 Curzon Street, London WIY7PN, England. All
persons listed below are citizens of the United Kingdom unless otherwise
indicated.
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment Material
Positions Held During
Name and Age the Past Five Years
- ------------ ----------------------------
<S> <C>
William J. Laule(1)..... Member of the Board of Directors of TI Group plc since 1995;
Age: 50 Chief Executive of TI Group plc since 1998; previously held
Chief Executive position at Bundy International from 1994 to
1998; President, Bundy North America from 1993 to 1994;
Member, Chairman's Committee; Director of National
Association of Manufacturers of the USA.
T. Allan Welsh(1)....... Director of TI Automotive Systems, Inc.; Member of the Board
Age: 47 of Directors of TI Group and Chief Executive, Bundy, since
1999; Formerly a Director of T&N plc and former Chief
Executive Officer of T&N Piston Products Group and T&N
Bearings Group.
Ken Templeton........... Deputy Group Finance Director, TI Group plc sma 1998; Deputy
Age: 59 Chief Executive, Bundy International from 1997 to 1998;
Finance Director and Chief of Staff, Bundy International
from 1992 to 1997.
Ralph Kessler(1)(2)..... Secretary of TI Automotive Systems, Inc. since April 1999;
Age: 55 Senior Vice President of Legal Affairs of TI Group Inc.
since January 1998; Vice President of Legal Affairs of TI
Group Inc. from June 1988 to December 1997; Secretary of TI
Group Inc. since June 1988.
David P. Lillycrop...... Member of the Board of Directors of TI Group plc since 1998;
Age: 42 General Counsel since 1997 and Group Secretary since 1991;
Chairman, TI Pension Trustee Ltd.; Barrister.
Daniel Cook(1).......... Commercial Director, Bundy Automotive since 1998; Vice
Age: 42 President; Business Events, Bundy North America, from 1996
to 1997; Director, Ford Business Unit Bundy North America
from 1994 to 1996; Director, Planning, Bundy NA from 1993 to
1994.
Guy Norris.............. Vice President of TI Automotive Systems, Inc. since 1999;
Age: 52 Deputy Group Secretary of TI Group plc since 1998;
Consultant of Foster, Baxter & Cookse from 1997 to 1998;
Group Secretary of Lucas Varity plc from 1996 to 1997;
Secretary, Group Lawyer of Lucas Industries plc from 1994 to
1996.
Nicholas Moore.......... Treasurer of TI Automotive Systems, Inc. since April 1999;
Age: 48 Group Treasurer of TI Group plc since 1990.
</TABLE>
- --------
(1) U.S. Citizen.
(2) Mr. Kessler's business address is 375 Park Avenue, New York, New York
10152.
Certain Information Concerning the Company
The shares of Common Stock constitute the only class of voting securities
of the Company. As of the close of business on April 27, 1999, there were
8,688,294 shares of Common Stock outstanding. Each share of Common Stock
entitles its record holder to one vote. Stockholders of the Company do not
have cumulative voting rights.
THE CURRENT MEMBERS OF THE BOARD AND EXECUTIVE OFFICERS OF THE COMPANY:
<TABLE>
<CAPTION>
Served as
Director
Name Age Position with Company Since
- ---- --- --------------------- ---------
<S> <C> <C> <C>
William T. Bacon (1)(2). 76 Director 1972
Frank E. Bauchiero
(2)(3)................. 64 President, Chief Executive Officer and Director 1990
J. Dwane Baumgardner
(4).................... 58 Director 1997
Daniel L. Hittler....... 63 Chief Administrative Officer and Secretary
Vernon E. Oeschle
(3)(4)................. 56 Director 1994
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Served as
Director
Name Age Position with Company Since
- ---- --- --------------------- ---------
<S> <C> <C> <C>
Michael A. Shope.......... 54 Chief Financial Officer
Robert D. Tuttle (1)(3)... 73 Director 1981
John E. Utley (1)(2)(4)... 58 Chairman of the Board of Directors 1993
Robert H. Walpole......... 59 Vice President of Planning and Director 1983
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Executive/Directors Committee.
(3) Member of Human Resources Planning/Committee.
(4) Member of Audit Committee.
Mr. Bacon has been an Associate at ABN AMRO since 1994. ABN AMRO is a
banking services corporation with its headquarters in The Netherlands. Mr.
Bacon was an Honorary Director of Stifel Financial Corporation from 1984
through 1994. Stifel Financial is an investment banking services corporation.
Prior thereto, Mr. Bacon was Managing Partner of Bacon Whipple & Co., Inc.
Bacon Whipple was an investment banking services corporation which merged with
Stifel Financial.
Mr. Bauchiero has been the Company's Chief Executive Officer since April 17,
1998, President since August 1996 and Chief Operating Officer from August 1996
to April 1998. Previously, he was the President, Industrial Group, Dana
Corporation North American Operations, Dana Corporation from 1989 to 1996; and
Dana Group Vice-President from 1987 through 1990. Dana Corporation manufactures
automotive product systems, mobile off-highway equipment and industrial
equipment. Mr. Bauchiero is also a director of Regal Beloit Corp. and Rockford
Products Corp.
Mr. Baumgardner has been the Chairman, President and Chief Executive Officer
of Donnelley Corporation since 1986. Donnelley Corporation is a manufacturer of
automotive vision systems, modular window systems and coated glass products.
From 1982 to 1986, he was the Chief Executive Officer, President and Chief
Operating Officer of Donnelley Corporation, and prior thereto he was the Vice
President, Technology of Donnelley Corporation. Mr. Baumgardner is also a
director of SL Industries, Inc. and Wescast Industries.
Mr. Hittler has been the Secretary of the Company since 1993 and the Chief
Administrative Officer of the Company since 1994. He was the Director of
Administration from 1992 to 1993.
Mr. Oeschle has been the President, Chief Executive Officer and Director of
Quanex Corporation since 1996. Previously, he was the Chief Operating Officer
of Quanex Corporation from 1993 through 1995. Quanex is a manufacturer of
specialty steel and aluminum products. Mr. Oeschle has been a Director of
Precision Castparts Corp. since 1996. From 1990 to 1992, he was Chief Executive
Officer of Allied Signal Automotive and prior thereto Group Executive,
Automotive and Truck for Dana Corporation and President of Hayes-Dana, Dana's
Canadian subsidiary.
Mr. Shope has been the Chief Financial Officer of the Company since December
1993 and Treasurer of the Company since April 1994. He was Treasurer of Libbey-
Owens-Ford Co., a manufacturer of glass for automotive and industrial
applications, from 1986 to 1993.
Mr. Tuttle is a Director of Woodhead Industries, Inc. From 1980 to 1991, he
was Chairman, CEO and Director of SPX Corporation, which produces specialty
tools and equipment and distributes automotive components.
Mr. Utley has been the Deputy President and Senior Vice President, Sales and
Marketing of Lucas Varity Automotive since 1998, and Senior Vice President of
Lucas Varity PLC from 1996 to 1998. Previously he was Senior Vice President of
Varity Corporation from 1994 to 1996. Mr. Utley was Chairman of the Board of
Kelsey-Hayes Company from 1992 to 1996 and Vice Chairman and Vice President
from 1989 to 1992. Lucas Varity Automotive is a supplier of automotive braking
systems, electrical systems and diesel systems.
Mr. Walpole has been the Vice President of Planning since October 1998.
Previously he was President of the Asia Pacific Region from January 1997 to
October 1998. From 1991 to 1996, he was President of Walbro Engine Management
Corporation. Mr. Walpole has been a Vice President of the Company since 1983.
A-3
<PAGE>
Director Compensation
Employee-officers who are also Directors do not receive compensation for
their service as Directors. The non-employee Directors of the Company receive
an attendance fee of $1,200 for each Directors' meeting attended, $750 for
each committee meeting attended and $350 for each telephone meeting of the
full Board or a committee. Additionally, non-employee Directors of the Company
receive an annual retainer of $20,000.
In addition, effective April 1, 1998, John E. Utley was awarded a
consulting contract related to his duties as Chairman of the Board. The
contract provides payment of $30,000 per year for services not to exceed 25
hours per month. Mr. Utley was elected Chairman of the Board effective May 20,
1998.
Meetings
During the year ended December 31, 1998, the Board of Directors held eleven
formal meetings. Each of the Company's current directors attended at least 75%
of the aggregate of the total number of meetings held during 1998 by the Board
and the total number of meetings held during 1998 by Committees on which he
served.
Committees of the Board of Directors
The Company has an Audit Committee, a Compensation Committee, an
Executive/Directors Committee and a Human Resource Planning Committee.
The Audit Committee met twice in 1998 and recommended to the Board the
selection of the Company's independent public accountants and reviewed the
plan, scope and results of such independent public accountants' audit. The
primary purpose and function of the Audit Committee is to provide an
opportunity for direct communication with the Board by the Company's
independent public accountants.
The Compensation Committee met four times in 1998. The Compensation
Committee awards stock options under the Company's stock option plans,
determines the compensation of the Company's executive officers and reviews,
and sets the policies for, the compensation payable to approximately the next
25 most highly compensated employees of the Company.
The Executive/Directors Committee of the Board did not meet in 1998. The
Executive/Directors Committee is vested with the powers of the Board, except
those powers specifically reserved by Delaware law to the full Board. The
Executive/Directors Committee exists to give the Board the flexibility to make
decisions during intervals between regular meetings of the full Board. In
addition, the Executive/Directors Committee (i) conducts a continuing study of
the size, structure, and composition of the Board; (ii) seeks out and
interviews possible candidates and reports its recommendations to the Board;
(iii) periodically reviews the Board's tenure policy; and (iv) determines the
criteria for selection and retention of Board members. Although the Committee
has its own procedures for selecting nominees for Board membership, it will
give due consideration to nominees recommended by stockholders. A stockholder
desiring to recommend a person for nomination to the Board should submit a
complete resume of the proposed nominee's qualifications and background
together with a statement setting forth the reasons why such person should be
considered for membership. Such information should be addressed to the
Secretary of the Company.
The Human Resources Planning Committee of the Board met once in 1998. The
Human Resource Planning Committee reviews the short and long range human
resource needs of the Company and advises management of its assessment. Also,
the Human Resource Planning Committee evaluates strategic human resource needs
including senior executive succession.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires the Company's officers, directors
and persons who own greater than 10% of a registered class of the Company's
equity securities to file reports of ownership and changes in
A-4
<PAGE>
ownership with the Commission. Based solely on a review of the forms it has
received and on written representations from certain reporting persons that no
such forms were required for them, the Company believes that, except as set
forth below, during 1998 all Section 16 filing requirements applicable to its
officers, directors and 10% beneficial owners were complied with by such
persons.
Dr. J. Dwane Baumgardner did not timely file on a Form 3 during 1997;
however, the information required was subsequently filed in 1998 on a Form 5.
EXECUTIVE COMPENSATION
The table below provides information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal
years ended December 31, 1998, 1997 and 1996 of the following persons: (i) the
Chief Executive Officer at December 31, 1998, (ii) the Company's former Chief
Executive Officer who retired effective April 17, 1998, and (iii) the four
other most highly compensated (based upon combined salary and bonus) executive
officers of the Company (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ ----------------------------
Other
Annual Long Term
Compen- Restricted Incentive Stock
Name and Salary Bonus sation Stock Payouts Options SAR Other
Principal Position Year ($) ($) ($) Awards ($) ($) (#) (#) ($)
------------------ ---- -------- ----- ------- ---------- --------- ------- --- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Frank E. Bauchiero...... 1998 428,125 160,000
Chief Executive Officer 1997 375,000 137,500 193,131(1)(2)
and President 1996 141,173(3) 180,000 19,607 4,500(1)
Lambert E. Althaver..... 1998 281,125(8) 51,562 11,080 60,000 9,600(1)
Former Chief 1997 450,000 1,862 9,000(1)
Executive Officer 1996 375,000 204,379 17,647 8,870(1)
Robert H. Walpole....... 1998 265,000 407,116(5) 29,349(1)(4)
Vice President 1997 265,000 386,338(1) 9,000(1)
1996 265,000 280,070(1) 30,000 9,717(1)
Richard H. Whitehead, 1998 200,000 42,000(6) 30,000
III.................... 1997 200,000 42,000(6) 21,220(1)(4)
Vice President 1996 200,000 42,000(6) 7,843 929(7)
Daniel L. Hittler....... 1998 160,000 742 16,000 11,189(1)(7)
Secretary and Chief 1997 160,000 9,150(1)
Administrative Officer 1996 150,000 5,882 8,325(1)(7)
Michael J. Shope........ 1998 165,000 16,000 13,921(1)(7)
Treasurer and Chief 1997 165,000 22,500 9,090(1)
Financial Officer 1996 150,000 27,000 3,529 10,035(1)
</TABLE>
- --------
(1) These amounts represent matching and retirement contributions made by the
Company pursuant to its salary savings plan, entitled the "Advantage
Plan."
(2) Includes imputed income for personal use of Company leased aircraft and
automobile.
(3) Salary for the period August 16, 1996 to December 31, 1996; executive
began employment on August 16, 1996.
(4) Includes reimbursed relocation expenses and imputed income for personal
use of Company leased automobile.
(5) First, second and third of four cash payments earned under the Company's
Engine Management Incentive Compensation Plan covering the period July 1,
1991 to June 30, 1996.
(6) $42,000 was paid in each 1998, 1997 and 1996, to adjust for cost of living
and expatriate status.
(7) Imputed income for personal use of Company leased automobile.
(8) Mr. Althaver retired effective April 17, 1998.
A-5
<PAGE>
Option Grants in 1998
The following table provides information on grants of stock options during
fiscal 1998 to the Named Officers. No stock appreciation rights were granted
to the Named Officers during fiscal 1998.
Option Grants in 1998
<TABLE>
<CAPTION>
Individual Grants Potential
--------------------- Realizable Value
Number of % of Total at Assumed Annual
Securities Options Rates of Stock
Underlying Granted to Appreciation for
Options Employees Exercise Option Terms (1)
Granted in 1998 Price Expiration -----------------
(#) (%) ($/SH) Date 5% ($) 10% ($)
---------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frank E. Bauchiero...... 60,000 33.5 13.25 2/18/08 564,719 1,473,222
100,000 9.25 8/25/08 657,063 1,714,127
Lambert E. Althaver..... 60,000 12.5 13.25 2/18/04 564,719 1,473,322
Robert H. Walpole....... 30,000 6.3 13.25 2/18/08 282,360 736,611
Richard H. Whitehead,
III.................... 30,000 6.3 13.25 2/18/08 282,360 736,611
Daniel L. Hittler....... 16,000 3.3 13.25 2/18/08 150,584 392,859
Michael A. Shope........ 16,000 3.3 13.25 2/18/08 150,584 392,859
</TABLE>
- --------
(1) Gains are reported net of option exercise price but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercise are
dependent on future performance of Common Stock. The amounts reflected in
the Table may not necessarily be achieved.
Aggregated Option Exercises in 1998 and Year-End 1998 Option Values. The
following table provides information on the Named Officers' option exercises
in 1998 and unexercised options at December 31, 1998.
Aggregated Option Exercises in 1998 and Year-End 1998 Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at
at December 31, 1998 (#) December 31, 1998 ($)(1)
----------------------------------- -------------------------
Exercisable Unercisable Exercisable Unexercisable
----------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank E. Bauchiero...... 192,514 0 0 0
Lambert E. Althaver..... 148,621 0 0 0
Robert H. Walpole....... 30,000 0 0 0
Richard H. Whitehead,
III.................... 61,426 0 0 0
Daniel L. Hittler....... 42,551 0 0 0
Michael A. Shope........ 27,338 0 0 0
</TABLE>
- --------
(1) Based upon the difference between the exercise price and the $6 3/8
closing price of the Company's Common Stock on the Nasdaq National Market
on December 31, 1998.
(2) Mr. Althaver retired effective April 17, 1998.
Employment and Severance Agreements
The Company has entered into employment agreements with Messrs. Hittler,
Shope, Whitehead and Walpole which have terms expiring on August 16, 1999 and
provides them minimum base salaries of $150,000, $150,000, $200,000 and
$265,000, respectively, subject to review and increase by the Board of
Directors Compensation Committee (the "Compensation Committee"). Each
employment agreement is renewable
A-6
<PAGE>
automatically for twelve months, subject to cancellation by the Company prior
to the anniversary date. The Company also entered into an employment agreement
with Mr. Bauchiero which expires on December 31, 2001 and provides a base
salary of $450,000, subject to review and increase by the Compensation
Committee. Mr. Bauchiero, pursuant to his employment agreement, will also be
granted options to purchase 350,000 shares of Common Stock upon the approval
by the stockholders of the Amendment to the Equity Based Long-Term Incentive
Plan. The original Employment Agreements are filed as Exhibits 3 through 7 to
this Schedule 14D-9 and are incorporated herein by reference.
For each of the executive officers, an employment agreement is linked to a
Termination and Change of Control Agreement ("COC Agreements"). In
combination, these agreements provide a severance provision under the terms of
which the employee is entitled to severance pay if during the initial term of
the agreement or a renewal term, his employment (i) is terminated (including
nonrenewal of his employment agreement) by the Company other than for cause or
(ii) is terminated voluntarily by him for good reason. The severance pay
payable under the agreements is an amount equal to the annual base
compensation being paid to the Named Officer at the date of termination.
The employment agreements and the COC Agreements were the result of a
determination by the Board of Directors that it was important to, and in the
best interests of the Company and its stockholders, to ensure that in the
event of a possible change in control of the Company, the stability and
continuity of management will continue unimpaired, free of distraction
incident to any such change in control.
The COC Agreements provide that if during a three-year period following a
Change in Control of the Company, an employee's employment is terminated by
the Company without cause or if the employee terminates employment for good
reason, the employee will receive (1) a single sum payment equal to three
times the employee's average compensation of the prior three calendar years
(including incentive bonus), (2) 36 months of additional medical, dental,
life, disability and accident insurance, (3) an amount equal to the actuarial
equivalent of the benefit under a SERP which the employee would receive if
employment would have continued for three years, (4) acceleration of any
performance awards granted prior to the extension date equal to the cash
amount payable plus the value of any shares of Common Stock payable upon
achievement of maximum performance, (5) a cash amount equal to the value of
any phantom shares of Common Stock credited to employee's deferral account,
(6) stock options will be fully exercisable and restricted stock will be
vested, (7) outplacement services at the sole discretion of employee and (8)
other perquisites substantially similar to those in effect for the employee at
the time of the Change of Control of the Company. In the event the present
value of these payments and benefits exceed an amount which would render them
"parachute payments" under Section 280G of the Internal Revenue Code, the
Company will pay a gross up amount to the employee to compensate him for the
additional excise tax assessed thereon. Each employee agrees that following
his termination of employment with the Company, he will cooperate with the
Company in any litigation involving the Company, not disclose Company trade
secrets, and for a one-year period following the date of such employee's
termination, not compete with the Company. "Change in Control" of the Company
is defined to include certain reorganizations, consolidations or mergers of
the Company, certain sales or transfers of substantially all the assets of the
Company, approval by the stockholders of the Company of its liquidation or
dissolution, a change in the composition of the Company's Board of Directors
such that it is comprised of directors, a majority of whom are not "Continuing
Directors" as defined in the agreements, or the acquisition by certain persons
of twenty percent or more of the combined voting power of the Company's
outstanding securities.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 11, 1999 the total number of
shares of Common Stock of the Company beneficially owned, and the percentage
so owned, by (i) each director of the Company, (ii) each person known to the
Company to be the beneficial owner of more than five percent of the
outstanding Common Stock of the Company, (iii) each of the Company's executive
officers, and (iv) all directors and executive officers as a
A-7
<PAGE>
group. The number of shares owned are those "beneficially owned," as
determined under the rules of the Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percentage
Name Ownership(1) of Class
- ---- ------------ ----------
<S> <C> <C>
David L. Babson & Co., Inc............................ 731,500(2) 8.4%
Franklin Resources.................................... 694,500(3) 8.0%
Merrill Lynch Asset Management Group.................. 647,900(4) 7.5%
Dimensional Fund Advisors............................. 471,802(5) 5.4%
American Express...................................... 435,650(6) 5.0%
Lambert E. Althaver................................... 301,288(7) 3.5%
William T. Bacon, Jr.................................. 67,775(6) *
Frank E. Bauchiero.................................... 245,184(9) 2.8%
J. Dwane Baumgardner.................................. 13,741(10) *
Daniel L. Hittler..................................... 50,763(11) *
Vernon E. Oechsle..................................... 17,591(12) *
Michael A. Shope...................................... 29,538(13) *
Robert D. Tuttle...................................... 25,000(14) *
John E. Utley......................................... 21,153(15) *
Robert H. Walpole..................................... 228,415(16) 2.6%
Richard H. Whitehead, III............................. 166,649(17) 1.9%
All Directors and Executive Officers as a Group (11
persons)............................................. 865,809(18) 13.4%
</TABLE>
- --------
* Indicates that the percentage beneficially owned does not exceed one
percent.
(1) The named stockholders have sole voting and dispositive power over all
shares except as otherwise noted and except as to those shares over which
beneficial ownership is disclaimed.
(2) As reported on a Schedule 13G dated February 1, 1999 filed with the
Commission by David L. Babson & Co., Inc., David L. Babson & Co., Inc.
has sole voting power and sole dispositive power with respect to all
731,500 of these shares. The address of this stockholder is One Memorial
Drive, Cambridge, Massachusetts 02142-1300.
(3) As reported on a Schedule 13G dated February 10, 1999 filed with the
Commission by Franklin Resources, Inc., Charles B. Johnson and Rupert H.
Johnson, Jr., the securities reported therein are beneficially owned by
one or more open or closed-end investment companies or other managed
accounts which are advised by direct and indirect investment advisory
subsidiaries of Franklin Resources, Inc. ("FRI"). According to such
Schedule 13G, neither FRI, Charles B. Johnson nor Rupert H. Johnson, Jr.
have any power to dispose or to direct the disposition of any of the
694,500 shares; Templeton Investment Counsel, Inc. has sole voting and
dispositive power with respect to 103,700 shares; Templeton Management
Limited has sole voting and dispositive power with respect to 353,100
shares; Templeton Global Advisors Limited has sole voting power with
respect to 190,200 shares and sole dispositive power with respect to
218,600 shares; and Templeton Investment Management Limited has sole
voting and dispositive power with respect to 19,100 shares. The address
of FRI is 777 Mariners Island Boulevard, San Mateo, California 94404.
(4) As reported on a Schedule 13G dated February 1, 1999 filed with the
Commission by Merrill Lynch & Co., Inc., Merrill Lynch Asset Management,
L.P. and Fund Asset Management, L.P. share voting and dispositive power
with respect to 647,900 shares. Merrill Lynch Asset Management, L.P. and
Fund Asset Management, L.P. are two of several legal entities comprising
Merrill Lynch Asset Management Group of Merrill Lynch & Co., Inc. The
address of Merrill Lynch & Co., Inc. is World Financial Center, North
Tower, 250 Vesey Street, New York, New York, 10381.
