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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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TRIANGLE PACIFIC CORP.
(NAME OF SUBJECT COMPANY)
TRIANGLE PACIFIC CORP.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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89591210
(CUSIP NUMBER OF CLASS OF SECURITIES)
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E. DWAIN PLASTER
VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER
TRIANGLE PACIFIC CORP.
16803 DALLAS PARKWAY
DALLAS, TX 75248
(214) 887-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON FILING STATEMENT)
WITH A COPY TO:
JEFFREY J. ROSEN, ESQ.
O'MELVENY & MYERS LLP
153 EAST 53RD STREET, 53TH FLOOR
NEW YORK, NY 10022
(212) 326-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Triangle Pacific Corp., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 16803 Dallas Parkway, Dallas, TX 75248. The title of the class
of equity securities to which this Statement relates is the common stock, par
value $.01 per share, of the Company (the "Company Common Stock" or the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by Sapling Acquisition, Inc.
("Merger Sub" or "Purchaser"), a Delaware corporation and a wholly owned
subsidiary of Armstrong World Industries, Inc., a Pennsylvania corporation
("Armstrong" or "Parent"), disclosed in a Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1") dated June 19, 1998 offering to purchase all of
the outstanding Shares at a price of $55.50 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 June 19, 1998 (the "Offer to Purchase")
and the related Letter of Transmittal (which, together with the Offer to
Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of June 12, 1998 (the "Merger Agreement") by and among Armstrong, Merger Sub
and the Company. The Merger Agreement provides for the making and consummation
of the Offer. In addition it provides, among other things, that following
satisfaction or waiver of the conditions set forth in the Merger Agreement,
Merger Sub shall be merged with and into the Company (the "Merger"), the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation (the "Surviving Corporation") and a
direct wholly owned subsidiary of Armstrong. A copy of the Merger Agreement is
filed as Exhibit A to this Statement and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Armstrong are located at 313 W. Liberty Street, P.O. Box 3001, Lancaster,
Pennsylvania 17604 and the principal executive offices of Merger Sub are
located at 313 W. Liberty Street, P.O. Box 3001, Lancaster, Pennsylvania
17604.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings
and no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates
or (ii) Armstrong or Merger Sub or their respective executive officers,
directors or affiliates.
EMPLOYMENT AGREEMENTS; COMPENSATION ARRANGEMENTS
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers are described
under the sections entitled "Compensation of Directors" and "Executive
Compensation" of the Company's Proxy Statement dated April 2, 1998, relating
to the Company's 1998 Annual Meeting of Stockholders held on May 5, 1998 (the
"1998 Proxy Statement"). Copies of the relevant pages of such sections of the
1998 Proxy Statement are filed as Exhibit B hereto and are incorporated herein
by reference.
George A. Lorch, Chairman and Chief Executive Officer of Armstrong and Frank
A. Riddick, Chief Financial Officer of Armstrong, have had discussions with
Floyd F. Sherman, Chairman of the Board and Chief Executive Officer of the
Company, and Joseph McHugh, President of the Company, concerning the roles
Messrs. Sherman and McHugh will play following the consummation of the Offer.
They have reached an understanding that, following receipt of certain payments
due to them upon a voluntary termination following a change of control,
Messrs. Sherman and McHugh will remain with the Company, for a one-year
period, most likely in their current or similar positions and will not compete
with or select employees for a one-year period after their employment. It is
anticipated that Mr. Sherman also will become President of Armstrong's wood
flooring and cabinet operations. Approximately one year after the transaction,
Mr. McHugh expects to retire.
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SPECIAL SEVERANCE PROGRAM
Pursuant to the Special Severance Program (the "Severance Program"), certain
executive officers and other employees of the Company, but not including those
executive officers who have employment agreements with the Company, will
receive a lump sum payment (the "Severance Payment") and certain medical,
dental and group term life insurance benefits from the Company if they are
involuntarily terminated (other than for cause) within one year after a change
of control. The Severance Payment equals two weeks' pay for each full and
fractional year of an eligible employee's service with the Company, a
subsidiary or its successor, as applicable, prior to the employee's
termination, subject to a minimum payment of 2 weeks' pay and a maximum
payment of 100 weeks' pay, and provided further that the Severance Payment for
a Vice President of the Company who is an eligible employee under the
Severance Program will equal at least 26 weeks' pay. Medical, dental and group
term life insurance benefits will continue for the number of weeks equal to
the number of weeks of pay for which the Severance Payment is calculated. A
copy of the Severance Program is filed as Exhibit C hereto and is incorporated
herein by reference.
EMPLOYEE OPTIONS
Pursuant to the terms of the Company's 1992 Stock Option Plan (the "1992
Option Plan"), 1993 Long-Term Incentive Compensation Plan (as amended, the
"Incentive Compensation Plan" and, together with the 1992 Option Plan, the
"Employee Plans") and the Company's Non-employee Director Stock Option Plan
(as amended, the "Director Option Plan"), certain executive officers, other
employees and certain directors of the Company have been granted options to
purchase shares of Company Common Stock. The 1992 Option Plan, the Incentive
Compensation Plan and the Director Option Plan are filed as Exhibits D, E and
F to this Statement, respectively, and are incorporated herein by reference.
Pursuant to the Merger Agreement, all outstanding options to purchase Company
Common Stock held by all current and former employees and directors of the
Company ("Company Stock Options") granted to such employees and directors
under the Employee Plans and the Director Option Plan, whether or not then
exercisable, shall be made fully vested and exercisable and canceled by the
Company immediately before the earlier of (x) the consummation of the Offer or
(y) the Effective Time (as defined in the Merger Agreement), and thereafter,
the holders' sole right shall be to, and the holders thereof shall, receive
from the Company, for each Share subject to such Company Stock Option, an
amount in cash equal to the difference between the Offer Price and the
exercise price per share of such Company Stock Option, which amount shall be
paid by the Company at the time such Company Stock Option is canceled. The
Company will use its best efforts to obtain any necessary consents and make
any amendments to the terms of the Company Stock Options to the extent such
consents or amendments are necessary to give effect to the foregoing. Prior to
the Effective Time the Employee Plans and the Director Option Plan will be
terminated and provisions in any other benefit plan providing for the issuance
or grant of any other interest in respect of the Company's capital stock or
any subsidiary shall be deleted. In addition, upon consummation of the Offer,
Armstrong has agreed to make a loan to the Company, on commercially reasonable
terms, in an amount sufficient for the Company to make payments to the holders
of the Company Stock Options, or, if such amount cannot be borrowed by the
Company for any reason, to contribute such amount to the Company. The
following executive officers hold options under the Employee Plans at various
exercise prices: Floyd F. Sherman: 266,318 shares; M. Joseph McHugh: 165,118
shares; Robert J. Symon: 88,118 shares; Michael J. Kearins: 99,776 shares; and
Charles A. Engle: 88,931 shares; Allen Silver: 55,286 shares; James T. Fidler:
48,398 shares; John W. Esch: 25,000 shares; Dwain Plaster: 67,001; James
Price: 87,040 shares; Richard Terhaar: 11,400 shares; Jennifer Wisdom: 10,000
shares; and Paul Barrett: 5,000 shares. In addition, the following directors
hold stock options under the Director Option Plan at various exercise prices:
Jack L. McDonald: 9,500 shares; B. William Bonnivier: 9,500 shares; David R.
Henkel: 9,500 shares; Charles M. Hansen: 9,500 shares; Karen Gordon Mills:
9,500 shares; and Carson R. Mckissick: 9,500.
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DIRECTORS' AND OFFICERS' INDEMNIFICATION
Section 145 of Delaware General Corporation Law (the "DGCL") authorizes a
court to award, or a corporation's board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act").
In accordance with Delaware Law, Article Sixth of the Restated Certificate
of Incorporation of the Company eliminates the personal liability of a
director of the Company for monetary damages for breaches of fiduciary duty as
a director. A copy of such Article Sixth is filed as Exhibit G to this
Statement and is incorporated herein by reference. Subject to certain
limitations, Article VII of the Amended and Restated Bylaws of the Company
also provides for indemnification of officers and directors of the Company. A
copy of such Article VII is filed as Exhibit H to this Statement and is
incorporated herein by reference. In addition, the Company has entered into
indemnification agreements with certain of its officers and directors by which
the Company provides such persons with the maximum indemnification allowed
under applicable law. These agreements also resolve certain procedural and
substantive matters which are not covered, or are covered in less detail, in
the Company's Restated Certificate of Incorporation and Amended and Restated
Bylaws. A copy of the form of such indemnification agreement is filed as
Exhibit I to this Statement and is incorporated herein by reference.
ARRANGEMENTS WITH ARMSTRONG, MERGER SUB OR THEIR AFFILIATES
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following summary
have the respective meanings ascribed to them in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of certain conditions to the Offer (the "Offer Conditions") (which are
set forth below under "Certain Conditions of the Offer"), the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger
Agreement provides that the Purchaser may modify and extend the terms of the
Offer. Subject to the terms and conditions of the Offer, the Purchaser shall
pay, as soon as reasonably practicable after it is permitted to do so under
applicable law, for all Shares validly tendered and not withdrawn.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with Delaware law, the Purchaser will be
merged with and into the Company as soon as practicable after satisfaction or
waiver of the conditions set forth in the Merger Agreement (the "Effective
Time"), with the Company continuing as the Surviving Corporation in the
Merger. In the Merger, each issued and outstanding Share (other than Shares
owned directly or indirectly by the Parent, Purchaser or any of their
subsidiaries or by the Company as treasury stock and Shares the holder of
which has perfected appraisal rights under the DGCL) will be converted into
the right to receive $55.50 per Share, without interest.
The Merger Agreement provides that the certificate of incorporation and
bylaws of the Company at the Effective Time will be the certificate of
incorporation and bylaws of the Surviving Corporation until thereafter amended
as provided by law. The Merger Agreement provides that the directors of the
Purchaser at the Effective Time will be the directors of the Surviving
Corporation, and the officers of the Company at the Effective Time will be the
officers of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that,
commencing upon the purchase of Shares pursuant to the Offer, and from time to
time thereafter, Parent will 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 (i) the total number of directors on
the Board (giving effect to any directors elected as described in this
sentence) and (ii) the percentage that (A) the aggregate number of shares of
Common Stock beneficially
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owned by Purchaser or any of its affiliates (including Shares accepted for
payment in the Offer, provided funds therefor have been deposited with the
Depositary) is to (B) the total number of Shares then outstanding. The Company
has agreed to take any and all actions within the Company's power necessary to
cause the Purchaser's designees to be appointed to the Company's Board of
Directors (including by increasing the size of such Board using its best
efforts to cause incumbent directors to resign). The Company also has agreed
to use its best efforts to cause persons designated by the Purchaser to
constitute the same percentage of each committee of the Board of Directors of
the Company, each board of directors of each subsidiary of the Company and
each committee of each such board as such persons represent on the Board of
Directors of the Company. In the Merger Agreement, the Company has agreed to
mail to the Company's stockholders an Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and, if
necessary, seeking the resignation of one or more existing directors. However,
the Merger Agreement further provides that until the Effective Time, the
Company will retain as members of its Board of Directors at least two
directors who are directors of the Company at the date of the Merger Agreement
("Company Designees"). The Merger Agreement also provides that following the
time that the Purchaser's designees to the Company's Board of Directors
constitute a majority of the Board, any amendment of the Merger Agreement, any
termination of the Merger Agreement by the Company, any extension of time for
performance of any of the obligations of the Purchaser or Parent under the
Merger Agreement, any waiver of any condition to the obligations of the
Company or of any of the Company's rights under the Merger Agreement or other
action by the Company under the Merger Agreement may be effected only by the
action of a majority of the Company Designees, provided that if there shall be
no such Company Designees, such actions may be effected by unanimous vote of
the entire Board of Directors.
Company Stock Options. Pursuant to the Merger Agreement, all outstanding
options held by all current and former employees and directors of the Company
to purchase Common Stock (the "Company Stock Options") granted under any
employee stock option or compensation plan or arrangement of the Company (the
"Company Stock Plans"), whether or not then exercisable, will be made fully
vested and exercisable and cancelled by the Company immediately before the
earlier of (i) the consummation of the Offer or (ii) the Effective Time, and
thereafter, each holder's sole right shall be to, and each holder will, be
paid by the Company for each Share subject to such Company Stock Option an
amount in cash (subject to any applicable withholding taxes) equal to the
difference between the Offer Price and the exercise price per share of such
Company Stock Option, which amount shall be paid by the Company at the time
such Company Stock Option is cancelled. The Company will use its best efforts
to obtain any necessary consents and make any amendments to the terms of the
Company Stock Plans to the extent such consents or amendments are necessary to
give effect to the foregoing. Prior to the Effective Time the Company Stock
Plans will be terminated and provisions in any other benefit plan providing
for the issuance or grant of any other interest in respect of the Company's
capital stock or any subsidiary shall be deleted. In addition, upon
consummation of the Offer, Parent has agreed to make a loan to the Company, on
commercially reasonable terms, in an amount sufficient for the Company to make
payments to the holders of the Company Stock Options, or, if such amount
cannot be borrowed by the Company for any reason, to contribute such amount to
the Company.
Warrants. Pursuant to the Merger Agreement, all outstanding Warrants of the
Company (other than the Bank Warrants (as defined below) which shall be
treated as described herein, and Warrants owned by Parent, the Purchaser or
any other direct or indirect subsidiary of Parent, which Warrants shall be
cancelled and extinguished at the Effective Time, with no payment being made
with respect to such Warrants) shall, following the Effective Time, be
exercisable only for an amount in cash equal to the product of (i) the number
of Shares issuable upon exercise of such Warrant and (ii) the difference
between the Offer Price and the per Share exercise price per Warrant, without
interest, which amount shall be paid from and after the Effective Time upon
surrender to the paying agent for the Offering of the warrant certificates for
cancellation. The Company has agreed to take all actions necessary to ensure
that following the Effective Time the Warrants shall represent only the right
to receive the consideration specified in the preceding sentence, all
agreements with respect to the Warrants shall be terminated and cancelled and
no party to such Warrant agreements shall have the right to acquire any
capital stock of the Company, Parent, the Surviving Corporation or any of
their respective subsidiaries. In addition, with
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respect to certain rights held by certain banks and other financial
institutions (the "Bank Warrants") entitling them to receive an aggregate of
not more than 4,858 Shares (upon payment of $.01 per Share) upon the exercise
of the Warrants described above, the Company has agreed to use its best
efforts to (i) obtain prior to the Effective Time, consents or waivers from
each bank and financial institution whereby such institutions agree to
receive, upon presentment of their Bank Warrants, cash equal to the product of
(x) the number of Shares issuable upon exercise of such Bank Warrant and (y)
the difference between the Offer Price and the per Share exercise price per
Bank Warrant, without interest, (ii) ensure that following the Effective Time
(A) the Bank Warrants shall represent only the right to receive cash in an
amount equal to the per share Offer Price less $.01 per Share, (B) the
agreement with respect to the Bank Warrants is terminated and cancelled and
(C) no party to such agreements shall have the right to acquire any capital
stock of the Company, Parent, the Surviving Corporation or any of their
respective subsidiaries.
Approval Required; Stockholders Meeting. The DGCL requires, among other
things, that the adoption of any plan of merger or consolidation of the
Company must be approved by the Board of Directors of the Company and, if the
"short form" merger procedure described below is not available, by the holders
of a majority of the Company's outstanding Shares. The Board of Directors of
the Company has approved the Offer, the Merger and the Merger Agreement;
consequently, the only additional action of the Company that may be necessary
to effect the Merger is approval by such stockholders if the "short-form"
merger procedure described below is not available. Under the DGCL, the
affirmative vote of holders of a majority of the outstanding Shares (including
any Shares owned by the Purchaser), is generally required to approve the
Merger. If the Purchaser acquires, through the Offer or otherwise, voting
power with respect to at least a majority of the outstanding shares, it would
have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company. However, the DGCL also provides that if a
parent company owns at least 90% of each class of stock of a subsidiary, the
parent company can effect a short-form merger with that subsidiary without the
action of the other stockholders of the subsidiary. Accordingly, if, as a
result of the Offer or otherwise, the Purchaser acquires or controls the
voting power of at least 90% of the outstanding Shares, the Purchaser could
(and, under the Merger Agreement, is required to) effect the Merger using the
"short-form" merger procedures without prior notice to, or any action by, any
other stockholder of the Company.
Pursuant to the Merger Agreement, the Company will, if required by
applicable law in order to consummate the Merger, duly call and hold a special
meeting of its stockholders (the "Special Meeting") as soon as practicable
following the consummation of the Offer, for the purpose of voting upon the
Merger and the adoption of the Merger Agreement. The Merger Agreement provides
that in connection with the Special Meeting, the Company will (i) as soon as
reasonably practicable after the consummation of the Offer, prepare and file
with the Commission a proxy statement and other proxy materials relating to
the Merger and the Merger Agreement and (ii) use its best efforts to have such
proxy statement and any supplement or amendment thereto cleared by the
Commission. If the Purchaser acquires at least a majority of the outstanding
Shares, the Purchaser will have sufficient voting power to approve the Merger,
even if no other stockholder votes in favor of the Merger. The Company has
agreed, subject to its fiduciary duties under applicable law, to include in
the proxy statement the recommendation of the Board of Directors that
stockholders of the Company vote in favor of the approval of the Merger and
the adoption of the Merger Agreement.
Interim Operations. The Company has agreed that during the period from the
date of the Merger Agreement until the Effective Time (except as expressly
permitted by the Merger Agreement or as otherwise indicated, or as required by
a governmental entity or agreed to in writing by Parent) the business of the
Company and its subsidiaries shall be conducted only in the ordinary course in
all material respects, in substantially the same manner as previously
conducted and the Company and its subsidiaries will use reasonable efforts to
preserve intact their present lines of business and keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors,
and others having business dealings with them. In addition, subject to the
exceptions described above, each of the Company and its subsidiaries will not:
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(i) (x) declare or pay any dividends on, or make any other distributions
(whether in stock, cash or property) in respect of, any of its capital
stock, except dividends by a wholly owned direct or indirect subsidiary of
the Company to such subsidiary's parent, (y) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,
shares of its capital stock, except for any such transaction by a wholly
owned subsidiary of the Company which remains a wholly owned subsidiary
after consummation of such transaction, or (z) repurchase, redeem or
otherwise acquire any shares of capital stock or any securities convertible
into or exercisable for any shares of its capital stock except to the
extent required under the Company's employment agreements;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock or authorize or propose the issuance, delivery, sale, pledge
or encumbrance of, any shares of its capital stock of any class,
any Company voting debt instruments (collectively, "Company Voting Debt"),
or any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares or Company Voting Debt, or
enter into any agreement with respect to the foregoing, other than (A) the
issuance of Common Stock upon the exercise of stock options of the Company
outstanding on the date of the Merger Agreement in accordance with their
present terms or upon the exercise of Warrants or (B) issuances by a wholly
owned subsidiary of the Company of capital stock to such subsidiary's
parent;
(iii) except to the extent required to comply with its obligations under
the Merger Agreement, required by law or required by the rules and
regulations of the Nasdaq National Market, amend their respective
certificates of incorporation, bylaws or other governing documents;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets (other than the
acquisition of assets used in the operations of the business of the Company
and its subsidiaries in the ordinary course); provided, however, that the
foregoing shall not prohibit (A) internal reorganizations or consolidations
involving existing wholly owned subsidiaries of the Company or (B) the
creation of new subsidiaries of the Company organized to conduct or
continue activities otherwise permitted by the Merger Agreement that in the
case of clause (A) or (B) would not otherwise be prohibited by or result in
a breach of these provisions. Other than (x) internal reorganizations or
consolidations involving existing wholly owned subsidiaries of the Company
and (y) as may be required by or in conformance with law or regulation in
order to permit or facilitate the transactions contemplated by the Merger
Agreement, the Company shall not, and shall not permit any wholly owned
subsidiary of the Company to, sell, lease, encumber or otherwise dispose
of, or agree to sell, lease, encumber or otherwise dispose of, any of its
assets (including capital stock of wholly owned subsidiaries of the
Company) which are material, individually or in the aggregate, to the
Company other than sales of inventory in the ordinary course of business.
(v) (A) create, assume or incur any indebtedness, guarantee or endorse
any such indebtedness of another person, issue any debt securities,
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, or guarantee any debt securities of another
person, other than indebtedness incurred under the Company's existing
credit agreement or other indebtedness in an aggregate amount not to exceed
$500,000, (B) except in the ordinary course of business consistent with
past practice make any loans, advances or capital contributions to, or
investments in, any other person, other than by the Company or a wholly
owned subsidiary of the Company to or in the Company or any wholly owned
subsidiary of the Company or (C) except in the ordinary course of business
consistent with past practice pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), provided, however, that the Company may refinance
indebtedness under its existing credit agreement;
(vi) other than in accordance with the provisions of the Merger Agreement
and unless required by law or to maintain the tax qualification of any
Company benefit plan, (A) increase any employee benefits
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provided to, or, except in the ordinary course of business consistent with
past practices, increase the compensation or fringe benefits payable to,
any employee or former employee of the Company or any subsidiary of the
Company, (B) adopt, enter into, terminate or amend in any material respect
any employment contract, collective bargaining agreement or Company benefit
plan; (C) pay any benefit not provided for under any Company benefit plan
or any other benefit plan or arrangement of the Company and its
subsidiaries; or (D) increase in any manner the severance or termination
pay of any officer or employee;
(vii) change its methods of accounting in effect as December 31, 1997,
except as required by changes in U.S. generally accepted accounting
principles as concurred in by the Company's independent auditors;
(viii) enter into any agreement of a nature that would be required to be
filed as an exhibit to Form 10-K under the Exchange Act, other than
contracts for the sale of the Company's or its subsidiaries' products in
the ordinary course of business; or
(ix) knowingly take any actions that would make any representation or
warranty of the Company contained in the Merger Agreement untrue or
incorrect in any material respect as of the date when made or as of the
closing date of the Merger;
(x) authorize any of, or commit to agree to take any of the foregoing
actions.