(5) As reported on a Schedule 13G dated February 11, 1999 filed with the
Commission by Dimensional Fund Advisors, Dimensional Fund Advisors has
sole voting and dispositive power with respect to 471,802 shares. The
address of Dimensional Fund Advisors is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401.
A-8
<PAGE>
(6) As reported on a Schedule 13G dated January 22, 1999 filed with the
Commission by American Express Financial Corporation, American Express
Company and American Express Financial Corporation share voting power
with respect to 411,250 shares and share dispositive power with respect
to 435,650 shares. The address of American Express Company is American
Express Tower, 200 Vesey Street, New York, New York 10285. The address of
American Express Financial Corporation is IDS Tower 10, Minneapolis,
Minnesota 55440.
(7) Includes 74,643 shares owned by Mr. Althaver's wife. Mr. Althaver
disclaims ownership of these shares. Also includes 148,621 shares which
are covered by presently exercisable options granted under the Equity
Plan.
(8) Includes 3,300 shares owned by the Margaret Hoyt Bacon Trust and 5,025
shares owned by Mr. Bacon's son. Mr. Bacon disclaims beneficial ownership
of these shares. Also includes 10,000 shares over which Mr. Bacon shares
voting power as co-trustee of two trusts for the benefit of the
beneficiaries of the estate of his deceased mother. Includes 10,000
shares which are covered by presently exercisable options granted under
the Equity Plan.
(9) Includes 192,514 shares which are covered by presently exercisable
options granted under the Equity Plan and 9,976 shares which represent
shares convertible from the Convertible Trust Preferred Securities.
(10) Includes 13,741 shares which are covered by presently exercisable options
granted under the Equity Plan.
(11) Includes 4,600 shares owned by Mr. Hittler's wife. Mr. Hittler disclaims
beneficial ownership of these shares. Also includes 42,551 shares which
are covered by presently exercisable options granted under the Equity
Plan and 1,238 shares held for the account of Mr. Hittler by the trustee
of the Company's Employee Stock Ownership Plan, plus 821 shares which
represent shares convertible from the Convertible Trust Preferred
Securities.
(12) Includes 16,591 shares which are covered by presently exercisable options
granted under the Equity Plan.
(13) Includes 27,338 shares which are covered by presently exercisable options
granted under the Equity Plan.
(14) Includes 15,000 shares over which Mr. Tuttle shares voting power as co-
trustee with his wife. Includes 10,000 shares which are covered by
presently exercisable options granted under the Equity Plan.
(15) Includes 1,500 shares over which Mr. Utley has voting power as trustee of
a trust and 21,153 shares which are covered by presently exercisable
options granted under the Equity Plan.
(16) Includes 79,385 shares over which Mr. Walpole shares voting power as co-
trustee of a trust for the benefit of the beneficiaries of the estate of
his deceased father. Includes 13,325 shares owned by Mr. Walpole's wife.
Mr. Walpole disclaims beneficial ownership of these shares. Also includes
4,680 shares held for the account of Mr. Walpole by the trustee of the
Advantage Plan.
(17) Includes 61,426 shares which are covered by presently exercisable options
granted under the Equity Plan. Also includes 5,223 shares held for the
account of Mr. Whitehead by the trustee of the Advantage Plan.
(18) Includes 572,435 shares which are covered by presently exercisable
options granted under the Equity Plan, 10,797 shares which represent
shares convertible from the Convertible Trust Preferred Securities. Also
includes 10,199 shares held for the account of three officers of the
Company by the trustee of the Advantage Plan and includes 1,238 shares
held for one officer of the Company by the Trustee of the Company's
Employee Stock Ownership Plan.
A-9
<PAGE>
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN (SERP)
On February 18, 1998, the Board of Directors approved a SERP for officers
of the Company. The following table provides a summary of expected benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
125,000.................. 28,125.00 37,500.00 46,875.00 56,250.00 65,625
150,000.................. 33,750.00 45,000.00 56,250.00 67,500.00 78,750.00
175,000.................. 39,375.00 52,500.00 65,625.00 78,750.00 91,875.00
200,000.................. 45,000.00 60,000.00 75,000.00 90,000.00 105,000.00
225,000.................. 50,625.00 67,500.00 84,375.00 101,250.00 118,125.00
250,000.................. 56,250.00 75,000.00 93,750.00 112,500.00 131,250.00
300,000.................. 67,500.00 90,000.00 112,500.00 135,000.00 157,500.00
400,000.................. 90,000.00 120,000.00 150,000.00 180,000.00 210,000.00
450,000.................. 101,250.00 135,000.00 168,750.00 202,500.00 236,250.00
500,000.................. 112,500.00 150,000.00 187,500.00 225,000.00 262,500.00
</TABLE>
In general the SERP provides for an annual benefit of 1 1/2% of the Final
Average Earnings ("FAE") (generally defined as the average of the executive's
base salary for the three highest consecutive years of Company employment)
times the number of years of credited service. As of the end of the reporting
year, Frank E. Bauchiero is credited with 16.2 years of service; Robert H.
Walpole is credited with 28 years of service; Richard H. Whitehead, III is
credited with 18 years of service; Michael A. Shope is credited with 5 years
of service; and Daniel L. Hittler is credited with 13 years of service. The
annual benefit under the SERP is payable for a fixed period of ten years
(except for Frank E. Bauchiero whose SERP benefit is distributed in the form
of a single life annuity), beginning at age 65 if the executive previously
retired with a vested benefit, or at retirement (if the executive retires
after age 65); provided, however, that SERP benefits may be distributed as a
lump sum based on an interest rate discount assumption of 9.2% per annum
(except for Frank E. Bauchiero who would have a 7.2% interest rate discount
assumption). In the event the executive dies before benefit distribution under
the SERP commences, the SERP provides for a spousal benefit equal to 50% of
the amount of the retirement benefit which would have been paid to the
deceased executive had the benefit commenced to be paid the day before the
executive died. In the event the executive dies after benefit distribution
under the SERP commences, the SERP provides for a spousal benefit equal to 50%
of the balance of the deceased executive's retirement benefit, if any. Vesting
occurs after 5 years of service and attainment of age 60, upon Change of
Control, or upon such earlier date as provided in a specific employment
agreement. At the end of the reporting year, only Frank E. Bauchiero and
Daniel L. Hittler have a vested benefit under the SERP. Benefits listed in the
Pension Plan Table above are not subject to any deduction for Social Security
or other offset amounts.
On January 5, 1999, subsequent to the reporting year, the Board
conditionally amended the SERP such that in the event of a Change of Control
during the calendar year 1999, (i) the executive's FAE under the SERP will
also include a bonus equal to 75% of the executive's base salary (except for
Frank E. Bauchiero who will receive a bonus equal to 100% of his base salary),
(ii) actuarial equivalency shall be based on an interest rate discount
assumption of 7.2% per annum (except for Frank E. Bauchiero who would have a
4.0% interest rate discount assumption), and (iii) the lump sum payment
determined on the basis of such interest rate discount assumption shall be
equal to the present value of a single life annuity if the executive is not
married, or a life and 50% surviving spouse annuity if the executive is
married, based on the 1983 Group Annuity Mortality Tables.
Pursuant to the Plan and coincident with his retirement from the Company,
Mr. Althaver was awarded an annual payment of $196,695 for ten years to be
paid beginning September 1, 1998.
A-10
<PAGE>
ANNEX B
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
April 27, 1999
The Board of Directors
Walbro Corporation
1227 Centre Road
Auburn Hills, Michigan 48236
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Walbro Corporation ("Walbro") of
the consideration to be received by such holders pursuant to the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of April 27, 1999 (the "Merger Agreement"), among TI Group plc ("TI
Group"), TI Automotive Systems, Inc., an indirect wholly owned subsidiary of
TI Group ("Merger Sub"), and Walbro. As more fully described in the Merger
Agreement, (i) Merger Sub will commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.50 per share, of Walbro
(the "Walbro Common Stock") at a purchase price of $20.00 per share, net to
the seller in cash (the "Cash Consideration" and, such tender offer, the
"Tender Offer") and (ii) subsequent to the Tender Offer, Merger Sub will be
merged with and into Walbro (the "Merger" and, together with the Tender Offer,
the "Transaction") and each outstanding share of Walbro Common Stock not
previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Walbro and certain senior officers and other representatives
and advisors of TI Group concerning the business, operations and prospects of
Walbro. We examined certain publicly available business and financial
information relating to Walbro as well as certain financial forecasts and
other information and data for Walbro which were provided to or otherwise
discussed with us by the management of Walbro. We reviewed the financial terms
of the Transaction as set forth in the Merger Agreement in relation to, among
other things: current and historical market prices and trading volumes of
Walbro Common Stock; the historical and projected earnings and other operating
data of Walbro; and the capitalization and financial condition of Walbro. We
considered, to the extent publicly available, the financial terms of certain
other similar transactions recently effected which we considered relevant in
evaluating the Transaction and analyzed certain financial, stock market and
other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of
Walbro. In connection with our engagement, we were requested to approach, and
we held discussions with, third parties to solicit indications of interest in
the possible acquisition of all or a part of Walbro. In addition to the
foregoing, we conducted such other analyses and examinations and considered
such other information and financial, economic and market criteria as we
deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have been advised by the management of Walbro that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of Walbro
as to the future financial performance of Walbro. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Walbro nor have we made any physical
inspection of the properties or assets of Walbro. We express no view as to,
and our opinion does not address, the relative merits of the Transaction as
compared to any alternative business strategies that might exist for Walbro or
the effect of any other transaction in which Walbro might engage. Our opinion
is necessarily based upon information available to us, and financial, stock
market and other conditions and circumstances existing and disclosed to us, as
of the date hereof.
B-1
<PAGE>
The Board of Directors
Walbro Corporation
April 27, 1999
Page 2
Salomon Smith Barney Inc. has acted as financial advisor to Walbro in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation
of the Transaction. We also will receive a fee upon the delivery of this
opinion. We have in the past provided investment banking services to Walbro
unrelated to the proposed Transaction, for which services we have received
compensation. In the ordinary course of our business, we and our affiliates
may actively trade or hold the securities of Walbro and TI Group for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. In addition, we and our
affiliates (including Citigroup Inc. and its affiliates) may maintain
relationships with Walbro, TI Group and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Walbro in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender shares of Walbro Common Stock in the Tender Offer or how such
stockholder should vote on any matters relating to the proposed Transaction.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of
the opinion that, as of the date hereof, the Cash Consideration to be received
in the Transaction by the holders of Walbro Common Stock (other than TI Group
and its affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Salomon Smith Barney Inc.
- ---------------------------------
SALOMON SMITH BARNEY INC.
B-2
<PAGE>
Exhibit 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
TI GROUP PLC,
TI AUTOMOTIVE SYSTEMS, INC.
AND
WALBRO CORPORATION
Dated as of April 27, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS.................................................... 1
1.1 Accounts................................................. 1
1.2 Acquisition Transaction.................................. 1
1.3 Affiliate................................................ 1
1.4 Agreement................................................ 1
1.5 Closing.................................................. 1
1.6 Closing Date............................................. 1
1.7 Code..................................................... 2
1.8 Company.................................................. 2
1.9 Company Common Stock..................................... 2
1.10 Company Disclosure Letter................................ 2
1.11 Company Financial Statements............................. 2
1.12 Company Preferred Rights................................. 2
1.13 Company Preferred Shares................................. 2
1.14 Company SEC Documents.................................... 2
1.15 Confidentiality Agreement................................ 2
1.16 Constituent Corporations................................. 2
1.17 Contracts................................................ 2
1.18 Control.................................................. 2
1.19 DGCL..................................................... 3
1.20 Dissenting Shares........................................ 3
1.21 ERISA.................................................... 3
1.22 Effective Time........................................... 3
1.23 Employee Benefit Plans................................... 3
1.24 Environmental Claim...................................... 3
1.25 Environmental Laws....................................... 3
1.26 Environmental Release.................................... 4
1.27 ERISA Affiliate.......................................... 4
1.28 Exchange Act............................................. 4
1.29 Exchange Agent........................................... 4
1.30 Exchange Fund............................................ 4
1.31 Existing Insurance Policies.............................. 4
1.32 Existing Liens........................................... 4
1.33 Existing Options......................................... 4
1.34 Existing Permits......................................... 4
1.35 Expiration Date.......................................... 4
1.36 Fully Diluted Basis...................................... 4
1.37 GAAP..................................................... 4
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1.38 Governmental Entity.......................................... 5
1.39 HSR Act...................................................... 5
1.40 Hazardous Materials.......................................... 5
1.41 Indebtedness................................................. 5
1.42 Indemnified Liabilities...................................... 5
1.43 Indemnified Party(ies)....................................... 5
1.44 Intangible Assets............................................ 5
1.45 Investment................................................... 5
1.46 Joint Ventures............................................... 6
1.47 Knowledge.................................................... 6
1.48 Law.......................................................... 6
1.49 Letter of Transmittal........................................ 6
1.50 Lien......................................................... 6
1.51 Material Adverse Effect...................................... 6
1.52 Merger....................................................... 7
1.53 Merger Consideration......................................... 7
1.54 Merger Sub................................................... 7
1.55 Minimum Condition............................................ 7
1.56 Offer........................................................ 7
1.57 Offer Documents.............................................. 7
1.58 Offer Price.................................................. 7
1.59 Offer to Purchase............................................ 7
1.60 Optionholders................................................ 7
1.61 Parent....................................................... 7
1.62 Parent-Provided Plan......................................... 7
1.63 Pension Plan................................................. 7
1.64 Permitted Liens.............................................. 7
1.65 Person....................................................... 7
1.66 Proxy Statement.............................................. 8
1.67 Real Estate.................................................. 8
1.68 SEC.......................................................... 8
1.69 Schedule 14D-1............................................... 8
1.70 Schedule 14D-9............................................... 8
1.71 Special Meeting.............................................. 8
1.72 Stockholders................................................. 8
1.73 Subsidiary................................................... 8
1.74 Superior Proposal............................................ 8
1.75 Surviving Corporation........................................ 8
1.76 Systems...................................................... 8
1.77 Takeover Laws................................................ 8
1.78 Transactions................................................. 8
1.79 Voting Debt.................................................. 8
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ARTICLE 2
THE MERGER............................................................. 9
2.1 The Offer........................................................ 9
2.2 Company Actions.................................................. 10
2.3 Directors........................................................ 11
2.4 The Merger....................................................... 12
2.5 Effective Time; Filing of Certificate of Merger.................. 12
2.6 Certificate of Incorporation..................................... 13
2.7 Bylaws........................................................... 13
2.8 Directors and Officers........................................... 13
2.9 Additional Actions............................................... 13
2.10 Time and Place of Closing........................................ 13
2.11 Conversion of Company Common Stock............................... 13
2.12 Exchange of Shares............................................... 14
2.13 No Further Rights or Transfers; Cancellation of Treasury Shares.. 16
2.14 Dissenters' Rights............................................... 16
2.15 Special Meeting of Stockholders.................................. 16
2.16 Merger Without Meeting of Stockholders........................... 17
2.17 Reasonable Best Efforts.......................................... 17
2.18 Existing Options................................................. 18
ARTICLE 3
OTHER AGREEMENTS....................................................... 18
3.1 Access........................................................... 18
3.2 Company Disclosure Letter........................................ 18
3.3 Deliveries of Information........................................ 19
3.4 Acquisition Proposals............................................ 19
3.5 Public Announcements............................................. 20
3.6 Confidentiality Agreement........................................ 20
3.7 Regulatory and Other Approvals................................... 20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 21
4.1 Organization; Business........................................... 21
4.2 Capitalization................................................... 21
4.3 Authorization; Enforceability.................................... 22
4.4 No Violation or Conflict......................................... 22
4.5 Title to Assets.................................................. 23
4.6 Litigation....................................................... 23
4.7 Books and Records; Company Financial Statements.................. 23
4.8 Absence of Certain Changes....................................... 24
4.9 Performance of Contracts......................................... 26
(iii)
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4.10 Insurance..................................................... 26
4.11 Employee Benefit Plans........................................ 26
4.12 Brokers' and Finders' Fees.................................... 28
4.13 Taxes......................................................... 28
4.14 Real Estate................................................... 29
4.15 Governmental Approvals........................................ 29
4.16 No Pending Acquisitions....................................... 29
4.17 Labor Matters................................................. 30
4.18 Existing Permits and Violations of Law........................ 30
4.19 Warranty or Other Claims...................................... 31
4.20 Intangible Assets............................................. 31
4.21 Customers and Suppliers....................................... 31
4.22 Environmental Protection...................................... 32
4.23 Vote Required................................................. 32
4.24 SEC Reports................................................... 32
4.25 Content of Proxy Statement.................................... 32
4.26 Opinion of Financial Advisor.................................. 33
4.27 Certain Agreements............................................ 33
4.28 Takeover Law; Company Rights Agreement........................ 33
4.29 Year 2000 Compliance.......................................... 34
4.30 Approval by Disinterested Directors........................... 34
ARTICLE 5
REPRESENTATIONS OF THE PARENT AND MERGER SUB........................ 34
5.1 Due Incorporation and Authority............................... 34
5.2 Consents and Approvals........................................ 35
5.3 Brokers' and Finders' Fees.................................... 35
5.4 No Violation or Conflict...................................... 35
5.5 Litigation.................................................... 35
5.6 Sufficient Funds.............................................. 36
ARTICLE 6
COVENANTS AND AGREEMENTS............................................ 36
6.1 Conduct of Business by the Company............................ 36
6.2 Indemnification............................................... 38
6.3 Certain Benefit Plans......................................... 40
6.4 No Survival of Representations and Warranties................. 41
6.5 Company Rights Plan........................................... 41
6.6 Consents...................................................... 41
6.7 Potential Claims.............................................. 41
(iv)
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ARTICLE 7
CONDITIONS TO THE MERGER.............................................. 41
7.1 Conditions to Each Party's Obligation to Effect the Merger...... 41
7.2 Conditions to the Parent's and Merger Sub's Obligation
to Effect the Merger............................................ 42
ARTICLE 8
TERMINATION, WAIVER AND AMENDMENT..................................... 42
8.1 Termination..................................................... 42
8.2 Rights on Termination........................................... 44
8.3 Termination Fee Payable to the Parent........................... 44
8.4 Other Remedies.................................................. 45
8.5 Notice of Termination........................................... 45
ARTICLE 9
MISCELLANEOUS......................................................... 45
9.1 Entire Agreement................................................ 45
9.2 Amendment....................................................... 45
9.3 Extension; Waiver............................................... 46
9.4 Governing Law................................................... 46
9.5 Assignment; Binding Effect...................................... 46
9.6 Notices......................................................... 46
9.7 Counterparts; Headings.......................................... 47
9.8 Interpretation.................................................. 47
9.9 Specific Performance............................................ 47
9.10 No Reliance..................................................... 47
9.11 Disclosure Letter............................................... 47
9.12 No Third Party Beneficiary...................................... 47
9.13 Severability.................................................... 48
9.14 Other Remedies.................................................. 48
9.15 Rules of Construction........................................... 48
(v)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of April 27, 1999 (the
"Agreement"), is among TI Group plc, a company organized under the laws of
England and Wales (the "Parent"), TI Automotive Systems, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Parent ("Merger Sub"),
and Walbro Corporation, a Delaware corporation (the "Company"). The Company and
Merger Sub are hereinafter sometimes collectively referred to as the
"Constituent Corporations."
WHEREAS, the Boards of Directors of the Parent, Merger Sub and the Company
have approved and deem it advisable and in the best interests of their
respective shareholders to consummate the merger of Merger Sub with and into the
Company upon the terms and subject to the conditions set forth herein (the
"Merger"); and
WHEREAS, the Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the Parent, Merger Sub and the Company agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, and in addition to the other terms defined
herein, the following terms shall have the meanings specified:
1.1 Accounts. "Accounts" shall mean all accounts receivable, notes and
associated rights owned by or payable to the Company or any Subsidiary.
1.2 Acquisition Transaction. "Acquisition Transaction" shall have the
meaning set forth in Section 3.4(a).
1.3 Affiliate. "Affiliate" shall mean, in relation to any party hereto,
any entity directly or indirectly controlling, controlled by or under common
control with such party.
1.4 Agreement. "Agreement" shall have the meaning set forth in the
Introduction.
1.5 Closing. "Closing" shall have the meaning set forth in Section 2.10.
1.6 Closing Date. "Closing Date" shall have the meaning set forth in
Section 2.10.
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1.7 Code. "Code" shall mean the Internal Revenue Code of 1986, as the same
may be in effect from time to time.
1.8 Company. "Company" shall have the meaning set forth in the
Introduction.
1.9 Company Common Stock. "Company Common Stock" shall mean shares of
common stock, par value $0.50 per share, of the Company and all references
herein to Company Common Stock, unless the context requires otherwise, shall
include the associated Company Preferred Rights.
1.10 Company Disclosure Letter. "Company Disclosure Letter" shall have the
meaning set forth in Article 4.
1.11 Company Financial Statements. "Company Financial Statements" shall
mean the audited Consolidated Balance Sheet, Consolidated Statement of Income,
Consolidated Statement of Cash Flows and Consolidated Statement of Shareholders'
Equity of the Company, and the audited balance sheet, statement of income,
statement of cash flows and statement of shareholders equity of Marwal Systems
SNC and of Mitsuba Walbro Inc., together with, in each of the foregoing cases
the related notes thereto, for each of the fiscal years ended on December 31,
1996, 1997 and 1998.
1.12 Company Preferred Rights. "Company Preferred Rights" shall mean those
Preferred Share Purchase Rights issued pursuant to the Shareholder Rights
Agreement dated as of June 30, 1998 by and between the Company and Harris Trust
and Savings Bank, as Rights Agent (the "Company Rights Agreement").
1.13 Company Preferred Shares. "Company Preferred Shares" means the
Convertible Trust Preferred Securities of Walbro Capital Trust, a wholly-owned
subsidiary of the Company.
1.14 Company SEC Documents. "Company SEC Documents" shall have the meaning
set forth in Section 4.24.
1.15 Confidentiality Agreement. "Confidentiality Agreement" shall have the
meaning set forth in Section 3.6.
1.16 Constituent Corporations. "Constituent Corporations" shall have the
meaning set forth in the Introduction.
1.17 Contracts. "Contracts" shall mean all of the contracts, agreements,
and obligations of the Company or any Subsidiary to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of the
assets of the Company or any Subsidiary are bound, including, without
limitation, any loan, bond, mortgage, indenture, lease, instrument, franchise or
license.
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1.18 Control. "Control" (including the terms "controlling," "controlled
by," and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities or by contract.
1.19 DGCL. "DGCL" shall have the meaning set forth in Section 2.4.
1.20 Dissenting Shares. "Dissenting Shares" shall mean shares of Company
Common Stock which (i) dissent from the Merger in accordance with the provisions
of Section 262 of DGCL and (ii) are held by Stockholders who have properly
exercised and perfected appraisal rights under Section 262 of DGCL.
1.21 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 as in effect on the date hereof.
1.22 Effective Time. "Effective Time" shall have the meaning set forth in
Section 2.5.
1.23 Employee Benefit Plans. "Employee Benefit Plans" shall mean any
pension plan, profit sharing plan, bonus plan, incentive compensation plan,
stock purchase plan, stock ownership plan, stock option plan, stock appreciation
plan, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, insurance plan, severance plan, disability plan, health care
plan, sick leave plan, death benefit plan, or any other plan, program or policy
to provide retirement income, fringe benefits or other benefits to former or
current employees and/or directors of the Company or any Subsidiary or an ERISA
Affiliate as of the date hereof or as of the Closing (including, without
limitation, any employee pension benefit plan, employee welfare plan or multi-
employer plan, as each term is defined in ERISA).
1.24 Environmental Claim. "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging liability
(including, without limitation, liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from: (A) the presence or environmental
release of any Hazardous Materials at any parcel of real property; or (B)
circumstances forming the basis of any violation or alleged violation, of any
Environmental Law; or (C) any and all claims by any Person seeking damages,
contribution, indemnification, cost, recovery, compensation or injunctive relief
resulting from the presence or Environmental Release of any Hazardous Materials.
1.25 Environmental Laws. "Environmental Laws" shall mean any federal,
state, local or foreign statute, Law, rule, ordinance, code, policy, rule of
common law and regulations, as in effect on the date hereof, relating to
pollution or protection of human health (including those parts of OSHA relating
to Hazardous Materials) or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
including, without limitation, Laws and regulations relating to Environmental
Releases or threatened Environmental
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Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, presence, use, treatment, storage, disposal, transport
or handling of Hazardous Materials.
1.26 Environmental Release. "Environmental Release" shall mean any
release, spill, emission, leaking, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the atmosphere, soil, surface water or
groundwater .
1.27 ERISA Affiliate. "ERISA Affiliate" shall mean a member of the
controlled group with the meaning of Code Section 414(b) or (c) of which the
Company is a member.
1.28 Exchange Act. "Exchange Act" shall have the meaning set forth in
Section 2.1(a).
1.29 Exchange Agent. "Exchange Agent" shall have the meaning set forth in
Section 2.12(a).
1.30 Exchange Fund. "Exchange Fund" shall have the meaning set forth in
Section 2.12(a).
1.31 Existing Insurance Policies. "Existing Insurance Policies" shall mean
all of the insurance policies currently in effect and owned by the Company or
any Subsidiary.
1.32 Existing Liens. "Existing Liens" shall mean those Liens affecting any
of the assets or properties of the Company or any Subsidiary.
1.33 Existing Options. "Existing Options" shall mean any of the following
relating to any capital stock or other equity interest of the Company, and as
described in the Company Disclosure Letter: (a) options or warrants (whether
vested or not) to purchase or other rights (including registration rights),
agreements, arrangements or commitments of any character to which the Company or
any Subsidiary is a party relating to the issued or unissued capital stock or
other equity or phantom equity interests of the Company to grant, issue or sell
any shares of the capital stock or other equity or phantom equity interests of
the Company, by sale, lease, license or otherwise; (b) rights to subscribe for
or purchase any shares of the capital stock or other equity or phantom equity
interests of the Company; (c) Contracts to which the Company or any Subsidiary
is a party with respect to any right to purchase, put or call; or (d) stock
appreciation rights, limited stock appreciation rights, performance shares or
restricted stock of the Company.
1.34 Existing Permits. "Existing Permits" shall mean those permits,
licenses, approvals, qualifications, authorizations, and registrations required
by Law which the Company and its Subsidiaries have or hold.
1.35 Expiration Date. "Expiration Date" shall have the meaning set forth
in Section 8.3.
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1.36 Fully Diluted Basis. "Fully Diluted Basis" shall have the meaning set
forth in Section 2.1(a).
1.37 GAAP. "GAAP" shall have the meaning set forth in Section 4.7(a).
1.38 Governmental Entity. "Governmental Entity" shall have the meaning set
forth in Section 4.15.
1.39 HSR Act. "HSR Act" shall have the meaning set forth in Section
7.1(a).
1.40 Hazardous Materials. "Hazardous Materials" shall mean: (A) any
petroleum or petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs") above regulated levels and radon gas; and (B)
any chemicals, materials or substances which are now defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
Environmental Law; and (C) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated by any governmental
authority.
1.41 Indebtedness. "Indebtedness" shall mean all liabilities or
obligations of the Company or any Subsidiary, whether primary or secondary or
absolute or contingent: (a) for borrowed money; (b) evidenced by notes, bonds,
debentures or similar instruments; or (c) secured by Liens on any assets of the
Company or any Subsidiary.
1.42 Indemnified Liabilities. "Indemnified Liabilities" shall have the
meaning set forth in Section 6.2(b).
1.43 Indemnified Party(ies). "Indemnified Party(ies)" shall have the
meaning set forth in Section 6.2(b).
1.44 Intangible Assets. "Intangible Assets" shall mean (a) any invention,
United States and foreign patents, pending patent applications, trade names,
trade dress, logos, corporate names, trademarks, service marks, trademark
registrations, service mark registrations, pending trademark applications,
pending service mark applications, registered copyrights, and pending copyright
applications, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (b)
proprietary software; and (c) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals).
5
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1.45 Investment. "Investment" by the Company shall mean (a) any equity,
debt, preferred stock, partnership interest, participation or any other security
of another Person that is beneficially owned by the Company or any Subsidiary;
(b) any loan or capital contribution by the Company or any Subsidiary to or in
any other Person; (c) any guaranty of any obligation to pay money to the Company
or any Subsidiary, or perform an obligation for or on behalf of the Company or
any Subsidiary, of any other Person; and (d) any investments in any property or
assets other than properties and assets acquired and used in the ordinary course
of the business of the Company and its Subsidiaries.
1.46 Joint Ventures. "Joint Ventures" shall mean the entities listed on
Section 1.47 of the Company Disclosure Letter.
1.47 Knowledge. "Knowledge" shall mean the actual knowledge of the
directors and executive officers of the Company.
1.48 Law. "Law" shall mean any foreign, federal, state or local
governmental law, rule, regulation or requirement, including any rules,
regulations and orders promulgated thereunder and any orders, decrees, consents
or judgments of any governmental regulatory agencies and courts having the force
of law, other than any Environmental Laws.
1.49 Letter of Transmittal. "Letter of Transmittal" shall have the meaning
set forth in Section 2.12(a).
1.50 Lien. "Lien" shall mean, with respect to any asset (real, personal or
mixed): (a) any mortgage, pledge, encumbrance, lien, easement, lease, title
defect or imperfection or any other form of security interest, whether imposed
by Law or by contract; and (b) the interest of a vendor or lessor under any
conditional sale agreement, financing lease or other title retention agreement
relating to such asset.
1.51 Material Adverse Effect. "Material Adverse Effect" or "Material
Adverse Change" means any effect, change, event, circumstance or condition which
when considered with all other effects, changes, events, circumstances or
conditions has materially adversely affected or would reasonably be expected to
materially adversely affect the results of operations or financial condition of
the Parent or the Company, in each case including its respective Subsidiaries
together with it taken as a whole, as the case may be. In no event shall any of
the following, considered alone without regard to any other effects, changes,
events, circumstances or conditions, constitute a Material Adverse Effect or a
Material Adverse Change: (i) a change in the trading prices of either of the
Parent's or the Company's securities between the date hereof and the Effective
Time, in and of itself; (ii) effects, changes, events, circumstances or
conditions generally affecting the industry in which either the Parent or the
Company operates or arising from changes in general business or economic
conditions, provided such effects, changes, events, circumstances or conditions
do not disproportionately impact the Company and its Subsidiaries, unless the
Company can establish that they arise solely and directly as a result of the
armed hostilities in Kosovo, Republic of Yugoslavia; (iii) any effects, changes,
events, circumstances or conditions resulting from any change in law or
generally accepted accounting principles, which affect
6
<PAGE>
generally entities such as the Company unless such effects, events,
circumstances or conditions disproportionately impact the Company and its
Subsidiaries; (iv) any effects, changes, events, circumstances or conditions
resulting from the announcement or pendency of any of the transactions
contemplated by this Agreement other than a breach of a representation or
warranty pursuant to this Agreement which would occur except for clauses (iv) or
(v) of this definition of Material Adverse Effect; and (v) any effects, changes,
events, circumstances or conditions resulting from actions taken by the Parent
or the Company in order to comply with the terms of this Agreement other than a
breach of a representation or warranty pursuant to this Agreement which would
occur except for clauses (iv) or (v) of this definition of Material Adverse
Effect.
1.52 Merger. "Merger" shall have the meaning set forth in the
Introduction.
1.53 Merger Consideration. "Merger Consideration" shall have the meaning
set forth in Section 2.11.
1.54 Merger Sub. "Merger Sub" shall have the meaning set forth in the
Introduction.
1.55 Minimum Condition. "Minimum Condition" shall have the meaning set
forth in Section 2.1(a).
1.56 Offer. "Offer" shall have the meaning set forth in Section 2.1(a).
1.57 Offer Documents. "Offer Documents" shall have the meaning set forth
in Section 2.1(b).
1.58 Offer Price. "Offer Price" shall have the meaning set forth in
Section 2.1(a).
1.59 Offer to Purchase. "Offer to Purchase" shall have the meaning set
forth in Section 2.1(a).
1.60 Optionholders. "Optionholders" shall mean all Persons holding the
Existing Options.
1.61 Parent. "Parent" shall have the meaning set forth in the
Introduction.
1.62 Parent-Provided Plan(s). "Parent-Provided Plan(s)" shall have the
meaning set forth in Section 6.3(a).
1.63 Pension Plan. "Pension Plan" shall mean the Employee Benefit Plan
which is an employee pension benefit and which is subject to Title IV of ERISA
(other than a multiemployer plan as defined in ERISA).
1.64 Permitted Liens. "Permitted Liens" shall mean those of the Existing
Liens that do not materially detract from the value of the property or assets of
the Company subject thereto and do not materially impair the business or
operations of the Company.
7
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1.65 Person. "Person" shall mean a natural person, corporation, limited
liability company, association, joint stock company, trust, partnership,
governmental entity, agency or branch or department thereof, or any other legal
entity.
1.66 Proxy Statement. "Proxy Statement" shall have the meaning set forth
in Section 2.15(b).
1.67 Real Estate. "Real Estate" shall mean the parcels of real property
owned or leased by the Company or any Subsidiary.
1.68 SEC. "SEC" shall have the meaning set forth in Section 2.1(b).
1.69 Schedule 14D-1. "Schedule 14D-1" shall have the meaning set forth in
Section 2.1(b).
1.70 Schedule 14D-9. "Schedule 14D-9" shall have the meaning set forth in
Section 2.2(b).
1.71 Special Meeting. "Special Meeting" shall have the meaning set forth
in Section 2.15(a).
1.72 Stockholders. "Stockholders" shall mean all Persons owning any shares
of Company Common Stock.
1.73 Subsidiary. "Subsidiary" shall mean any corporation, at least a
majority of the outstanding capital stock of which (or any class or classes,
however designated, having ordinary voting power for the election of at least a
majority of the board of directors of such corporation) shall at the time be
owned by the Company directly or through one or more corporations which are
themselves Subsidiaries.
1.74 Superior Proposal. "Superior Proposal" shall have the meaning set
forth in Section 3.4(b).
1.75 Surviving Corporation. "Surviving Corporation" shall have the meaning
set forth in Section 2.4.
1.76 Systems. "Systems" shall have the meaning set forth in Section 4.29.
1.77 Takeover Laws. "Takeover Laws" shall have the meaning set forth in
Section 4.28(a).
1.78 Transactions. "Transactions" shall have the meaning set forth in
Section 2.2(a).
1.79 Voting Debt. "Voting Debt" shall have the meaning set forth in
Section 4.2(c).
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ARTICLE 2
THE MERGER
2.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), Merger Sub
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Exchange Act")) a tender offer (the "Offer") for all of the
outstanding shares of Company Common Stock (including the Company Preferred
Rights) at a price of $20 per share of Company Common Stock, net to the seller
in cash (such price, or any such higher price per share as may be paid in the
Offer, being referred to herein as the "Offer Price"), subject to there being
validly tendered and not withdrawn prior to the expiration of the Offer, that
number of shares of Company Common Stock (excluding shares of Company Common
Stock held in the Company's treasury) which represents at least a majority of
the Company Common Stock outstanding on a Fully Diluted Basis (the "Minimum
Condition") and to the other conditions set forth in Annex A hereto, and shall
consummate the Offer in accordance with its terms ("Fully Diluted Basis" means
issued and outstanding Company Common Stock and Company Common Stock subject to
issuance under the Existing Options). The obligations of Merger Sub to accept
for payment and to pay for any Company Common Stock validly tendered on or prior
to the expiration of the Offer and not withdrawn shall be subject only to the
Minimum Condition and the other conditions set forth in Annex A hereto. The
Offer shall be made by means of an offer to purchase (the "Offer to Purchase")
containing the terms set forth in this Agreement, the Minimum Condition and the
other conditions set forth in Annex A hereto. Merger Sub shall not amend or
waive the Minimum Condition and shall not decrease the Offer Price or decrease
the number of shares of Company Common Stock sought, or amend any other
condition of the Offer in any manner adverse to the holders of the Company
Common Stock without the prior written consent of the Company; provided,
however, that if on the initial scheduled expiration date of the Offer which
shall be twenty business days after the date the Offer is commenced, the sole
condition remaining unsatisfied is the failure of the waiting period under the
HSR Act to have expired or been terminated, Merger Sub shall extend the
expiration date from time to time until two business days after the expiration
of the waiting period under the HSR Act. Merger Sub shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment Company Common Stock tendered as soon as it is legally
permitted to do so under applicable law; provided, however, that if, immediately
prior to the initial expiration date of the Offer (as it may be extended), the
Company Common Stock tendered and not withdrawn pursuant to the Offer equals
less than 90% of the outstanding Company Common Stock, Merger Sub may extend the
Offer two times for a period not to exceed ten business days, notwithstanding
that all conditions to the Offer are satisfied as of such expiration date of the
Offer.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Merger Sub shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1").
9
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The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form
of letter of transmittal and summary advertisement (collectively, together with
any amendments and supplements thereto, the "Offer Documents"). The Offer
Documents will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the 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 circumstances under which they were made, not misleading, except that no
representation is made by Parent or Merger Sub with respect to information
furnished by the Company to Parent or Merger Sub, in writing, expressly for
inclusion in the Offer Documents. The information supplied by the Company to
Parent or Merger Sub, in writing, expressly for inclusion in the Offer Documents
and by Parent or Merger Sub to the Company, in writing, expressly for inclusion
in the Schedule 14D-9 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 therein, in light of the circumstances under which
they were made, not misleading.
(c) Each of Parent and Merger Sub will take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated to the
Stockholders, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and Merger Sub, on the one hand, and the
Company, on the other hand, will promptly correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect and Parent and Merger Sub will take
all steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to the Stockholders, in each case as and to
the extent required by applicable federal securities laws. The Company and its
counsel shall be given the opportunity to review the Schedule 14D-1 before it is
filed with the SEC. In addition, Parent and Merger Sub will provide the Company
and its counsel, in the form in which they are received, with any comments,
whether written or oral, Parent, Merger Sub or their counsel may receive from
time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments.
2.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that its Board of Directors, at a meeting duly called and held, has
(i) unanimously determined that each of the Agreement, the Offer and the Merger
are fair to and in the best interests of the Stockholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger (collectively, the "Transactions"), and (iii) resolved to recommend that
the Stockholders accept the Offer, tender their Company Common Stock thereunder
to Merger Sub and approve and adopt this Agreement and the Merger; provided,
that such recommendation may be withdrawn, modified or amended if, in the good
faith opinion of the Board of Directors, based upon the receipt of advice from
outside independent legal counsel and after consultation with a nationally
recognized investment bank, failure to withdraw, modify or amend such
recommendation could violate the Board's fiduciary duties under applicable Law.
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(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the approval and
recommendation of the Board referred to in Section 2.2(a) hereof. The Schedule
14D-9 will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the 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 circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or Merger Sub, in writing, expressly for inclusion in the Schedule 14D-9.
The Company further agrees to take all steps necessary to cause the Schedule
14D-9 to be filed with the SEC and to be disseminated to the Stockholders, in
each case as and to the extent required by applicable federal securities laws.
Each of the Company, on the one hand, and Parent and Merger Sub, on the other
hand, agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false and
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 be disseminated to the Stockholders, in each case as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Parent, Merger Sub and
their counsel, in the form in which they are received, with any comments,
whether written or oral, that the Company or its counsel may receive from time
to time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly furnish
or cause to be furnished to Merger Sub mailing labels, security position
listings and any available listing, or computer file containing the names and
addresses of all recordholders of Company Common Stock as of a recent date, and
shall furnish Merger Sub with such additional information (including, but not
limited to, updated lists of Stockholders and their addresses, mailing labels
and lists of security positions) and assistance as Merger Sub or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of the Company Common Stock. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and Merger Sub shall hold in confidence
the information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer, and, if this Agreement is terminated, will,
upon request of the Company, deliver or cause to be delivered to the Company all
copies of such information then in its possession or the possession of its
agents or representatives.
2.3 Directors.
(a) Promptly upon the purchase of and payment for any Company Common
Stock by Parent or any of its Subsidiaries which represents at least a majority
of the outstanding Company Common Stock (on a Fully Diluted Basis), Parent shall
be entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the
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Company as is equal to the product of the total number of directors on such
Board (giving effect to the directors designated by Parent pursuant to this
sentence) multiplied by the percentage that the number of shares of Company
Common Stock so accepted for payment bears to the total number of shares then
outstanding. In furtherance thereof, the Company shall, upon request of Merger
Sub, promptly either increase the size of its Board of Directors or secure the
resignation of such number of its incumbent directors, or both, as is necessary
to enable Parent's designees to be so elected to the Company's Board, and shall
take all actions available to the Company to cause Parent's designees to be so
elected. At such time, the Company shall, if requested by Parent, also cause
persons designated by Parent to constitute at least the same percentage (rounded
up to the next whole number) as is on the Company's Board of Directors on each
committee of the Company's Board of Directors. The Parent shall use its best
efforts to cause the Company to have at least one independent director until the
Effective Time, including, but not limited to retaining one of the Company's
current directors.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under Section 2.3(a), including mailing to
shareholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable Parent's designees to be elected to the Company's Board of
Directors. Parent or Merger Sub will supply the Company and be solely
responsible for any information provided by them in writing expressly for
inclusion in the information sent to Stockholders with respect to either of them
and their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. The provisions of this Section 2.3 are in addition to and
shall not limit any rights which the Merger Sub, Parent or any of their
affiliates may have as a holder or beneficial owner of Company Common Stock as a
matter of law with respect to the election of directors or otherwise.
2.4 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement and in accordance with the Delaware General Corporation Law
("DGCL") at the Effective Time, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease and the
Company shall (i) be the surviving corporation in the Merger (in such capacity,
the "Surviving Corporation"), (ii) succeed to and assume all the rights and
obligations of Merger Sub in accordance with the DGCL, and (iii) continue its
corporate existence under the laws of the State of Delaware. The Merger shall be
pursuant to the provisions of, and shall be with the effect provided in, the
DGCL. In accordance with the DGCL, all of the rights, privileges, property,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all of the debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.5 Effective Time; Filing of Certificate of Merger. Subject to the terms
of this Agreement, the parties hereto shall cause the Merger to be consummated
by filing a properly executed Certificate of Merger or other appropriate
documents with the Secretary of State of the State of Delaware in accordance
with the provisions of the DGCL. The Merger shall become effective at the time
of such filing of the Certificate of Merger with the Secretary of State of the
State of Delaware or at such later date or time as Merger Sub and the Company
shall agree and specify in the Certificate of Merger (the "Effective Time").
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2.6 Certificate of Incorporation. At the Effective Time, the Certificate
of Incorporation of Merger Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with its terms and the DGCL.
2.7 Bylaws. At the Effective Time, the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with their terms and the
DGCL.
2.8 Directors and Officers. At the Effective Time, the directors of Merger
Sub and the officers of the Company immediately prior to the Effective Time
shall be the initial directors and officers of the Surviving Corporation. Each
director and officer of the Surviving Corporation shall hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until his or her death, resignation or removal or a successor is
duly elected or appointed and qualified.
2.9 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any further assignments or assurances in law or any
other acts are necessary or desirable (i) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, title to and possession of any
property or right of either Constituent Corporation acquired or to be acquired
by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, then, subject to the terms and conditions of this
Agreement, each such Constituent Corporation and its officers and directors
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement; and the
officers and directors of the Surviving Corporation are fully authorized in the
name of either Constituent Corporation to take any and all such action.
2.10 Time and Place of Closing. The closing of the Merger (the "Closing")
shall take place (i) at the offices of Sullivan & Cromwell, 375 Park Avenue, New
York, New York on a date and at a time to be specified by the parties, which
shall be no later than the second business day following satisfaction or waiver
of all of the conditions set forth in Article 7, or (ii) at such other place, at
such other time or on such other date as the parties may mutually agree (the
date of the Closing is hereinafter sometimes referred to as the "Closing Date").
2.11 Conversion of Company Common Stock.
(a) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time (except for Dissenting Shares, shares of
Company Common Stock beneficially owned by Parent and Merger Sub, and shares of
Common Stock held in the Company's treasury), shall, by virtue of the Merger and
without any action on the part of the Company, the Parent, Merger Sub or the
holder thereof, be converted into the right to receive
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the Offer Price in cash, payable to the holder thereof, without any interest
thereon ("Merger Consideration"), as soon as reasonably practicable after the
surrender of the certificate(s) representing such Company Common Stock as
provided in Section 2.12.
(b) Each share of common stock, par value $0.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one share of common stock of the Surviving Corporation. Each
certificate evidencing ownership of any such shares shall, following the Merger,
evidence ownership of the same number of shares of common stock of the Surviving
Corporation.
(c) Payments in respect of the Existing Options are provided for in
Section 2.18 below.