Employee Benefits. Parent has agreed to cause the Surviving Corporation to
maintain until December 31, 1999 employee benefit plans or policies (other
than those based on shares of Common Stock) for the benefit of the employees
of the Company and its subsidiaries (other than those employees who are
employed pursuant to a collective bargaining agreement or who are members of a
collective bargaining unit or labor union) which are substantially comparable
in the aggregate to the employee benefit plans of the Company in effect on the
date of the Merger Agreement (other than stock-based plans or stock-based
provisions in the plans). The Company's employees shall be given credit, for
purposes of any service requirements for participation in the Parent employee
benefit plans for which they become eligible, if any, for their period of
service with the Company prior to the Effective Time. Parent has acknowledged
that the transactions contemplated by the Merger Agreement will constitute a
change of control under certain employment agreements and accordingly require
certain payments thereunder.
No Solicitations. In the Merger Agreement, the Company has agreed that,
except as provided below, until the earlier of the termination of the Merger
Agreement or the Effective Date, neither the Company nor any of its
subsidiaries shall, and that it shall direct and use its reasonable best
efforts to cause its and its subsidiaries' directors, officers, employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or knowingly facilitate (including by
way of furnishing information) any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase or sale of all or a significant portion
of the assets of it or any of its subsidiaries or any purchase or sale of more
than 25% of the equity securities of the Company or any equity securities of
any Significant Subsidiary (as that term is defined in Rule 405 under the
Securities Act of 1933, as amended) (any such proposal or offer whether or not
in writing or in sufficient detail to be accepted and whether or not
conditional (other than a proposal or offer made by Parent or an affiliate
thereof) being hereinafter referred to as an "Acquisition Proposal"). In
addition, the Company agreed that neither it nor any of its subsidiaries
shall, and that it shall direct and use its reasonable best efforts to cause
its and its subsidiaries' directors, officers, employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
have any discussion with or provide any confidential information or data to
any person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, the Company or its Board of Directors
is permitted to, at any time prior to the acceptance for payment of the Shares
pursuant to the Offer, (i) engage in discussions or negotiations with, or
provide information to, any person in response to an unsolicited Acquisition
Proposal by such person if (A) the Board of Directors of the Company concludes
in good faith that such Acquisition Proposal constitutes or could reasonably
be expected to lead to a
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Superior Proposal (as defined below) and (B), before providing any information
to such person, the Board of Directors receives from such person an executed
confidentiality agreement; and (ii) if the Board of Directors concludes in
good faith that such unsolicited Acquisition Proposal constitutes a Superior
Proposal (x) recommend approval of such Superior Proposal, (y) in response to
such Superior Proposal, withdraw or modify in an adverse manner the approval
of the Company's Board of Directors, or (z) enter into an agreement in
principle or a definitive agreement with respect to such Superior Proposal,
provided, however, that, in the case of either (i) or (ii) the Board of
Directors of the Company determines in good faith after consultation with
outside counsel that it should take such action consistent with its fiduciary
duties under applicable law. The Company has agreed to (i) notify Parent
promptly after receipt of any Acquisition Proposal (or any indication that any
person is considering making an Acquisition Proposal) or any decision to
provide non-public information relating to the Company or any of its
subsidiaries to any person that may be considering making, or has made, an
Acquisition Proposal, including a description of the material terms thereof.
For the purposes hereof, a "Superior Proposal" means a bona fide unsolicited
Acquisition Proposal which the Company's Board of Directors concludes in good
faith (after consultation with its financial advisors and legal counsel),
taking into account all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, provides for a transaction that,
taking into account its likelihood of completion, is more favorable to the
Company's stockholders (in their capacity as stockholders), than the
transactions contemplated by the Merger Agreement.
Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that until the expiration of all applicable statutes of limitations,
from and after the consummation of the Offer, the Company shall and Parent
shall cause the Company to, and from and after the Effective Time, Parent and
Surviving Corporation (each, an "Indemnifying Party") shall indemnify, defend
and hold harmless the present and former officers and directors of the Company
and its subsidiaries ("Indemnified Parties") against all losses, claims,
damages, liabilities, fees, penalties and expenses (including reasonable fees
and disbursements of counsel and judgments, fines, losses, claims, liabilities
and amounts paid in settlement arising out of actions or omissions occurring
at or before the consummation of the Offer) (including losses incurred in
connection with such person's serving as a trustee or other fiduciary in any
entity if such service was at the request or for the benefit of the Company or
any of its subsidiaries), to the fullest extent permitted by Delaware law,
such right to include the right to advancement of expenses incurred in the
defense of any action or suit promptly after statements therefor are received
to the fullest extent permitted by law; provided that the Indemnified Party to
whom expenses are advanced provides an undertaking to repay such advance if it
is ultimately determined that such party is not entitled to indemnification.
Notwithstanding the foregoing, an Indemnifying Party shall not be liable for
any settlement of any claim effected without such Indemnifying Party's written
consent, which consent shall not be unreasonably withheld.
The Merger Agreement also provides that the Surviving Corporation shall
until the sixth anniversary of the Effective Time, cause to be maintained in
effect, to the extent available, the policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries as of the
date of the Merger Agreement (or policies of at least the same coverage and
amounts containing terms that are no less favorable to the insured parties),
in each case including for claims arising from facts or events that occurred
at or before the consummation of the Offer. In addition, the Merger Agreement
provides that the provisions relating to indemnification contained in the
Company's certificate of incorporation and bylaws (and following the Effective
Time, the Surviving Corporation) will not for a period of ten years following
the Effective Time, be amended, repealed or otherwise modified in any manner
that would adversely affect the rights thereunder of individuals who on or
before the consummation of the Offer were entitled to advances,
indemnification or exculpation thereunder.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of the Company, Parent and the Purchaser to consummate the Merger
are subject to the satisfaction or waiver of the following conditions: (i) no
laws shall have been adopted or promulgated, and no temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
governmental entity of competent jurisdiction shall be in effect, having the
effect of making the Merger illegal or otherwise prohibiting
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consummation of the Merger; (ii) any applicable waiting period (and any
extension thereof) under the HSR Act relating to the Merger shall have expired
or been terminated; (iii) Parent, the Purchaser or their affiliates shall have
purchased Shares pursuant to the Offer; and (iv) the Merger Agreement having
been adopted by the requisite vote of the stockholders of the Company, if
required by applicable law, in order to consummate the Merger. In addition,
the obligations of (A) Parent and the Purchaser to consummate the Merger are
subject to the satisfaction or waiver of the following additional conditions:
(x) each of the representations and warranties of the Company contained in the
Merger Agreement being true and correct on the closing date of the Merger; and
(y) performance or compliance in all material respects with all agreements and
covenants required to be performed by the Company under the Merger Agreement
at or before the closing of the Merger and (B) the Company to consummate the
Merger are subject to the satisfaction or waiver of the following additional
conditions: (1) each of the representations and warranties of Parent and the
Purchaser contained in the Merger Agreement being true and correct on the
closing date of the Merger and (2) performance or compliance in all
material respects with all agreements and covenants required to be performed
by Parent and the Purchaser under the Merger Agreement at or before the
closing of the Merger.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, conduct of business, compliance with laws,
litigation, title to property, non-contravention, consents and approvals,
opinions of financial advisors, undisclosed liabilities and the absence of
certain changes with respect to the Company since January 2, 1998.
Termination; Fees. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company: (i) by the mutual written consent of the Company and Parent, by
action of their respective boards of directors; (ii) by either of the Company,
on the one hand, or Parent and Merger Sub, on the other hand (A) if Shares
shall not have been purchased pursuant to the Offer on or before the Extension
Date, (B) 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 shall use their respective reasonable best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement, and such order, decree,
ruling or other action shall have become final and nonappealable, (C) if, due
to the failure of one of the Offer Conditions (other than the condition set
forth in paragraph (g) of "Certain Conditions of the Offer" below) to occur,
Parent, the Purchaser or any of their affiliates shall have failed to commence
the Offer on or before five business days following the date of the initial
public announcement of the Offer or (D) if, due to a failure of any of the
Offer Conditions, the Offer is terminated or expires in accordance with its
terms and the terms of the Merger Agreement without Parent or Merger Sub, as
the case may be, purchasing any Shares thereunder; (iii) by the Company (A)
if, before the purchase of Shares pursuant to the Offer, the Board of
Directors either shall (x) have entered into an agreement with respect to a
Superior Proposal, (y) have recommended a Superior Proposal or (z) have
withdrawn or modified in an adverse manner to Parent or the Purchaser its
approval or recommendation of the Offer, this Agreement or the Merger (or the
Board of Directors resolves to do any of the foregoing) or (B) if Parent or
the Purchaser shall have terminated the Offer, or the Offer shall have expired
in accordance with its terms and the terms of the Merger Agreement without
Parent or the Purchaser, as the case may be, purchasing any Shares pursuant
thereto; (iv) by Parent and the Purchaser if, before the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company shall (A) have
recommended an Acquisition Proposal, (B) have withdrawn or modified in a
manner adverse to Parent or Merger Sub its approval or recommendation of the
Offer, the Merger Agreement or the Merger or (C) have executed an agreement in
principle or definitive agreement relating to an Acquisition Proposal or
similar business combination with a person other than Parent, the Purchaser or
their affiliates (or the Board of Directors of the Company resolves to do any
of the foregoing).
In the event that (i) the Company terminates the Merger Agreement pursuant
to clause (iii)(A) of the previous paragraph, or if Parent terminates the
Merger Agreement pursuant to clause (iv) of the previous paragraph or (ii) the
Merger Agreement is terminated for any other reason (other than the breach of
this Agreement by Parent or the Purchaser and other than by mutual agreement
of the parties thereto) and, in the
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case of this clause (ii) only, (A) at the time of such termination there was
pending an Acquisition Proposal from a third party and (B) the transactions
contemplated by such Acquisition Proposal with such third party are
consummated with such third party within one year after such termination, then
the Company shall pay to Parent a termination fee in an amount equal to $28
million.
Credit Agreement. In connection with the Credit Agreement, the Company has
agreed to use its best efforts to obtain all necessary waivers and consents
prior to the consummation of the Offer so that the transactions contemplated
by the Merger Agreement will not result in or constitute a default under the
Credit Agreement. In the event that (i) such waivers and consents are not
obtained; (ii) the transactions contemplated by the Merger Agreement result in
a default under the Credit Agreement and the lenders thereunder accelerate the
payment of outstanding indebtedness thereunder; and (iii) the Company, after
using its best efforts, is unable to refinance or repay such indebtedness,
then, Parent has agreed following the consummation of the Offer, to make a
loan to the Company in an amount sufficient for the Company to repay the
outstanding indebtedness
under the Credit Agreement and any other obligations under the Credit
Agreement, or, if such amount cannot be borrowed by the Company for any
reason, to contribute such amount to the Company.
Fees and Expenses. The Merger Agreement provides that, except as provided
above under "Termination; Fees", all expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such expenses, except (i) if the Merger is consummated, the
Surviving Corporation shall pay, or cause to be paid, any and all property or
transfer taxes imposed on the Company or its subsidiaries; (ii) expenses
incurred in connection with the filing, printing and mailing of the Offer
materials, the Schedule 14D-9 and, if required, the Proxy Statement, which
shall be shared equally by Parent and the Company; and (iii) amounts loaned or
contributed by Parent to the Company as described herein, shall be repaid by
the Company or the Surviving Corporation, as the case may be, on commercially
reasonable terms.
Stock Tender Agreement. The following is a summary of the material terms of
the Stock Tender Agreement. This summary is qualified in its entirety by
reference to the Stock Tender Agreement which is incorporated herein by
reference, a copy of which has been filed with the Commission as an exhibit to
the Schedule 14D-1. The Stock Tender Agreement may be examined and copies may
be obtained at the place and in the manner as set forth in Section 8 of the
Offer to Purchase.
After the execution of the Merger Agreement, the Purchaser, Parent and the
Stock Tender Parties entered into the Stock Tender Agreement. Pursuant to such
Agreement, so long as the Company, Parent or the Purchaser has not terminated
the Merger Agreement, the Stock Tender Parties have agreed to validly tender
(and not thereafter withdraw) the Shares owned by them pursuant to and in
accordance with the terms of the Offer. As of June 9, 1998, the Stock Tender
Parties owned a total of 5,909,184 Shares, representing approximately 35% of
the outstanding Shares calculated on a fully diluted basis.
In connection with the Stock Tender Agreement, the Stock Tender Parties have
made certain customary representations, warranties and covenants, including
with respect to (i) ownership of the Shares, (ii) the Stock Tender Parties'
authority to enter into and perform their respective obligations under the
Stock Tender Agreement, (iii) the ability of the Stock Tender Parties to enter
into the Stock Tender Agreement without violating other agreements to which
they are party, (iv) the absence of liens and encumbrances on and in respect
of the Stock Tender Parties' Shares and (v) restrictions on the transfer of
the Stock Tender Parties' Shares.
Certain Conditions of the Offer. Notwithstanding any other provisions of the
Offer, and in addition to (and not in limitation of) the Purchaser's rights
pursuant to the Merger Agreement to extend and amend the Offer at any time, in
its sole discretion, the Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any
tendered Shares, and may terminate the Offer, if, in the sole judgment of the
Purchaser (i) any
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applicable waiting period under the HSR Act has not expired or been
terminated, (ii) the Minimum Condition (as defined in the Merger Agreement)
has not been satisfied or (iii) at any time on or after the date of this Offer
to Purchase and before the time of acceptance of Shares for payment pursuant
to the Offer, any of the following events shall occur:
(a) there shall have been any statute, rule, regulation, judgment,
decision, action, order or injunction promulgated, entered, enforced,
enacted or issued applicable to the Offer or the Merger by any federal or
state governmental regulatory or administrative agency or authority or
court or legislative body or commission that (1) prohibits the consummation
of the Offer or the Merger, (2) prohibits Parent's or the Purchaser's
ownership or operation of all or a majority of the Company's businesses or
assets, or imposes any material limitations on Parent's or the Purchaser's
ownership or operation of all or a majority of the Company's businesses or
assets or would have a material adverse effect on the Company and its
subsidiaries taken as a whole or (3) imposes material limitations on the
ability of Parent or Merger Sub to acquire or hold, or exercise full rights
of ownership of, any Shares to be accepted for payment pursuant to the
Offer including, without limitation, the right to vote such Shares on all
matters properly presented to the stockholders of the Company or any
federal or state governmental regulatory or administrative agency or
authority shall have commenced or threatened to commence litigation or
another proceeding intended to achieve the results set forth in clauses (1)
through (3) above; provided, that the parties shall have used their
reasonable best efforts to cause any such statute, rule, regulation,
judgment, order or injunction to be vacated or lifted;
(b) (1) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and accurate as of the date of the
Merger Agreement and at the scheduled or extended expiration of the Offer
(except for those representations and warranties that address matters only
as of a particular date or only with respect to a specified period of time
which need only be true and accurate as of such date or with
respect to such time period), except where the failure of such
representations or warranties to be true and accurate, individually or in
the aggregate, does not have a material adverse effect on the Company and
its subsidiaries taken as a whole or (2) the Company shall have breached or
failed to perform or comply in any material respect with any covenant
required by the Merger Agreement to be performed or complied with by it;
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) it shall have been publicly disclosed that any person, entity or
"group" (as defined in Section 13(d)(3) of the Exchange Act) shall have
acquired beneficial ownership (as determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of more than a majority of the then-
outstanding Shares, through the acquisition of stock, the formation of a
group or otherwise;
(e) the Board of Directors of the Company (or any committee thereof)
shall have withdrawn or modified in a manner adverse to Parent or Merger
Sub its approval or recommendation of the Offer or the Merger or the
adoption of the Merger Agreement or recommended an Acquisition Proposal
other than the one contemplated by the Merger Agreement, or shall have
executed an agreement in principle or a definitive agreement relating to
such an Acquisition Proposal or similar business combination with a person
or entity other than Parent, the Purchaser or their affiliates, or the
Board of Directors of the Company shall have adopted a resolution to do the
foregoing;
(f) there shall have occurred and be continuing (1) any general
suspension of trading of securities on any national securities exchange or
in the over-the-counter market, (2) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory) or (3) any limitation (whether or not mandatory)
by a United States governmental authority or agency on the extension of
credit by banks or other financial institutions which in the reasonable
judgment of Parent or the Purchaser, in any such case, makes it inadvisable
to proceed with the Offer or with such acceptance for payment or payments;
(g) all consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be obtained or made by the
Company, Parent or the Purchaser with or from any governmental
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entity in connection with the execution, delivery and performance of the
Merger Agreement, the Offer and the consummation of the transactions
contemplated by the Merger Agreement shall not have been made or obtained
and such failure is reasonably likely to have a material adverse effect on
the Company and its subsidiaries taken as a whole or; or
(h) any change shall have occurred since the date of the Merger Agreement
that individually or in the aggregate constitutes a material adverse effect
on the Company and its subsidiaries taken as a whole.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of the Purchaser and Parent and may be asserted by Parent and the
Purchaser, in their sole discretion, regardless of the circumstances
(including any action or omission by Parent or the Purchaser) giving rise to
any such conditions and (except for the Minimum Condition, which may be waived
only with the consent of the Company) may be waived by Parent or the
Purchaser, in their sole discretion, in whole or in part, at any time and from
time to time, subject to the terms of the Merger Agreement. The failure by the
Parent or the Purchaser 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. Any determination by the Purchaser concerning any condition or event
described herein under "Certain Conditions of the Offer" shall be final and
binding upon all parties.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company (with one director absent) has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and determined that the Offer and the Merger, taken together, are fair
to and in the best interests of the Company and its stockholders. THE BOARD OF
DIRECTORS (WITH ONE DIRECTOR ABSENT) UNANIMOUSLY RESOLVED TO RECOMMEND THE
ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE MERGER BY THE STOCKHOLDERS OF THE COMPANY. THIS RECOMMENDATION IS BASED IN
PART UPON A JUNE 12, 1998 OPINION OF SALOMON BROTHERS INC AND SMITH BARNEY
INC., COLLECTIVELY DOING BUSINESS AS SALOMON SMITH BARNEY ("SALOMON SMITH
BARNEY") THAT AS OF SUCH DATE AND BASED UPON AND SUBJECT TO CERTAIN MATTERS
STATED IN SUCH OPINION, THE CONSIDERATION TO BE RECEIVED BY THE COMPANY'S
STOCKHOLDERS IN THE OFFER AND THE MERGER WAS FAIR TO THE STOCKHOLDERS FROM A
FINANCIAL POINT OF VIEW (THE "FAIRNESS OPINION"). THE FAIRNESS OPINION
CONTAINS A DESCRIPTION OF THE FACTORS CONSIDERED, THE ASSUMPTIONS MADE, AND
THE QUALIFICATIONS AND LIMITATIONS ON OF THE REVIEW UNDERTAKEN BY SALOMON
SMITH BARNEY IN RENDERING ITS OPINION. THE FULL TEXT OF THE FAIRNESS OPINION
IS ATTACHED HERETO AS EXHIBIT K TO THIS STATEMENT AND IS INCORPORATED HEREIN
BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS
ENTIRETY.
A letter to the Company's stockholders communicating the Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits L and M, respectively, and are
incorporated herein by reference.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION OF THE COMPANY'S BOARD OF
DIRECTORS
Background.
In January 1997, Floyd F. Sherman, the Company's Chairman and Chief
Executive Officer was contacted by George A. Lorch, Armstrong's Chairman and
Chief Executive Officer and met with him to discuss the possibility of a
business combination.
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On March 20, 1997, Mr. Sherman, M. Joseph McHugh (the Company's President
and Chief Operating Officer) and Robert Symon (the Company's Chief Financial
Officer at that time) met with Mr. Lorch, Frank A. Riddick, Armstrong's Senior
Vice President and Chief Financial Officer and Robert J. Shannon, President of
Armstrong's Worldwide Floor Products Operations. Mr. Sherman stated that if
Armstrong wanted to make an offer, the Board of the Company would consider it.
The Company received a letter dated March 26, 1997, from Mr. Lorch to Mr.
Sherman, submitting a preliminary non-binding proposal with respect to the
acquisition of all of the common stock of the Company at a price of $32.00 per
share through an all cash tender offer that would not be contingent upon
financing.
By letter dated April 7, 1997 from Mr. Sherman to Mr. Lorch, Mr. Sherman
advised that Armstrong's unsolicited proposal was discussed with the directors
of the Company, that the Company was not for sale at that time and that the
Board had no interest in pursuing Armstrong's proposal.
At its board meeting on February 18, 1998, there was a discussion about the
Company's status and prospects. In the course of that discussion, directors
noted the Company's success in increasing revenues, cash flow and income, the
fact that the Company operated in a cyclical business environment, and the low
volumes in which the Company's stock traded--in part because of large
institutional holdings. The directors explored whether it was an appropriate
time to seek alternatives for maximizing shareholder value. After considerable
discussion about the prospects for the Company remaining independent and the
types of potential acquisition transactions that might be available, the Board
adopted a resolution instructing management to initiate discussions with
investment banking firms with a view to retaining an investment banker to
conduct a market test to determine what price could be available if the
Company were willing to be sold.
As a result of that resolution, management retained Salomon Smith Barney. In
late February and early March, Salomon Smith Barney prepared a confidential
memorandum and, in discussions with management, prepared and refined a list of
13 potential acquirors that Salomon Smith Barney and management believed were
the parties most likely to have an interest in the Company. Included were six
financial buyers and seven strategic or industry buyers, including Armstrong.
In late March or early April of 1998, a representative from Salomon Smith
Barney called Armstrong to say that the Company would likely be put up for
sale through an auction process and that an invitation to participate would be
forthcoming.
During March and April, Salomon Smith Barney and the Company negotiated
confidentiality agreements with the prospective buyers, including Armstrong
(which executed a confidentiality agreement on April 6, attached hereto as
Exhibit J), prepared management presentations, agreed on procedures for
seeking initial indications of interest and began preparation of a data room.