2.12 Exchange of Shares.
(a) Prior to the Effective Time, the Company shall appoint a Person
that is reasonably acceptable to the Parent to act as the exchange agent
hereunder (the "Exchange Agent") to receive in trust the funds to which
Stockholders shall become entitled upon surrender of the certificates for
exchange in accordance with this Section 2.12.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a share certificate which
immediately prior to the Effective Time represented outstanding Company Common
Stock (other than Parent, the Company, any Subsidiary of Parent and any holder
of Dissenting Shares): (1) a letter of transmittal (a "Letter of Transmittal")
which shall (x) specify that delivery shall be effected, and risk of loss and
title to each such certificate shall pass, only upon delivery of such
certificates to the Exchange Agent, (y) contain a representation in a form
reasonably satisfactory to the Parent as to the good and marketable title to the
Company Common Stock held by such holder free and clear of any Lien, and (z)
contain such other provisions as the Company and the Parent may reasonably
specify; and (2) instructions to effect the surrender of such certificate(s) in
exchange for a check in an amount equal to the Offer Price multiplied by the
number of shares of Company Common Stock represented by such certificate(s).
Parent shall cause Merger Sub to provide the Exchange Agent from time to
time on behalf of the Stockholders, amounts in cash required to make prompt
payment of the Merger Consideration provided for in Section 2.11(a) to the
holder of such certificate(s). Parent shall provide to the Company prompt
written notice of the provision of funds to the Exchange Agent.
Thereafter (except as otherwise provided for in Section 2.12(c)), each
holder of certificate(s) representing Company Common Stock may surrender such
certificate(s) to the Exchange Agent and (subject to applicable abandoned
property, escheat and similar laws) receive from the Exchange Agent in exchange
therefor an amount equal to the product of (x) the Offer Price and (y) the
number of shares of Company Common Stock represented by the certificate(s)
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so surrendered, without interest, but such holder shall have no rights
whatsoever against the Surviving Corporation.
Upon the surrender of any such certificate(s) to the Exchange Agent, the
Exchange Agent shall promptly surrender such certificate(s) to the Surviving
Corporation for cancellation.
(b) If the consideration payable for any Company Common Stock is to
be delivered to a person other than the person in whose name the certificate(s)
representing such Company Common Stock is registered, it shall be a condition of
such delivery that the certificate(s) so surrendered shall be properly endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name of the record holder appears on such certificate, and shall otherwise be in
proper form for transfer, and that the person requesting such delivery shall pay
to the Exchange Agent or the Surviving Corporation, as the case may be, any
transfer or other taxes required by law as a result of such delivery to a person
other than the record holder of the certificate(s) surrendered or shall
establish to the Exchange Agent's and the Surviving Corporation's reasonable
satisfaction that such tax has been paid or is not payable.
(c) From and after one (1) year following the Closing Date, any
Stockholders who have not theretofore complied with Section 2.12(a) shall
thereafter look only to the Surviving Corporation for delivery of the Merger
Consideration, subject in all events to all applicable escheat and other similar
laws.
(d) Until surrender as contemplated by this Section 2.12,
certificate(s) representing Company Common Stock shall be deemed at all times
after the Effective Time to represent only the right to receive upon surrender
the Merger Consideration as specified in this Agreement.
(e) No interest shall accrue or be payable with respect to any
amounts which any Stockholder or Optionholder shall be entitled to receive
pursuant to this Agreement. The Exchange Agent shall be authorized to pay the
Merger Consideration attributable to any certificate(s) representing Company
Common Stock which has been lost or destroyed upon receipt of evidence of
ownership of the Company Common Stock represented thereby and of appropriate
indemnification and/or bond in each case reasonably satisfactory to the Company
or the Surviving Corporation, as the case may be (but no bond shall be required
in cases of 25 shares or less).
(f) Neither the Exchange Agent nor any party to this Agreement shall
be liable to any Stockholder or Optionholder for any Company Common Stock, any
Existing Options, the Offer Price, the Merger Consideration, or cash delivered
to a public official pursuant to any abandoned property, escheat or similar law.
(g) The Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
Stockholder or Optionholder such amounts as the Company reasonably determines
are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax Law. To
the extent that amounts are so withheld by the Exchange Agent, such
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withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Stockholder or Optionholder in respect of which such deduction
and withholding was made by the Exchange Agent.
2.13 No Further Rights or Transfers; Cancellation of Treasury Shares.
Except for the surrender of the certificate(s) representing the Company Common
Stock in exchange for the Merger Consideration with respect to each share of
Company Common Stock or the perfection of appraisal rights with respect to the
Dissenting Shares, at and after the Effective Time, the holder of shares of
Company Common Stock shall cease to have any rights as a stockholder of the
Company, and no transfer of shares of Company Common Stock shall thereafter be
made on the stock transfer books of the Surviving Corporation. Each share of
Company Common Stock held in the Company's treasury or held by Parent or Merger
Sub immediately prior to the Effective Time shall, by virtue of the Merger, be
canceled and retired and cease to exist without any conversion thereof.
2.14 Dissenters' Rights. Shares of Company Common Stock which immediately
prior to the Effective Time are held by Stockholders who have properly exercised
and perfected appraisal rights under Section 262 of the DGCL (the "Dissenting
Shares") shall, if required by the DGCL, but only to the extent required
thereby, not be converted into the right to receive the Merger Consideration,
but the holders of Dissenting Shares shall be entitled to receive such
consideration as shall be determined pursuant to Section 262 of the DGCL;
provided, however, that if any such holder shall have failed to perfect or shall
withdraw or lose his right to appraisal and payment under the DGCL, such
holder's shares of Company Common Stock shall thereupon be deemed to have been
converted as of the Effective Time into the right to receive the Merger
Consideration, without any interest thereon, and such shares shall no longer be
Dissenting Shares. The Company shall give the Parent, Merger Sub and the
Exchange Agent prompt notice of any claim by a Stockholder for payment of fair
value for Dissenting Shares as provided in Section 262 of the DGCL. Prior to the
Effective Time, the Company will not, except with the prior written consent of
Parent and Merger Sub, make any payments with respect to, or settle or offer to
settle, any such demands.
2.15 Special Meeting of Stockholders.
(a) If required by applicable law in order to consummate the Merger,
the Company agrees to take all steps necessary to cause a special meeting of the
Stockholders (the "Special Meeting") to be duly called, noticed, convened and
held as soon as practicable following the acceptance for payment and purchase of
shares of Company Common Stock by the Parent or its affiliates pursuant to the
Offer for the purpose of voting to approve this Agreement and the Merger. In
connection with the Special Meeting, the Board of Directors of the Company
shall, subject to the Board's fulfillment of its fiduciary duties under
applicable Law, unanimously recommend to the Stockholders that the Stockholders
vote in favor of the approval of this Agreement and the Merger.
(b) In connection with the Special Meeting, the Company agrees to
promptly prepare and cause to be filed with the SEC and mailed to the
Stockholders a notice of the Special
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Meeting and a definitive proxy statement (the "Proxy Statement") and shall cause
such notice to be mailed no later than the time required by applicable Law and
the certificate of incorporation and bylaws of the Company. The Parent and
Merger Sub agree to provide the Company with any information for inclusion in
the Proxy Statement (or any amendments or supplements thereto) which is required
by applicable Law or which is reasonably requested by the Company. The Company
shall consult with the Parent and Merger Sub with respect to the Proxy Statement
(and any amendments or supplements thereto) and shall afford the Parent and
Merger Sub reasonable opportunity to comment thereon prior to its finalization.
If, at any time prior to the Special Meeting, any event shall occur relating to
the Company or the transactions contemplated by this Agreement which should be
set forth in an amendment or a supplement to the Proxy Statement, the Company
will promptly notify in writing the Parent and Merger Sub of such event. In such
case, the Company, with the cooperation of the Parent and Merger Sub, will
promptly prepare and mail such amendment or supplement and the Company shall
consult with the Parent and Merger Sub with respect to such amendment or
supplement and shall afford the Parent and Merger Sub reasonable opportunity to
comment thereon prior to such mailing. The Company agrees to notify the Parent
and Merger Sub at least three (3) days prior to the mailing of the Proxy
Statement (or any amendment or supplement thereto) to the Stockholders.
(c) The Parent agrees that if any event with respect to the Parent,
Merger Sub or their officers or directors shall occur which is required to be
described in an amendment or supplement to the Proxy Statement or any other
filing with the SEC that may be required in connection with this Agreement, the
Merger and all matters related thereto, the Parent will promptly inform the
Company thereof and the Company will cause such event to be so described and
such amendment or supplement to be promptly filed with the SEC and, as required
by law, disseminated to the Stockholders; provided, however, that prior to such
filing or mailing the Company shall consult with the Parent and Merger Sub with
respect to such amendment, supplement or other filing and shall afford the
Parent and Merger Sub a reasonable opportunity to comment thereon.
2.16 Merger Without Meeting of Stockholders. Notwithstanding Section 2.15
hereof, in the event that Parent, Merger Sub and any other Subsidiaries of
Parent shall acquire in the aggregate at least 90% of the Company Common Stock,
pursuant to the Offer or otherwise, the parties hereto shall, at the request of
Parent and subject to Article 7 hereof, take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
2.17 Reasonable Best Efforts. So long as this Agreement has not been
terminated, the Company, Parent and Merger Sub shall: (i) promptly make their
respective filings and thereafter make any other submissions required under all
applicable laws with respect to this Agreement, the Offer, the Merger and the
other transactions contemplated hereby and (ii) use their respective reasonable
best efforts to promptly take, or cause to be taken, all other actions and do,
or cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the Offer and the Merger as provided for in this
Agreement.
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2.18 Existing Options.
(a) As of the Effective Time, each Existing Option other than the
Company Preferred Shares which is outstanding at the Effective Time will be
exchanged for, and the holders of each such Existing Option will be entitled to
receive at the Closing (or thereafter, if necessary) upon surrender of such
Existing Option for cancellation, cash equal to (i) the product of (a) the
positive difference, if any, between the Offer Price less the exercise price of
each such Existing Option, multiplied by (b) the number of shares of Company
Common Stock covered by such Existing Option. Notwithstanding the foregoing,
from and after the Effective Time each holder of Company Preferred Shares shall
have the right to convert its Company Preferred Shares only into the amount of
cash provided for by the terms of the Company Preferred Shares after giving
effect to any adjustment in the conversion price provided for by such terms,
which the Company hereby acknowledges and represents shall be $26.40 per Company
Preferred Share.
(b) The Company shall take all actions reasonably necessary to ensure
that from and after the Effective Time the Surviving Corporation will not be
bound by any options, warrants, rights or agreements which would entitle any
person, other than Parent or Merger Sub, to beneficially own shares of Surviving
Corporation or Parent or receive any payments (other than as set forth in
Section 2.18(a)) in respect of such options, warrants, rights or agreements. The
Company shall take all actions necessary to terminate each plan with respect to
Existing Options as of the Effective Time.
ARTICLE 3
OTHER AGREEMENTS
3.1 Access. Subject to the provisions of the Confidentiality Agreement
referred to in Section 3.6 below, and so long as this Agreement has not been
terminated as herein provided, upon reasonable request, the Company shall grant
to Parent, Merger Sub and their agents, accountants, attorneys and other
advisers reasonable access during normal business hours to the properties,
facilities, books, records, financial statements and other documents and
materials of the Company and its Subsidiaries. In addition, the Company shall
confer and consult with representatives of Parent, as Parent may reasonably
request, to report on operational matters, financial matters and the status of
ongoing business operations of the Company.
3.2 Company Disclosure Letter. The Company has delivered to Parent the
Company Disclosure Letter as provided in Article 4. The Company Disclosure
Letter shall be signed by the President and the Secretary of the Company and
shall state that such Company Disclosure Letter was delivered pursuant to this
Agreement and that such Company Disclosure Letter is the Company Disclosure
Letter referred to in this Agreement. The Company Disclosure Letter is deemed to
constitute an integral part of this Agreement and to modify, as specified, the
representations, warranties, covenants or agreements of the Company contained in
this Agreement.
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3.3 Deliveries of Information. From time to time after the date of this
Agreement and prior to the Closing Date (unless this Agreement is terminated),
the Company shall furnish promptly to Parent a copy of each report, schedule and
other document filed by the Company or received by the Company after the date of
this Agreement pursuant to the requirements of federal or state securities Laws
promptly after such documents are available.
3.4 Acquisition Proposals.
(a) The Company agrees that, as of the date hereof, it, its
Affiliates, and the respective directors, officers, employees, agents and
representatives of the foregoing, shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Person
(other than Parent and its representatives) conducted heretofore with respect to
any Acquisition Transaction. Prior to the Effective Time, the Company agrees
that neither it, any of its Affiliates, nor any of the respective directors,
officers, employees, agents or representatives of the foregoing, will, directly
or indirectly, (i) solicit or initiate, or knowingly facilitate or encourage
(including by way of furnishing or disclosing non-public information) any
Acquisition Transaction or (ii) negotiate, explore or otherwise engage in
discussions with any Person (other than Parent and its representatives) with
respect to any Acquisition Transaction, or which may lead to a proposal for an
Acquisition Transaction, or enter into any agreement, arrangement or
understanding with respect to any such Acquisition Transaction or which would
require it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement, or which may cause the Board to
withdraw, modify or amend its recommendation that the Stockholders accept the
Offer, tender their Company Common Stock to Merger Sub or approve and adopt the
Agreement and the Merger; provided, however, that the Company may, in response
to a bona fide unsolicited proposal from a third party regarding an Acquisition
Transaction, (x) furnish information to and engage in discussions and
negotiations with such third party (subject to such third party entering into a
confidentiality agreement with the Company containing terms substantially
similar to the Confidentiality Agreement (as defined herein)), but only if the
Board of Directors of the Company reasonably determines in good faith, after
consultation with its outside independent counsel and a nationally recognized
investment bank, that such unsolicited proposal could reasonably lead to a
Superior Proposal and that failing to take such action could violate the Board's
fiduciary duties under applicable Law and (y) take and disclose to the
Stockholders any proposal, and make related filings with the SEC, as required by
Rule 14e-3 and 14d-9 under the Exchange Act. Any violation of this Section 3.4
by any director, officer, Affiliate, investment banker, financial advisor,
attorney or other advisor or representative of the Company, whether or not such
Person is purporting to act on behalf of the Company, or otherwise, shall be
deemed to be a breach of this Section 3.4 by the Company. As used herein,
"Acquisition Transaction" means any inquiries or the making of any proposal
other than by Parent or any of its Affiliates with respect to any merger,
consolidation or other business combination involving the Company or any
Subsidiary or with respect to the acquisition of beneficial ownership of all or
any significant part of the assets or capital stock of the Company (including
assets held by, or shares of, Subsidiaries). As used herein, "Superior Proposal"
means a bona fide, written Acquisition Proposal for at least a majority of the
outstanding Company Common Stock that is on terms that the Board reasonably
determines in good faith, after consultation with its outside independent legal
counsel and a nationally recognized investment bank, would result
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in a transaction, if consummated, that is more favorable to the Stockholders
from a financial point of view than the Offer and the Merger.
(b) The Company agrees to advise Parent promptly (within 24 hours in
the case of written inquiries or proposals, and otherwise within 48 hours) of
(x) the existence of any inquiries or proposals (or desire to make a proposal)
received by (or indicated to) it after the date hereof, any such information
requested from, or any negotiations or discussions sought to be initiated or
continued with, the Company, its Affiliates, or any of the respective directors,
officers, employees, agents or representatives of the foregoing, in each case
from a Person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and (y) the material terms thereof (including the
identity of such Person). If the Company engages in discussions or negotiations
with respect to any such Acquisition Proposal thereafter in accordance with
clause (x) above, the Company shall keep Parent and Merger Sub informed on a
timely basis as to such discussions and negotiations and the material terms
being discussed or negotiated.
3.5 Public Announcements. Any public announcement made by or on behalf of
either Parent or the Company prior to the termination of this Agreement pursuant
to Article 8 hereof concerning this Agreement, the transactions described herein
or any other aspect of the dealings heretofore had or hereafter to be had
between the Company and Parent and their respective Affiliates must first be
approved by the other party (any such approval not to be unreasonably withheld),
subject to either party's obligations under applicable Law or stock exchange
listing requirements or rules (but such party shall use its reasonable best
efforts to consult with the other party as to all such public announcements).
3.6 Confidentiality Agreement. The Company and Parent agree that the
Confidentiality Agreement entered into between the Company and the Parent, dated
November 30, 1998 (the "Confidentiality Agreement") remains in effect, but shall
at the Effective Time be deemed to have terminated without further action by the
parties.
3.7 Regulatory and Other Approvals.
(a) Subject to the terms and conditions herein provided, the Company
will (i) take all steps necessary or reasonably desirable, and proceed
diligently and in good faith and use its reasonable best efforts to obtain all
approvals required by any Contract to consummate the transactions contemplated
hereby, (ii) take all steps necessary or reasonably desirable, and proceed
diligently and in good faith and use its reasonable best efforts to obtain all
approvals, authorizations, and clearances of governmental and regulatory
authorities required of the Company or any Subsidiary to permit the Company to
consummate the transactions contemplated hereby, (iii) provide such other
information and communications to such governmental and regulatory authorities
as such authorities may reasonably request, and (iv) cooperate with Parent in
obtaining all approvals, authorizations, and clearances of governmental or
regulatory authorities and others required of Parent to consummate the
transactions contemplated hereby.
(b) The Company and Parent will (i) take all reasonable actions
necessary to file as soon as practicable, notifications under the HSR Act, (ii)
comply at the earliest practicable
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date with any request for additional information received from the Federal Trade
Commission or Antitrust Division of the Department of Justice pursuant to the
HSR Act, (iii) request early termination of the applicable waiting period, and
(iv) take all reasonable actions necessary to comply with any applicable
European Union antitrust laws.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger Sub, subject
to the exceptions disclosed in writing in the disclosure letter dated as of the
date hereof delivered to the Parent by the Company pursuant to, and as an
integral part of, this Agreement (the "Company Disclosure Letter"), which
identifies the Section and Subsection numbers hereof to which the disclosures
pertain, as follows:
4.1 Organization; Business.
(a) Organization. Each of the Company and its Subsidiaries, and to
the Company's knowledge, each of the Joint Ventures, is a corporation or similar
entity duly and validly organized and existing and in good standing under the
Laws of the jurisdiction of its incorporation or formation and is qualified to
do business as a foreign corporation or similar entity and in good standing in
the jurisdictions where the ownership, leasing or operation of property or the
conduct of its business requires its qualification as a foreign corporation or
similar entity except where the failure to so qualify would not have a Material
Adverse Effect on the Company.
(b) Powers. The Company and each of its Subsidiaries has all
requisite corporate power and authority to carry on its business as it is now
conducted and to own, lease and operate its current assets and properties.
4.2 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of common stock, par value $0.50 per share, of
which 8,688,294 shares are issued and outstanding as of the date hereof and none
are held in treasury and (ii) 1,000,000 shares of preferred stock having such
rights and preferences as the Board of Directors may designate, none of which
are outstanding as of the date hereof. Section 1.34 of the Company Disclosure
Letter sets forth all of the Existing Options and the number of shares of
Company Common Stock which are issuable in respect of the Existing Options.
(b) Issuance; Ownership. All of the outstanding capital stock of the
Company is duly authorized, validly issued, fully paid and nonassessable and was
not issued in violation of any preemptive rights. Section 4.2(b) of the Company
Disclosure Letter contains a complete list of the Company's Subsidiaries. Except
as set forth in Section 4.2(b) of the Company Disclosure Letter, each of the
outstanding shares of capital stock of each of the Company's Subsidiaries and
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to the Company's knowledge, each of the outstanding shares of capital stock of
the Joint Ventures beneficially owned directly or indirectly by the Company is
duly authorized, validly issued, fully paid and nonassessable and owned, either
directly or indirectly, by the Company free and clear of all Liens. Except for
the Company's Existing Options, the Company Preferred Rights, and the Company
Preferred Shares, there are no options, warrants, conversion rights or other
rights to subscribe for or purchase, or other contracts with respect to, any
capital stock of the Company and there are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. Except as provided in the Joint Venture agreements
previously provided to Parent and Merger Sub, to the Company's knowledge, there
are no options, warrants, conversion rights or other rights to subscribe for or
purchase, or other contracts with respect to, any capital stock of any of the
Joint Ventures. Except as set forth in Section 4.2(b) of the Company Disclosure
Letter, to the knowledge of the Company, there are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
(c) Voting Debt. As of the date of this Agreement, (i) no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
under ordinary circumstances ("Voting Debt") are issued or outstanding, and (ii)
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company.
(d) Listings. The Company Common Stock and the Company Preferred
Shares are listed for trading on the Nasdaq National Market; the Company's 9
7/8% Senior Notes due 2005, and 10 1/8% Senior Notes due 2007 are listed for
trading on the New York Stock Exchange. Except as set forth in the preceding
sentence, the Company's securities are not listed or quoted, for trading on any
U.S. domestic or foreign securities exchange.
4.3 Authorization; Enforceability. The execution, delivery and performance
by the Company of this Agreement are within the corporate power and authority of
the Company and have been duly authorized by the Board of Directors of the
Company. Except for the approval of the Stockholders as required by Law and the
Company's Certificate of Incorporation, and as described in Section 4.23 hereof,
no other corporate proceeding or action on the part of the Company is necessary
to authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the Merger and the other transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and is, and
each of the other documents and instruments required by this Agreement to be
executed and delivered by the Company will be when executed and delivered by the
Company, the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws generally affecting the rights of creditors and
subject to general equity principles.
4.4 No Violation or Conflict. Subject to the receipt of the clearance or
expiration or termination of the waiting period described in Section 7.1(a), the
execution and delivery of this Agreement by the Company and all documents and
instruments required by this Agreement to be
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executed and delivered by the Company do not, and the consummation by the
Company of the Offer, the Merger and the other transactions contemplated hereby
and the Company's compliance with the provisions hereof will not, (i) except as
disclosed in Section 4.4 of the Company Disclosure Letter, 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 under, or result in the loss by the Company or any Subsidiary or
to the Company's knowledge, any of the Joint Ventures, of a material benefit or
provide any third party with any material benefit under, any Contract of the
Company or its Subsidiaries or to the Company's knowledge, any of the Joint
Ventures, or result in the creation of any Lien upon any of the properties or
assets of the Company or its Subsidiaries or to the Company's knowledge, any of
the Joint Ventures, (ii) result in any violation of any provision of the
Certificate of Incorporation or Bylaws of the Company or the charter documents
of its Subsidiaries or to the Company's knowledge, any of the Joint Ventures,
(iii) violate any Existing Permits of the Company or its Subsidiaries or to the
Company's knowledge, any of the Joint Ventures, or any Law applicable to the
Company or its Subsidiaries or to the Company's knowledge, any of the Joint
Ventures, or its properties or assets, other than, in the case of clauses (i)
and (iii), any such violations, defaults, rights, losses or Liens that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, or would not affect adversely the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement.
4.5 Title to Assets. Each of the Company and its Subsidiaries, and, to the
Company's knowledge, each of the Joint Ventures owns fee simple or valid
leasehold (as the case may be) title to its Real Estate and has valid title to
its other tangible assets and properties necessary for the conduct of its
business, free and clear of any and all Liens, except for its Permitted Liens or
liens listed on Section 4.5 of the Company Disclosure Letter.
4.6 Litigation. Except as set forth in Section 4.6 of the Company
Disclosure Letter, (a) there are no actions, suits, claims, litigation, or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or its Subsidiaries or to the Company's knowledge with respect to any of
the Joint Ventures that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company; (b) there are no such
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened, against the Company or its Subsidiaries or to the Company's
knowledge with respect to any of the Joint Ventures which question the legality
or validity of the Merger and the other transactions contemplated by this
Agreement; and (c) there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Entity against the Company or its
Subsidiaries or to the Company's knowledge, any of the Joint Ventures, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
4.7 Books and Records; Company Financial Statements.
(a) Audited Company Financial Statements. The Company Financial
Statements comply in all respects with the applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with the applicable generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
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periods involved (except as may be indicated therein). The Company Financial
Statements fairly present the consolidated financial position of the Company and
its Subsidiaries and to the Company's knowledge, the Joint Ventures, as of the
date set forth on each of such Company Financial Statements and the consolidated
results of operations and cash flows of the Company and its Subsidiaries and to
the Company's knowledge, the Joint Ventures, for the periods indicated on each
of the Company Financial Statements.
(b) Unaudited Company Financial Statements. Those consolidated
financial statements which are unaudited and contained in the Company SEC
Documents fairly present the consolidated financial position of the Company and
its Subsidiaries and to the Company's knowledge, the Joint Ventures, as of the
date set forth on each of such consolidated financial statements and the
consolidated results of operations and cash flows of the Company and its
Subsidiaries and to the Company's knowledge, the Joint Ventures, for the periods
indicated on each of such consolidated financial statements in accordance with
GAAP applied on a consistent basis throughout the periods involved except that
such unaudited consolidated financial statements do not reflect normal and
recurring year-end adjustments and other adjustments described therein and do
not contain footnote disclosure of the type associated with audited financial
statements.
(c) Accounting Records. The accounting books and records of the
Company and each of its Subsidiaries and to the Company's knowledge, the Joint
Ventures: (i) are in all material respects correct and complete; (ii) are
current in a manner consistent with past practice; and (iii) have recorded
therein all the properties, assets and liabilities of the Company and its
Subsidiaries and the Joint Ventures.
(d) Undisclosed Liabilities. There is no material indebtedness,
obligation or liability (whether absolute or contingent) of the Company or any
of its Subsidiaries and to the Company's knowledge, the Joint Ventures, except
for (i) liabilities reflected or reserved for in the Consolidated Balance Sheet
for the year ended December 31, 1998 included in the Company Financial
Statements or (ii) liabilities or obligations incurred in the ordinary course,
consistent with past practice, from January 1, 1999 until the date hereof.
4.8 Absence of Certain Changes.
Except as described in Section 4.8 of the Company Disclosure Letter,
since December 31, 1998 there has not been any:
(a) Material Adverse Effect;
(b) transactions by the Company or its Subsidiaries outside the
ordinary course of business of the Company or its Subsidiaries, or, to the
knowledge of the Company, any of the Joint Ventures, except for the transactions
contemplated by this Agreement;
(c) declaration, setting aside or payment of any dividend or any
distribution in respect of the capital stock of the Company or its Subsidiaries
or any direct or indirect redemption, purchase or other acquisition of any such
stock by the Company or any Subsidiary;
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(d) payments or distributions, to the Stockholders as such, other
than normal salaries, and except for transactions in the ordinary course of
business upon commercially reasonable terms of the Company, to any Affiliate of
the Company;
(e) tax elections, other than those consistent with past practice,
not required by law or any settlement or compromise of any tax liability in
either case that is material to the Company or its Subsidiaries;
(f) any amendment of any material term of any outstanding security of
the Company or any Subsidiary;
(g) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any Indebtedness in excess of $3.0 million as to any single item
or $10.0 million in the aggregate, or any foreign currency, hedging, financial
derivative or similar transactions, other than in the ordinary course of
business and in amounts and on terms consistent with past practices;
(h) the making by the Company or any Subsidiary of any Investment;
(i) any transaction or any agreement entered into, by the Company or
any Subsidiary or, to the knowledge of the Company, any of the Joint Ventures
relating to its assets or business (including the acquisition or disposition of
assets) or any relinquishment by the Company or any Subsidiary or any Joint
Venture of any contract or other right, in either case, material to the Company
and the Subsidiaries taken as a whole, other than transactions and commitments
in the ordinary course of business consistent with past practice and those
contemplated by this Agreement;
(j) any change in any method of accounting or accounting practice by
the Company or any Subsidiary, except for any such change required by reason of
a concurrent change in GAAP or in Regulation S-X promulgated under the Exchange
Act;
(k) any grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary, increase in benefits
payable under any existing severance or termination pay policies or employment
agreements, entering into any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any Subsidiary, or increases in
compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary (other than any such increases
payable to employees other than directors or officers in the ordinary course of
business consistent with past practice);
(l) any cancellation, termination, lapse, assignment or other loss of
any material permits, licenses, approvals, qualification, authorizations or
registrations held by the Company or any Subsidiary or, to the knowledge of the
Company, any of the Joint Ventures or any notification to the Company or any
Subsidiary or, to the knowledge of the Company, any of the Joint Ventures that
any permit, license, approval, qualification, authorization or registration will
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not be extended beyond its expiration date in effect on the date hereof except
for any such occurrence that would not cause a Material Adverse Effect;
(m) any capital expenditure by the Company or its Subsidiaries (or
series of related capital expenditures) either involving more than $6.0 million
(unless such expenditure is identified in the current business plan of the
Company or its Subsidiary) or outside the ordinary course of business;
(n) any material damage, destruction, or loss (whether or not covered
by insurance) from fire or other casualty to its tangible property of the
Company or any Subsidiary or, to the knowledge of the Company, any of the Joint
Ventures;
(o) neither the Company nor its Subsidiaries have adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other similar plan for the benefit of any of its directors, officers or
employees; or
(p) any agreement or binding commitment by the Company or any
Subsidiary or, to the knowledge of the Company, any of the Joint Ventures
relating to any of the foregoing.
4.9 Performance of Contracts. Each of the material Contracts of the
Company and its Subsidiaries is in full force and effect and constitutes the
legal and binding obligation of the Company or its Subsidiaries and, to the
knowledge of the Company, constitutes the legal and binding obligation of the
other parties thereto. Except as disclosed in Section 4.9 of the Company
Disclosure Letter, there are no existing breaches or defaults by the Company or
its Subsidiaries under any such Contract the effect of which could constitute a
Material Adverse Effect on the Company, and, to the knowledge of the Company, no
event has occurred or state of circumstances or facts exists which, with the
passage of time or the giving of notice or both, could reasonably be expected to
constitute such a breach or default.
4.10 Insurance. Section 4.10 of the Company Disclosure Letter lists all of
the Existing Insurance Policies of the Company and its Subsidiaries and all
outstanding claims against such Existing Insurance Policies. Neither the Company
nor any of its Subsidiaries has received notice of cancellation or termination
of, or material premium increase with respect to, any such Existing Insurance
Policy. All such Existing Insurance Policies provide adequate insurance coverage
for the assets and properties of the Company and its Subsidiaries necessary for
the conduct of its business as currently being conducted.
4.11 Employee Benefit Plans. Except as disclosed in Section 4.11 of the
Company Disclosure Letter for the six-calendar year period prior to and
including the calendar year in which the Closing Date occurs:
(a) Employee Benefit Plans. Neither the Company nor any ERISA
Affiliate maintains or contributes to, any Employee Benefit Plan. Each Employee
Benefit Plan that is subject to ERISA or the Code is in substantial compliance
with ERISA and the Code. True and complete copies of all Employee Benefit Plans,
including, but not limited to, any trust instruments
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and insurance contracts forming a part of any Employee Benefit Plans, and all
amendments thereto have been provided or made available to Parent. Each Pension
Plan which is intended to meet the requirements of Section 401(a) of the Code
has been determined by the Internal Revenue Service to be "qualified" within the
meaning of the Code with respect to "TRA" (as defined in Section 1 of Rev. Proc.
93-39) or will be filed with the Internal Revenue Service with a request for a
determination letter on or prior to the end of the applicable remedial amendment
period and, to the knowledge of the Company, there are no facts which would
adversely affect the tax qualified status of any Pension Plan.
(b) ERISA; Code. There is no accumulated funding deficiency, within
the meaning of Section 302 of ERISA or Section 412 of the Code, in connection
with a Pension Plan. No reportable event, as defined in ERISA (other than
reportable events for which the 30-day notice requirement has been waived), has
occurred in connection with a Pension Plan. Neither the Company nor any ERISA
Affiliate is contributing to, nor has any such party incurred any liability
with respect to, any multi-employer plan, as defined in Section 3(37) of ERISA.
(c) Compliance. Neither the Company nor any ERISA Affiliate has
incurred, directly or indirectly, any liability to or on account of a Pension
Plan or any terminated or frozen single employer Pension Plan within the meaning
of Section 4001(a)(15) of ERISA; no proceedings have been instituted to
terminate any Pension Plan; and, to the knowledge of the Company, no condition
exists that presents a material risk to the Company or any ERISA Affiliate of
incurring a liability to or on account of a Pension Plan.
(d) Funding. As of December 31, 1999, the current value of the assets
of each Pension Plan exceeds the accumulated benefit obligation for the Pension
Plan as defined under FASB No. 87 (as amended by statement 132); and all
contributions or other amounts payable by the Company as of the Effective Time
with respect to each of its Employee Benefit Plans in respect of current or
prior plan years have been either paid or accrued on the balance sheet of the
Company. There are no pending or, to the knowledge of the Company, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Employee Benefit Plans or any trusts related thereto and
neither the Company nor any Subsidiary has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(e) Other Plan Obligations. To the knowledge of the Company, neither
the Company nor any ERISA Affiliate, nor any of its Employee Benefit Plans, nor
any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any ERISA
Affiliate, any of its Employee Benefit Plans, any such trust, or any trustee or
administrator thereof, or any party dealing with any of its Employee Benefit
Plans or any such trust could be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code. No Employee Benefit Plan of the Company provides death
or medical benefits (whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable Law or
(ii) death benefits under any "employee pension plan," as that term is defined
in Section 3(2) of ERISA.
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Subject to requirements in a collective bargaining agreement, under the terms of
the Employee Benefit Plans, the Company or any Subsidiary may amend or terminate
any such Employee Benefit Plan at any time without incurring any liability
thereunder. The consummation of the transactions contemplated by this Agreement
will not (i) entitle any employees of the Company or any Subsidiary to severance
pay; (ii) accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of the Employee Benefit Plans; or (iii) result in any breach or
violation of, or a default under, any of the Employee Benefit Plans. All
Employee Benefit Plans covering current or former non-U.S. employees comply in
all material respects with applicable local law. The Company and its
Subsidiaries have no material unfunded liabilities with respect to any Pension
Plan that covers such non-U.S. employees.
4.12 Brokers' and Finders' Fees. Except for fees to be paid to Salomon
Smith Barney Inc., the Company has not incurred any brokers', finders',
investment bankers' or any similar fee in connection with the transactions
contemplated by this Agreement. A true, correct and complete copy of the
engagement letter between the Company and Salomon Smith Barney Inc. has been
made available to Parent.
4.13 Taxes.
(a) Tax Returns. For all years for which the applicable statutory
period of limitations has not expired, the Company and each of its Subsidiaries
has timely and properly filed, and will through the Closing Date timely and
properly file, all material federal, state, local and foreign tax returns
(including but not limited to income, franchise, sales, payroll, employee
withholding and social security and unemployment) which were or will be required
to be filed and all such tax returns are or will be true and complete in all
material respects. The Company and each of its Subsidiaries has paid all taxes
shown on such returns (including interest and penalties) and withholding amounts
owed by the Company and each of its Subsidiaries except where the failure to do
so would not cause a Material Adverse Effect on the Company. The Company and
each of its Subsidiaries have made adequate provisions or reserves for any
accrued taxes that are not yet due and payable. No material tax deficiencies
have been proposed or assessed against the Company or its Subsidiaries. To the
knowledge of the Company, no issue has been raised in any prior tax audit of the
Company or its Subsidiaries which, by application of the same or similar
principles, could reasonably be expected, upon a future tax audit of the Company
or its Subsidiaries to result in a proposed deficiency for any period and which
deficiency would have a Material Adverse Effect on the Company. Except as
disclosed in Section 4.13 of the Company Disclosure Letter, the Company is not
liable for any taxes attributable to any other Person, whether by reason of
being a member of another affiliated group, being a party to a tax sharing
agreement, as a transferee or successor, or otherwise.
(b) Audits. Except as disclosed on Section 4.13 of the Company
Disclosure Letter, the Company and each of its Subsidiaries have not consented
to any extension of the statute of limitations with respect to any open federal,
state or local tax returns.
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(c) Liens. There are no tax Liens upon any property or assets of the
Company necessary for the conduct of its business as currently being conducted,
except for Liens for current taxes not yet due and payable, and except for such
claims which, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(d) Deliveries. The Parent has had the opportunity to review correct
and complete copies of all tax returns and reports of the Company filed for all
periods not barred by the applicable statute of limitations through the date
hereof. Except as disclosed in Section 4.13 of the Company Disclosure Letter, no
examination or audit of any tax return or report for any period not barred by
the applicable statute of limitations has occurred, no such examination is in
progress and, the Company has not received written notice that any such
examination or audit is planned.
(e) Withholding Taxes. The Company has properly withheld and timely
paid substantially all withholding and employment taxes which it was required to
withhold and pay relating to salaries, compensation and other amounts heretofore
paid to its employees or other Persons. All Forms W-2 and 1099 required to be
filed with respect thereto have been timely and properly filed except where the
failure to file would not have a Material Adverse Effect.
(f) Other Representations. The Company has not and will not make any
elections under Section 341(f) of the Code and, except as shown in Section 4.13
of the Company Disclosure Letter, has and will not be subject to Section 280G of
the Code.
4.14 Real Estate. Except as set forth in Section 4.14 of the Company
Disclosure Letter, the Real Estate: (a) constitutes all real property and
improvements leased or owned by the Company or any Subsidiary; and (b) is not
subject to any leases, tenancies, encumbrances or encroachments of any kind
except for Permitted Liens.
4.15 Governmental Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
federal, state, local or foreign court, arbitral tribunal, administrative agency
or commission or other governmental or regulatory authority or administrative
agency (a "Governmental Entity") is required by the Company in connection with
the execution and delivery of this Agreement by the Company or the consummation
of the Offer or the consummation by the Company of the Merger or the other
transactions described herein, except for: (a) the approvals or filings in
connection with (i) the HSR Act as described in Section 7.1(a) and (ii) the
Exchange Act, including, without limitation, filing the Proxy Statement with the
SEC; (b) the filing of the Certificate of Merger as described in this Agreement;
and (c) such other permissions, approvals, determinations, consents, waivers,
declarations, filings, or registrations that are not material and that would not
materially impair the Company's ability to consummate the Merger and the other
transactions contemplated hereby.
4.16 No Pending Acquisitions. Except for this Agreement and previously
executed confidentiality agreements, the Company is not a party to or bound by
any agreement, undertaking or commitment with respect to an Acquisition
Transaction.
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4.17 Labor Matters.
(a) Employment Claims. Except as set forth in Section 4.17 of the
Company Disclosure Letter, there is no present or former employee of the Company
or any of its Subsidiaries who has any claim against the Company or any of its
Subsidiaries (whether under Law, under any employee agreement or otherwise) on
account of or for: (i) overtime pay, other than overtime pay for the current
payroll period; (ii) wages or salaries, other than wages or salaries for the
current payroll period; or (iii) vacations, sick leave, time off or pay in lieu
of vacation or time off, other than vacation, sick leave or time off (or pay in
lieu thereof) earned in the period immediately preceding the date of this
Agreement or incurred in the ordinary course of business and appearing as a
liability on the most recent Company Financial Statements; except where such
claims, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
(b) Labor Disputes. Except as disclosed in Schedule 4.17 of the
Company Disclosure Letter, (i) there are no pending and unresolved material
claims by any Person against the Company or any of its Subsidiaries arising out
of any statute, ordinance or regulation relating to unfair labor practices,
discrimination toward employees or in employment practices, or occupational or
safety and health standards; (ii) there is no pending, nor has the Company or
any of its Subsidiaries experienced any, material labor dispute, strike or
organized work stoppage; (iii) to the knowledge of the Company, there is no
threatened material labor dispute, strike or organized work stoppage against the
Company or any of its Subsidiaries or (iv) the Company is not subject to a
proceeding seeking to compel it to bargain with any labor union or labor
organization.
(c) Union Matters. Except as disclosed in Section 4.17 of the Company
Disclosure Letter, (i) neither the Company nor any Subsidiary is a party to any
collective bargaining agreement; (ii) to the knowledge of the Company, no union
organizing activities are in process or have been proposed or threatened
involving any employees of the Company or any of its Subsidiaries; and (iii) no
petitions have been filed or, to the knowledge of the Company, have been
threatened or proposed to be filed, for union organization or representation of
employees of the Company or any of its Subsidiaries not presently organized.
4.18 Existing Permits and Violations of Law. The Company and each of its
Subsidiaries and to the Company's knowledge, the Joint Ventures, have all
licenses, permits, approvals, exemptions, orders, franchises, qualifications,
permissions, agreements and governmental authorizations required by Law and
required for the conduct of the business of the Company and its Subsidiaries and
the Joint Ventures as currently conducted, except where the failure to have the
same would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. No action or proceeding is pending or, to the
knowledge of the Company, threatened that is reasonably likely to result in a
revocation, non-renewal, termination, suspension or other material impairment of
any material Existing Permits of the Company or its Subsidiaries or the Joint
Ventures. The business of the Company and its Subsidiaries and to the Company's
knowledge, the Joint Ventures, is not being conducted in violation of any
applicable Law, except for such violations which would not have a Material
Adverse Effect on the Company
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and except for such violations of any Environmental Law set forth on Section
4.22 of the Company Disclosure Letter. No Governmental Entity has notified the
Company or any Subsidiary or to the Company's knowledge, the Joint Ventures, of
the Company of its intention to conduct an investigation or review with respect
to the Company or any Subsidiary of the Company or the Joint Ventures other
than, in each case, those which would not have a Material Adverse Effect on the
Company.
4.19 Warranty or Other Claims. No product manufactured, sold, leased or
delivered by the Company or any of its Subsidiaries is subject to any guaranty,
warranty, right of return or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Except as set forth in Section 4.19 of
the Company Disclosure Letter, there are no existing or, to the knowledge of the
Company, threatened claims or any facts upon which a claim could be based,
against the Company, any of its Subsidiaries or any of the Joint Ventures for
services or merchandise which are defective or fail to meet any service or
product warranties which would, individually or in the aggregate, have a
Material Adverse Effect on the Company.
4.20 Intangible Assets. Section 4.20 of the Company Disclosure Letter
contains a complete list identifying each patent which is owned or licensed by
the Company or any of its Subsidiaries. Except as set forth in Section 4.20 of
the Company Disclosure Letter, (i) there are no claims, demands or proceedings
instituted, pending or, to the knowledge of the Company, threatened by any
Person contesting or challenging the right of the Company or its Subsidiaries or
any of the Joint Ventures to use any Intangible Assets currently used by it in
the operation of its business, except where such claims, individually or in the
aggregate, would not have a Material Adverse Effect on the Company; (ii) each
trademark registration, service mark registration, copyright registration and
patent which is owned by the Company or its Subsidiaries, has been maintained in
good standing and which is licensed to the Company or its Subsidiaries, to the
Company's knowledge, has been maintained in good standing except where the
failure to so maintain would not have a Material Adverse Effect on the Company;
(iii) there are no Intangible Assets owned by a Person which the Company or its
Subsidiaries or, to the knowledge of the Company, any of the Joint Ventures is
using without license to do so, except where the failure to possess such license
could not reasonably be expected to have a Material Adverse Effect on the
Company; (iv) to the Company's knowledge, the Company and each of its
Subsidiaries and the Joint Ventures own or possess adequate licenses or other
rights to use all Intangible Assets necessary to conduct its business as now
conducted, except where the failure to possess such licenses could not
reasonably be expected to have a Material Adverse Effect on the Company; and (v)
to the Company's knowledge, the consummation of the Merger and the other
transactions contemplated by this Agreement will not impair the validity,
enforceability, ownership or right of the Company or its Subsidiaries or, to the
knowledge of the Company, any of the Joint Ventures to use the Intangible Assets
currently used by it in the operation of its business except, in each case,
where the impairment would not have a Material Adverse Effect on the Company.
4.21 Customers and Suppliers. Since December 31, 1998, there has been no
termination, cancellation or curtailment of the business relationship of the
Company with any customer or supplier or group of affiliated customers or
suppliers which would result in a Material
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Adverse Effect, and the Company has not received written notice of any such
termination, cancellation or curtailment.
4.22 Environmental Protection. Except as set forth in Section 4.22 of the
Company Disclosure Letter or as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on the Company, the
Company and each of its Subsidiaries and to the Company's knowledge, each of the
Joint Ventures: (i) is in compliance with all applicable Environmental Laws; and
(ii) has not received any Environmental Claim or any communication (written or
oral), from a governmental authority or third party that alleges that the
Company or any current or former Affiliate of the Company is not in compliance
with applicable Environmental Laws; (iii) has not owned or operated any property
that is contaminated with any Hazardous Material which may be expected to
require remediation under any Environmental Law; (iv) is not subject to
liability for any off-site disposal or contamination; and (v) is not subject to
any other circumstances in connection with any Environmental Law that could
reasonably be expected to result in any claims, liabilities, costs or
restrictions on the business or the ownership, use or transfer of any property.
4.23 Vote Required. The affirmative vote of the holders of at least a
majority of the outstanding shares of Company Common Stock entitled to vote with
respect to the Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve the Merger and this Agreement.
4.24 SEC Reports. The Company has filed with the SEC true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1996 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Company SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, the Company SEC
Documents, including, without limitation, any financial statements or schedules
included therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, at such time of filing.
4.25 Content of Proxy Statement. The Proxy Statement, if any (or any
amendment thereof or supplement thereto), will, at the date mailed to the
Stockholders and at the time of the Special Meeting to be held in connection
with the Merger, 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 are
made, not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied by Parent or
Merger Sub in writing specifically for inclusion in the Proxy Statement. The
Proxy Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
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4.26 Opinion of Financial Advisor. The Board of Directors of the Company
has received the opinion of Salomon Smith Barney Inc., its financial advisor, to
the effect that, as of the date of this Agreement, the cash consideration to be
received in the Offer and the Merger by the Stockholders (other than Parent and
its Affiliates), based upon and subject to the assumptions and limitations set
forth in such opinion, is fair to such Stockholders from a financial point of
view.