By letter dated April 6, 1998, a representative of Salomon Smith Barney
invited Armstrong to participate in a bidding process and to submit a
preliminary indication of interest relating to the acquisition of the Company.
At that time Armstrong received general information on the Company. On April
24, five potential buyers, including Armstrong, submitted initial, non-binding
indications of interest, only three of which were in writing.
On May 5, the Board met to discuss the results of the procedures undertaken
thus far. In addition to the directors and various officers of the Company.
Representatives of Salomon Smith Barney and counsel to the corporation were
present. The Company's outside counsel explained to the Board its fiduciary
duties when considering a sale of the Company. Representatives of Salomon
Smith Barney described the process that had been undertaken thus far and went
on to describe the indications of interest that had been received. In
addition, Salomon Smith Barney made an extensive preliminary presentation as
to valuation, explaining the different methods of valuation and the ranges of
value that could be derived from each. There followed a discussion of the
options facing the Board, the price levels at which various directors might
regard a sale of the Company as
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attractive and the benefits and risks of continuing to operate independently.
Ultimately it was the sense of the directors that Salomon Smith Barney should
continue with the process but only after sending a strong signal that, at the
levels of interest expressed, the Company was not for sale.
Thereafter, Salomon Smith Barney notified Armstrong by telephone that
Armstrong would be included as one of the bidders in the auction process and
invited Armstrong to conduct due diligence.
In mid-May, management made presentations to buyer groups and the buyer
groups visited the data room. Further due diligence was conducted with
accountants, bankers and lawyers of the parties. Over the same time period, a
draft of a merger agreement, as well as final bid instructions, were
distributed to the potential buyers. The instructions stated that the final
bids were due by June 5, 1998.
Armstrong submitted a bid on June 5, 1998, together with a comprehensive
mark-up of the draft agreement. Another bidder indicated at that point that it
was still working on preparing a structure and financing package. There were
no other bids or continuing expressions of interest.
On June 8, 1998, Salomon Smith Barney notified Armstrong and J.P. Morgan and
Co. Incorporated, Armstrong's financial advisor, that Armstrong would be given
an opportunity to conduct plant tours and to meet with counsel to the Company
to discuss the Merger Agreement.
On June 9, 1998 meetings among representatives to the Company, Armstrong and
Sapling were held during which negotiations on the Merger Agreement were
conducted and additional legal and financial due diligence regarding the
Company was conducted by Armstrong. Negotiations with respect to the Merger
Agreement addressed, among other things, the circumstances under which the
termination fee would be payable, the amount of the termination fee,
provisions imposing restrictions on the Company's ability to enter into a
competing transaction, representations and warranties and the conditions to
the Offer. On June 9 and June 10, members of Armstrong's due diligence team
conducted additional due diligence at several of the Company's plants.
Armstrong and the other bidder were advised that the Board of Directors of
the Company would analyze various offers submitted by bidders with respect to
the Company on June 10, 1998. At Armstrong's request on the morning of June
10, Armstrong had discussions with Messrs. Sherman and McHugh and reached a
general understanding regarding their respective roles with the Company
following consummation of the Merger.
On June 10, 1998, the Board held a meeting at which Salomon Smith Barney
made a presentation analyzing the offer from Armstrong and the continuing oral
indication of interest from another bidder. The Salomon Smith Barney
representatives noted that the other potential bidder's communications never
included a firm structure or price, and that any proposal from that bidder
would likely be contingent on financing. In addition, they stated that, based
on their communications with representatives of the other party, the value of
the consideration (which would not be all cash) that the other potential
bidder had in mind would be below the Armstrong bid. Armstrong, in contrast,
was prepared to launch an all-cash tender offer for all the shares with no
financing contingency. Salomon Smith Barney provided a detailed analysis of
the value of the Company and submitted information about Armstrong's financial
resources.
The Board carefully considered the advantages of selling the Company as well
as the competitive situation surrounding the Armstrong offer. Ultimately, the
Board instructed Salomon Smith Barney to make a final effort to improve the
price and reduce the break up fee in the Armstrong offer. The June 10 meeting
was adjourned to June 12. On June 11, the Armstrong bid was increased to
$55.50 per share, Armstrong agreed to reduce the breakup fee to $28 million
and lawyers for the Company and Armstrong reached consensus on the fundamental
terms of the merger agreement.
At the meeting on June 12 the Board again received a briefing on the status
of negotiations with Armstrong. At that meeting, Salomon Smith Barney
continued its analysis of the value of the Company and delivered its opinion
that, as of such date and based upon and subject to certain matters stated in
such opinion, the offer price
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and merger consideration of $55.50 per share was fair to the Company's
shareholders from a financial point of view. Salomon Smith Barney again
discussed the other potential bidder and reiterated that any offer it would
make would likely be contingent on financing, would not involve prompt
delivery of consideration and would be at a value lower than the revised
Armstrong bid. Thereafter the Board formally resolved to (i) execute the
Merger Agreement, (ii) recommend that the shareholders tender their shares and
approve the Merger and (iii) authorize all actions necessary to proceed with
the transaction with Armstrong. Later that evening the Company and Armstrong
executed the Merger Agreement. The following day the Company and Armstrong
issued press releases announcing the execution of the Merger Agreement.
Reasons for the Recommendation of the Company's Board of Directors
In light of the Board of Directors' review of the Company's competitive and
financial position, recent operating results and prospects, the Board
determined that the Offer and the Merger, taken together, are fair to, and in
the best interests of, the Company and its stockholders. In making such
recommendation and in approving the Merger Agreement and the transactions
contemplated thereby, the Board considered a number of factors, including, but
not limited to, the following:
(1) the terms and conditions of the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to their
respective obligations, the limited ability of Armstrong and Merger Sub to
terminate the Offer or the Merger Agreement and the provision for payment
of all cash with no financing condition;
(2) the financial condition, results of operations, cash flows and
prospects of the Company;
(3) the prospects of the Company if the Company were to remain
independent and the risks inherent in remaining independent, including the
fact that the Company is in a cyclical business and in a business that is
consolidating;
(4) the extensive arms-length negotiations between the Company and
Armstrong that resulted in the $55.50 per Share price;
(5) the history of the Company's discussions with other parties,
including, without limitation, (i) the opportunity provided to other
parties to submit proposals to the Company and (ii) the fact that the only
other indication of interest was far more conditional, had greater
uncertainty and appeared likely to deliver a lower value than the agreement
with Armstrong;
(6) that the agreement with Armstrong provides for a prompt cash tender
offer for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
(7) the current status of the industries in which the Company competes;
(8) the recent trading price and volume of the Shares and the fact that
the $55.50 per Share to be paid in the Offer and as the consideration in
the Merger represents a premium of approximately 26.86% over the closing
sale price of the Shares on the NASDAQ on June 12, 1998;
(9) that, in view of the efforts of the Company and Salomon Smith Barney
to find potential acquirors, as well as the notice to each potential bidder
of the need to make their best proposal by June 5, 1998, it was highly
unlikely that an unconditional superior offer would be made;
(10) the financial presentations of Salomon Smith Barney and the opinion
of Salomon Smith Barney delivered to the Board to the effect that, as of
the date of such opinion and based upon and subject to certain matters
stated in such opinion, the cash consideration of $55.50 per Share to be
received by holders of Shares in the Offer and the Merger was fair, from a
financial point of view, to such holders;
(11) the fact that the Merger Agreement permits the Board, in the
exercise of its fiduciary duties, to furnish information and data, and
enter into discussions and negotiations, in connection with an unsolicited
acquisition proposal and recommend an unsolicited acquisition proposal to
the Company's stockholders;
16
<PAGE>
(12) the fact that the Merger Agreement permits the Company Board, in the
exercise of its fiduciary duties, to terminate the Merger Agreement in
favor of a superior proposal; upon such termination, the Company must pay
Armstrong a fee of $28 million (representing approximately 2.45% of the
transaction value and 3% of the total value of the consideration to be paid
to stockholders and option holders under the agreement with Armstrong); and
(13) the business reputation of Armstrong and its management, and
Armstrong's financial strength, including its ability to finance the Offer.
The Company's Board of Directors did not assign relative weights to the
above factors or determine that any factor was of particular importance.
Rather, the Board viewed its position and recommendations as being based on
the totality of the information presented to and considered by it. In
addition, it is possible that different members of the Board assigned
different weights to the factors.
The Company's Board of Directors recognized that, while the consummation of
the Offer gives the Company's stockholders the opportunity to realize a
significant premium over the price at which the Shares were traded before the
public announcement of the Offer, tendering in the Offer would eliminate the
opportunity for stockholders to participate in the future growth and profits
of the Company. The Board believes that the loss of the opportunity to
participate in the growth and profits of the Surviving Corporation was
reflected in the Offer Price of $55.50 per Share. The Board also recognized
that there can be no assurance as to the level of growth or profits to be
attained by the Surviving Corporation in the future.
It is expected that, if the Shares are not purchased by Merger Sub in
accordance with the terms of the Offer or if the Merger is not consummated,
the Company's current management, under the general direction of the Board of
Directors, will continue to manage the Company as an ongoing business.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company entered into a letter agreement (the "Salomon Smith Barney
Agreement") with Salomon Smith Barney dated March 11, 1998, pursuant to which
Salomon Smith Barney agreed to act as financial advisor to the Company in
connection with the possible sale of the Company or an interest in the Company
to another corporation or other business entity (a "Buyer") in a transaction
taking the form of a merger of the Company with, or sale of all or a
substantial portion of its assets or at least 40% of its equity securities (on
a fully diluted basis) (a "Sale") to, a Buyer. As financial advisor, Salomon
Smith Barney agreed, among other things, to assist the Company to analyze the
business and financial condition of the Company, formulate an appropriate
strategy, advise in connection with negotiations and aid in the consummation
of a transaction.
Pursuant to the Salomon Smith Barney Agreement, the Company agreed to pay
Salomon Smith Barney the following fees: (a) $150,000, payable following the
Company's execution of the Salomon Smith Barney Agreement; plus (b) an
additional fee of $750,000, payable for the fairness opinion rendered by
Salomon Smith Barney; plus (c) an additional fee equal to the applicable
percentage of the Aggregate Consideration (as defined below) defined as
follows: 0.48% of the Aggregate Consideration for a Sale with a per share
equity price less than $50; 0.55% of the Aggregate Consideration for a Sale
with a per share equity price equal to or greater than $50 but less than or
equal to $52; or 0.62% of the Aggregate Consideration for a Sale with a per
share equity price greater than $52 (in each case this additional fee shall be
reduced by any amounts payable under the immediately preceding clauses (a) and
(b)), such additional fee to be contingent upon the consummation of a Sale and
payable at the closing thereof.
Under the Salomon Smith Barney Agreement, the term Aggregate Consideration
means the total amount of cash and the fair market value (on the date of
payment) of all other property paid or payable directly or indirectly to the
Company or its security holders by a Buyer in connection with a Sale
(including, without limitation, amounts paid by the Company or a Buyer (A)
pursuant to covenants not to compete, employment contracts, employee benefit
plans or other similar arrangements not in effect on the date hereof and (B)
to holders of any
17
<PAGE>
warrants, stock purchase rights or convertible securities of the Company and
to holders of any options or stock appreciation rights issued by the Company
(whether or not vested). Aggregate Consideration also includes the principal
amount of any indebtedness for borrowed money or capital leases (other than
the lease of the West Virginia facility) (x) repaid or retired in connection
with or anticipation of a Sale or (y) existing on the Company's balance sheet
at the time of a Sale (if such Sale takes the form of a merger or a sale of
stock) or assumed by a Buyer in connection with a Sale (if such Sale takes the
form of a sale of assets), provided that if the Sale results in a sale of less
than two-thirds but greater than or equal to 40% of the equity securities (on
a fully-diluted basis), Aggregate Consideration includes only that portion of
such liabilities equal to the percentage of equity sold.
In addition to any fees that may be payable to Salomon Smith Barney under
the Salomon Smith Barney Agreement and regardless of whether any Sale is
proposed or consummated, the Company has agreed, from time to time upon
request, to reimburse Salomon Smith Barney for all reasonable fees and
disbursements of Salomon Smith Barney's counsel and all of Salomon Smith
Barney's reasonable travel and other out-of-pocket expenses incurred in
connection with any actual or proposed Sale or otherwise arising out of
Salomon Smith Barney's engagement under the Salomon Smith Barney Agreement.
In addition, Salomon Smith Barney and the Company have also entered into a
separate letter agreement, dated March 11, 1998, providing for the
indemnification of Salomon Smith Barney by the Company against certain
liabilities and expenses relating to or arising out of Salomon Smith Barney's
engagement under the Salomon Smith Barney Agreement, including certain
liabilities under the federal securities laws.
Salomon Smith Barney or its affiliates had previously rendered certain
investment banking and financial advisory services to the Company and
Armstrong, for which such entity received customary compensation. In addition,
in the ordinary course of its business, Salomon Smith Barney may hold or
actively trade the debt and equity securities of the Company and Armstrong for
its own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to the stockholders concerning the Offer or
the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected by
the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons
(other than shares issuable upon the exercise of stock options and Shares, if
any, which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act), subject to and consistent
with any fiduciary obligations of such persons. TCW Special Credits Fund IIIb,
a California limited partnership, TCW Special Credits Trust, a California
collective investment trust, TCW Special Credits Trust V, a California limited
partnership, Weyerhaeuser Company Master Retirement Trust, a special account,
The Common Fund for Bond Investment, a special account and TCW Asset
Management Company, a California corporation the ("Stock Tender Parties"),
each entered into a Stock Tender Agreement (the "Stock Tender Agreement"),
dated as of June 12, 1998, with Armstrong and Merger Sub. The Stock Tender
Parties collectively own 5,909,184, or approximately 35% of the outstanding
Shares calculated on a fully diluted basis as of June 12, 1998. Pursuant to
the Stock Tender Agreement, the Stock Tender Parties have agreed, so long as
the Board of Directors of the Company, Armstrong or the Merger Sub have not
terminated the Merger Agreement, to tender pursuant to the Offer, and not
withdraw, all Shares which are owned of record or beneficially by them prior
to the Expiration Date (as defined in the Stock Tender Agreement).
18
<PAGE>
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer that 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 3(b) or 4 (the provisions of which are
hereby incorporated by reference), there are no transactions, Board of
Directors resolutions, agreements in principle, or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
INFORMATION STATEMENT
The Information Statement attached hereto as Annex A is being furnished in
connection with the contemplated designation by Merger Sub, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders following
the purchase by Merger Sub of the number of Shares pursuant to the Offer
necessary to satisfy the Minimum Condition.
SENIOR NOTES
In accordance with the terms of the Indenture, dated as of August 1, 1993
(the "Indenture"), between Triangle Pacific Corp., as issuer, and First Trust
National Association, as trustee (the "Trustee"), with respect to the
Company's 10 1/2% Senior Notes due 2003 (the "Senior Notes"), within five days
following the acquisition by Armstrong or Merger Sub of beneficial ownership,
directly or indirectly, of more than 50% of the Company Common Stock, the
Company shall, in accordance with the Indenture, notify the Trustee and, the
Company or the Surviving Corporation, as the case may be, within 20 business
days prior to the Final Change of Control Put Date (as defined in the
Indenture), give written notice to each holder of the Senior Notes, stating,
among other things, (i) that a Change of Control (as defined in the Indenture)
has occurred, (ii) that each holder of the Senior Notes has the right to
require the Company to repurchase such holder's Senior Notes at a purchase
price in cash in an amount equal to 101% of the principal amount of such
Senior Notes, plus accrued and unpaid interest thereon, if any, to the
purchase date thereof and (iii) the date on which such Senior Notes shall be
purchased which shall be a business day no later than 40 business days after
the occurrence of a Change of Control. Armstrong shall loan or contribute to
the Surviving Corporation an amount in cash necessary to repurchase all such
Senior Notes.
CREDIT AGREEMENT
The Company entered into a Credit Agreement dated as of August 4, 1993 by
and among the Company, Lenders, Bank of America NT & SA, as Co-Agent for
Lenders and The Bank of Nova Scotia, as the Agent for Lenders (the "Credit
Agreement"), which provides for up to $105 million of revolving loans for
working capital and general corporate purposes and for letters of credit.
Availability of borrowings under the Credit Agreement is based upon a formula
related to inventory and accounts receivable. At June 12, 1998, the Company
had approximately $76.4 million of borrowings and approximately $18 million in
letters of credit issued to the Company under the Credit Agreement. Borrowings
under the Credit Agreement bear interest at the agent's prime rate plus 0.375%
(8.875% at June 12, 1998) or, at the Company's option, at certain alternate
floating rates, and are secured by a pledge of the Company's inventory and
accounts receivable. The Credit Facility expires on December 21, 2000.
The execution of the Merger Agreement is an event of default under the
Credit Agreement. Upon the occurrence of an event of default under the Credit
Facility, at least three of the lenders holding at least 60% of
19
<PAGE>
the principal indebtedness outstanding under the Credit Agreement may declare
all amounts thereunder immediately due and payable, except that such amounts
automatically become immediately due and payable in the event of certain
bankruptcy, insolvency or similar defaults.
In accordance with the terms of the Merger Agreement, the Company will use
its best efforts to obtain all necessary waivers and consents prior to the
consummation of the Offer so that the execution of the Merger Agreement and
the consummation of the transactions contemplated thereby do not result in an
event of default by the Company. The Company expects to receive applicable
waivers of such defaults. In the event that (i) such waiver and consent is not
obtained, (ii) the transactions contemplated hereby result in a default and
the Lenders under the Credit Agreement accelerate the payment of outstanding
indebtedness thereunder, and
(iii) the Company, after using its best efforts, is unable to refinance or
repay such indebtedness, then, following the consummation of the Offer,
Armstrong agrees to make a loan to the Company in an amount sufficient for the
Company to repay the outstanding Indebtedness (as defined in the Credit
Agreement) and any other obligations under the Credit Agreement, or, if such
amount cannot be borrowed by the Company for any reason, to contribute such
amount to the Company.
LITIGATION
On June 15, 1998, Pinna Yosevitz ("Plaintiff") filed a putative class action
in the Court of Chancery for the State of Delaware in and for the County of
New Castle (the "Complaint"). The Complaint asserts a cause of action sounding
in breach of fiduciary duty against the Company, each of the Company's
directors (the "Director Defendants") and Armstrong.
The Complaint alleges that the Director Defendants, in agreeing to the
Merger, breached their fiduciary duties owed to the Company's stockholders to
take all necessary steps to ensure that the stockholders will receive the
maximum value realizable for their shares in any merger or acquisition of the
Company. For example, Plaintiff alleges that the Director Defendants failed to
adequately evaluate the Company's value as a potential merger or acquisition
candidate and/or did not act to enhance the Company's value as such a
candidate, and failed to implement "an auction process or active market check"
for other potential bidders. The Complaint alleges that Armstrong agreed to
deal exclusively with Armstrong and thereby breach their fiduciary obligation,
which allegedly makes Armstrong and the Company liable to Plaintiff and the
class. The Complaint also alleges that the Director Defendants engaged in all
or part of the allegedly unlawful acts, plans, schemes or transactions
complained of and thus aided and abetted the alleged breach of fiduciary duty.
The Complaint seeks, among other things, to have the Court declare the suit a
proper class action, an injunction preventing the Merger-Sub and Armstrong
from consummating the Offer, an injunction preventing the Company and
Armstrong from consummating the Merger Agreement and unspecified monetary
damages, together with costs and disbursements.
The Company believes that the lawsuit is without merit. A copy of the
Complaint is filed herewith as Exhibit N and is incorporated herein by
reference.
20
<PAGE>
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit A Agreement and Plan of Merger dated as of June 12, 1998 by and among
Armstrong, Merger Sub and the Company
Exhibit B Information under the sections entitled "Compensation of Directors"
and "Executive Compensation" of the Company's 1998 Proxy Statement
dated April 2, 1998
Exhibit C Special Severance Program
Exhibit D Triangle Pacific Corp. 1992 Stock Option Plan
Exhibit E Triangle Pacific Corp. 1993 Long-Term Incentive Compensation Plan
Exhibit F Triangle Pacific Corp. Non-employee Director Stock Option Plan
Article Sixth of the Restated Certificate of Incorporation of the
Exhibit G Company
Exhibit H Article VII of the Amended and Restated Bylaws of the Company
Exhibit I Form of Indemnity Agreement
Confidentiality Agreement dated as of April 16, 1998 between
Exhibit J Armstrong and the Company
Exhibit K Opinion of Salomon Smith Barney, dated June 12, 1998*
Exhibit L Form of letter to stockholders of the Company*
Exhibit M Press Release dated June 13, 1998
Exhibit N Complaint filed in the Court of Chancery of the State of Delaware in
and for New Castle County in an action titled Pinna Yosevitz on
behalf of herself and all others similarly situated v. Floyd F.
Sherman et al.
</TABLE>
- --------
* Included in copies mailed to stockholders of the Company.
21
<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.
Triangle Pacific Corp.
By: /s/ E. Dwain Plaster
-----------------------------------
Name: E. Dwain Plaster
Title: Vice President, Treasurer and
Chief Financial Officer
Dated: June 19, 1998
22
<PAGE>
ANNEX A
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 19, 1998 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Triangle Pacific Corp., a Delaware corporation (the "Company"), to
the holders of record of shares of common stock, par value $.01 per share, of
the Company (the "Common Stock" or the "Shares"). You are receiving this
Information Statement in connection with the possible election of persons
designated by Parent (as defined below) to the Board of Directors of the
Company (the "Board").
On June 12, 1998, the Company, Armstrong World Industries, Inc., a
Pennsylvania corporation ("Parent"), and Sapling Acquisition, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Purchaser"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which (i) Purchaser will commence a tender offer (the "Offer") for all of the
outstanding Shares at a price of $55.50 per Share, net to the seller in cash,
and (ii) Purchaser will be merged with and into the Company (the "Merger"),
with the Company continuing as the surviving corporation.