4.27 Certain Agreements. Except as set forth in Section 4.27 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any oral or written agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the consummation of the Merger or any of the other
transactions contemplated by this Agreement. Except as described in Section 4.27
of the Company Disclosure Letter, the Merger and the other transactions
contemplated by this Agreement will not constitute a "change of control" under,
require the consent from or the giving of notice to any third party pursuant to,
or accelerate the vesting or repurchase rights under, any Contract to which the
Company or any of its Subsidiaries is a party, other than Contracts which are
not Contracts with directors, officers or employees of the Company or any
Subsidiary and which have been entered into in the ordinary course and are not
material. Except as set forth in Section 4.27 of the Company Disclosure Letter,
there are no amounts payable by the Company to any officers of the Company (in
their capacity as officers) as a result of the Merger or the other transactions
contemplated by this Agreement.
4.28 Takeover Law; Company Rights Agreement.
(a) The Company has taken all action required to be taken by it in
order to exempt this Agreement and the Merger and the other transactions
contemplated hereby from, and this Agreement is exempt from, the requirements of
all anti-takeover Laws and regulations (collectively, "Takeover Laws") that
apply or may purport to apply to the Offer and the Merger, including, without
limitation, Section 203 of DGCL.
(b) The Company has (i) duly entered into an appropriate amendment to
the Company Rights Agreement and (ii) taken all other action necessary or
appropriate so that the entering into of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby do not and will not
result in the ability of any Person to exercise any Company Preferred Rights
under the Company Rights Agreement or enable or require the Company Preferred
Rights to separate from the shares of Company Common Stock to which they are
attached or to be triggered or become exercisable, and the Company Rights
Agreement, as so amended, has not been further amended or modified. In
particular, the Company has taken all actions necessary under the Rights
Agreement, so that the execution of this Agreement and any amendments thereto by
the parties hereto and the consummation of any of the transactions contemplated
hereby shall not cause (i) Parent and/or Merger Sub or their respective
Affiliates to become an Acquiring Person (as such terms are defined in the
Rights Agreement) unless this Agreement has been terminated in accordance with
its terms or (ii) a Distribution Date, a Shares Acquisition Date, or a
Triggering Event (as such terms are defined in the Rights Agreement) to
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occur, irrespective of the number of shares of Company Common Stock acquired
pursuant to the Offer, Merger or other transactions contemplated by this
Agreement.
4.29 Year 2000 Compliance. Except as set forth on Schedule 4.29 of the
Company Disclosure Letter or as would not result in a Material Adverse Effect,
(i) all functions including, without limitation, date-reliant (which includes
year-reliant) functions of the information and business systems of the Company
and its Subsidiaries (collectively, the "Systems") are capable of continuing to
operate up to, during and after the year 2000, (ii) neither the performance nor
functionality of the Systems will be affected by any changes to the field
configuration which contains the date information within any part of the System
caused by the advent of the year 2000, and (iii) the Systems will perform
consistent with past performance and there shall be no faults in the processing
of dates and date-dependent information or data including, without limitation,
in calculations, comparisons and sequencing of information or data. Schedule
4.29 of the Company Disclosure Letter sets forth, with respect to any exception,
the nature of such exception in detail, including the nature of the problem, the
nature of the steps undertaken and planned, and the Company's good faith
estimate of the cost to correct such problem and its projection of a date for
project completion.
4.30 Approval by Disinterested Directors. A majority of the Company's
Disinterested Directors (as defined in the Company's Restated Certificate of
Incorporation, as amended) have approved the Merger.
ARTICLE 5
REPRESENTATIONS OF THE PARENT AND MERGER SUB
The Parent and Merger Sub represent and warrant to the Company on the date
of this Agreement as follows:
5.1 Due Incorporation and Authority. Each of the Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The
execution, delivery and performance by each of Parent and Merger Sub of this
Agreement and all of the documents and instruments required by this Agreement to
be executed and delivered by Parent and/or Merger Sub, and the consummation by
Merger Sub of the Merger, have been duly authorized by all the shareholders of
Merger Sub and the Board of Directors of Parent and Merger Sub as required by
Law and the organizational documents of each such entity, and no other corporate
proceedings on the part of Parent or Merger Sub will be necessary to authorize
the execution, delivery and performance by each of Parent and Merger Sub of this
Agreement, or the consummation by Merger Sub and Parent of the Merger. This
Agreement has been duly executed and delivered by Parent and Merger Sub and is,
and each of the other documents and instruments required by this Agreement to be
executed and delivered by Parent and/or Merger Sub will be, when executed and
delivered by Parent and/or Merger Sub, the valid
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and binding obligations of Parent and Merger Sub, as the case may be,
enforceable against Parent and Merger Sub, as the case may be, in accordance
with their respective terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
generally affecting the rights of creditors and subject to general equity
principles.
5.2 Consents and Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, any Governmental
Entity is required by Parent and Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation of the
Offer or the consummation by Parent and Merger Sub of the Merger or the other
transactions described herein, except for: (a) the approvals or filings in
connection with (i) the HSR Act as described in Section 7.1(a), (ii) filings and
approvals pursuant to European Union or other applicable European antitrust
laws, and (iii) the Exchange Act including, without limitation, filing the Proxy
Statement with the SEC; (b) the filing of the Certificate of Merger as described
in this Agreement; and (c) such other permissions, approvals, determinations,
consents, waivers, declarations, filings, or registrations that are not material
and that would not materially impair Parent or Merger Sub's ability to
consummate the Merger and the other transactions contemplated hereby.
5.3 Brokers' and Finders' Fees. Except for fees to be paid to Warburg
Dillon Read LLC, neither Parent nor Merger Sub has incurred any brokers',
finders', investment bankers' or any similar fee in connection with the
transactions contemplated by this Agreement.
5.4 No Violation or Conflict. Subject to the receipt of the clearance or
expiration or termination of the waiting period described in Section 7.1(a), the
execution and delivery of this Agreement by Parent and Merger Sub and all
documents and instruments required by this Agreement to be executed and
delivered by Parent or Merger Sub do not, and the consummation by Parent and
Merger Sub of the Offer, the Merger and the other transactions contemplated
hereby and Parent's and Merger Sub's compliance with the provisions hereof will
not, (i) 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 the loss by Parent or Merger Sub of a material
benefit or provide any third party with any material benefit under, any Contract
of Parent or Merger Sub, or result in the creation of any Lien upon any of the
properties or assets of Parent or Merger Sub, (ii) result in any violation of
any provision of the charter documents of the Parent or the Certificate of
Incorporation or Bylaws of Merger Sub, (iii) violate any Existing Permits of
Parent or Merger Sub or any Law applicable to Parent or Merger Sub or any of
such party's properties or assets, other than, in the case of clauses (i) and
(iii), any such violations, defaults, rights, losses or Liens that, individually
or in the aggregate, would not affect adversely the ability of Parent or Merger
Sub to consummate the Merger and the other transactions contemplated by this
Agreement.
5.5 Litigation. As of the date hereof, there are no actions, suits, claims,
litigation or proceedings pending or, to the knowledge of Parent or Merger Sub,
threatened, against Parent or its Subsidiaries by any Person which question the
legality, validity or consummation of the Merger and the other transactions
contemplated by this Agreement.
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5.6 Sufficient Funds. Parent has possession of, or has available to it
under existing lines of credit, sufficient funds to consummate the Merger and
the other transactions contemplated by this Agreement, including payment of the
aggregate cash to be paid in respect of shares of Company Common Stock converted
into the right to receive cash in the Merger and all related costs and expenses
and will cause Merger Sub to have sufficient funds available to consummate the
Merger and the transactions contemplated hereby.
ARTICLE 6
COVENANTS AND AGREEMENTS
6.1 Conduct of Business by the Company. From and after the date of this
Agreement and until the earlier of the termination of this Agreement, the
Effective Time, or the date Parent's designees constitute a majority of the
Board of Directors of the Company, the Company shall, and shall cause each of
its Subsidiaries to:
(a) carry on its business in the usual, regular and ordinary course
substantially in the same manner as heretofore carried on;
(b) not (i) make payments or distributions (other than normal
salaries) to any Affiliate of the Company except for transactions in the
ordinary course of business upon commercially reasonable terms and in accordance
with past practice; (ii) sell, lease, transfer or assign any of its assets,
tangible or intangible, other than the sale of products manufactured by the
Company or any Subsidiary in the ordinary course of business and other than the
disposition of obsolete or unusable property; (iii) enter into any Contract (x)
involving more than $1.0 million individually or $5.0 million in the aggregate
(other than purchase and sales orders in the ordinary course of business in
accordance with past practice) or (y) outside the ordinary course of business,
without the consent of the Parent (which consent shall not be unreasonably
withheld, assuming for purposes of determining such reasonableness that the
Offer and the Merger are consummated pursuant to the terms of this Agreement);
(iv) accelerate, terminate, modify in any material respect, or cancel any
Contract (other than purchase and sales orders in the ordinary course of
business in accordance with past practice) involving more than $1.0 million
individually or $5.0 million in the aggregate to which the Company or any
Subsidiary is a party without the consent of the Parent (which consent shall not
be unreasonably withheld, assuming for purposes of determining such
reasonableness that the Offer and the Merger are consummated pursuant to the
terms of this Agreement); (v) make any capital expenditure (or series of related
capital expenditures) other than expenditures identified in the current business
plan of the Company or its Subsidiaries or (y) outside the ordinary course of
business, without the consent of the Parent (which consent shall not be
unreasonably withheld, assuming for purposes of determining such reasonableness
that the Offer and the Merger are consummated pursuant to the terms of this
Agreement); (vi) delay or postpone the payment of accounts payable and other
liabilities outside the ordinary course of business; (vii) cancel, compromise,
waive or release any right or claim (or series of related rights and claims) not
covered by the reserves or accruals relating to such claim in the Company
Financial Statements (x) involving more than $1.0 million each or $5.0 million
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in the aggregate or (y) outside the ordinary course of business consistent with
past practice without the consent of the Parent (which consent shall not be
unreasonably withheld, assuming for purposes of determining such reasonableness
that the Offer and the Merger are consummated pursuant to the terms of this
Agreement); (viii) grant any license or sublicense of any rights under, or with
respect to, any Intangible Assets; or (ix) make any loan to, or enter into any
other transaction with, any of its Affiliates, directors, officers and employees
outside the ordinary course of business consistent with past practice;
(c) use, operate, maintain and repair all assets and properties of the
Company necessary to conduct its business as currently conducted in a normal
business manner consistent with its past practices;
(d) use its reasonable best efforts to preserve its business
organization intact, to retain the services of its employees, subject to changes
in the ordinary course, and to conduct business with suppliers, customers,
creditors and others having business relationships with the Company or its
Subsidiaries in the best interests of the Company and its Subsidiaries, taken as
a whole;
(e) use its reasonable best efforts to maintain all of its Existing
Insurance Policies (or policies substantially equivalent thereto) in full force
and effect;
(f) not (i) except as required by any Contract to which the Company or
any of its Subsidiaries are a party, increase the rate of pay of or other
compensation to any of its directors, officers or employees; (ii) institute or
amend any Employee Benefit Plan unless required by Law; (iii) enter into or
modify any employment or severance agreement with any Person; or (iv) pay or
accrue any bonus or incentive compensation to any Person;
(g) except for Indebtedness for working capital not to exceed $6.0
million at any one time, not create, incur or assume any Indebtedness in excess
of $5.0 million in the aggregate or make any Investment;
(h) not amend its Certificate of Incorporation, Bylaws or charter
documents;
(i) not (i) issue any additional shares of stock of any class (except
pursuant to its Existing Options) or grant any warrants, options or rights to
subscribe for or acquire any additional shares of stock of any class; (ii)
declare or pay any dividend or make any capital, surplus or other distributions
(other than normal salaries) of any nature to the Stockholders; or (iii)
directly or indirectly redeem, purchase or otherwise acquire, recapitalize or
reclassify any of its capital stock or liquidate in whole or in part;
(j) timely and properly file, or timely and properly file requests for
extensions to file, all federal, state, local and foreign tax returns which are
required to be filed, and pay or make provision for the payment of all taxes
owed by it; and
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(k) not do any act or omit to do any act that would result in a breach
of any representation by the Company set forth in this Agreement.
(l) not make any tax elections, other than those consistent with past
practice, not required by law or make any settlement or compromise any tax
liability in either case that is material to the Company or its Subsidiaries,
without the prior written consent of the Parent (which consent shall not be
unreasonably withheld).
(m) enter into any agreement, arrangement or understanding with
respect to any of the foregoing.
6.2 Indemnification.
(a) From and after the date of this Agreement through and including
the Effective Time (without regard to the termination of this Agreement),
neither Parent nor the Company will take any action, nor permit any action to be
taken, which would change or amend the provisions of the Certificate of
Incorporation or the Bylaws of the Company in effect on the date hereof relating
to limitation of liability or indemnification inconsistent with its obligations
under Section 6.2(b) hereof or eliminate or make any modification in the
Company's existing director's and officer's insurance inconsistent with its
obligations under Section 6.2(c) hereof. The Parent agrees that from and after
the Effective Time all rights to indemnification now existing in favor of
individuals who at or prior to the Effective Time were directors or officers of
the Company or any of its Subsidiaries as set forth in the Certificate of
Incorporation or the Bylaws of the Company shall survive the Merger with respect
to matters existing or occurring at or prior to the Effective Time and shall
continue in full force and effect for a period of six years following the
Effective Time.
(b) The Company shall, and from and after the Effective Time, the
Surviving Corporation shall, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who becomes prior to
the Effective Time, an officer or director of the Company or any of its
Subsidiaries (each individually an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities or judgments, fines or
amounts that are paid in settlement as a result of or in connection with any
threatened or actual action, suit or proceeding based on or arising out of the
fact that such person is or was a director or officer of the Company or any of
its Subsidiaries or out of or in connection with activities in such capacity,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent a corporation
is permitted under the DGCL to indemnify any such person and, without limiting
the generality or effect of the foregoing, to the fullest extent provided in the
Certificate of Incorporation or the Bylaws of the Company and its Subsidiaries
as in effect on the date hereof. The Parent will cause the Surviving Corporation
to pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted by law and,
without limiting
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the generality or effect of the foregoing, to the fullest extent provided in the
respective Certificate of Incorporation or Bylaws of the Company and its
Subsidiaries as in effect on the date hereof subject to receipt by the Company
of an undertaking by or on behalf of such officer or director contemplated by
the DGCL. Without limiting the generality or effect of the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time) and, in the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, there is a conflict on any significant issue
between the position of the Company and an Indemnified Party or different
defenses may reasonably be expected to exist, the Indemnified Parties may retain
counsel which counsel shall be reasonably satisfactory to the Company (or the
Surviving Corporation after the Effective Time) and the Company shall (or after
the Effective Time, Parent will cause the Surviving Corporation to) pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, provided, however that (i) Parent
or the Surviving Corporation shall have the right, from and after the Effective
Time, to assume the defense thereof (which right shall not affect the right of
the Indemnified Parties to be reimbursed for separate counsel as specified in
the preceding sentence), (ii) the Company and the Indemnified Parties will
cooperate in the defense of any such matter and (iii) neither Parent, the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent. Any Indemnified Party wishing to
claim indemnification under this Section 6.2, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify both the Parent
and the Company (or, after the Effective Time, the Surviving Corporation) (but
the failure to so notify shall not relieve a party from any liability which it
may have under this Section 6.2 except and only to the extent such failure
materially prejudices such party), and shall deliver to both the Parent and the
Company (or after the Effective Time, the Surviving Corporation) the undertaking
contemplated by the DGCL. The Indemnified Parties as a group may not retain more
than one counsel to represent them with respect to each such matter unless there
is, in the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties or unless different
defenses may reasonably be expected to exist. The Company, Parent and Merger Sub
agree that all rights to indemnification including provisions relating to
advances of expenses incurred in defense of any action or suit, existing in
favor of the Indemnified Parties with respect to matters occurring through the
Effective Time, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time;
provided, however, that all rights to indemnification in respect of any
Indemnified Liabilities asserted or made within such period shall continue until
the disposition of such Indemnified Liabilities.
(c) The Parent agrees that the Company, and from and after the
Effective Time, the Surviving Corporation shall cause to be maintained in effect
for not less than six years (except as provided in the last sentence of this
Section 6.2(c)) from the Effective Time the current policies of the directors'
and officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor other policies of at least the
same coverage amounts and which contain terms and conditions not less
advantageous (other than to a de minimus extent) to the beneficiaries of the
current policies and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and
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provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 200% of the last annual premium paid by the
Company prior to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 6.2(c) it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
(d) The Parent shall guarantee the obligations of the Surviving
Corporation under this Section 6.2.
(e) This Section 6.2 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of Parent and the Surviving Corporation and shall be enforceable by the
Indemnified Parties.
6.3 Certain Benefit Plans.
(a) Parent agrees that the Company will honor and, from and after the
Effective Time, it will cause the Surviving Corporation to honor all obligations
under Employee Benefit Plans and all employment agreements entered into by the
Company prior to the date hereof; provided, however, that nothing in this
Agreement shall be interpreted as limiting the power of Parent or the Surviving
Corporation to amend or terminate any such Employee Benefit Plan or as requiring
the Parent or the Surviving Corporation to offer to continue (other than as
required by its terms) any written employment contract so long as any such
action shall not adversely affect the rights or benefits of any employees or
other beneficiaries which shall have arisen thereunder prior to such amendment
or termination and shall not affect any rights or benefits for which the
agreement of the other party or a beneficiary is required as a condition to any
such amendment or termination. As soon as administratively practicable following
the Effective Time, Parent shall cause all employees of the Company then
actually at work to be covered under employee benefit and fringe benefit plans,
programs, policies and arrangements (including, without limitation, those which
provide medical, dental or life insurance benefits) that are no less favorable
than the employee benefit plans, programs, policies and arrangements that Parent
maintains for its similarly situated employees ("Parent-Provided Plans");
provided, that nothing in this sentence shall be deemed to limit or otherwise
affect the right of the Surviving Corporation to terminate the employment or
change the place of work, responsibilities, status or designation of any
employee of the Company as the Surviving Corporation may determine in the
exercise of its business judgment and in compliance with the terms of any
applicable employment or retainer agreement to which the Company or any of its
Subsidiaries is presently a party.
(b) All service of an employee of the Company taken into account prior
to the Effective Time under any Employee Benefit Plan shall, on and after the
Effective Time, be taken into account as service with the Parent for purposes of
eligibility to participate and vesting under any similar Parent-Provided Plan.
Parent shall cause all Parent-Provided Plans to (i) waive any pre-existing
condition limitations otherwise applicable on and after the Effective Time to
the extent that such conditions are covered under the Company's Employee Benefit
Plans immediately prior to the Effective Time and (ii) provide that any expenses
incurred by the Company's employees
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(and their dependents) during the plan year within which the Effective Time
occurs shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions (and like
adjustments or limitations on coverage) under the Parent-Provided Plans. Any
salary reduction elections of employees of the Company under a flexible spending
plan maintained by the Company pursuant to section 125 of the Code prior to the
Effective Time shall continue in effect under any similar Parent-Provided Plan
on and after the Effective Time, and any amounts credited and debited to
accounts of such employees under such Employee Benefit Plan as of the Effective
Time shall be credited and debited to such employees' accounts under such
Parent-Provided Plan.
6.4 No Survival of Representations and Warranties. Except for the
provisions of Sections 2.9, 2.12, 2.13, 2.14, 2.18, 6.2, 6.3 and 8.3, and
Article 9, none of the representations, warranties, covenants, agreements and
certifications contained herein shall survive the Effective Time.
6.5 Company Rights Plan. The Company shall make no further amendments to or
modifications of the Company Rights Agreement, or adopt any similar rights
agreement, from and after the date of this Agreement without the prior written
consent of Parent.
6.6 Consents. The Company will use its reasonable best efforts to obtain
the consents under the contracts listed in Section 4.28 of the Company
Disclosure Letter.
6.7 Potential Claims. The Company and Parent each agree to use their
reasonable best efforts to resolve any actions, suits, claims, litigation, or
proceedings instituted or threatened by any Governmental Entity or otherwise
against any of the parties hereto which would give rise to the occurrence of any
of the events specified in paragraph (a) or (b) of Annex A to this Agreement.
ARTICLE 7
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to consummate and effect the Merger shall be
subject to the satisfaction prior to or at the Closing as hereinafter provided
of the following conditions, each of which may be waived in whole or in part by
the party for whose benefit the condition exists, to the extent permitted by
Law:
(a) Regulatory Approvals. Clearance from the appropriate agencies,
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), shall have been obtained by the Company and the Parent or the
waiting period thereby required shall have expired or been terminated.
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(b) Approval of Stockholders. This Agreement, the Merger and the
transactions contemplated by this Agreement shall, if necessary, have received
the requisite approval and authorization of the Stockholders in accordance with
applicable Law and the Certificate of Incorporation and Bylaws of the Company.
(c) Statutes, Court Orders. No statute, rule or regulation shall have
been enacted or promulgated by any Governmental Entity which prohibits the
consummation of the Merger; and there shall be no order or injunction of a court
of competent jurisdiction in effect precluding consummation of the Merger.
(d) Purchase of Company Common Stock in Offer. Parent, Merger Sub or
their Affiliates shall have purchased Company Common Stock pursuant to the
Offer, except that this condition shall not apply if Parent, Merger Sub or their
Affiliates shall have failed to purchase Company Common Stock pursuant to the
Offer in breach of their obligations under this Agreement.
7.2 Conditions to the Parent's and Merger Sub's Obligation to Effect the
Merger. The obligations of the Parent and Merger Sub to consummate the Merger
and the other transactions contemplated hereby are further subject to the
fulfillment of the condition that all actions contemplated by Section 2.18(b)
hereto shall have been taken, which may be waived in whole or part by the Parent
or Merger Sub and that the representations and warranties of the Company in
Section 4.28 shall have been true when made and shall be true as of the
Effective Time.
ARTICLE 8
TERMINATION, WAIVER AND AMENDMENT
8.1 Termination. This Agreement may be terminated and the Merger and
transactions contemplated by this Agreement may be abandoned at any time prior
to the Effective Time (whether before or after the approval of this Agreement by
the Stockholders), as follows:
(a) by mutual written consent of the Company and the Parent;
(b) by either of the Parent or the Company:
(i) if (x) the Offer shall have expired without any Company
Common Stock being purchased therein or (y) Merger Sub shall not have accepted
for payment all Company Common Stock tendered pursuant to the Offer by September
30, 1999; provided, however, that the right to terminate this Agreement under
this Section 8.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of Parent or Merger Sub, as the case may be, to purchase the
Company Common Stock pursuant to the Offer on or prior to such date; or
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(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance for payment
of, or payment for, Company Common Stock pursuant to the Offer or the Merger and
such order, decree, ruling or other action shall have become final and non-
appealable.
(c) by the Company:
(i) if Parent, Merger Sub or any of their Affiliates shall have
failed to commence the Offer on or prior to five business days following the
date of the initial public announcement of the Offer; provided, that the Company
may not terminate this Agreement pursuant to this Section 8.1(c)(i) if the
Company is at such time in breach of its obligations under this Agreement;
(ii) upon the execution of a definitive agreement for an
Acquisition Transaction that the Board shall have decided to recommend to the
Stockholders after the Board has reasonably concluded, after consultation with
its outside independent counsel, that such Acquisition Transaction constitutes a
Superior Proposal and that its failure to make such recommendation and terminate
this Agreement could violate the Board's fiduciary duties under applicable Law,
provided (A) it has complied with all provisions of Section 3.4, including the
notice provisions therein, (B) that it has paid or made arrangements reasonably
satisfactory to Parent to pay promptly (and, in any event, within five (5)
business days of the termination of this Agreement) the amounts referred to in
Section 8.3 hereof and (C) it shall have provided to Parent at least five
business days' prior written notice that the Board intends to terminate this
Agreement pursuant to this Section 8.1(c)(ii), specifying the material terms and
conditions of such Acquisition Transaction. In connection with the foregoing,
the Company agrees that it will
(X) not enter into a binding agreement with respect to an
Acquisition Transaction until at least the sixth business day after it
has provided the notice to Parent required hereby,
(Y) consider in good faith any offer made by Parent during that
period, and
(Z) notify Parent promptly if its intention to enter into such an
agreement shall change at any time after such notification; or
(iii) if Parent or Merger Sub shall have breached in any material
respect any of their respective representations, warranties, covenants or other
agreements contained in this Agreement, which breach cannot be or has not been
cured, in all material respects, within 30 days after the giving of written
notice to Parent or Merger Sub, as applicable.
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(d) by Parent:
(i) if, due to an occurrence, not involving a breach by Parent or
Merger Sub of their obligations hereunder, which makes it impossible to satisfy
any of the conditions set forth in Annex A hereto, Parent, Merger Sub, or any of
their affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of the
Offer;
(ii) if prior to the purchase of Company Common Stock pursuant to
the Offer, the Company shall have breached any representation, warranty,
covenant or other agreement contained in this Agreement (other than those
contained in Section 3.4) which (A) would give rise to the failure of a
condition set forth in paragraph (f) or (g) of Annex A hereto and (B) cannot be
or has not been cured, in all material respects, within 30 days after the giving
of written notice to the Company;
(iii) if either Parent or Merger Sub is entitled to terminate the
Offer as a result of the occurrence of any event set forth in paragraph (e) of
Annex A hereto; or
(iv) if there has been a material breach of Section 3.4 of this
Agreement which, if capable of being cured, has not been cured within 10 days.
8.2 Rights on Termination. In the event of termination and abandonment of
the Merger by any party pursuant to Section 8.1, written notice thereof shall
forthwith be given to the other parties and this Agreement shall terminate and
the Merger and the other transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated and the transactions contemplated hereby are not consummated pursuant
to Section 8.1 of this Agreement, this Agreement shall become void and of no
further force and effect, except for (a) the provisions of Section 3.1 relating
to the obligation of the Parent and Merger Sub to keep confidential and not to
use certain information obtained from the Company and (b) the provisions of
Section 8.3 relating to the Company's obligations to make certain payments to
the Parent.
8.3 Termination Fee Payable to the Parent. Notwithstanding any provision to
the contrary contained herein, the Company shall immediately pay to the Parent
(x) the amount of $11.0 million and (y) all actual documented out-of-pocket
expenses reasonably incurred by the Parent and Merger Sub in connection with
this Agreement and the Merger in an amount not to exceed $2.0 million (the
"Termination Expenses") if this Agreement is terminated: (1) by the Company
pursuant to Section 8.1(c)(ii), (2) by Parent pursuant to Section 8.1(d)(iii) if
within six (6) months after such termination an Acquisition Transaction shall be
consummated or (3) by either the Company or Parent pursuant to Section 8.1(b)(i)
and (a) within six (6) months thereafter there shall be publicly announced
another Acquisition Transaction or prior thereto an event set forth in paragraph
(h) of Annex A shall have occurred (the "Expiration Date") and (b) an
Acquisition Transaction shall be consummated prior to the Expiration Date, or an
event set forth in paragraph (h) of Annex A shall have occurred, as the case may
be. In the event that this Agreement is terminated by Parent pursuant to Section
8.1(d)(iv), the Company shall immediately
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pay Parent the Termination Expenses. In the event that the Company becomes
obligated to make the payment described in the preceding sentence and another
Acquisition Transaction is consummated within six (6) months after termination
by the Parent, the Company shall also pay to Parent the amount in (x) above.
Notwithstanding any provision to the contrary contained herein, the Company
shall immediately pay to the Parent, the Termination Expenses, if this Agreement
is terminated by Parent pursuant to Section 8.1(d)(ii) if the breach thereof is
due solely to the Company's intentional or bad faith acts. The amount in (x)
above shall be paid concurrently with any such termination and the Termination
Expenses shall be paid within five (5) business days after receipt by the
Company of reasonably detailed evidence of the same. Upon receipt of such
payments, Parent shall not be entitled to and shall waive the right to seek
damages or other amounts or remedies from the Company for breach of, or
otherwise in connection with, this Agreement, other than in the case of
termination by Parent pursuant to Section 8.1(d)(ii).
8.4 Other Remedies. Notwithstanding any provision to the contrary contained
herein, if this Agreement is terminated pursuant to Article 8 or otherwise by
the Company, on the one hand, or Parent or Merger Sub, on the other hand, and
the non-terminating party is not entitled to receive the payments described in
Section 8.3 (as the case may be) or if Parent terminates this Agreement pursuant
to Section 8.1(d)(ii)), then the non-terminating party shall be entitled to
pursue any available legal rights to recover actual damages (not to exceed $5.0
million in respect of claim following a termination by Parent pursuant to
Section 8.1(d)(ii)), including, without limitation, its reasonable costs and
expenses incurred in pursuing such recovery (including, without limitation,
reasonable attorneys' fees).
8.5 Notice of Termination. Any termination of this Agreement under Section
8.1 above will be effective immediately upon the delivery of written notice of
the terminating party to the other parties hereto upon satisfaction of the
requirements set forth in Section 8.1.
ARTICLE 9
MISCELLANEOUS
9.1 Entire Agreement. This Agreement and the documents referred to in, or
contemplated by, this Agreement, including the Company Disclosure Letter and the
Confidentiality Agreement, constitute the entire agreement among the parties
pertaining to the subject matter of this Agreement, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written, and there are no warranties, representations
or other agreements between the parties in connection with the subject matter of
this Agreement, except as specifically set forth in this Agreement, it being
understood that the Confidentiality Agreement shall continue in full force and
effect until the Effective Time and shall survive termination of this Agreement.
9.2 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
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9.3 Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (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 made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. 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.
9.4 Governing Law. This Agreement shall be governed and construed (i) with
respect to the Merger, in accordance with the Laws of the State of Delaware and
(ii) with respect to all other transactions contemplated hereunder, in
accordance with the Laws of the State of New York, applicable to agreements made
and to be performed entirely within such States.
9.5 Assignment; Binding Effect. Neither this Agreement, nor any rights,
obligations or interests hereunder, may be assigned by any party hereto, except
with the prior written consent of the other parties hereto. Any such purported
assignment made without such written consent shall be null and void. Subject to
the preceding sentence, this Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
9.6 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date personally delivered or sent by telephonic facsimile
transmission (with a copy via regular mail) or one day after sending via
nationally recognized overnight courier or five days after deposit in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this Section 9.6 of a change of address:
If to the Company: Walbro Corporation
1227 Centre Road
Auburn Hills, Michigan 48326
Telephone: 248-377-1800
Telecopy: 248-377-6820
Attention: Frank E. Bauchiero
Chief Executive Officer
With a copy to: Katten Muchin & Zavis
525 W. Monroe
Suite 1600
Chicago, Illinois 60661-3693
Telephone: (312) 902-5200
Telecopy: (312) 902-1061
Attention: Howard S. Lanznar, Esq.
David J. Kaufman, Esq.
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If to the Parent
or Merger Sub: TI Group plc
50 Curzon Street
London, W1Y 7PN
United Kingdom
Telephone: 011-49-171-560-5700
Telecopy: 011-44-171-560-5701
Attention: David Lillycrop
Director and General Counsel
with a copy to: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Telecopy: (212) 558-3588
Attention: John Evangelakos, Esq.
9.7 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement.
9.8 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular, and all
words in any gender shall extend to and include all genders. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
9.9 Specific Performance. The parties agree that the assets and business of
the Company as a going concern constitute unique property and, accordingly, each
party shall be entitled, at its option and in addition to any other remedies
available as herein provided, to the remedy of specific performance to effect
the Merger as provided in this Agreement.
9.10 No Reliance. Except for the parties to this Agreement: (a) no Person
is entitled to rely on any of the representations, warranties and agreements of
the parties contained in this Agreement; and (b) the parties assume no liability
to any Person because of any reliance on the representations, warranties and
agreements of the parties contained in this Agreement.
9.11 Disclosure Letter. The Company Disclosure Letter is a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses and the Company Disclosure Letter shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require. The inclusion of any information in the Disclosure Letter shall not be
deemed to be an admission or an acknowledgment by the Company that such
information is material to or outside the ordinary course of business activity
of the Company. The specification of any dollar amount in the representations
and warranties set forth in this Agreement shall not
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be deemed to constitute an admission by the Company or otherwise imply that any
such amount is material for purposes of this Agreement.
9.12 No Third Party Beneficiary. Except as provided pursuant to Section 6.2
hereof, the terms and provisions of this Agreement are intended solely for the
benefit of the parties hereto and their respective successors and assigns and it
is not the intention of the parties to confer third-party beneficiary rights
upon any other Person.
9.13 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such voided
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such voided or unenforceable provision.
9.14 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.15 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
* * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
TI GROUP PLC
By: /s/ Sir Christopher Lewinton
-----------------------------------------
Name: Sir Christopher Lewinton
Title: Chairman
TI AUTOMOTIVE SYSTEMS, INC.
By: /s/ William J. Laule
-----------------------------------------
Name: William J. Laule
Title: President
WALBRO CORPORATION
By: /s/ Frank E. Bauchiero
-----------------------------------------
Name: Frank E. Bauchiero
Title: President and Chief Executive Officer
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(ANNEX A TO THE MERGER AGREEMENT)
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Merger Sub's right to extend and amend the Offer at
anytime in its sole discretion (subject to the provisions of the Merger
Agreement), Merger Sub shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to Merger Sub's obligation to pay for or return
tendered Company Common Stock promptly after termination or withdrawal of the
Offer), and may terminate or amend the Offer as to any Company Common Stock not
then paid for, if (i) any applicable waiting period under the HSR Act or any
applicable European antitrust law has not expired or terminated, (ii) approval
under any applicable European antitrust law has not been obtained, (iii) the
Minimum Condition has not been satisfied, or (iv) at any time on or after the
date of the Merger Agreement and before the time of acceptance for payment for
any such Company Common Stock, any of the following events shall have occurred:
(a) there shall be pending any action, suit, investigation or
proceeding by any Governmental Entity before any court or governmental authority
or agency,
(i) seeking to make illegal, or otherwise directly or indirectly
restrain or prohibit the making of the Offer or, the acceptance for payment or
payment for some of or all the Shares pursuant to the Offer or the consummation
of the Merger or seeking to obtain material damages in connection with the
transactions contemplated by the Merger Agreement;
(ii) seeking to restrain, prohibit or terminate the Company's or,
as a result of the transactions contemplated by the Merger Agreement, Parent's
ownership, operation or lease (or that of their respective subsidiaries or
affiliates) of any business, properties or assets which are material to the
business or operation, as such business or operations are currently conducted,
of the Company and its Subsidiaries or of Parent and its subsidiaries, as the
case may be, or to compel the Company or, as a result of the transactions
contemplated by the Merger Agreement, Parent or any of their respective
subsidiaries or affiliates to dispose of, cease operating or hold separate any
business, properties or assets that are material to the business or operations,
as such business or operations are currently conducted, of the Company and its
Subsidiaries or of Parent and its subsidiaries;
(iii) seeking to impose limitations on the ability of Parent or
any of its subsidiaries or affiliates effectively to exercise full rights of
ownership of the Company Common Stock, including, without limitation, the right
to vote any shares acquired or owned by Parent or any of its subsidiaries or
affiliates on all matters properly presented to the Stockholders; or
(iv) seeking to require divestiture by Parent or any of its
subsidiaries or affiliates of any Company Common Stock;
(b) there shall be in effect any judgment, decree or order of any
court or Governmental Entity, domestic or foreign, or any other legal restraint
that:
<PAGE>
(i) makes illegal, or otherwise directly or indirectly restrains
or prohibits the making of the Offer or the acceptance for payment or payment
for some of or all the Shares pursuant to the Offer or the consummation of the
Merger or that imposes or would impose upon the Company or Parent or any of
their respective subsidiaries or affiliates material damages in connection with
the transactions contemplated by the Merger Agreement;
(ii) restrains, prohibits or terminates the Company's or, as a
result of the transactions contemplated by the Merger Agreement, Parent's
ownership, operation or lease (or that of their respective subsidiaries or
affiliates) of any business, properties or assets which are material to the
business or operation, as such business or operations are currently conducted,
of the Company and its Subsidiaries or of Parent and its subsidiaries, as the
case may be, or compels the Company or, as a result of the transactions
contemplated by the Merger Agreement, Parent or any of their respective
subsidiaries or affiliates to dispose of, cease operating or hold separate any
business, properties or assets that are material to the business or operations,
as such business or operations are currently conducted, of the Company and its
Subsidiaries or of Parent and its subsidiaries;
(iii) imposes limitations on the ability of Parent or any of its
subsidiaries or affiliates effectively to exercise full rights of ownership of
the Company Common Stock, including, without limitation, the right to vote any
shares acquired or owned by Parent or any of its subsidiaries or affiliates on
all matters properly presented to stockholders; or
(iv) requires divestiture by Parent or any of its subsidiaries or
affiliates of any Company Common Stock;
(c) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or issued or applicable to
the Offer or the Merger, on behalf of a Government Entity, or any other action
shall be taken by any Governmental Entity, other than the application to the
Offer or the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(d) there shall have occurred any events or state of circumstances
after the date of the Agreement which, either individually or in the aggregate,
would have a Material Adverse Effect on the Company;
(e) (i) the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Parent or Merger Sub its approval or
recommendation of the Offer, the Merger or the Agreement, or approved or
recommended any Acquisition Transaction or (ii) the Company shall have entered
into any agreement or agreement in principle with respect to any Acquisition
Transaction;
(f) any of the representations and warranties of the Company set forth
in the Agreement that is qualified by materiality or Material Adverse Effect
shall not be true or any of the representations and warranties of the Company
set forth in the Agreement that is not so
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qualified shall not be true in any material respect, in each case (i) as of the
date referred to in any representation or warranty which addresses matters as of
a particular date, or (ii) as to all other representations and warranties, as of
the date of the Agreement and as of the scheduled expiration of the Offer;
(g) the Company shall have failed in any material respect to perform
any obligation or to comply with any agreement or covenant to be performed or
complied with by it under the Agreement;
(h) any person acquires beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least 30% of the outstanding Company
Common Stock (other than any person not required to file a Schedule 13D under
the rules promulgated under the Exchange Act);
(i) the Agreement shall have been terminated in accordance with its
terms; or
(j) there shall have occurred and be continuing (i) any suspension of,
or limitation on prices for, trading in securities on the National Association
of Securities Dealers Automated Quotation System, or (ii) any limitation by any
governmental authority on the extension of credit by banks or other lending
institutions or banking moratorium or any suspension of payments in respect of
banks, which materially affects the ability of Parent or Merger Sub to pay for
the Company Common Stock;
which in the reasonable judgment of Parent in any such case makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Merger Sub,
may be asserted by Parent or Merger Sub regardless of the circumstances giving
rise to such condition (including any action or inaction by Parent or Merger Sub
not in violation of the Agreement) and may be waived by Parent or Merger Sub in
whole or in part at any time and from time to time in the sole discretion of
Parent or Merger Sub, subject in each case to the terms of the Merger Agreement.
The failure by Parent or Merger Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
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EXHIBIT 2
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT ("Amendment No. 1") dated as of May 3, 1999 to the
Agreement and Plan of Merger (the "Agreement") dated as of April 27, 1999 among
TI Group plc, a company organized under the laws of England and Wales
("Parent"), TI Automotive Systems, Inc., a Delaware corporation ("Purchaser"),
and Walbro Corporation, a Delaware corporation (the "Company").
WHEREAS, the Company, Parent and Purchaser have each determined that
it is in their respective best interests, and the best interests of their
respective stockholders, to amend the Agreement as hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement has the meaning
assigned to such term in the Agreement.
SECTION 2. Amendment of Section 2.1(a). Section 2.1(a) of the
Agreement is amended by replacing the fourth sentence thereof in its entirety
with the following:
Merger Sub shall not amend or waive the Minimum Condition and shall not
decrease the Offer Price or decrease the number of shares of Company Common
Stock sought, or amend any other condition of the Offer in any manner
adverse to the holders of the Company Common Stock without the prior
written consent of the Company; provided, however, that if on the initial
scheduled expiration date of the Offer, which shall be June 10, 1999, the
sole condition remaining unsatisfied is the failure of the waiting period
under the HSR Act to have expired or been terminated, Merger Sub shall
extend the expiration date from time to time until two business days after
the expiration of the waiting period under the HSR Act has been received.
SECTION 3. Confirmation of Agreement. Except as modified or amended
in this Amendment No. 1, all terms and conditions in the Agreement remain in
full force and effect and are hereby ratified and confirmed.
<PAGE>
SECTION 4. Governing Law. This Amendment No. 1 shall be construed in
accordance with and governed by the laws specified in the Agreement.
SECTION 5. Counterparts. This Amendment No. 1 may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Amendment shall become effective when each party hereto shall have received
counterparts hereof signed by all of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be duly executed by their respective authorized officers as of the day and
the year first above written.
WALBRO CORPORATION
/s/ Frank E. Bauchiero
By:________________________
Name: Frank E. Bauchiero
Title: President and Chief Executive Officers
TI GROUP PLC
/s/ David P. Lillycrop
By: _________________________
Name: David P. Lillycrop
Title: Director
TI AUTOMOTIVE SYSTEMS, INC.
/s/ William J. Laule
By: ___________________________
Name: William J. Laule
Title: President
<PAGE>
Exhibit 13
WALBRO CORPORATION
FIRST AMENDMENT TO THE AMENDED AND RESTATED
TERMINATION AND CHANGE OF CONTROL AGREEMENT
FOR FRANK E. BAUCHIERO
WHEREAS, WALBRO CORPORATION, a Delaware corporation (the "Company") and
Frank E. Bauchiero (the "Executive") entered into that certain Amended and
Restated Termination and Change of Control Agreement dated as of the _____ day
of August, 1998 (the "Termination Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to further
assure, by amending the Termination Agreement for the 1999 calendar year, that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in the
Termination Agreement) of the Company during such calendar year;
WHEREAS, the Board and the Executive intend (i) for the Termination
Agreement to continue to apply, as originally entered into by the parties
hereto, until the date of a Change of Control (as defined in the Termination
Agreement) of the Company, if any, during the 1999 calendar year, and (ii) for
this Amendment to the Termination Agreement (the "Amendment") to apply only as
of and after the date of such Change of Control, if any, and to automatically
terminate on December 31, 1999, in the absence of a Change of Control during
such calendar year.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Definitions. For purposes of this Amendment, the definitions of terms
contained in the Termination Agreement hereby are incorporated by reference,
except to the extent that any term is specifically defined in this Amendment.
2. Effective Date, Term and Application. This Amendment is entered into
effective January 1, 1999. Unless otherwise agreed upon in writing by the
Company and the Executive prior to December 31, 1999, this Amendment shall be
operative only in the event of a Change of Control of the Company occurring on
or prior to December 31, 1999.
3. Amendments.
(a) Section 6(d) of the Termination Agreement is amended by adding new
subsections (v), (vi) and (vii) to read as follows:
"(v) provide the Executive with relocation benefits pursuant to
the Company's relocation policy X-H dated January 1, 1998,
in connection with a move of the Executive's principal
residence to Michigan or Vermont (as the Executive may
elect) at any time on
<PAGE>
or before the later of December 31,
1999 or six months after the Date of Termination;
(vi) provide to the Executive for his personal use a current
model, luxury automobile and pay the expense relating
thereto until the end of the three-year period commencing
on the Date of Termination, all as presently being provided
or paid pursuant to Section 5(f)(iv) of the Employment
Agreement; provided that the Company may at its option
transfer to the Executive the ownership of the automobile
presently being provided for the Executive's use, in which
case the Executive shall thereafter be responsible for all
such related expenses; and"
(vii) pay the Executive an amount equal to $2,000,000 in
consideration of the cancellation of, or failure to grant,
the Second Option, as applicable, as such term is defined
in Section 5(a) of the Employment Agreement."
(b) Section 7 of the Termination Agreement is amended in its entirety
to read as follows:
"7. Other Amounts.
(a) Stock Options and Restricted Stock. In the event of any
Termination of Employment, stock options and restricted stock held by the
Executive as of the Date of Termination will be exercisable or vested, as
applicable, to the extent and for such periods, and otherwise governed, by
the Plans (and the agreements and other documents thereunder) pursuant to
which such stock options or restricted stock were granted; provided,
however, that (i) the First Option as such term is defined in Section 5(a)
of the Employment Agreement shall be fully vested and shall be exercisable
to the extent and for such periods, and otherwise governed by, the
provisions of Section 5(a) of the Employment Agreement, and (ii) upon the
payment by the Company to the Executive of the amount specified in Section
6(d)(vii) hereof, the Company shall be released from its obligation to
grant the Second Option (as such term is defined in Section 5(a) of the
Employment Agreement) or, if the Second Option shall have already been
granted, it shall be canceled.
(b) Supplemental Retirement Benefit. In the event of any Termination
of Employment, the Executive's Supplemental Retirement Benefit shall be
paid at the time or times and in the amounts determined in accordance with
Section 5(d) of the Employment Agreement, except that in the event of a
Termination Without Cause or a Termination for Good Reason during the
Extended Employment Period, the Supplemental Retirement Benefit shall be
provided in the form of a life and 50% surviving spouse annuity rather than
a single life annuity and shall be computed based upon an interest rate
discount assumption of 4%, and as though (i) the Executive's employment
with the
2
<PAGE>
Company had continued for three years after the Date of Termination for
purposes of determining his Adjusted Years of Service with the Company (as
determined pursuant to Section 5(d) of the Employment Agreement) and (ii)
the Executive had received compensation in each of such three years
determined in accordance with Section 3 hereof. In such event, the
reference to the phrase 'single-life annuity' in Section 5(d)(iii) of the
Employment Agreement shall be deemed to refer to the life and 50% surviving
spouse annuity specified in the preceding sentence."