The Merger Agreement provides that, promptly upon the purchase of Shares by
Parent or any of its Subsidiaries (as defined in the Merger Agreement)
pursuant to the Offer, Parent shall be entitled to designate such number of
directors ("Parent Designees"), rounded up to the next whole number, on the
Board 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 aggregate number of Shares
beneficially owned by Purchaser, Parent and any of their affiliates bears to
the total number of shares of Company Common Stock then outstanding. The
Company shall, upon request of Purchaser, take any and all actions within the
Company's power which are necessary to cause Parent's designees to be
appointed to the Board (including by increasing the size of the Board or using
its best efforts to cause incumbent directors to resign). At such time, the
Company shall use its best efforts to cause persons designated by Parent to
constitute the same percentage of each committee of the Board, each board of
directors of each Subsidiary and each committee of each such board as such
persons represent on the Board. Notwithstanding the foregoing, until the
Effective Time (as defined in the Merger Agreement), the Company shall retain
as members of its Board at least two directors who are directors of the
Company on the date of the Merger Agreement. The Company's obligations with
respect to the foregoing provisions shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to such Section 14(f) and Rule 14f-1 in
order to fulfill its obligations with respect to the foregoing provisions,
including mailing to stockholders the information required to 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 any information with respect to either of them and their nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended, 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. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
A-1
<PAGE>
INFORMATION WITH RESPECT TO THE COMPANY
OUTSTANDING VOTING STOCK
The only outstanding voting security of the Company is its Common Stock.
There were 14,766,575 shares of common stock, par value $.01 per share
("Common Stock"), of the Company outstanding on June 9, 1998, and each share
is entitled to one vote on each matter presented to the stockholders for a
vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 23, 1998 information with respect
to the only persons who were known to the Company to be the beneficial owners
of more than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
(1)
------------------
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ --------- --------
<S> <C> <C>
The TCW Group, Inc. (through certain affiliates
which act as general partners of limited
partnerships, trustees of certain trusts and
investment managers of third party accounts which
hold shares of Common Stock) (2).................... 5,909,184 40.1%
865 South Figueroa Street
Los Angeles, California 90017
Hibridge Capital Corporation (3).................... 804,146 5.5%
Seven Mile Beach
Grand Cayman, Cayman Islands
British West Indies
United High Income Fund, Inc. and United High Income
Fund II, Inc. ...................................... 788,286 5.3%
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
BEA Associates...................................... 774,879 5.3%
153 East 53rd Street
One City Corp. Center
New York, New York 10022
</TABLE>
--------
(1) The information contained in this table with respect to
beneficial ownership reflects "beneficial ownership" as
defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Certain information
with respect to the beneficial ownership of any beneficial
owner is based upon filings made by such beneficial owner
with the Securities and Exchange Commission (the "SEC") and,
unless otherwise indicated, each beneficial owner has sole
voting and investment power with respect to shares listed as
beneficially owned by such beneficial owner.
(2) The TCW Group, Inc. ("TCW") and its affiliates may be deemed
to be beneficial owners of all shares of Common Stock
currently held by such limited partnerships, third party
accounts and trusts for purposes of the reporting
requirements of the Exchange Act. In the most recent Schedule
13D filed by TCW, TCW stated that the filing of the Schedule
13D shall not be construed as an admission that TCW or any of
its affiliates is, for purposes of Section 13(d) or for any
other purpose under the Exchange Act, the beneficial owner of
any securities covered by the Schedule 13D. Oaktree and TCW
affiliates provide investment advice and management services
to entities that own 5,570,131 of the shares of Common Stock
included in the table. Oaktree may be deemed to be a
beneficial owner of an additional 159,716 shares of Common
Stock owned by a third party managed account for which
Oaktree provides investment advisory and management services.
A-2
<PAGE>
(3) Hibridge Capital Corporation may be deemed to beneficially
own the number of shares of Common Stock shown opposite its
name in the table by virtue of the ownership of certain
warrants to purchase such shares which have exercise prices
that range from $22.39 to $37.31 per share.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 23, 1998, the beneficial
ownership of Common Stock by each director of the Company, each named executive
officer listed in the Summary Compensation Table appearing elsewhere herein,
and all directors and executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
(1)
--------------------
NUMBER OF PERCENT OF
NAME SHARES CLASS
---- --------- ----------
<S> <C> <C>
DIRECTORS
B. William Bonnivier (2)............................. 13,000 *
Charles M. Hansen, Jr. (2)........................... 8,000 *
David R. Henkel (2).................................. 13,000 *
Bruce A. Karsh (3)................................... 124,278 *
Jack L. McDonald (2)................................. 8,000 *
M. Joseph McHugh (4)................................. 176,831 1.2%
Carson R. McKissick (2).............................. 9,000 *
Karen Gordon Mills (2)............................... 10,867 *
Floyd F. Sherman (4)................................. 225,618 1.5%
NAMED EXECUTIVE OFFICERS (EXCLUDING ANY DIRECTOR
NAMED ABOVE)
Robert J. Symon (4).................................. 135,331 *
Michael J. Kearins (4)............................... 91,102 *
Charles A. Engle (4)................................. 66,862 *
All directors and executive officers as a group (20
persons)............................................. 1,116,539 7.6%
</TABLE>
* less than 1%
--------
(1) The information contained in this table with respect to
beneficial ownership reflects "beneficial ownership" as
defined in Rule 13d-3 under the Exchange Act. All information
with respect to the beneficial ownership of any director or
named executive officer has been furnished by such director
or named executive officer and, unless otherwise indicated,
each director or named executive officer has sole voting and
investment power with respect to shares listed as
beneficially owned by such director or named executive
officer.
(2) The number of shares set forth above as being beneficially
owned by Mrs. Mills and Messrs. Bonnivier, Hansen, Henkel,
McKissick and McDonald include 8,000 shares issuable to each
of such individuals upon exercise of stock options granted to
them under the Company's Non-employee Director Stock Option
Plan.
(3) Does not include 5,729,847 shares (38.9%) of the outstanding
Common Stock of which Oaktree or TCW and its affiliates may be
deemed the beneficial owners, as further described in footnote
(2) under "Security Ownership of Certain Beneficial Owners"
above.
(4) The number of shares set forth above as being beneficially
owned by Messrs. Sherman, McHugh, Symon, Kearins and Engle
include 163,818, 107,618, 78,118, 59,776 and 48,391 shares,
respectively, issuable to such individuals upon exercise of
stock options held by them, as determined in accordance with
Rule 13d-3 under the Exchange Act.
A-3
<PAGE>
BOARD OF DIRECTORS
The Certificate of Incorporation and Bylaws of the Company provide for three
classes of directors, designated Class I, Class II and Class III, with
approximately one-third of the directors constituting each class. Directors
serve for staggered terms of three years each. Information with respect to the
directors as of June 12, 1998 is presented below.
CLASS I DIRECTORS
Floyd F. Sherman............. Mr. Sherman has served as Chairman of the Board
Age 58, director and Chief Executive Officer since July 1992.
since 1982 Prior to November 1994, he served as President
of the Company since 1981. Prior to 1981, he
served as Executive Vice President of the
Company. He has been an employee of the Company
since 1973.
M. Joseph McHugh............. Mr. McHugh has served as President and Chief
Age 60, director Operating Officer of the Company since November
since 1986 1994. Prior thereto, he served as Senior
Executive Vice President and Treasurer of the
Company since 1981. Prior to 1981, he served as
Executive Vice President of the Company. He has
been an employee of the Company since 1976. Mr.
McHugh is also a director of Pillowtex
Corporation. Pillowtex Corporation manufactures
and markets textile furnishings for the bedroom
and bathroom.
Bruce A. Karsh............... Mr. Karsh currently serves as President and
Age 43, director Principal of Oaktree Capital Management, LLC
since 1997 ("Oaktree"), an investment management firm
which he co-founded in April 1995. He also
serves as a general partner of TCW Special
Credits ("Special Credits"), a general
partnership of which TCW Asset Management
Company ("TAMCO") is the managing general
partner, since September 1988. Prior to the
founding of Oaktree, he served as a Managing
Director of TAMCO and its affiliated entity
Trust Company of the West. Oaktree and Special
Credits provide investment advice and asset
management services, primarily to institutional
investors. Mr. Karsh is a director of Furniture
Brands International, the parent company of the
Broyhill, Lane and Thomasville furniture
companies and Littelfuse, Inc., a manufacturer
of fuses for electronic products and
automobiles.
CLASS II DIRECTORS
David R. Henkel.............. Mr. Henkel is a private investor. From 1994 to
Age 47, director 1997, he was with 7th Level, Inc., an
since 1992 interactive entertainment company; serving from
1995 to 1997 as Chief Operating Officer and
from 1994 to 1995 as Executive Vice President
and Chief Financial Officer. Mr. Henkel had
also been a director of 7th Level from 1993 to
1997. Prior thereto, Mr. Henkel had been Senior
Vice President and Chief Financial Officer of
Value-Added Communications, Inc., since April
1993. From April 1991 to April 1993, Mr. Henkel
served as Executive Vice President, Chief
Financial Officer and a director of Micrografx,
Inc., a personal computer graphics software
company. Prior thereto, he was an audit partner
at Arthur Andersen LLP.
A-4
<PAGE>
Karen Gordon Mills...........
Age 44, director Mrs. Mills has been President of MMP Group, a
since 1988 management advisory company to leveraged
buyouts and company owners, since January 1993.
From December 1983 to January 1993, she was a
Managing Director of E.S. Jacobs & Company and
Chief Operating Officer of its Industrial
Group. Prior thereto, Mrs. Mills had been a
consultant with McKinsey & Co. and a product
manager with General Foods Corp. Mrs. Mills is
also a director of Arrow Electronics, Inc. and
The Scotts Company.
Carson R. McKissick.......... Mr. McKissick has been Managing Director of
Age 65, director Corporate Development Company since 1992. From
since 1993 1992 to December 1996 he has been a Senior
Advisor of Trust Company of the West, an
investment management company. Mr. McKissick is
also a director of Alexander & Baldwin, Inc.
and Peregrine Real Estate Trust.
CLASS III DIRECTORS
B. William Bonnivier......... Mr. Bonnivier has been President, Chief
Age 55, director Executive Officer and a director of Chatham
since 1992 Technologies, Inc. ("Chatham"), a company that
he co-founded in August 1997. Chatham designs,
manufacturers and markets custom, integrated
electronic enclosures, primarily for the global
telecommunications industry. Mr. Bonnivier has
been Vice Chairman and a Director of Maxim
Technologies, Inc., an environmental consulting
firm since May 1995. Prior thereto, he had been
the Chairman and Chief Executive Officer of
Princeton Packaging, Inc. since March 1991.
Prior thereto, Mr. Bonnivier was President,
Chief Operating Officer and a director of
Snyder General Corporation, a manufacturer of
heating and air conditioning products.
Charles M. Hansen, Jr........ Mr. Hansen has been President of Pillowtex
Age 57, director Corporation since 1974 and, in addition, became
since 1992 Chairman of the Board and Chief Executive
Officer of that company in December 1992.
Pillowtex Corporation manufactures and markets
textile furnishings for the bedroom and
bathroom.
Jack L. McDonald............. Mr. McDonald has been Chairman of the Board and
Age 64, director Chief Executive Officer of New Millennium
since 1992 Homes, L.L.C. since September 1997. Prior
thereto, Mr. McDonald was a private investor
and consultant for over five years. He also
served as President and Chief Operating Officer
of Centex Corporation from 1978 until his
retirement from Centex in 1985. Mr. McDonald is
a director of Bally's Grand, Inc. and American
Home Star Corp.
BOARD MEETINGS AND COMMITTEES
During 1997, the Board of Directors held seven meetings. Each director of
the Company attended at least 75% of the aggregate number of meetings of the
full Board and of the Board committees on which he or she served in 1997, with
the exception of Mr. Karsh.
The Company has a standing Finance/Audit Committee and a standing
Compensation Committee. The Company does not have a standing nominating
committee. The members of the committees, number of meetings
A-5
<PAGE>
held by each committee in 1997 and a brief description of the functions
performed by each committee are set forth below:
Finance/Audit Committee (two meetings). The Finance/Audit Committee consists
of four non-employee directors, Messrs. Bonnivier, Henkel (Chairman), Karsh
and McDonald. This committee is primarily responsible for reviewing the
quality of the financial reporting of the Company and the effectiveness of the
audit of the Company's financial statements by its independent public
accountants; reviewing the scope and results of such audits; reviewing the
organization and scope of the Company's internal systems of accounting and
financial control; and establishing the accounting standards and principles to
be followed by the Company.
Compensation Committee (two meetings). The Compensation Committee consists
of four non-employee directors, Messrs. Hansen, McDonald (Chairman) and
McKissick and Mrs. Mills. This committee approves the compensation of officers
and makes awards under the Company's 1993 Long-Term Incentive Compensation
Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. McHugh, an executive officer of the Company, serves as a director of
Pillowtex Corporation. As an outside director, Mr. McHugh participated in
reviewing and approving target goals under Pillowtex Corporation's annual
management incentive compensation plan. Mr. Hansen, a director of the Company
and a member of the Company's Compensation Committee, is an executive officer
and director of Pillowtex Corporation.
COMPENSATION OF DIRECTORS
Directors who are not also employees of the Company receive an annual
retainer of $30,000, or $35,000 in the event that the director is a committee
chairman, for serving as such plus $1,000 per meeting attended for each
meeting of the Finance/Audit Committee or the Compensation Committee not held
in conjunction with a regularly scheduled quarterly meeting of the Board of
Directors.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below as of June 12, 1998 are the names, ages and principal
occupations of the executive officers of the Company, as well as certain other
information concerning their business experience.
Floyd F. Sherman............. Mr. Sherman has served as Chairman of the Board
Chairman of the Board of and Chief Executive Officer since July 1992.
Directors and Chief Prior to November 1994 he served as President
Executive Officer of the Company since 1981. Prior to 1981, he
served as Executive Vice President of the
Company. Mr. Sherman is 58 years old and became
a director of the Company in 1982.
M. Joseph McHugh............. Mr. McHugh has served as President and Chief
Director, President and Operating Officer of the Company since November
Chief Operating Officer 1994. Prior thereto, he served as Senior
Executive Vice President and Treasurer of the
Company since 1981. Prior to 1981, he served as
Executive Vice President of the Company. He
became a director of the Company in 1986. Mr.
McHugh is also a director of Pillowtex
Corporation. He is 60 years old.
Robert J. Symon.............. Mr. Symon has served as Executive Vice
Executive Vice President President, since February 1998. Prior thereto,
he served as Executive Vice President,
Treasurer and Chief Financial Officer since
November 1994. Prior thereto, he served as Vice
President--Controller of the Company since
1978. Mr. Symon is 67 years old and served as a
Director of the Company from December 1988 to
June 1992.
A-6
<PAGE>
E. Dwain Plaster.............
Vice President, Treasurer Mr. Plaster has served as a Vice President,
and Chief Financial Officer Treasurer and Chief Financial Officer of the
Company since February 1998. Prior thereto, he
served as Vice President since November 1994
and had been the Controller of Bruce Hardwood
Floors since 1977. Mr. Plaster is 48 years old.
Paul L. Barrett.............. Mr. Barrett has served as Vice President,
Vice President, Secretary Secretary and General Counsel of the Company
and since November 1997. Prior thereto for more
General Counsel than the past five years he served as Vice
President, Secretary and General Counsel of
Redman Industries Inc. Mr. Barrett is 62 years
old.
Charles A. Engle............. Mr. Engle has served as a Vice President of the
Vice President Company since 1979. He has also served as
President of the Cabinet group since January
1996. Mr. Engle is 54 years old.
John W. Esch................. Mr. Esch has served as a Vice President of the
Vice President Company since November 1994. He has been
Controller of the Cabinet group since 1977. Mr.
Esch is 54 years old.
James T. Fidler.............. Mr. Fidler has served as a Vice President of
Vice President the Company since 1981. He has been Vice
President--Operations since August 1995. Prior
thereto, he was Director--Management
Information Operations for the Company. Mr.
Fidler is 55 years old.
Michael J. Kearins........... Mr. Kearins has served as a Vice President of
Vice President the Company since 1985 and has primary
responsibility for sales and marketing of
flooring products. Prior to 1983, he had been a
Regional Sales Manager of the Company. Mr.
Kearins is 52 years old.
James E. Price............... Mr. Price has served as a Vice President of the
Vice President Company since November 1994. He has been Vice
President of manufacturing of flooring products
since March 1993. Prior thereto, he was General
Manager since 1984. He had been a Plant Manager
of the Company since 1979. Mr. Price is 56
years old.
Allen Silver................. Mr. Silver has served as a Vice President of
Vice President the Company since 1985. Prior to that time he
had been a Vice President of manufacturing of
cabinet products. Mr. Silver is 59 years old.
Richard A. TerHaar........... Mr. TerHaar has served as Vice President of the
Vice President Company since May 1997. He has been Director of
Management Information Systems since 1995.
Prior thereto he served as Manager of Systems
and Programming since 1981. Mr. TerHaar is 49
years old.
Jennifer E. Wisdom........... Ms. Wisdom has served as Vice President of the
Vice President Company since May 1997. She has been Director
of Human Resources since 1994. Prior thereto,
Ms. Wisdom was Director of Human Resources at
Varo, Inc. since 1986. Ms. Wisdom is 51 years
old.
A-7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth summary compensation data for the Chief
Executive Officer of the Company and each of the other four most highly-paid
executive officers of the Company (collectively, the "named executive
officers" for the 1997 fiscal year).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ -----------------------
OPTIONS
OTHER (NUMBER
NAME AND PRINCIPAL ANNUAL OF ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SHARES) COMPENSATION(1)
- ------------------ ---- -------- -------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Floyd F. Sherman 1997 $400,000 $448,720 $45,280 -- $12,638
Chairman of the Board 1996 350,000 394,940 50,484 45,000 12,210
and Chief Executive Of-
ficer 1995 300,000 275,000 52,070 -- 12,037
M. Joseph McHugh 1997 $300,000 $352,230 $22,296 -- $12,638
President and 1996 265,000 299,026 22,106 35,000 12,206
Chief Operating Officer 1995 225,000 200,000 25,221 -- 12,037
Robert J. Symon 1997 $240,000 $281,784 $24,722 -- $12,638
Executive Vice Presi-
dent, Treasurer 1996 215,000 242,606 23,151 20,000 12,203
and Chief Financial Of-
ficer 1995 190,000 135,000 24,789 -- 12,037
Michael J. Kearins 1997 $168,000 $185,842 $27,609 20,000 $12,638
Vice President 1996 160,000 169,824 26,510 20,000 12,201
1995 155,000 104,718 29,064 -- 12,037
Charles A. Engle 1997 $178,333 $109,613 $28,980 20,000 $12,638
Vice President 1996 165,000 82,533 21,799 20,000 12,201
1995 123,000 84,194 23,525 -- 9,496
</TABLE>
- --------
(1) Amounts shown for each officer consist of amounts contributed by the
Company to the Company's Profit Sharing Plan and to the Company's
Supplemental Profit Sharing and Deferred Compensation Plan that are
allocable to such officer for fiscal 1995, 1996 and 1997.
A-8
<PAGE>
OPTIONS GRANTED IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
RATES OF STOCK PRICE
% OF APPRECIATION FOR
NUMBER TOTAL EXER- EXPIR- STOCK OPTION TERMS
OF OPTIONS CISE ATION ---------------------
NAME SHARES GRANTED PRICE DATE 5% 10%
- ---- ------ ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Floyd F. Sherman........... -- -- -- -- -- --
M. Joseph McHugh........... -- -- -- -- -- --
Robert J. Symon............ -- -- -- -- -- --
Michael J. Kearins......... 20,000 7.2% $28.375 5/07/07 $ 356,898 $ 904,449
Charles A. Engle........... 20,000 7.2% $28.375 5/07/07 $ 356,898 $ 904,449
</TABLE>
The following table sets forth certain information with respect to options
exercised and value realized during the 1997 fiscal year, and the unexercised
options held at January 2, 1998, and the value thereof, by each of the named
executive officers.
OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT JANUARY 2, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
OPTION AT 1/2/98 IN-THE-MONEY
(NUMBER OF SHARES) OPTIONS AT 1/2/98
SHARES -------------------- ----------------------
DATE ACQUIRED ON VALUE EXER- UNEXER- EXER- UNEXER-
NAME OF GRANT EXERCISE REALIZED CISABLE CISABLE CISABLE CISABLE
- ---- -------- ----------- -------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Floyd F. Sherman 6/10/92 -- -- 35,018 -- $ 1,081,531 --
2/16/94 -- -- 6,300 -- 118,125 --
3/21/94 -- -- 75,000 25,000 1,457,813 $ 485,938
2/15/96 -- -- 11,250 33,750 196,875 590,625
M. Joseph McHugh 6/10/92 8,600 $243,036 26,418 -- $ 815,920 --
2/16/94 -- -- 3,700 -- 69,375 --
3/21/95 -- -- 45,000 15,000 874,688 $ 291,563
2/15/96 -- -- 8,750 26,250 153,125 459,375
Robert J. Symon 6/10/92 3,400 $ 93,534 28,418 -- $ 877,690 --
2/16/94 -- -- 3,700 -- 69,375 --
3/21/95 -- -- 30,000 10,000 583,125 $ 194,375
2/15/96 -- -- 5,000 15,000 87,500 262,500
Michael J. Kearins 6/10/92 2,500 $ 72,838 7,076 -- $ 218,542 --
2/16/94 -- -- 2,700 -- 50,625 --
3/21/95 -- -- 26,250 8,750 510,234 $ 170,078
2/15/96 -- -- 5,000 15,000 87,500 262,500
5/7/97 -- -- -- 20,000 -- 110,000
Charles A. Engle 6/10/92 1,000 $ 28,260 8,931 -- $ 275,834 --
3/21/94 -- -- 18,750 6,250 364,453 $ 121,484
2/15/96 -- -- 5,000 15,000 87,500 262,500
5/7/97 -- -- -- 20,000 110,000
</TABLE>
EMPLOYMENT AGREEMENTS
In March 1995, the Company entered into amended and restated employment
agreements with Floyd F. Sherman, M. Joseph McHugh and Robert J. Symon, and
new employment agreements with Michael J. Kearins, Charles A. Engle and five
other current executive officers of the Company (each an "Employment
Agreement" and collectively the "Employment Agreements"). The Employment
Agreements provide for base compensation at the employees' then current annual
rates through the end of 1995, with annual percentage increases not less than
the percentage increase in the Consumer Price Index, as defined in the
Employment Agreements. In addition, the Employment Agreements provide that the
employees are entitled to participate in the Annual Cash Incentive Bonus
System and all other incentive compensation plans for executive employees in
effect from time to time.
A-9
<PAGE>
Each Employment Agreement provides for an initial employment term of three
years (for Messrs. Sherman, McHugh and Symon) or two years (for Messrs.
Kearins, Engle and other executive officers). On each anniversary of the
effective date of the Employment Agreements (March 8, 1995), the employment
term will be automatically extended for one year, unless either party gives
notice not to extend. The Company may terminate the executive's employment for
"cause," "total disability" or "inadequate performance" (except for Mr.
Sherman), and the executive may terminate his employment for any reason within
six months following a "change of control" or at any time for "good reason"
(as such events permitting termination are defined in the Employment
Agreements). Mr. Symon's agreement has been modified to the extent that it
will remain in full force and effect except as amended to allow for his
retirement on December 31, 1998, whereupon it will terminate. Thereafter, Mr.
Symon will provide services for a period of five months as a consultant to the
Company.
If the Company terminates the executive's employment other than for cause,
total disability, or inadequate performance, or employment of the executive
terminates (other than voluntarily) within six months following a change of
control, or if the executive terminates employment for good reason, the
Company is required to pay the executive certain amounts, including a lump sum
cash payment equal to three times (for Messrs. Sherman, McHugh and Symon) or
two times (for the other executives) the executive's average annual
compensation for the preceding five years and certain benefits under the
incentive compensation plans. If the Company terminates the executive's
employment for inadequate performance, or if the executive voluntarily
terminates employment following a change of control, the Company is required
to pay the executive certain amounts, including a lump sum cash payment equal
to two times (for Messrs. Sherman, McHugh and Symon) or one and one-half times
(for the other executives) the executive's average annual compensation and
certain benefits under the incentive compensation plans. If any executive's
employment is terminated by reason of death or total disability, the executive
or his estate is entitled to receive a lump sum payment equal to the sum of
(i) one year's base salary plus (ii) the incentive compensation that would
have accrued to the executive's benefit at the end of the year of termination
had his employment continued until then.
In addition, if the Company terminates the executive's employment (other
than for cause, total disability or inadequate performance), or if the
executive terminates employment for good reason, or if a change of control
occurs during the term of the Employment Agreements, (i) all stock options and
other awards the executives hold under any Company incentive compensation or
benefit plans will become fully vested and exercisable or their market value
payable and (ii) the executive will have the right to sell to the Company any
or all shares of Common Stock held by the executive at market value. The total
payments to be received by the executive pursuant to the Employment Agreement
following a change of control are restricted to the maximum amount which could
be deducted by the Company for federal income tax purposes.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and officers of the
Company, and persons who own more than 10 percent of the Common Stock, to file
with the SEC initial reports of ownership and reports of changes in ownership
of the Common Stock. Directors, officers and more than 10 percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of such
reports furnished to the Company, the Company believes that all Section 16(a)
filing requirements applicable to its directors, officers and more than 10
percent beneficial owners were complied with.
A-10
<PAGE>
INFORMATION WITH RESPECT TO THE PARENT DESIGNEES
Parent has informed the Company that it will choose the Parent Designees
from the directors of Purchaser listed in the following table, which contains
certain biographical information regarding such directors.
<TABLE>
<C> <S>
Robert J. Shannon, Jr... Age 50; President, Worldwide Floor Products
Operations of Armstrong since February 1, 1997;
President Floor Products Operations International
February 1, 1996, through February 1, 1997; President
American Olean Tile Company, Inc. March 1, 1992
through December 29, 1995.
Deborah K. Owen......... Age 46; Senior Vice President, Secretary and General
Counsel of Armstrong since January 1, 1998; Attorney,
Law Offices of Deborah K. Owen, Columbia, MD,
September 1996-September 1997; Partner, Arent Fox
Kintner Poltkin & Kahn law firm, Washington DC,
August 1994-August 1996; Commissioner, Federal Trade
Commission, Washington, DC, October 1989-August 1994.
Frank A. Riddick, III... Age 41; Senior Vice President, Finance and Chief
Financial Officer of Armstrong since April 1995; and
the following positions with FMC Corporation,
Chicago, IL (chemicals, machinery): Controller May
1993-March 1995; Treasurer December 1990-May 1993.
Mr. Riddick has also acted as interim Treasurer since
April 27, 1998.
Edward R. Case.......... Age 51; Vice President and Controller of Armstrong
since April 27, 1998; Prior to such date Mr. Case had
served as Vice President and Treasurer since May 8,
1996; and the following positions with Campbell Soup
Company (branded food products): Director, Corporate
Development October 1994-May 1996; Director,
Financial Planning, U.S. Soup May 1993-September
1994; Deputy Treasurer September 1991-April 1993.
George A. Lorch......... Age 56; Director of Armstrong since March 1988; Mr.
Lorch is a graduate of Virginia Polytechnic
Institute. He began his Armstrong association in
1963. He has served as the Company's Chairman of the
Board since April 1994. Prior to his election as
President and Chief Executive Officer in September
1993, he served as Executive Vice President from
1988. After various assignments in marketing (1963-
1983) with Armstrong and an Armstrong subsidiary, he
served as Group Vice President for Carpet Operations
during the period 1983 to 1988. Mr. Lorch is also a
Director of Household International, Inc., R.R.
Donnelley & Sons Company and Warner-Lambert Company.
He is a member of The Policy Committee of the
Business Roundtable and a member of the Conference
Board and The Pennsylvania Business Roundtable.
</TABLE>
A-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit A Agreement and Plan of Merger dated as of June 12, 1998 by and among
Armstrong, Merger Sub and the Company
Exhibit B Information under the sections entitled "Compensation of Directors"
and "Executive Compensation" of the Company's 1998 Proxy Statement
dated April 2, 1998
Exhibit C Special Severance Program
Exhibit D Triangle Pacific Corp. 1992 Stock Option Plan
Exhibit E Triangle Pacific Corp. 1993 Long-Term Incentive Compensation Plan
Exhibit F Triangle Pacific Corp. Non-employee Director Stock Option Plan
Exhibit G Article Sixth of the Restated Certificate of Incorporation of the
Company
Exhibit H Article VII of the Amended and Restated Bylaws of the Company
Exhibit I Form of Indemnity Agreement
Exhibit J Confidentiality Agreement dated as of April 16, 1998 between
Armstrong and the Company
Exhibit K Opinion of Salomon Smith Barney, dated June 12, 1998*
Exhibit L Form of letter to stockholders of the Company*
Exhibit M Press Release dated June 13, 1998
Exhibit N Complaint filed in the Court of Chancery of the State of Delaware in
and for New Castle County in an action titled Pinna Yosevitz on
behalf of herself and all others similarly situated v. Floyd F.
Sherman et al.
</TABLE>
<PAGE>
EXHIBIT 99.(A)
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 12, 1998
AMONG
TRIANGLE PACIFIC CORP.,
ARMSTRONG WORLD INDUSTRIES, INC.
AND
SAPLING ACQUISITION, INC.
<PAGE>
LIST OF EXHIBITS
Schedule Title
- -------- -----
1.2(a) Officers and Directors Tendering
5.5(a) Employment Agreements
5.5(b) Severance Plans
5.5(c) Employee Benefit Plans
<PAGE>
Table of Defined Terms
Definition Location of Definition
- ---------- ----------------------
Acquisition Proposal............. Section 5.4
Additional Conditions............ Section 1.1(a)
Agreement........................ Preamble
Bank Warrants.................... Section 2.5(b)
Blue Sky Laws.................... Section 3.1(c)(v)
Board of Directors............... Section 8.13(b)
Business Day..................... Section 8.13(c)
Certificate...................... Section 2.2(b)
Certificate of Merger............ Section 1.6
Certificates..................... Section 2.2(b)
Closing.......................... Section 1.5
Closing Date..................... Section 1.5
Company.......................... Preamble
Company Benefit Plans............ Section 3.1(b)(i)
Company Board Approval........... Section 3.1(f)
Company Common Stock............. Section 1.1(a)
Company Designees................ Section 1.3
Company Disclosure Schedule...... Section 3.1
Company Material Adverse Effect.. Section 3.1(a)
Company SEC Reports.............. Section 3.1(d)
Company Stockholders Meeting..... Section 5.1(a)
Company Stock Options............ Section 2.4
Company Termination Fee.......... Section 7.2(b)
Company Voting Debt.............. Section 3.1(b)(ii)
Confidentiality Agreement........ Section 5.2(b)
Credit Agreement................. Section 5.10
dated hereof..................... Section 8.13(a)
D&O Insurance.................... Section 5.7(b)
DGCL............................. Section 1.2
Dissenting Shares................ Section 2.3
DOJ.............................. Section 5.3(b)
Effective Time................... Section 1.6
Employment Agreements............ Section 5.5(a)
ERISA............................ Section 3.1(b)(i)
ESJ Warrants..................... Section 2.5(a)
Exchange Act..................... Section 1.1(a)
Expenses......................... Section 5.6
Extension Date................... Section 1.1(a)
Financial Advisor................ Section 3.1(h)
GAAP............................. Section 3.1(d)
-ii-
<PAGE>
Governmental Entity.............. Section 3.1(c)(iii)
HSR Act.......................... Section 3.1(c)(v)
Indebtedness..................... Section 8.13(d)
Indemnified Party................ Section 5.7(a)
Indenture........................ Section 5.9
Lien............................. Section 3.1(b)(iii)
Merger........................... Recitals
Merger Consideration............. Section 2.1(c)
Merger Sub....................... Preamble
Merger Sub Common Stock.......... Section 2.1
Minimum Condition................ Section 1.1(a)
Offer............................ Section 1.1(a)
Offer Documents.................. Section 1.1(b)
Offer Price...................... Section 1.1(a)
Offer to Purchase................ Section 1.1(a)
Options.......................... Section 3.1(b)(i)
Parent........................... Preamble
Parent Disclosure Schedule....... Section 3.2
Parent Material Adverse Effect... Section 3.2(a)
Paying Agent..................... Section 2.2(a)
Permitted Lien................... Section 8.13(g)
Person........................... Section 8.13(f)
Preferred Stock.................. Section 3.1.(b)(i)
Proxy Statement.................. Section 5.1(b)
Regulatory Law................... Section 5.3(b)
Required Company Vote............ Section 3.l(g)
Required Consents................ Section 3.1(c)(v)
Schedule 14D-1................... Section 1.1(b)
Schedule 14D-9................... Section 1.2(b)
SEC.............................. Section 1.1(a)
Securities Act................... Section 3.1(c)(v)
Share............................ Section 1.1(a)
Shares........................... Section 1.1(a)
Senior Notes..................... Section 5.9
Stock Tender Agreement........... Section 8.13(h)
Subsidiary....................... Section 8.13(j)
Superior Proposal................ Section 5.4
Surviving Corporation............ Section 1.4
the other party.................. Section 8.13(e)
Transactions..................... Section 1.2(a)
Trustee.......................... Section 5.9
Violation........................ Section 3.1(c)(ii)
Warrants......................... Section 2.5(b)
Warrant Consideration............ Section 2.5(c)
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 12, 1998 (this
"AGREEMENT"), among TRIANGLE PACIFIC CORP., a Delaware corporation (the
"COMPANY"), ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvania corporation
("PARENT"), and SAPLING ACQUISITION, INC., a Delaware corporation and a direct
wholly owned subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have each approved, and deem it advisable and in the best interests
of their respective stockholders to consummate, the acquisition of the Company
by Parent and Merger Sub pursuant to the Offer (as defined herein) and the
merger of Merger Sub with and into the Company (the "MERGER") upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
1.1 THE OFFER. (a) Provided that this Agreement shall not have been
---------
terminated in accordance with Section 7.1 and none of the events set forth in
Annex A hereto (other than the events set forth in clause (g) thereof) shall
have occurred or be continuing, as promptly as practicable (but in no event
later than five business days from 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 (the "EXCHANGE ACT")) an offer (the
"OFFER") to purchase for cash all of the issued and outstanding shares of Common
Stock, par value $.01 per share (each a "SHARE" and, collectively, the "SHARES"
or the "COMPANY COMMON STOCK"), of the Company, at a price of $55.50 per Share,
net to the seller in cash (such price, or such higher price per Share as may be
paid in the Offer, the "OFFER PRICE"). Merger Sub shall, on the terms and
subject only to the prior satisfaction or waiver of the conditions of the Offer
set forth in Annex A hereto (except that the Minimum Condition (as defined
herein) may not be waived by Parent or Merger Sub without the consent of the
1
<PAGE>
Company), accept for payment and pay for Shares tendered as soon as it is
legally permitted to do so under applicable law. The obligations of Merger Sub
to accept for payment and to pay for any and all Shares validly tendered on or
before the expiration of the Offer and not withdrawn shall be subject only to
(i) there being validly tendered and not withdrawn before the expiration of the
Offer, that number of Shares which, together with any Shares beneficially owned
by Parent or Merger Sub, represent at least a majority of the Shares outstanding
on a fully diluted basis (the "MINIMUM CONDITION") and (ii) the other conditions
set forth in Annex A hereto (the "ADDITIONAL CONDITIONS" and, together with the
Minimum Condition, the "OFFER CONDITIONS"). The Offer shall be made by means of
an offer to purchase (the "OFFER TO PURCHASE") containing the terms set forth in
this Agreement and the Offer Conditions. Merger Sub shall not amend or waive
the Minimum Condition and shall not decrease the Offer Price or decrease the
number of Shares sought, or amend any other term or condition of the Offer in
any manner adverse to the holders of the Shares or, except as provided in the
next two sentences, extend the expiration date of the Offer without the prior
written consent of the Company. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company, (i) extend the Offer on one or more
occasions for an aggregate period of not more than 20 days, if at the scheduled
or extended expiration date of the Offer, the Minimum Condition shall not be
satisfied, (ii) extend the Offer from time to time until the earlier to occur of
(x) the satisfaction or waiver of all Offer Conditions or (y) August 31, 1998;
provided, however, that notwithstanding the foregoing, if all Offer Conditions
- -------- -------
other than the HSR Condition (as defined in Annex A hereto) have been satisfied
or waived, Merger Sub may, if such HSR Condition is reasonably capable of being
satisfied, extend the Offer without the consent of the Company until October 31,
1998 (either such date, as applicable, being the "EXTENSION DATE"), if at the
scheduled or extended expiration date of the Offer any of the Offer Conditions
(other than the Minimum Condition) which are reasonably capable of being
satisfied shall not be satisfied or waived, (iii) extend the Offer for any
period required by any rule, regulation, interpretation or position of the
United States Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer and (iv) extend the Offer on one or more
occasions for an aggregate period of not more than 10 Business Days beyond the
latest expiration date that would otherwise be permitted under clause (i), (ii)
or (iii) of this sentence, if on such expiration date there shall not have been
tendered at least 90% of the outstanding Shares on a fully diluted basis;
provided, however, that if the Offer is extended pursuant to this clause (iv)
- -------- -------
hereof, the conditions to the Offer set forth in clauses (b), (f) or (h) of
Annex A hereto shall be deemed satisfied at all times thereafter.
Notwithstanding the foregoing, if requested by the Company, Merger Sub shall,
and Parent agrees to cause Merger Sub to, extend the Offer from time to time
until the earlier to occur of (x) the satisfaction or waiver of all Offer
Conditions or (y) the Extension Date if, and to the extent that, at the initial
expiration date of the Offer, or any extension thereof, all Offer Conditions
have not been satisfied or waived and all such conditions are reasonably capable
of being satisfied. In addition, the Offer Price may be increased and the Offer
may be extended to the extent required by law in connection with such increase,
in each case without the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Merger Sub shall file with 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
2
<PAGE>
exhibits thereto, the "SCHEDULE 14D-1"). 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 Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or Merger Sub with respect to information supplied by the Company
or any of its stockholders in writing for inclusion or incorporation by
reference in the Offer Documents. Each of Parent and Merger Sub further agrees
to take all steps necessary to cause the Offer Documents to be filed with the
SEC and to be disseminated to holders of Shares, 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, agrees promptly
to 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 Merger Sub further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review the initial Schedule 14D-1 before it is filed
with the SEC. In addition, Parent and Merger Sub agree to provide the Company
and its counsel in writing with any comments or other communications that
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 or other communications.
(c) Parent shall provide or cause to be provided to Merger Sub all of
the funds necessary to purchase any shares of Company Common Stock that Merger
Sub becomes obligated to purchase pursuant to the Offer.
(d) Upon the consummation of the Offer, Parent agrees to make a loan
to the Company, on commercially reasonable terms, in an amount sufficient for
the Company to make payments to holders of Company Stock Options as set forth in
Section 2.4 hereof, or, if such amount cannot be borrowed by the Company for any
reason, to contribute such amount to the Company.
1.2 COMPANY ACTIONS. (a) The Company hereby approves of and
---------------
consents to the Offer and represents that the Board of Directors (as defined in
Section 8.13(b)), at a meeting duly called and held, has duly and unanimously
(i) approved this Agreement and the transactions contemplated hereby, including
the Offer and the Merger (as defined in the Recitals hereto) (collectively, the
"TRANSACTIONS") and (ii) determined, as of the date of such resolutions, that
the terms of the Offer and the Merger are fair to, and in the best interests of
the Company's stockholders, and resolved to recommend that the stockholders of
the Company accept the Offer, tender their Shares thereunder to Merger Sub and
approve and adopt this Agreement and the Merger (if required) and (iv) taken all
necessary steps to render Section 203 of the Delaware General Corporation Law
(the "DGCL") inapplicable to the Merger (it being understood that
3
<PAGE>
(x) nothing in this Agreement shall prevent or prohibit the Company from
complying with Rule 14d-9 and Rule 14(e)(2) under the Exchange Act with respect
to an Acquisition Proposal and (y) such recommendation may be withdrawn,
modified or amended as provided in Section 5.4 hereof). The Company has been
advised by each of its directors and executive officers listed on Schedule
--------
1.2(a) annexed hereto that each such person currently intends to tender all
- ------
Shares beneficially owned by such person pursuant to the Offer.
(b) As promptly as practicable following the commencement of the Offer
and in all events not later than 10 business days following such commencement,
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, subject to
the provisions of this Agreement, contain the recommendation referred to in
clause (ii) of Section 1.2(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 Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent or Merger Sub
in writing for inclusion in the Schedule 14D-9. The Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of
Shares, 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 or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as corrected to be filed
with the SEC and to be disseminated to holders of the Shares, in each case as
and to the extent required by applicable federal securities laws. Parent and
its counsel shall be given a reasonable opportunity to review the initial
Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees
to provide Parent, Merger Sub and their counsel in writing with any comments or
other communications 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 and the Merger, 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 the record holders of the Shares as of a recent date, and
shall furnish Merger Sub with such additional information (including updated
lists of holders of Shares and their addresses, mailing labels and lists of
security positions) and such other assistance as Merger Sub or its agents may
reasonably request in communicating the Offer to the record and beneficial
stockholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents and as required by applicable law, each of
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
4
<PAGE>
preceding sentence, will use such information only in connection with the Offer
and the Merger, and, if this Agreement is terminated, will upon request of the
Company deliver, and use its reasonable best efforts to cause its agents and
representatives to deliver to the Company all copies of such information then in
its possession or the possession of its agents or representatives.
1.3 DIRECTORS. (a) Promptly upon the purchase of and payment
---------
for Shares by Parent or any of its Subsidiaries (as defined in Section 8.13(j))
pursuant to the Offer, Parent 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 Parent pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub, Parent and any of their affiliates bears to
the total number of shares of Company Common Stock then outstanding. The
Company shall, upon request of Merger Sub take any and all actions within the
Company's power which are necessary to cause Parent's designees to be appointed
to the Board of Directors (including by increasing the size of the Board of
Directors or using its best efforts to cause incumbent directors to resign). At
such time, the Company shall use its best efforts to cause persons designated by
Parent to constitute the same percentage of each committee of the Board of
Directors, each board of directors of each Subsidiary and each committee of each
such board as such persons represent on the Board of Directors. Notwithstanding
the foregoing, until the Effective Time (as defined in Section 1.6 hereof), the
Company shall retain as members of its Board of Directors at least two directors
who are directors of the Company on the date hereof (the "COMPANY DESIGNEES").
The Company's obligations under this Section 1.3(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 1.3(a), including
mailing to stockholders the information required to 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 any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Board of Directors and until the Effective Time any
amendment of this Agreement, any termination of this Agreement by the Company,
any extension of time for performance of any of the obligations of Parent of
Merger Sub hereunder, any waiver of any condition or any of the Company's rights
hereunder or other action by the Company hereunder may be effected only by the
action of a majority of the directors of the Company then in office who are
Company Designees, which action shall be deemed to constitute the action of the
full Board of Directors; provided, that if there shall be no such directors
(other than in breach hereof), such actions may be effected by unanimous vote of
the entire Board of Directors of the Company.
1.4 THE MERGER. Upon the terms and subject to the conditions set
----------
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"),
5
<PAGE>
Merger Sub shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION") under the name "Triangle Pacific Corp."
1.5 CLOSING. The closing of the Merger (the "CLOSING") will take
-------
place on the fifth Business Day after the satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) set forth in Article VI (the
"CLOSING DATE"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of O'Melveny & Myers
LLP, 153 East 53rd Street, New York, NY 10022, unless another place is agreed to
in writing by the parties hereto.
1.6 EFFECTIVE TIME. As soon as practicable following the Closing,
--------------
the parties shall (i) file a certificate of merger (the "CERTIFICATE OF MERGER")
in such form as is required by and executed in accordance with the relevant
provisions of the DGCL and (ii) make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such subsequent time as the Company and Parent shall agree and be specified in
the Certificate of Merger (the date and time the Merger becomes effective being
the "EFFECTIVE TIME").
1.7 EFFECTS OF THE MERGER. At and after the Effective Time, the
---------------------
Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.8 CERTIFICATE OF INCORPORATION. The certificate of incorporation
----------------------------
of the Company, as in effect immediately before the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law.
1.9 BYLAWS. The bylaws of the Company as in effect at the Effective
------
Time shall be the bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
1.10 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers of
-----------------------------------------------
the Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of Merger Sub as of the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director or
until their respective successors are duly elected and qualified.
6
<PAGE>
1.11 VOTE TO APPROVE MERGER. Parent agrees that it will vote, or
----------------------
cause to be voted, all of the Shares then owned by it, Merger Sub or any of its
other Subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of this Agreement.
1.12 MERGER WITHOUT MEETING OF STOCKHOLDERS. If permitted by the
--------------------------------------
DGCL, in the event that Parent, Merger Sub or any other Subsidiary of Parent
shall acquire at least 90% of the outstanding shares of each class of capital
stock of the Company, pursuant to the Offer or otherwise, the parties hereto
agree to 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.
ARTICLE II
CONVERSION OF SECURITIES
2.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue
---------------------------
of the Merger and without any action on the part of the holders of any shares of
Company Common Stock or common stock of Merger Sub (the "MERGER SUB COMMON
STOCK"):
(a) Merger Sub Common Stock. Each issued and outstanding share of
-----------------------
Merger Sub Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
-----------------------------------------------------
of Company Common Stock owned by the Company or any Subsidiary of the Company
and each share of Company Common Stock owned by Parent, Merger Sub or any other
wholly owned Subsidiary of Parent shall be cancelled and retired and shall cease
to exist and no consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding share of Company
------------------
Common Stock (other than Shares to be cancelled in accordance with Section
2.1(b) hereof and any Dissenting Shares (as defined in Section 2.3 hereof, if
applicable)), shall be converted into the right to receive the Offer Price,
payable to the holder thereof, without interest (the "MERGER CONSIDERATION"),
upon surrender of the certificate formerly representing such share of Company
Common Stock in the manner provided in Section 2.2 hereof. All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2 hereof, without interest, or to perfect any rights of appraisal as a
holder of Dissenting Shares that such holder may have pursuant to Section 262 of
the DGCL.
7
<PAGE>
2.2 EXCHANGE OF CERTIFICATES.
------------------------
(a) Paying Agent. Parent shall designate a bank or trust company
------------
reasonably acceptable to the Company to act as agent in order for the holders of
shares of Company Common Stock and the holders of Warrants in connection with
the Merger (the "PAYING AGENT") to receive the funds to which all such holders
shall become entitled pursuant to Section 2.1(c) or 2.5 hereof. Before the
Effective Time, Parent shall deposit or cause to be deposited with the Paying
Agent such funds for timely payment hereunder. Such funds shall be invested by
the Paying Agent as directed by Parent or the Surviving Corporation.
(b) Exchange Procedures. Parent shall instruct the Paying Agent to,
-------------------
as soon as reasonably practicable after the Effective Time but in no event more
than three business days thereafter, mail to each holder of record of a
certificate, which immediately before the Effective Time represented outstanding
shares of Company Common Stock (a "CERTIFICATE," or, collectively, the
"CERTIFICATES"), whose shares were converted pursuant to Section 2.1 hereto into
the right to receive the Merger Consideration (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration payable for each share of
Company Common Stock formerly represented by such Certificate and the
Certificate so surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the person in whose
name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration in cash as contemplated by
this Section 2.2. No interest will be paid or accrue on the cash payable upon
the surrender of any Certificate.
(c) Transfer Books; No Further Ownership Rights in Company Common
-------------------------------------------------------------
Stock. At the Effective Time, the stock transfer books of the Company shall be
- -----
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after
the Effective Time, the holders of Certificates evidencing ownership of shares
of Company Common Stock outstanding immediately before the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.
8
<PAGE>
(d) Termination of Fund; No Liability. At any time following one year
---------------------------------
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.3 DISSENTING SHARES. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares outstanding immediately before the Effective Time and held
by a holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such Shares in accordance with the
DGCL ("DISSENTING SHARES") shall not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses his or her right to appraisal. A holder of Dissenting Shares
shall be entitled to receive payment of the appraised value of such Shares held
by him or her in accordance with the provisions of Section 262 of the DGCL,
unless, after the Effective Time, such holder fails to perfect or withdraws or
loses his or her right to appraisal, in which case such Shares shall be treated
as if they had been converted as of the Effective Time into a right to receive
the Merger Consideration, without interest thereon. The Company shall give
Parent (i) prompt notice of any demands for appraisal of Shares received by the
Company and (ii) the opportunity to participate in and direct all negotiations
and proceedings with respect to any such demands. The Company shall not,
without the prior written consent of Parent, make any payment with respect to,
or settle, offer to settle or otherwise negotiate, any such demands.
2.4 COMPANY OPTION PLANS.
--------------------
(a) All outstanding options to purchase Company Common Stock held by
all current and former employees and directors of the Company ("COMPANY STOCK
OPTIONS") granted to such employees and directors under any Company Benefit Plan
(as defined in Section 3.1(b)(i)), whether or not then exercisable, shall be
made fully vested and exercisable and canceled by the Company immediately before
the earlier of (x) the consummation of the Offer or (y) the Effective Time, and
thereafter, the holders' sole right shall be to, and the holders thereof shall,
receive from the Company, for each Share subject to such Company Stock Option,
an amount in cash equal to the difference between the Offer Price and the
exercise price per share of such Company Stock Option, which amount shall be
paid by the Company at the time such Company Stock Option is canceled. The
Company will use its best efforts to obtain any necessary consents and make any
amendments to the terms of the Company Benefit Plans to the extent such consents
or amendments are necessary to give effect to the foregoing. All applicable
withholding taxes attributable to the payments made hereunder shall be deducted
from the amounts payable under this Section 2.4.
9
<PAGE>
(b) Prior to the Effective Time, the Company's employee stock benefit
plans shall be terminated and the provisions in any other Company Benefit Plan
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any Subsidiary shall be deleted. The Company
shall take all actions necessary to ensure that following the Effective Time no
holder of a Company Stock Option or any participant in any Company Benefit Plan
shall have the right thereunder to acquire any capital stock of the Company,
Parent, the Surviving Corporation or any of their respective Subsidiaries,
except as provided in this Section 2.4.
2.5 WARRANTS.
--------
(a) In accordance with the terms of the ESJ Exchange Agreement dated
as of June 5, 1992 among the ESJ Entities, TPC Holding Corp. and the Company and
the warrant certificates issued thereunder (the "Warrant Certificates"), all
outstanding warrants of the Company issued pursuant thereto (the "ESJ WARRANTS")
(other than ESJ Warrants owned by Parent, Merger Sub or any other direct or
indirect subsidiary of Parent, which ESJ Warrants shall be canceled and
extinguished at the Effective Time, with no payment being made with respect to
such ESJ Warrants) shall, following the Effective Time, be exercisable only for
an amount of cash equal to the Offer Price and the holders of such ESJ Warrants
shall be entitled to receive, upon surrender to the Paying Agent of the warrant
certificates for cancellation, cash in an amount equal to the Warrant
Consideration. The Company shall take all actions necessary to ensure that
following the Effective Time (i) the ESJ Warrants shall represent only the right
to receive the Warrant Consideration in lieu of Shares issuable upon exercise
thereof, (ii) all warrant agreements shall be terminated and cancelled and
(iii) no party to such warrant agreements shall have the right to acquire any
capital stock of the Company, Parent, the Surviving Corporation or any of their
respective subsidiaries.
(b) In accordance with the terms of the Lenders' Equity Agreement
dated as of June 5, 1992 between the Company and certain banks and other
financial institutions (the "Banks"), the Banks hold certain rights (the "BANK
WARRANTS" and, collectively with the ESJ Warrants, the "WARRANTS") entitling
them to receive an aggregate of 4,858 Shares (upon payment of $.01 per Share)
upon the exercise of the ESJ Warrants by the holders thereof. The Company
agrees to use its best efforts to (i) obtain, prior to the Effective Time,
consents or waivers from each Bank whereby such Bank agrees to receive the
Warrant Consideration in lieu of Shares issuable upon the exercise of the Bank
Warrants and (ii) ensure that following the Effective Times (x) the Bank
Warrants shall represent only the right to receive cash in an amount equal to
the per share Offer Price less $.01 per share, (y) the Lenders' Equity Agreement
shall be terminated and cancelled and (z) no party to such Lenders' Equity
Agreement shall have the right to acquire any capital stock of the Company,
Parent, the Surviving Corporation or any of their respective Subsidiaries..
(c) As used herein "WARRANT CONSIDERATION" shall mean an amount per
Warrant equal to the product of (i) the number of Shares issuable upon exercise
of such Warrant and (ii) the difference between the Offer Price and the per
Share exercise price per Warrant, without interest, which amount shall be paid
from and after the Effective Time.
10
<PAGE>
2.6 LOST CERTIFICATES. If any Certificate or Warrant Certificate
-----------------
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate or Warrant Certificate to be
lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such Person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate or Warrant Certificate, the Paying Agent
will deliver in exchange for such lost, stolen or destroyed Certificate or
Warrant Certificate the applicable Merger Consideration or Warrant
Consideration, as the case may be, with respect to the shares of Company Common
Stock or Warrants formerly represented thereby.
2.7 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent
------------------
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock or Warrants such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder and the rules and
regulations promulgated thereunder, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving Corporation
or Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock or Warrants in respect of which such deduction and
withholding was made by the Surviving Corporation or Parent, as the case may be.
2.8 FURTHER ASSURANCES. At and after the Effective Time, the
------------------
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
---------------------------------------------
forth in the Company SEC Reports (as defined in Section 3.1(d)) filed prior to
the date hereof or in the Company Disclosure Schedule delivered by the Company
to Parent before the execution of this Agreement (the "COMPANY DISCLOSURE
SCHEDULE"), the Company represents and warrants to Parent and Merger Sub as
follows:
(a) Organization, Standing and Power. Each of the Company and its
--------------------------------
Subsidiaries (1) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (2) has all necessary power
and authority required to own, lease, license or use its assets and properties
now owned, leased, licensed or used and to carry on its
11
<PAGE>
business as now conducted and (3) is duly qualified as a foreign corporation,
limited liability company or limited partnership, as the case may be, under the
laws of each jurisdiction in which qualification is required either to own,
lease, license or use its properties now owned, leased, licensed and used or to
carry on its business as now conducted, except where the failure to effect or
obtain such qualification, individually or in the aggregate, would not
constitute a Company Material Adverse Effect. "COMPANY MATERIAL ADVERSE EFFECT"
means, with respect to the Company, any adverse change, circumstance or effect
that is reasonably likely to be materially adverse to the business, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole or on transactions contemplated hereby, other than any change,
circumstance or effect (i) relating to the economy or securities markets in
general, (ii) relating to the industries in which the Company operates and not
specifically relating to the Company or (iii) resulting from the execution of
this Agreement, the announcement of this Agreement and the Transactions
contemplated hereby or any change in the value of the Company relating to such
execution or announcement. The copies of the certificate of incorporation and
bylaws of the Company, which were previously furnished to Parent, are complete
copies of such documents as in effect on the date of this Agreement.
(b) Capital Structure.
-----------------
(i) The authorized capital stock of the Company consists solely
of 30,000,000 shares of Company Common Stock and 10,000,000 shares of
preferred stock, par value $.01 per share (the "PREFERRED STOCK"). As of
June 9, 1998, 14,766,575 shares of Company Common Stock were issued and
outstanding, no shares of Preferred Stock were issued and outstanding, no
shares of capital stock were held in the treasury of the Company and
2,510,021 shares of Company Common Stock were reserved for issuance
pursuant to the Company Benefit Plans and Warrants of the Company. Since
such date, there have been no issuances of shares of the capital stock of
the Company or any other securities of the Company other than issuances of
shares pursuant to options or rights outstanding as of such date under the
Company Benefit Plans. All issued and outstanding shares of the capital
stock of the Company are and all shares reserved for issuance will be, when
issued in accordance with the terms specified in the commitments or
agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock is
entitled to preemptive rights. As of June 9, 1998 except for (i) options
representing in the aggregate the right to purchase 1,375,414 shares of
Company Common Stock under the Company Benefit Plans and (ii) 809,014
Warrants validly issued and currently exercisable for 809,014 shares of
Company Common Stock in the aggregate, there were no, and at the Effective
Time (except pursuant to this Agreement) there will not be any, outstanding
securities, options, subscriptions, warrants, calls, rights (including
"phantom" stock rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or
exchange under any outstanding security, instrument or agreement (together,
"OPTIONS") obligating the Company or any of its Subsidiaries to issue,
deliver or sell or cause to be issued, delivered or sold any shares of
capital stock of the Company or to issue, grant, extend or enter into any
Option with respect thereto or to repurchase, redeem or otherwise acquire
any share of capital stock of the Company. The
12
<PAGE>
Company is not a party to any voting agreement with respect to the voting
of any of its securities. "COMPANY BENEFIT PLANS" means each employee
benefit plan, program, arrangement and contract (including but not limited
to any "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") , whether or
not subject to ERISA and any bonus, deferred compensation, incentive, stock
appreciation right, phantom stock, stock bonus, stock purchase, restricted
stock, stock option, employment, termination, stay agreement or bonus,
change in control, severance or other compensatory plan, program,
arrangement and contract) all of the foregoing in effect on the date of
this Agreement and, in the case of a Company Benefit Plan which is subject
to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of
ERISA, at any time during the five-year period preceding the date of this
Agreement, to which the Company is a party, which is maintained or
contributed to by the Company or a Subsidiary, or with respect to which the
Company could incur material liability or which otherwise benefits any
employees and directors of the Company or its Subsidiaries. No options or
warrants or other rights to acquire capital stock from the Company have
been issued or granted since June 9, 1998.
(ii) No bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible or exchangeable into or
exercisable for securities having the right to vote) on matters on which
stockholders of the Company or any of its Subsidiaries may vote ("COMPANY
VOTING DEBT") are authorized, issued or outstanding.
(iii) All of the outstanding shares of capital stock of each
Subsidiary of the Company are duly authorized, validly issued, fully paid
and nonassessable and are owned, beneficially and of record, by the Company
or a Subsidiary wholly-owned, directly or indirectly, by the Company, free
and clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, equities and charges of any kind (each, a "LIEN"), other than
Permitted Liens described in clauses (i) and (ii) of the definition
thereof. Except for interests in its Subsidiaries, neither the Company nor
any of its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, limited liability company, trust or other entity. There are no
outstanding Options obligating the Company or any of its Subsidiaries to
issue, deliver or sell or cause to be issued, delivered or sold any shares
of capital stock of any Subsidiary of the Company or to issue, grant,
extend or enter into any Option with respect thereto, or to repurchase,
redeem or otherwise acquire any shares of capital stock of any Subsidiary
of the Company.
(c) Authority; No Conflicts.
-----------------------
(i) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the Transactions
contemplated hereby, subject in the case of the consummation of the Merger
to the adoption of this Agreement by the Required Company Vote (as defined
in Section 3.1(g)), if required by law. The execution and delivery of this
Agreement and the consummation of the Transactions contemplated hereby have
been duly authorized by all necessary corporate action on the
13
<PAGE>
part of the Company, subject in the case of the consummation of the Merger
to the adoption of this Agreement by the Required Company Vote. This
Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable
against it in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally, by general
equity principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not and
the consummation of the Merger and the other Transactions contemplated
hereby will not conflict with, result in any violation of, constitute a
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, amendment, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of
a Lien on any assets of the Company or any of its Subsidiaries (any such
conflict, violation, default, right of termination, amendment, cancellation
or acceleration, loss or creation, a "VIOLATION") pursuant to: (A) any
provision of the certificate of incorporation or bylaws of the Company or
any of its Subsidiaries, or (B) except as would not, individually or in the
aggregate, constitute a Company Material Adverse Effect and, subject to
obtaining or making the Required Consents (as defined in Section
3.1(c)(iv)), any loan or credit agreement, note, mortgage, bond, indenture,
lease, benefit plan or other agreement, obligation, instrument, permit,
franchise, license, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any Subsidiary of the Company or
their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any national, state, municipal or
local government, any instrumentality, subdivision, court, administrative
agency or commission or other authority thereof, or any quasi-governmental
or private body exercising any regulatory, taxing, importing or other
governmental or quasi-governmental authority (a "GOVERNMENTAL ENTITY"), is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Company
or the consummation of the Merger and the other Transactions contemplated
hereby, except for the Required Consents and such other consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to make or obtain would not, individually or in the
aggregate, constitute a Company Material Adverse Effect.
(iv) The Company and its Subsidiaries are not in violation of any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any Subsidiary of the Company or their
respective properties or assets except for violations which, individually
or in the aggregate, do not constitute a Company Material Adverse Effect.
14
<PAGE>
(v) As used herein, "REQUIRED CONSENTS" shall mean consents,
approvals, orders, authorizations, registrations, declarations and filings
required under or in relation to (A) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), (B) state securities
or "blue sky" laws (the "BLUE SKY LAWS"), (C) the Securities Act of 1933,
as amended (the "SECURITIES ACT"), (D) the Exchange Act, (E) the filing of
the Certificate of Merger under the DGCL, (F) rules and regulations of
NASDAQ, (G) antitrust or other competition laws of other jurisdictions and
(H) consents set forth on the Company Disclosure Schedule.
(d) Reports and Financial Statements. The Company and each of its
--------------------------------
wholly owned Subsidiaries required to file reports under Sections 13 or 15(d) of
the Exchange Act has filed all required reports, schedules, forms, statements
and other documents required to be filed by it with the SEC since January 1,
1995 (collectively, including all exhibits thereto, and together with such other
reports, schedules, forms, statements and other documents, filed by the Company
or any Subsidiary with the SEC under the Exchange Act and the Securities Act,
including all exhibits thereto, the "COMPANY SEC REPORTS"). None of the Company
SEC Reports, as of their respective dates, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in the Company
SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, and were prepared in conformity with United States
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved except as otherwise noted therein, and subject, in the case
of the unaudited interim financial statements, to normal and recurring year-end
adjustments that have not been and are not expected to be material in amount.
All of the Company SEC Reports, as of their respective dates (and as of the date
of any amendment to the respective Company SEC Report), complied as to form in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder. Except
for matters reflected or reserved against in the balance sheet for the period
ended April 3, 1998 included in the financial statements contained in the
Company's most recent Form 10-Q, neither the Company nor any of its Subsidiaries
has incurred since that date any liabilities or obligations of any nature
(whether accrued, absolute, contingent, fixed or otherwise) which would be
required under GAAP to be set forth on a consolidated balance sheet of the
Company and its consolidated Subsidiaries, except liabilities and obligations
which were incurred in the ordinary course of business consistent with past
practice since such date.
(e) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Offer Documents,
the Schedule 14D-9 or the Proxy Statement, if required, including any
amendments or supplements thereto, will, at the respective times the Offer
Documents, the Schedule 14D-9 and the Proxy
15
<PAGE>
Statement, as the case may be, are filed with the SEC or first published,
sent or given to the Company's stockholders or at the time of the Company
Stockholders Meeting contain any untrue statement of 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 false or misleading. The Schedule 14D-9 and the
Proxy Statement, if required, will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act
and the rules and regulations thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by the Company with respect
to statements made or incorporated by reference in the Offer Documents, the
Schedule 14D-9 or, if required, the Proxy Statement based on information
supplied by Parent for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of the Company, by
--------------
resolutions duly adopted at a meeting duly called and held and not subsequently
rescinded or modified (the "COMPANY BOARD APPROVAL"), has duly and unanimously
(i) determined that this Agreement and the terms of the Offer and the Merger are
fair to, in the best interests of the Company and its stockholders, (ii)
approved this Agreement, the Offer and the Merger, (iii) determined to recommend
that the stockholders of the Company accept the Offer, tender their Shares
thereunder to Merger Sub and approve and adopt this Agreement and the
Transactions, and (iv) approved the transactions contemplated by the Stock
Tender Agreement prior to the execution and delivery of such Stock Tender
Agreement and this Agreement. The Company Board Approval constitutes approval
by and on behalf of the Company of this Agreement and the Merger for purposes of
Section 251 of the DGCL and Section 203 of the DGCL and the provisions of
Section 203 of the DGCL will not, before the termination of this Agreement,
apply to this Agreement, the Offer, the Merger or the other transactions
contemplated hereby.
(g) Vote Required. The affirmative vote of the holders of a majority
-------------
of the outstanding shares of Company Common Stock, voting together as a single
class, to approve the Merger (the "REQUIRED COMPANY VOTE"), if required by
applicable law, is the only vote of the holders of any class or series of the
Company capital stock or Company Voting Debt necessary to adopt this Agreement
and approve the Transactions contemplated hereby.
(h) Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the Transactions contemplated by this Agreement, except Salomon Smith Barney
(the "FINANCIAL ADVISOR"), whose fees and expenses will be paid by the Company
in accordance with the Company's agreement with such firm, which has been
disclosed to Parent.
(i) Opinion of the Financial Advisor. The Company has received the
--------------------------------
opinion of the Financial Advisor, dated the date hereof, to the effect that, as
of such date, the Offer Price and the Merger Consideration is fair, from a
financial point of view, to the holders of
16
<PAGE>
Company Common Stock, a true and complete copy of which has been delivered to
Parent prior to the execution of this Agreement.
(j) Absence of Certain Changes or Events. Except for the process
------------------------------------
culminating in the execution of this Agreement and as contemplated by this
Agreement, since January 2, 1998 (i) there has not been any change, event or
development constituting, individually or in the aggregate, a Company Material
Adverse Effect; (ii) the businesses of the Company and its Subsidiaries have
been conducted only in the ordinary course consistent with past practice; (iii)
the Company has not set aside or declared any dividend or other distribution
with respect to its capital stock; and (iv) the Company has not changed, in any
material way, its accounting principles, practices or methods.
(k) Title to Properties; Entire Business. The Company and its
------------------------------------
Subsidiaries have good title or a valid and subsisting leasehold interest in and
to or a valid and enforceable license to use all material assets, properties and
rights owned, used or held for use by them in the conduct of their respective
businesses, in each case, free and clear of any Liens other than Permitted
Liens. The Company and its Subsidiaries own or have sufficient right to use all
assets and properties necessary to conduct their businesses in the manner in
which they are currently conducted.
(l) Litigation. As of the date hereof, there is no suit, action or
----------
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries that, individually or in the aggregate,
constitutes a Company Material Adverse Effect.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Except as set forth in
----------------------------------------
the Parent Disclosure Schedule delivered by Parent to the Company before the
execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), Parent
represents and warrants to the Company hereof as follows:
(a) Organization, Standing and Power. Each of Parent and its
--------------------------------
Subsidiaries (1) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (2) has all necessary power
and authority and all material licenses, authorizations, consents and approvals
required to own, lease, license or use its properties now owned, leased,
licensed or used and to carry on its business as now conducted and (3) is duly
qualified as a foreign corporation, limited liability company or limited
partnership, as the case may be, under the laws of each jurisdiction in which
qualification is required either to own, lease, license or use its properties
now owned, leased, licensed and used or to carry on its business as now
conducted, except where the failure to effect or obtain such qualification,
individually or in the aggregate, would not constitute a Parent Material Adverse
Effect. "PARENT MATERIAL ADVERSE EFFECT" means, with respect to Parent, any
adverse change, circumstance or effect that is reasonably likely to be
materially adverse to the business, financial condition or results of operations
of Parent and its Subsidiaries taken as a whole or on the transactions
contemplated hereby, other than any change, circumstance or effect (i) relating
to the economy or securities markets in general, or (ii) relating to the
industries in which Parent and its Subsidiaries operate
17
<PAGE>
and not specifically relating to Parent and its Subsidiaries. The copies of the
certificate of incorporation and bylaws of Parent, which were previously
furnished to the Company, are complete copies of such documents as in effect on
the date of this Agreement.
(b) Authority; No Conflicts.
-----------------------
(i) Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the Transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the Transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has been
duly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally, by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the Merger and the
other Transactions contemplated hereby will not, conflict with, or result
in a Violation pursuant to: (A) any provision of the certificate of
incorporation or bylaws of Parent or any Subsidiary of Parent, (B) except
as would not, individually or in the aggregate, constitute a Parent
Material Adverse Effect and, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Parent or any Subsidiary of Parent or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent or any Subsidiary of Parent in
connection with the execution and delivery of this Agreement by Parent or
the consummation of the Merger and the other Transactions contemplated
hereby, except for the Required Consents and such consents, approvals,
orders, authorizations, registrations, declarations and filings the failure
of which to make or obtain would not, individually or in the aggregate,
constitute a Parent Material Adverse Effect.
(c) Information Supplied.
--------------------
(i) None of the information supplied or to be supplied by Parent
for inclusion or incorporation by reference in (A) the Offer Documents or
the Schedule 14D-9, including any amendments or supplements thereto, will,
at the respective times the Offer Documents and the Schedule 14D-9 are
filed with the SEC or first published or given to the Company's
stockholders contain any untrue statement of material fact, or
18
<PAGE>
omit to state any material fact required to be stated herein or necessary
in order to make the statements therein in light of the circumstances under
which they were made not false or misleading, and (B) if required, the
Proxy Statement will, on the date it is first mailed to Company
stockholders or at the time of the Company Stockholders Meeting, 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.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(c), no representation or warranty is made by Parent with respect to
statements made or incorporated by reference in the Offer Documents, the
Schedule 14D-9, or the Proxy Statement, if required, based on information
supplied by the Company for inclusion or incorporation by reference
therein.
(d) Board Approval. The Board of Directors of Parent, by resolutions
--------------
duly adopted at a meeting duly called and held and not subsequently rescinded or
modified in any way, has duly and unanimously (i) determined that this Agreement
and the Merger are fair to and in the best interests of Parent and its
stockholders and (ii) approved this Agreement and the Merger.
(e) Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the Transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent, except J.P. Morgan & Company and Bain & Company, whose
fees and expenses will be paid by Parent in accordance with Parent's agreement
with such firm based upon arrangements made by or on behalf of Parent and
previously disclosed to the Company.
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent
-------------------------------------------------------
and Merger Sub represent and warrant to the Company as follows:
(a) Organization and Corporate Power. Merger Sub is a corporation
--------------------------------
duly incorporated, validly existing and in good standing under the laws of
Delaware. Merger Sub is a direct wholly owned subsidiary of Parent. The copies
of the certificate of incorporation and bylaws of Merger Sub, which were
previously furnished to the Company, are complete copies of such documents as in
effect on the date of this Agreement.
(b) Corporate Authorization. Merger Sub has all requisite corporate
-----------------------
power and authority to enter into this Agreement and to consummate the
Transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
Transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws
19
<PAGE>
relating to or affecting creditors generally, by general equity principles
(regardless or whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing.
(c) No Conflicts. The execution, delivery and performance by Merger
------------
Sub of this Agreement and the consummation by Merger Sub of the Transactions
contemplated hereby do not and will not contravene or conflict with the
certificate of incorporation or bylaws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
----------------------
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
Transactions contemplated hereby. Merger Sub has no Subsidiaries.
(e) Sufficient Funds. Either Parent or Merger Sub has sufficient
----------------
funds available to purchase all of the Shares outstanding on a fully diluted
basis pursuant to the Offer, to perform their respective obligations under this
Agreement including, without limitation, making the loans and/or contributions
to the Company as set forth in Section 1.1(d), 5.9 and 5.10 hereof and to pay
all fees and expenses related to the Transactions contemplated by this Agreement
to be paid by them.
(f) Share Ownership. Except as contemplated by the Stock Tender
---------------
Agreement, none of Parent, Merger Sub or any of their respective "affiliates" or
"associates" (as those terms are defined in Rule 12b-2 under the Exchange Act)
beneficially owns any Shares.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. During the period from the date of
------------------------
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated on the Company Disclosure Schedule
or as required by a Governmental Entity or to the extent that Parent shall
otherwise consent in writing, such consent not to be unreasonably withheld):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on
---------------
their respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore conducted, and
shall use all reasonable efforts to preserve intact their present lines of
business and keep available the services of their current officers and employees
and preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them; provided,
--------
however, that no action by the Company or its Subsidiaries covered by any other
- -------
provision of this Section 4.1
20
<PAGE>
shall be deemed a breach of this Section 4.1(a) unless such action would also
constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. The Company shall not, and
-----------------------------------
shall not permit any of its Subsidiaries to, (i) declare or pay any dividends on
or make other distributions (whether in stock, cash or property) in respect of
any of its capital stock, except dividends by a wholly owned direct or indirect
Subsidiary of the Company to such Subsidiary's parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of the Company which remains a wholly owned Subsidiary after
consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except to the extent required by
the Employment Agreements.
(c) Issuance of Securities. The Company shall not, and shall not
----------------------
permit any of its Subsidiaries to, issue, deliver, sell, pledge or otherwise
encumber (except for Permitted Liens described in clauses (i) and (ii) of the
definition thereof), any shares of its capital stock or authorize or propose the
issuance, delivery, sale, pledge or encumbrance (except for Permitted Liens
described in clauses (i) and (ii) of the definition thereof), of, any shares of
its capital stock of any class, any Company Voting Debt or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares or Company Voting Debt, or enter into any agreement
with respect to any of the foregoing, other than (i) the issuance of Company
Common Stock upon the exercise of Company Stock Options outstanding on the date
hereof in accordance with their present terms or upon the exercise of the
Warrants, or (ii) issuances by a wholly owned Subsidiary of the Company of
capital stock to such Subsidiary's parent.
(d) Governing Documents. Except to the extent required to comply with
-------------------
their respective obligations hereunder, required by law or required by the rules
and regulations of the NASDAQ, the Company and its wholly owned Subsidiaries
shall not amend their respective certificates of incorporation, bylaws or other
governing documents.
(e) Acquisitions and Divestitures. The Company shall not, and shall
-----------------------------
not permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other than
the acquisition of assets used in the operations of the business of the Company
and its Subsidiaries in the ordinary course); provided, however, that the
foregoing shall not prohibit (x) internal reorganizations or consolidations
involving existing wholly owned Subsidiaries of the Company or (y) the creation
of new Subsidiaries of the Company organized to conduct or continue activities
otherwise permitted by this Agreement that in the case of clause (x) and (y)
would not otherwise be prohibited by or result in a breach of any other
provision of this Section 4.1. Other than (i) internal reorganizations or
consolidations involving existing wholly owned
21
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Subsidiaries of the Company and (ii) as may be required by or in conformance
with law or regulation in order to permit or facilitate the consummation of the
Transactions contemplated hereby, the Company shall not, and shall not permit
any wholly owned Subsidiary of the Company to, sell, lease, encumber or
otherwise dispose of, or agree to sell, lease, encumber or otherwise dispose of,
any of its assets (including capital stock of wholly owned Subsidiaries of the
Company) which are material, individually or in the aggregate, to the Company
other than sales of inventory in the ordinary course of business.
(f) Indebtedness. The Company shall not, and shall not permit any of
------------
its wholly owned Subsidiaries to, (i) create, assume or incur any Indebtedness
or issue any debt securities, warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, other than Indebtedness
incurred under the Credit Agreement or other Indebtedness in an aggregate amount
not to exceed $500,000, (ii) except in the ordinary course of business
consistent with past practice, make any loans, advances or capital contributions
to, or investments in, any other Person, other than by the Company or a wholly
owned Subsidiary of the Company to or in the Company or any wholly owned
Subsidiary of the Company or (iii) except in the ordinary course of business
consistent with past practice, pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise); provided however, that the Company may refinance Indebtedness under
--------
the Credit Agreement.
(g) Compensation. Other than in accordance with the provisions of
------------
this Agreement, the Company shall not, and shall not permit any of its
Subsidiaries to, unless required by law or to maintain the tax qualification of
any Company Benefit Plan, to (i) increase any employee benefits provided to, or,
except in the ordinary course of business consistent with past practices,
increase the compensation or fringe benefits payable to, any employee or former
employee of the Company or any Subsidiary of the Company; (ii) adopt, enter
into, terminate or amend in any material respect any employment contract,
collective bargaining agreement or Company Benefit Plan; (iii) pay any benefit
not provided for under any Company Benefit Plan or any other benefit plan or
arrangement of the Company and its Subsidiaries; or (iv) increase in any manner
the severance or termination pay of any officer or employee.
(h) Accounting Methods; Income Tax Elections. Except as disclosed in
----------------------------------------
Company SEC Reports filed before the date of this Agreement, or as required by a
Governmental Entity, the Company shall not change its methods of accounting in
effect at December 31, 1997, except as required by changes in GAAP as concurred
in by the Company's independent auditors. The Company shall not (i) change its
fiscal year or (ii) make any material tax election, other than in the ordinary
course of business consistent with past practice, without consultation with
Parent.
(i) Material Agreements. The Company shall not, and shall not permit
-------------------
any of its Subsidiaries to, enter into any agreement of a nature that would be
required to be filed as an exhibit to Form 10-K under the Exchange Act, other
than contracts for the sale of the Company's or its Subsidiaries' products in
the ordinary course of business.
22
<PAGE>
(j) Representations and Warranties. The Company shall not knowingly
------------------------------
take, and shall not permit any of its Subsidiaries knowingly to take, any
actions that would make any representation or warranty of the Company contained
in this Agreement untrue or incorrect in any material respect as of the date
when made or as of the Closing Date.
(k) Agreements or Commitments. The Company shall not, and shall not
-------------------------
permit any of its Subsidiaries to, authorize any of, or commit or agree to take
any of, the foregoing actions.
4.2 ADVICE OF CHANGES; GOVERNMENTAL FILINGS. Each party shall (a)
---------------------------------------
confer on a regular and frequent basis with the other and (b) report (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters. The Company and Parent shall file all
reports required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the Effective Time
and shall (to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such
reports, announcements and publications promptly after the same are filed.
Subject to applicable laws relating to the exchange of information, each of the
Company and Parent shall have the right to review in advance, and will consult
with the other with respect to, all the information relating to the other party
and each of their respective wholly owned Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials submitted
to, any third party or any Governmental Entity in connection with the
Transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party agrees that, to the extent practicable and as timely as
practicable, it will consult with, and provide all appropriate and necessary
assistance to, the other party with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the Transactions contemplated by
this Agreement and each party will keep the other party apprised of the status
of matters relating to completion of the Transactions contemplated hereby.
4.3 CONTROL OF THE COMPANY'S BUSINESS. Nothing contained in this
---------------------------------
Agreement shall give Parent, directly or indirectly, the right to control or
direct the Company's operations before the consummation of the Offer. Before
the consummation of the Offer, each of the Company and Parent shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 STOCKHOLDERS MEETING; PREPARATION OF PROXY STATEMENT. If
----------------------------------------------------
required by applicable law in order to consummate the Merger, the Company
(acting through its Board of Directors in the case of clauses (a) and (b))
shall, as soon as practicable following the
23
<PAGE>
consummation of the Offer in accordance with applicable law, its certificate of
incorporation and its bylaws:
(a) duly call, give notice of, convene and hold a special meeting of
its stockholders as soon as practicable following the consummation of the Offer
for the purpose of considering and taking action upon this Agreement (the
"COMPANY STOCKHOLDERS MEETING").
(b) subject to its fiduciary duties under applicable law, include in
the proxy statement or information statement prepared by the Company for
distribution to stockholders of the Company in advance of the Company
Stockholders Meeting in accordance with Regulation 14A or Regulation 14C
promulgated under the Exchange Act (the "PROXY STATEMENT") so much of the
recommendation of its Board of Directors referred to in Section 1.2(a) hereof as
is relevant to the Merger; and
(c) (i) prepare and file a preliminary and definitive Proxy Statement
with the SEC, (ii) use its best efforts to, after consultation with Parent,
respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its stockholders following the consummation of the Offer and (iii)
take all actions necessary to obtain the necessary approvals of this Agreement
by its stockholders.
(d) if there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, promptly prepare and mail to its
stockholders such an amendment or supplement.
Parent will provide the Company with the information concerning Parent and
Merger Sub required to be included in the Proxy Statement and will vote, or
cause to be voted, all Shares owned by it or its Subsidiaries in favor of
approval and adoption of this Agreement.
5.2 ACCESS TO INFORMATION.
---------------------
(a) Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries to) (i) afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent reasonable access during
normal business hours, during the period before the consummation of the Offer,
to all its officers, key employees, properties, books, contracts, commitments
and records and, during such period, the Company shall (and shall cause its
Subsidiaries to) furnish promptly to Parent, consistent with its legal
obligations, all information concerning its business, properties and personnel
as Parent may reasonably request and (ii) make available to Parent a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the federal or
state securities laws or the federal tax laws and all other information
concerning its business, properties and personnel as Parent may reasonably
request; provided, however, that the Company may restrict the foregoing access
to the extent that (i) a Governmental Entity requires the Company or any of its
Subsidiaries to restrict access to any properties or information reasonably
related to any such contract on the basis of applicable laws and
24
<PAGE>
regulations with respect to national security matters or (ii) any law, treaty,
rule or regulation of any Governmental Entity applicable to the Company requires
the Company or its Subsidiaries to restrict access to any properties or
information.
(b) The parties will hold any such information that is nonpublic in
confidence to the extent required by, and in accordance with, the provisions of
the letter dated April 6, 1998 between the Company and Parent (the
"CONFIDENTIALITY AGREEMENT").
5.3 BEST EFFORTS.
------------
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the Offer, the Merger and the
other Transactions contemplated by this Agreement as soon as practicable after
the date hereof. In furtherance and not in limitation of the foregoing, each
party hereto agrees to make, to the extent it has not already done so, an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the Transactions contemplated hereby as promptly as practicable
and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and to take
all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(b) Each of the Company and Parent shall, in connection with the
efforts referenced in Section 5.3(a) to obtain all requisite approvals and
authorizations for the Transactions contemplated by this Merger Agreement under
the HSR Act or any other Regulatory Law (as defined below), use its reasonable
best efforts to (i) cooperate in all respects with each other in connection with
any filing or submission and in connection with any investigation or other
inquiry, including any proceeding initiated by a private party, (ii) promptly
inform the other party of any communication received by such party from, or
given by such party to, the Antitrust Division of the Department of Justice (the
"DOJ") or any other Governmental Entity and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding any of the Transactions contemplated hereby, and (iii) permit the
other party to review any communication given by it to, and consult with each
other in advance of any meeting or conference with, the DOJ or any such other
Governmental Entity or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by the DOJ or such other
applicable Governmental Entity or other Person, give the other party the
opportunity to attend and participate in such meetings and conferences. For
purposes of this Agreement, "REGULATORY LAW" means the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
25
<PAGE>
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.3(a) and 5.3(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of the
Company and Parent shall cooperate in all respects with each other and use its
respective reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the Transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.3 shall limit a party's right to terminate this Agreement
pursuant to Section 7.1(b)(ii) so long as such party has complied in all
material respects with its obligations under this Section 5.3.
5.4 ACQUISITION PROPOSALS. The Company agrees that neither it nor
---------------------
any of its Subsidiaries shall, and that it shall direct and use its reasonable
best efforts to cause its and its Subsidiaries' directors, officers, employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or knowingly facilitate (including by
way of furnishing information) any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase or sale of all or any significant portion
of the assets of, it or any of its Subsidiaries or any purchase or sale of more
than 25% of the equity securities of the Company or any equity securities of any
Significant Subsidiary (as that term is defined in Rule 405 under the Securities
Act) (any such proposal or offer whether or not in writing or in sufficient
detail to be accepted and whether or not conditional (other than a proposal or
offer made by Parent or an affiliate thereof) being hereinafter referred to as
an "ACQUISITION PROPOSAL"). The Company further agrees that neither it nor any
of its Subsidiaries shall, and that it shall direct and use its best efforts to
cause its and its Subsidiaries' directors, officers, employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, have
any discussion with or provide any confidential information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, the Company or its Board of Directors
shall be permitted, at any time prior to the acceptance for payment of the
Shares pursuant to the Offer, to (A) engage in discussions or negotiations with,
or provide information to, any Person in response to an unsolicited Acquisition
Proposal by such Person if (x) the Board of Directors of the Company concludes
in good faith that such Acquisition Proposal constitutes or could reasonably be
expected to lead to a Superior Proposal and (y), before providing any
information to such Person, the Board of Directors receives from such Person an
executed confidentiality agreement containing confidentiality provisions
substantially similar to those contained in the Confidentiality Agreement; and
(B) if the Board of Directors concludes in good faith that such Acquisition
Proposal constitutes a Superior Proposal (i) recommend approval of such Superior
Proposal, (ii) in response to such Superior Proposal, withdraw or modify in an
adverse manner the Company Board Approval, or (iii) enter into an agreement in
principle or
26
<PAGE>
a definitive agreement with respect to such Superior Proposal, provided,
--------
however, that, in the case of either (A) or (B) the Board of Directors of the
- -------
Company determines in good faith after consultation with outside counsel that it
should take such action consistent with its fiduciary duties under applicable
law. In the event the Company shall determine to provide any information as
described above, or shall receive any Acquisition Proposal, it shall promptly
inform Parent as to the fact that information is to be provided or that an
Acquisition Proposal has been received and shall furnish to Parent a description
of the material terms thereof. As used in this Agreement, "SUPERIOR PROPOSAL"
means a bona fide Acquisition Proposal which the Company Board of Directors
concludes in good faith (after consultation with its financial advisors and
legal counsel), taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, provides for a
transaction that, taking into account its likelihood of completion, is more
favorable to the Company's stockholders (in their capacities as stockholders),
than the Transactions contemplated by this Agreement.
5.5 EMPLOYEE BENEFITS.
-----------------
(a) Employment Agreements. Parent has reviewed and is familiar with
---------------------
the terms and provisions of the employment agreements set forth on Schedule
5.5(a) (the "EMPLOYMENT AGREEMENTS") and understands and agrees that such
Employment Agreements are in full force and effect and constitute valid and
binding agreements of the Company and/or its Subsidiaries. Parent acknowledges
that the transactions contemplated by this Agreement will constitute a change of
control under such Employment Agreements and that, upon such change of control,
and upon any termination of employment of any employee covered by such
Employment Agreements following such change of control, the pertinent employee
will be entitled to the payments due under the relevant Employment Agreement to
such employee upon a change of control, in the first case, and to the payments
due thereunder upon a termination following a change of control, in the second
case. Parent will cause the Company to comply with and make the payments due
under the Employment Agreements.
(b) Severance Agreements. Parent has reviewed and is familiar with
--------------------
the terms and provisions of the severance plan described on Schedule 5.5(b).
Parent acknowledges that the transactions contemplated by this Agreement will
constitute a "transaction change" for purposes of such severance plan and that,
in consequence, the severance provisions there set forth will be applicable
following the consummation of the Offer.
(c) Benefit Plans. Until December 31, 1999, Parent agrees that it
-------------
shall, or it shall cause the Company and the Surviving Corporation to, maintain
employee benefit plans, policies or arrangements (other than stock-based plans
or stock-based provisions in plans) for the benefit of employees of the Company
and its Subsidiaries (other than those employees who are employed pursuant to a
collective bargaining agreement or who are members of a collective bargaining
unit or labor union) which are substantially comparable in the aggregate to the
employee benefit plans, policies or arrangements of the Company in effect on the
date hereof (other than stock-based plans or stock-based provisions in the
plans) set forth on Schedule 5.5(c).
27
<PAGE>
(d) Benefit Plan Eligibility. Parent agrees that it shall, or it
------------------------
shall cause the Company and the Surviving Corporation to, give employees of the
Company and/or any of its Subsidiaries full credit for service for purposes of
eligibility, vesting and satisfaction of waiting periods under any employee
benefit plans, policies or arrangements maintained by the Company, Parent or the
Surviving Corporation in which such employees are entitled to participate.
Employees of the Company and/or any of its Subsidiaries shall not be subject to
any pre-existing condition exclusions or limitations under Parent's or the
Surviving Corporation's benefit plans (except to the extent that such exclusions
presently apply to an employee under the Company's and/or any of such
Subsidiaries' benefit plans).
5.6 FEES AND EXPENSES. Whether or not the Offer is consummated, all
-----------------
Expenses incurred in connection with this Agreement and the Transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, the Surviving Corporation shall pay, or cause
to be paid, any and all property or transfer taxes imposed on the Company or its
Subsidiaries, (b) Expenses incurred in connection with the filing, printing and
mailing of the Offer Documents, Schedule 14D-9 and, if required, the Proxy
Statement, which shall be shared equally by Parent and the Company (c) amounts
loaned or contributed by Parent to the Company pursuant to Section 1.1(d) or
5.10 shall be repaid by the Company or the Surviving Corporation, as the case
may be, on commercially reasonable terms and (d) as provided in Section 7.2. As
used in this Agreement, "EXPENSES" includes all out-of-pocket expenses
(including all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
Transactions contemplated hereby, including the preparation, printing, filing
and mailing of the Offer Documents, Schedule 14D-9, the Proxy Statement, if
required, and the solicitation of stockholder approvals, if required, and all
other matters related to the Transactions contemplated hereby.
5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
------------------------------------------------------
(a) Until the expiration of all applicable statutes of limitations,
from and after the consummation of the Offer, the Company shall and Parent shall
cause the Company (or any successor to the Company) to, and from and after the
Effective Time, Parent and Surviving Corporation shall, indemnify, defend and
hold harmless the present and former officers and directors of the Company and
its Subsidiaries (each an "INDEMNIFIED PARTY") against all losses, claims,
damages, liabilities, fees, penalties and expenses (including reasonable fees
and disbursements of counsel and judgments, fines, losses, claims, liabilities
and amounts paid in settlement arising out of actions or omissions occurring at
or before the consummation of the Offer) (including losses incurred in
connection with such person's serving as a trustee or other fiduciary in any
entity if such service was at the request or for the benefit of the Company or
any of its subsidiaries) to the full extent permitted by the DGCL, such right to
include the right to advancement of expenses incurred in the defense of any
action or suit promptly after statements therefor are received to the fullest
extent permitted by law; provided that the Indemnified Party to whom expenses
are advanced provides an undertaking to repay such advance if it is ultimately
determined that such party is not entitled to indemnification.
28
<PAGE>
Notwithstanding the foregoing, an Indemnifying Party shall not be liable for any
settlement of any claim effected without such Indemnifying Party's written
consent, which consent shall not be unreasonably withheld. Parent will
cooperate in the defense of any such matter.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing directors' and officers' liability insurance on behalf of the
Indemnified Parties, including any such insurance maintained on behalf of any
such Indemnified Party serving as a director or officer of any Subsidiary of the
Company, including coverage with respect to claims arising from facts or events
which occurred at or before the consummation of the Offer ("D&O INSURANCE") for
a period of not less than six years after the consummation of the Offer;
provided, however, that Parent may substitute therefor policies of substantially
similar coverage with a face amount not less that the existing D&O Insurance and
containing terms no less favorable to such Indemnified Parties; provided,
further, if the existing D&O Insurance expires, is terminated or cancelled
during such period, Parent or the Surviving Corporation will obtain
substantially similar D&O Insurance.
(c) The certificate of incorporation and the bylaws of the Company
and, after the Effective Time, the Surviving Corporation shall contain the
provisions with respect to advancement of expenses, indemnification and
exculpation from liability set forth in the certificate of incorporation and
bylaws of the Company on the date of this Agreement, which provisions shall not
for a period of ten years following the Effective Time be amended, repealed or
otherwise modified in any manner that would adversely affect the rights
thereunder of individuals who on or before the consummation of the Offer were
entitled to advances, indemnification or exculpation thereunder, including any
individuals serving as directors or officers of any Subsidiary of the Company at
the Company's request, it being acknowledged by the parties hereto that each
director or officer of the Company that is currently serving as a director or
officer of a Subsidiary of the Company is doing so at the request of the
Company.
(d) In the event Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all of substantially all its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, honor the indemnification obligations set forth
in this Section 5.7.
(e) The obligations of the Company, Parent and the Surviving
Corporation under this Section 5.7 shall not be terminated, modified or assigned
in such a manner as to materially adversely affect any Indemnified Party without
the consent of such Indemnified Party (it being expressly agreed that the
Indemnified Parties shall be third-party beneficiaries of this Section 5.7).
5.8 PUBLIC ANNOUNCEMENTS. The Company and Parent shall use all
--------------------
reasonable efforts to develop a joint communications plan, and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the Transactions
29
<PAGE>
contemplated hereby shall be consistent with such joint communications plan, and
(ii) unless otherwise required by applicable law or by obligations pursuant to
any listing agreement with or rules of any securities exchange, to consult with
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or the Transactions contemplated
hereby.
5.9 SENIOR NOTES. In accordance with the terms of the Indenture,
------------
dated as of August 1, 1993 (the "INDENTURE"), between the Company, as issuer,
and First Trust National Association, as trustee (the "TRUSTEE"), with respect
to the 10 1/2% Senior Notes due 2003 (the "SENIOR NOTES"), within five days
following the acquisition by Parent or Merger Sub of beneficial ownership,
directly or indirectly, of more than 50% of the Common Stock, the Company shall,
in accordance with the Indenture, notify the Trustee and, the Company or the
Surviving Corporation, as the case may be, within 20 business days prior to the
Final Change of Control Put Date (as defined in the Indenture), give written
notice to each holder of the Senior Notes, stating, among other things, (i) that
a Change of Control (as defined in the Indenture) has occurred, (ii) that each
holder of the Senior Notes has the right to require the Company to repurchase
such holder's Senior Notes at a purchase price in cash in an amount equal to
101% of the principal amount of such Senior Notes, plus accrued and unpaid
interest thereon, if any, to the purchase date thereof and (iii) the date on
which such Senior Notes shall be purchased which shall be a business day no
later than 40 business days after the occurrence of or Change of Control.
Parent shall lend or contribute to the Company an amount in cash necessary to
repurchase all such Senior Notes.
5.10 CREDIT AGREEMENT. The Company shall use its best efforts to
----------------
obtain all necessary waivers and consents prior to the consummation of the Offer
so that the transactions contemplated hereby will not result in or constitute a
default under that certain Credit Agreement dated as of August 4, 1993, as
amended, by and among the Company, Lenders, Bank of America NT & SA, as Co-Agent
for Lenders and The Bank of Nova Scotia, as the Agent for Lenders (the "CREDIT
AGREEMENT"). In the event that (i) such waiver and consent is not obtained,
(ii) the transactions contemplated hereby result in a default and the Lenders
under the Credit Agreement accelerate the payment of outstanding indebtedness
thereunder, and (iii) the Company, after using its best efforts, is unable to
refinance or repay such indebtedness, then, following the consummation of the
Offer, Parent agrees to make a loan to the Company in an amount sufficient for
the Company to repay the outstanding Indebtedness and any other obligations
under the Credit Agreement, or, if such amount cannot be borrowed by the Company
for any reason, to contribute such amount to the Company.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
----------------------------------------------------------
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or before the Closing Date of the
following conditions:
30
<PAGE>
(a) No Injunctions or Restraints, Illegality. No Laws shall have been
----------------------------------------
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(a) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.3 shall have been the cause of, or shall have resulted in, such order
or injunction.
(b) HSR Act. The waiting period (and any extension thereof)
-------
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) Purchase of Shares. Parent, Merger Sub or their affiliates shall
------------------
have purchased Shares of Company Common Stock pursuant to the Offer.
(d) Company Stockholder Approval. If required by applicable law, the
----------------------------
Company shall have obtained the Required Company Vote in connection with the
adoption of this Agreement by the stockholders of the Company.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
-------------------------------------------------------------
The obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction, or waiver by Parent, on or before the Closing Date, of the
following conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
on the Closing Date as though made on and as of the Closing Date, or in the case
of representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, except to the extent that failure
to be true and correct does not constitute a Company Material Adverse Effect,
and Parent shall have received a certificate of the Company, executed on its
behalf by its chief executive officer and chief financial officer to such
effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed or complied in all material respects with all agreements and covenants
required to be performed by it under this Agreement at or before the Closing
Date, and Parent shall have received a certificate of the Company, executed on
its behalf by its chief executive officer and chief financial officer to such
effect.
The conditions set forth in Section 6.2 hereof shall cease to be conditions to
the obligations of the parties if Merger Sub shall have accepted for payment and
paid for Shares validly tendered pursuant to the Offer.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
---------------------------------------------------
obligations of the Company to effect the Merger are subject to the satisfaction,
or waiver by the Company, on or before the Closing Date, of the following
additional conditions:
31
<PAGE>
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct on the Closing Date as though made on and as of the Closing Date, or
in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, except to the
extent that failure to be true and correct does not constitute a Parent Material
Adverse Effect, and the Company shall have received a certificate of Parent,
executed on its behalf by its chief executive officer and chief financial
officer to such effect.
(b) Performance of Obligations of Parent. Parent shall have performed
------------------------------------
or complied in all material respects with all agreements and covenants required
to be performed by it under this Agreement at or before the Closing Date, and
the Company shall have received a certificate of Parent, executed on its behalf
by its chief executive officer and chief financial officer to such effect.
The conditions set forth in Section 6.3 hereof shall cease to be conditions to
the obligations of the parties if Merger Sub shall have accepted for payment and
paid for Shares validly tendered pursuant to the Offer.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time before
-----------
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, and except as provided below, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company:
(a) By mutual written consent of Parent and the Company, by action of
their respective Boards of Directors;
(b) By either of the Company, on the one hand, or Parent and Merger
Sub, on the other hand:
(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or before the Extension Date; or
(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 respective reasonable best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable; or
32
<PAGE>
(iii) if, due to the occurrence of one of the events set forth
on Annex A hereto (other than the event set forth in clause (g) thereof),
-------
Parent, Merger Sub or any of their affiliates shall have failed to commence
the Offer on or before five business days following the date of the initial
public announcement of the Offer; or
(iv) if, due to a failure of any of the conditions set forth in
Annex A hereto to be satisfied, the Offer is terminated or expires in
-------
accordance with its terms and the terms of this Agreement without Parent or
Merger Sub, as the case may be, purchasing any shares of Company Common
Stock thereunder.
(c) By the Company:
(i) if, before the purchase of shares of Company Common Stock
pursuant to the Offer, the Board of Directors either shall (A) have entered
into an Agreement with respect to a Superior Proposal pursuant to clause
(B)(iii) of Section 5.4, (B) have recommended a Superior Proposal, or (C)
have withdrawn or modified in an adverse manner to Parent or Merger Sub its
approval or recommendation of the Offer, this Agreement or the Merger (or
the Board of Directors resolves to do any of the foregoing); or
(ii) if Parent or Merger Sub shall have terminated the Offer, or
the Offer shall have expired in accordance with its terms and the terms of
this Agreement, without Parent or Merger Sub, as the case may be,
purchasing any shares of Company Common Stock pursuant thereto.
(d) By Parent and Merger Sub:
(i) if, before the purchase of shares of Company Common Stock
pursuant to the Offer, the Board of Directors of the Company shall (A) have
recommended an Acquisition Proposal, (B) have withdrawn or modified in a
manner adverse to Parent or Merger Sub its approval or recommendation of
the Offer, this Agreement or the Merger or (C) have executed an agreement
in principle or definitive agreement relating to an Acquisition Proposal or
similar business combination with a Person other than Parent, Merger Sub or
their affiliates (or the Board of Directors of the Company resolves to do
any of the foregoing).
Notwithstanding anything else contained in this Agreement, the right to
terminate this Agreement under this Section 7.1 shall not be available to any
party (a) that is in material breach of its obligations hereunder or (b) whose
failure to fulfill its obligations or to comply with its covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.
33
<PAGE>
7.2 EFFECT OF TERMINATION.
---------------------
(a) In the event of termination of this Agreement by either the
Company or Parent as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company or their respective officers or directors except with
respect to Section 3.1(h), Section 3.2(e), Section 5.2(b), Section 5.6, this
Section 7.2 and Article VIII. Nothing in this Section 7.2 shall relieve any
party hereto for breach of any covenant or other agreement in this Agreement
before termination.
(b) Parent and the Company agree that (i) if the Company shall
terminate this Agreement pursuant to Section 7.1(c)(i), or if Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i), or (ii) this Agreement
is terminated for any other reason (other than the breach of this Agreement by
Parent or Merger Sub and other than pursuant to Section 7.1(a)) and, in the case
of this clause (ii) only, (x) at the time of such termination there was pending
an Acquisition Proposal from a third party and (y) the transactions contemplated
by such Acquisition Proposal with such third party are consummated with such
third party within one year after such termination, then the Company shall pay
to Parent an amount equal to $28 million (the "COMPANY TERMINATION FEE").
(c) Any payment required to be made pursuant to Section 7.2(b) shall
be made to Parent not later than three Business Days after the termination of
this Agreement or in the case of Section 7.2(b)(ii), three Business Days after
the consummation of, an Acquisition Proposal, as applicable. All payments under
this Section 7.2 shall be made by wire transfer of immediately available funds
to an account designated by the party entitled to receive payment.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None
---------------------------------------------------------
of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the consummation of the Offer,
except for (x) those representations, warranties and covenants which are
conditions to the Merger, which, for purposes of Section 6, shall survive until
the Effective time, (y) those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the consummation of the Offer and (z) this Article VIII.
8.2 NOTICES. All notices and other communications hereunder shall be
-------
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the tenth
34
<PAGE>
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) if to the Company to:
Triangle Pacific Corp.
16803 Dallas Parkway
Dallas, Texas 75248
Telephone: (214) 887-2300
Facsimile: (214) 887-2428
Attention: Paul L. Barrett, Esq.
with a copy to:
O'Melveny & Myers LLP
153 E. 53rd Street
New York, New York 10022
Telephone: (212) 326-2000
Facsimile: (212) 326-2061
Attention: Jeffrey J. Rosen, Esq.
(b) if to Parent or Merger Sub, to:
Armstrong World Industries, Inc.
313 West Liberty Street
Lancaster, Pennsylvania 17604
Telephone: (717) 397-0611
Facsimile: (717) 396-2983
Attention: Deborah K. Owen, Esq.
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York
Telephone: (212) 878-8000
Facsimile: (212) 878-8375
Attention: Robert E. King, Jr., Esq.
Bonnie A. Barsamian, Esq.
35
<PAGE>
8.3 INTERPRETATION. When a reference is made in this Agreement to
--------------
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified. The words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
who such information is to be made available. As used in this Agreement, the
term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the
Exchange Act. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
----------------------------------------------
(a) This Agreement and the Confidentiality Agreement constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
other than the Confidentiality Agreement, which shall survive the execution and
delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Sections 5.5(a) and 5.7 (which are intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons).
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Delaware.
8.7 SEVERABILITY. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions
36
<PAGE>
of this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the Transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the Transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of the Company and
-----------------------------------
Parent irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Chancery or other Courts of the State of Delaware,
and each of the Company and Parent hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of the Company and Parent hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) the defense of sovereign
immunity, (b) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason other than the failure to serve process in
accordance with this Section 8.9, (c) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment before judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (d) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
8.10 ENFORCEMENT. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
8.11 AMENDMENT. This Agreement may be amended by the parties hereto,
---------
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company and Parent, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
37
<PAGE>
stockholders without such further approval; and provided, however, that after
-------- -------
the approval of this Agreement by the shareholders of the Company, no such
amendment, modification or supplement shall reduce or change the Merger
Consideration or adversely affect the rights of the Company's shareholders
hereunder without the approval of such shareholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.12 EXTENSION; WAIVER. At any time before the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective Boards of
Directors, 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 contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions 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 a written instrument signed on behalf of such party. The failure
of any party to this Agreement to assert any of its rights under this Agreement
or otherwise shall not constitute a waiver of those rights.
8.13 DEFINITIONS. As used in this Agreement:
-----------
(a) "DATE HEREOF" means June 12, 1998.
(b) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any committees thereof.
(c) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(d) "INDEBTEDNESS" of any person means all obligations of such person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other person.
(e) "THE OTHER PARTY" means, with respect to the Company, Parent and
Merger Sub and means, with respect to Parent, the Company.
(f) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(g) "PERMITTED LIEN" means any Lien that:
(i) is a lien of a landlord, carrier, warehouseman, mechanic, materialman,
or any other statutory lien arising in the ordinary course of business;
38
<PAGE>
(ii) is a lien for Taxes not yet due or being contested in good faith;
(iii) with respect to the right of Seller to use any property leased to
Seller, arises by the terms of the applicable lease;
(iv) is a purchase money security interest arising in the ordinary course
of business;
(v) is a lien granted prior to the date hereof pursuant to the Credit
Agreement; or
(vi) does not materially detract from the value of the encumbered property
or assets or materially detract from or interfere with the use of the
encumbered property or assets in the ordinary course of business.
(h) "STOCK TENDER AGREEMENT" means that certain stock tender agreement
dated as of the date hereof by and between Parent or Merger Sub and the other
parties thereto.
(j) "SUBSIDIARY" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
8.14 OTHER AGREEMENTS. The parties hereto acknowledge and agree that,
----------------
except as otherwise expressly set forth in this Agreement, the rights and
obligations of the Company and Parent under any other agreement between the
parties shall not be affected by any provision of this Agreement.
39
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
TRIANGLE PACIFIC CORP.
By: /s/ Floyd F. Sherman
-----------------------------------
Title: Chairman of the Board and Chief
-----------------------------------
Executive Officer
-----------------------------------
ARMSTRONG WORLD INDUSTRIES, INC.
By: /s/ George A. Lorch
-------------------------------------
Title: Chairman of the Board, President and
-------------------------------------
Chief Executive Officer
-------------------------------------
SAPLING ACQUISITION, INC.
By: /s/ George A. Lorch
-----------------------------------
Title: President and Chairman
-----------------------------------
of the Board of Directors
S-1
<PAGE>
ANNEX A
-------
CONDITIONS TO THE OFFER
-----------------------
Notwithstanding any other provision of the Offer, 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 Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may not accept for payment any tendered Shares if (i) any applicable
waiting period under the HSR Act has not expired or been terminated prior to the
expiration of the Offer, (ii) the Minimum Condition has not been satisfied or
(iii) at any time on or after June 12, 1998, and before the time of acceptance
of Shares for payment pursuant to the Offer, any of the following events shall
occur:
(a) there shall have been any statute, rule, regulation, judgment,
decision, action, order or injunction promulgated, entered, enforced, enacted or
issued applicable to the Offer or the Merger by any federal or state
governmental regulatory or administrative agency or authority or court or
legislative body or commission that (1) prohibits the consummation of the Offer
or the Merger, (2) prohibits Parent's or Merger Sub's ownership or operation of
all or a majority of the Company's businesses or assets, or imposes any material
limitations on Parent's or Merger Sub's ownership or operation of all or a
majority of the Company's businesses or assets or constitutes a Company Material
Adverse Effect or a Parent Material Adverse Effect, (3) imposes material
limitations on the ability of Parent or Merger Sub to acquire or hold, or
exercise full rights of ownership of, any Shares to be accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
Shares on all matters properly presented to the stockholders of the Company, or
any federal or state governmental regulatory or administrative agency or
authority shall have commenced or threatened to commence litigation or another
proceeding intended to achieve the results set forth in clauses (1)-(3) above;
provided, that the parties shall have used their reasonable best efforts to
- --------
cause any such statute, rule, regulation, judgment, order or injunction to be
vacated or lifted;
(b) (i) the representations and warranties of the Company set forth in
the Merger Agreement (without giving effect in any such representation or
warranty to any materiality or Company Material Adverse Effect standard,
qualification or exception contained therein) shall not be true and accurate as
of the date of the Merger Agreement and at the scheduled or extended expiration
of the Offer (except for those representations and warranties that address
matters only as of a particular date or only with respect to a specific period
of time which need only be true and accurate as of such date or with respect to
such period), except where the failure of such representations or warranties to
be true and accurate, individually or in the aggregate, does not constitute a
Company Material Adverse Effect, or (ii) the Company shall have breached or
failed to perform or comply in any material respect with any covenant required
by the Merger Agreement to be performed or complied with by it except, in the
case
A-1
<PAGE>
of covenants set forth in Sections 4.1(a) and (j), where the failure to perform
or comply with such covenants does not constitute a Company Material Adverse
Effect.
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) it shall have been publicly disclosed that any Person, entity or
"group" (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired
beneficial ownership (as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of more than a majority of the then-outstanding Shares, through
the acquisition of stock, the formation of a group or otherwise;
(e) the Board of Directors of the Company shall or any Committee
thereof have withdrawn or modified in a manner adverse to Parent or Merger Sub
its approval or recommendation of the Offer or the Merger or the adoption of the
Agreement or recommended an Acquisition Proposal other than the one contemplated
by the Merger Agreement, or shall have executed an agreement in principle a
definitive agreement relating to such an Acquisition Proposal or similar
business combination with a Person or entity other than Parent, Merger Sub or
their affiliates, or the Board of Directors of the Company shall have adopted a
resolution to do the foregoing; or
(f) there shall have occurred and be continuing (i) any general
suspension of trading in securities on any national securities exchange or in
the over-the-counter market, (ii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or not
mandatory) or (iii) any limitation (whether or not mandatory) by an United
States governmental authority or agency on the extension of credit by banks or
other financial institutions which in the reasonable judgment of Parent or
Merger Sub, in any such case, makes it inadvisable to proceed with the Offer or
with such acceptance for payment or payments;
(g) all consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be obtained or made by the
Company, Parent or Merger Sub with or from any Governmental