(c) Section 16(n) of the Termination Agreement is amended in its
entirety to read as follows:
"(n) "Highest Annual Bonus" means one hundred percent (100%) of the
Executive's Annual Base Salary."
4. Application of the Termination Agreement. Except as amended hereby, the
Termination Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this instrument to be duly executed as of this ____ day of
_____________, 1999.
WALBRO CORPORATION
By: /s/ John E. Utley
------------------------------------------
Name: John E. Utley
Title: Chairman of the Board
FRANK E. BAUCHIERO
/s/ Frank E. Bauchiero
---------------------------------------------
3
<PAGE>
Exhibit 14
WALBRO CORPORATION
MODEL AMENDMENT TO
THE TERMINATION AND CHANGE OF CONTROL AGREEMENT
(Level I)
WHEREAS, WALBRO CORPORATION, a Delaware corporation (the "Company") and
________________________ (the "Executive") entered into that certain Termination
and Change of Control Agreement dated as of the _____ day of _________________,
199__ (the "Termination Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to further
assure, by amending the Termination Agreement for the 1999 calendar year, that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in the
Termination Agreement) of the Company during such calendar year;
WHEREAS, the Board and the Executive intend (i) for the Termination
Agreement to continue to apply, as originally entered into by the parties
hereto, until the date of a Change of Control (as defined in the Termination
Agreement) of the Company, if any, during the 1999 calendar year, and (ii) for
this Amendment to the Termination Agreement (the "Amendment") to apply only as
of the date of such Change of Control, if any, and to automatically terminate on
December 31, 1999, in the absence of a Change of Control during such calendar
year.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Definitions. For purposes of this Amendment, the definitions of terms
contained in the Termination Agreement hereby are incorporated by reference,
except to the extent that any term is specifically defined in this Amendment.
"Welfare Plan Benefits" shall mean (i) such benefits as are provided under
the Walbro Corporation Employees' Welfare Benefit Plan, including medical,
dental and vision benefits, life insurance, accidental death and dismemberment,
short-term disability and long-term disability insurance, and (ii) such
additional executive disability coverage as is provided by various underwriters,
including Provident, Monarch or Unum as applicable.
2. Effective Date, Term and Application. This Amendment is entered into
effective January 1, 1999. Unless otherwise agreed upon in writing by the
Company and the Executive prior to December 31, 1999, this Amendment shall be
operative only in the event of a Change of Control of the Company occurring on
or prior to December 31, 1999 (the "Operative Period").
1
<PAGE>
3. Amendments.
(a) Section 8 of the Termination Agreement is amended in its entirety
to read as follows:
"8. Termination by the Company Without Cause and Termination by
Executive for Good Reason During the Extended Employment Period
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term
of the Employment Agreement) or voluntarily by the Executive for Good
Reason, the Term of this Termination Agreement will immediately terminate
and all obligations of the Company and Executive under Sections 1 through 5
of this Termination Agreement and under the Employment Agreement will
immediately cease; provided, however, that subject to the provisions of
Section 13(c) the Company shall pay Executive (or his or her
beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of the
following amounts:
(i) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore
paid, and (2) the product of (x) ____________ percent
(__%) of the Executive's Annual Base Salary ("Highest
Annual Bonus") and (y) a fraction, the numerator of which
is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is
365;
(ii) the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the
Highest Annual Bonus;
(iii) an amount equal to the actuarial equivalent (determined in
accordance with the provisions of the SERP) of the benefit
under the SERP which the Executive would receive assuming
for this purpose that the Executive's employment continued
for three (3) years after the Date of Termination and
assuming that the Executive's compensation in each of the
three years is that required by Section 3 of the
Termination Agreement plus the Executive's Highest Annual
Bonus;
(iv) in lieu of any payment in respect of performance shares,
or other long term incentive awards (including awards of
phantom shares
2
<PAGE>
under the EBP) granted prior to the Extension Date or in
accordance with Section 4(a) of the Termination Agreement,
for any performance period not completed at the
Executive's Date of Termination, an amount equal to the
cash amount payable plus the value of any shares of Common
Stock or other property (valued at the Date of
Termination) payable upon the achievement of maximum
performance (or in the case of phantom shares, target
performance under the EBP) in respect of each tranche of
such performance shares or awards without proration as if
the Date of Termination were the end of the performance
period;
(v) a cash amount will be paid equal to the value at the Date
of Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under deferral
arrangements authorized under the Employment Agreement at
the Date of Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such accounts
by directing the Trustee to distribute the assets of the
"rabbi trust" and the Company shall be relieved of its
obligation under this Employment Agreement and the
Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed as
promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to fully
settle such accounts; and
(vi) to the extent not covered in (i), (ii), (iii), (iv) or
(v), all vested, nonforfeitable amounts owing or accrued
at the Date of Termination under any other compensation
and benefit plans, programs, and arrangements in which
Executive theretofore participated will be paid under the
terms and conditions of the plans, programs, and
arrangements (and agreements and documents thereunder)
pursuant to which such compensation and benefits were
granted.
(b) Stock options then held by the Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock
options or restricted stock were granted; provided, however, that the stock
options and restricted stock described in Section 5 of the Employment
Agreement shall be fully vested and shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of
the Employment Agreement.
3
<PAGE>
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue Welfare Plan
Benefits to the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b) of the
Termination Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. If such plans, programs, or arrangements do not
allow Executive's continued participation, a cash payment equivalent on an
after-tax basis to the value of the additional benefits Executive would
have received under such employee benefit plans, programs, and arrangements
in which Executive was participating immediately prior to the Date of
Termination, as if Executive had received credit under such plans,
programs, and arrangements for service and age with the Company during such
period following Executive's Date of Termination, with such benefits
payable by the Company at the same times and in the same manner as such
benefits would have been received by Executive under such plans (it being
understood that the value of any insurance-provided benefits will be based
on the premium cost to Executive, which shall not exceed the highest risk
premium charged by a carrier having an investment grade or better credit
rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company
at its sole expense as incurred."
(b) The last sentence of Section 9(e) of the Termination Agreement is
amended in its entirety to read as follows:
"For purposes of this Section, (i) the Executive shall be deemed to
terminate employment for "Good Reason" in the event the Executive separates
from employment with the Company within a period of thirty (30) days
following the date six (6) months after a Change of Control, and (ii) any
good faith determination of "Good Reason" otherwise made by the Executive
shall be conclusive."
4. Application of the Termination Agreement. Except as provided herein, the
Termination Agreement shall remain in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this instrument to be duly executed as of this ____ day of
_____________, 1999.
WALBRO CORPORATION
By:
-----------------------------------------
Name:
Title:
[NAME OF EXECUTIVE]
---------------------------------------------
5
<PAGE>
Exhibit 15
WALBRO CORPORATION
MODEL AMENDMENT TO
THE TERMINATION AND CHANGE OF CONTROL AGREEMENT
(Level II-Single Trigger)
WHEREAS, WALBRO CORPORATION, a Delaware corporation (the "Company") and
________________________ (the "Executive") entered into that certain Termination
and Change of Control Agreement dated as of the _____ day of _________________,
199__ (the "Termination Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to further
assure, by amending the Termination Agreement for the 1999 calendar year, that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in the
Termination Agreement) of the Company during such calendar year;
WHEREAS, the Board and the Executive intend (i) for the Termination
Agreement to continue to apply, as originally entered into by the parties
hereto, until the date of a Change of Control (as defined in the Termination
Agreement) of the Company, if any, during the 1999 calendar year, and (ii) for
this Amendment to the Termination Agreement (the "Amendment") to apply only as
of the date of such Change of Control, if any, and to automatically terminate on
December 31, 1999, in the absence of a Change of Control during such calendar
year.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Definitions. For purposes of this Amendment, the definitions of terms
contained in the Termination Agreement hereby are incorporated by reference,
except to the extent that any term is specifically defined in this Amendment.
"Welfare Plan Benefits" shall mean (i) such benefits as are provided under
the Walbro Corporation Employees' Welfare Benefit Plan, including medical,
dental and vision benefits, life insurance, accidental death and dismemberment,
short-term disability and long-term disability insurance, and (ii) such
additional executive disability coverage as is provided by various underwriters,
including Provident, Monarch or Unum as applicable.
2. Effective Date, Term and Application. This Amendment is entered into
effective January 1, 1999. Unless otherwise agreed upon in writing by the
Company and the Executive prior to December 31, 1999, this Amendment shall be
operative only in the event of a Change of Control of the Company occurring on
or prior to December 31, 1999 (the "Operative Period").
1
<PAGE>
3. Amendments.
(a) Section 8 of the Termination Agreement is amended in its entirety
to read as follows:
"8. Termination by the Company Without Cause and Termination by
Executive for Good Reason During the Extended Employment Period
Upon an Executive's Date of Termination during the Extended Employment
Period by the Company without Cause (other than for non-renewal of the Term
of the Employment Agreement) or voluntarily by the Executive for Good
Reason, the Term of this Termination Agreement will immediately terminate
and all obligations of the Company and Executive under Sections 1 through 5
of this Termination Agreement and under the Employment Agreement will
immediately cease; provided, however, that subject to the provisions of
Section 13(c) the Company shall pay Executive (or his or her
beneficiaries), and Executive (or his or her beneficiaries) shall be
entitled to receive, the following:
(a) the Company shall pay to the Executive in a lump sum in cash
within thirty (30) days after the Date of Termination the aggregate of the
following amounts:
(i) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore
paid, and (2) the product of (x) ____________ percent
(__%) of the Executive's Annual Base Salary ("Highest
Annual Bonus") and (y) a fraction, the numerator of which
is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is
365;
(ii) the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the
Highest Annual Bonus;
(iii) in lieu of any payment in respect of performance shares,
or other long term incentive awards (including awards of
phantom shares
2
<PAGE>
under the EBP) granted prior to the Extension Date or in
accordance with Section 4(a) of the Termination Agreement,
for any performance period not completed at the
Executive's Date of Termination, an amount equal to the
cash amount payable plus the value of any shares of Common
Stock or other property (valued at the Date of
Termination) payable upon the achievement of maximum
performance (or in the case of phantom shares, target
performance under the EBP) in respect of each tranche of
such performance shares or awards without proration as if
the Date of Termination were the end of the performance
period;
(iv) a cash amount will be paid equal to the value at the Date
of Termination of any phantom shares of Common Stock
credited to Executive's deferral accounts under deferral
arrangements authorized under the Employment Agreement at
the Date of Termination, less applicable withholding taxes
under Section 14(i) of the Employment Agreement; provided,
however, that the Company may instead settle such accounts
by directing the Trustee to distribute the assets of the
"rabbi trust" and the Company shall be relieved of its
obligation under this Employment Agreement and the
Termination Agreement to the extent that assets are so
distributed. Such amounts shall be paid or distributed as
promptly as practicable following such Date of
Termination, without regard to any stated period of
deferral otherwise remaining in respect of such amounts,
and the payment of such amounts shall be deemed to fully
settle such accounts; and
(v) to the extent not covered in (i), (ii), (iii) or (iv),
all vested, nonforfeitable amounts owing or accrued at
the Date of Termination under any other compensation
and benefit plans, programs, and arrangements in which
Executive theretofore participated will be paid under
the terms and conditions of the plans, programs, and
arrangements (and agreements and documents thereunder)
pursuant to which such compensation and benefits were
granted.
(b) Stock options then held by the Executive will be exercisable and
restricted stock held by the Executive will be vested to the extent and for
such periods, and otherwise governed, by the plans and programs (and the
agreements and other documents thereunder) pursuant to which such stock
options or restricted stock were granted; provided, however, that the stock
options and restricted stock described in Section 5 of the Employment
Agreement shall be fully vested and shall be exercisable to the extent and
for such periods, and otherwise governed by, the provisions of Section 5 of
the Employment Agreement.
3
<PAGE>
(c) For three (3) years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue Welfare Plan
Benefits to the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b) of the
Termination Agreement if the Executive's employment had not been terminated
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. If such plans, programs, or arrangements do not
allow Executive's continued participation, a cash payment equivalent on an
after-tax basis to the value of the additional benefits Executive would
have received under such employee benefit plans, programs, and arrangements
in which Executive was participating immediately prior to the Date of
Termination, as if Executive had received credit under such plans,
programs, and arrangements for service and age with the Company during such
period following Executive's Date of Termination, with such benefits
payable by the Company at the same times and in the same manner as such
benefits would have been received by Executive under such plans (it being
understood that the value of any insurance-provided benefits will be based
on the premium cost to Executive, which shall not exceed the highest risk
premium charged by a carrier having an investment grade or better credit
rating); and
(d) outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion, provided by the Company
at its sole expense as incurred."
(b) The last sentence of Section 9(e) of the Termination Agreement is
amended in its entirety to read as follows:
"For purposes of this Section, (i) the Executive shall be deemed to
terminate employment for "Good Reason" in the event the Executive separates
from employment with the Company within a period of thirty (30) days
following the date six (6) months after a Change of Control, and (ii) any
good faith determination of "Good Reason" otherwise made by the Executive
shall be conclusive."
4. Application of the Termination Agreement. Except as provided herein, the
Termination Agreement shall remain in full force and effect.
4
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this instrument to be duly executed as of this ____ day of
_____________, 1999.
WALBRO CORPORATION
By:
----------------------------------------------
Name:
Title:
[NAME OF EXECUTIVE]
--------------------------------------------------
5
<PAGE>
Exhibit 18
[WALBRO LETTERHEAD]
Walbro Corporation Enters Into Merger Agreement with TI Group
AUBURN HILLS, Michigan -- Walbro Corporation, (NASDAQ: WALB) based in Auburn
Hills, Michigan, announced today that it has entered into a definitive merger
agreement with TI Group plc, headquartered in London, England, pursuant to which
Walbro will become a wholly-owned subsidiary of TI Group. The all-cash
transaction of $20.00 per share values Walbro at $570 million and is subject to
customary regulatory approvals. The Board of Directors of both companies have
unanimously approved the merger agreement and will be effected through a tender
offer launched by TI Group.
Walbro is a global leader in the automotive and small engine fuel storage and
delivery systems and components business with 1998 sales of $680 million.
Walbro has a number of joint ventures with sales of $210 million.
TI Group is a $3.5 billion (sales) global specialized engineering company with
four world leader businesses: John Crane (engineered sealing systems), Forsheda
(engineered elastomer seals), Bundy (fluid carrying systems) and Dowty
(aerospace systems). TI will combine its existing Bundy automotive fuel
business with Walbro to create a strong global position in supplying complete
automotive fuel storage and delivery systems. Walbro has operations in 15
countries while TI's Bundy business operates in 27 countries.
Sir Christopher Lewinton, Chairman of TI Group, commented, "This attractive
acquisition is consistent with the strategy TI Group has followed over a number
of years and I am very pleased that, on completion, it will enable TI to form a
new TI Automotive Systems group of which Bundy and Walbro will be key
businesses. I am confident that the combination of these two businesses within
TI Automotive Systems will accelerate growth of this important part of the
Group."
The new TI Automotive Systems group will have important positions in three key
fluid handling automotive markets for brake, fuel and powertrain systems. The
combined revenues of this new group in 1998 would have been approximately $2.0
billion.
On completion of the transaction, Frank Bauchiero, President and CEO of Walbro,
will report to Bill Laule, Chief Executive of TI Group in England.
Walbro consists of two businesses: a $530 million automotive fuel storage and
delivery systems business and a $150 million fuel systems business for small
engines. The $530 million automotive fuel systems business is complementary to
TI's existing $375 million Bundy fuel delivery systems business consisting of
rigid and flexible lines and quick connectors.
Mr. Bauchiero commented, "We are very pleased that our mutual efforts have
resulted in a merger agreement which offers significant benefits to
stockholders, customers, employees and joint venture partners, as well as to the
communities where we are located. We believe that this
<PAGE>
combination with TI strengthens the global reach of both companies and offers
current and potential customers of both businesses an impressive array of
products and systems that enjoy strong market positions. Moreover, the
respective cultures of both companies are very similar. We believe that merging
these talents will have a positive, synergistic effect on the competitiveness of
the combined company."
Bill Laule, Chief Executive Officer of TI Group, commented, "I am delighted that
we are able to make this recommended offer for Walbro. With the strong
strategic fit and sustained investment in new facilities, this acquisition now
gives us the opportunity to continue Walbro's strong record of sales growth,
enhance its margins and deliver increased profitability and cash generation.
The creation of a uniquely positioned TI Automotive Systems group, capable of
supplying a completely integrated fuel storage and delivery system on a global
basis, moves the business further up the added value chain. The enlarged market
that will now be served by us provides great potential for accelerated growth
and ideally positions TI Automotive Systems to enjoy even greater success in the
future, and contribute to improved shareholder value."
Walbro Corporation was advised in this transaction by the investment banking
firm of Salomon Smith Barney Inc. and the law firm of Katten Muchin & Zavis.
Walbro Corporation is a designer and manufacturer of precision fuel systems and
products for automotive and small engine markets. Walbro Corporation has
subsidiaries and joint ventures throughout the world, including North and South
America, Europe and Asia. Walbro common stock is traded on the Nasdaq National
Market under the symbol WALB.
<PAGE>
Exhibit 19
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
-----------------------------------
AMENDMENT NO. 1 TO RIGHTS AGREEMENT ("Amendment No. 1"), dated as of April
27, 1999, between Walbro Corporation, a Delaware corporation (the "Company"),
and HARRIS TRUST AND SAVINGS BANK (the "Rights Agent"), amending the Rights
Agreement, dated as of June 30, 1998, between the Company and the Rights Agent
(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") by and among TI Group, plc, a
company organized under the laws of England and Wales ("Parent"), TI Automotive
Systems, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of
Parent ("Acquisition Sub"), and the Company, providing for Acquisition Sub to
commence an all-cash tender offer for all outstanding shares of the common
stock, $.50 par value per share, of the Company (the "Offer") and for the
subsequent merger of Acquisition Sub with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Merger Agreement and the transactions contemplated thereby, including, without
limitation, the Offer and the Merger, are fair to and in the best interests of
the Company and its stockholders;
WHEREAS, the willingness of Parent and Acquisition Sub to enter into the
Merger Agreement is conditioned on, among other things, the amendment of the
Rights Agreement on the terms set forth herein;
WHEREAS, Section 27 of the Rights Agreement provides that the Company may
from time to time supplement or amend the Rights Agreement without the approval
of any holders of Rights Certificates to, among other things, make any
provisions with respect to the Rights which the Company may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent; provided, however, that from and after such
time as any Person becomes an Acquiring Person, the Rights Agreement may not be
amended in any manner which would adversely affect the interest of the holders
of Rights; and
WHEREAS, in compliance with Section 27 of the Rights Agreement, on April
27, 1999 the Board of Directors of the Company resolved to amend the Rights
Agreement as hereinafter set forth and has executed and delivered this Amendment
No. 1 immediately prior to the execution
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and delivery of the Merger Agreement, and directs the Rights Agent to enter into
this Amendment No. 1.
NOW, THEREFORE, the Company hereby amends the Rights Agreement as follows:
1. Section 1 of the Rights Agreement is hereby amended by adding the
following definitions thereto:
"Acquisition Sub" shall mean TI Automotive Systems, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Parent.
"Merger" shall mean the merger of Acquisition Sub with and into the
Company as contemplated by the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of April 27, 1999, by and among Parent, Acquisition Sub and the Company,
as the same may be amended in accordance with the terms thereof.
"Offer" shall have the meaning set forth in the Merger Agreement.
"Parent" shall mean TI Group, plc, a company organized under the laws
of England and Wales.
2. Section 1(a) of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"Notwithstanding anything to the contrary contained herein, neither
Parent nor any Affiliate of Parent shall be or become an Acquiring Person
(and no Shares Acquisition Date or Triggering Event shall occur) as a
result of (i) the announcement, commencement or consummation of the Offer,
or (ii) the execution, delivery or performance of the Merger Agreement (or
any amendment thereto in accordance with the terms thereof) or the
consummation of the transactions contemplated thereby (including, without
limitation, the Offer and the Merger)."
3. Section 3(a) of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"Notwithstanding anything to the contrary contained herein, no
Distribution Date shall occur as a result of (i) the announcement,
commencement or consummation of the Offer, or (ii) the execution, delivery
or performance of the Merger Agreement (or any amendment thereto in
accordance with the terms
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thereof) or the consummation of the transactions contemplated thereby
(including, without limitation, the Offer and the Merger)."
4. Section 7(a) of the Rights Agreement is hereby amended by replacing
"(the "Final Expiration Date"), (ii) the time at which the Rights are redeemed
as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such rights are exchanged as provided in Section 24 hereof" with the
following:
", (ii) immediately prior to the effective time of the Merger (the
earlier of (i) and (ii) being herein referred to as the "Final Expiration
Date"), (iii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), or (iv) the time at which such
Rights are exchanged as provided in Section 24 hereof."
5. Section 11 of the Rights Agreement is hereby amended by adding to the
end thereof the following:
"(o) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 11 will not apply to or be triggered by (i) the
announcement, commencement or consummation of the Offer, or (ii) the
execution, delivery or performance of the Merger Agreement (or any
amendment thereto in accordance with the terms thereof) or the consummation
of the transactions contemplated thereby (including, without limitation,
the Offer and the Merger)."
6. Section 13 of the Rights Agreement is hereby amended by adding to the
end thereof the following:
"(d) Notwithstanding anything to the contrary contained herein, the
provisions of this Section 13 will not apply to or be triggered by the
execution, delivery or performance of the Merger Agreement or any amendment
thereto or the consummation of the transactions contemplated thereby
(including, without limitation, the Merger)."
7. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended by this Amendment No. 1.
8. Capitalized terms used herein but not defined herein shall have the
respective meanings ascribed to them in the Rights Agreement.
9. Except as set forth herein, the Rights Agreement shall remain in full
force and effect and shall be otherwise unaffected hereby.
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<PAGE>
10. This Amendment No. 1 may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, Company has caused this Amendment No. 1 to be duly
executed, all as of the day and year first above written.
WALBRO CORPORATION
Attest:
By: /s/ Daniel L. Hittler By: /s/ Michael Shope
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Name: Daniel L. Hittler Name: Michael Shope
Title: Secretary Title: Chief Financial Officer
IN WITNESS WHEREOF, the undersigned, Harris Trust and Savings Bank, as
Rights Agent under the Rights Agreement, hereby acknowledges and agrees to this
Amendment No. 1.
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
Attest:
By: /s/ Arlene M. Kaminsky By: /s/ Deborah J. Hokinson
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Name: Arlene M. Kaminsky Name: Deborah J. Hokinson
Title: Trust Officer Title: Trust Officer
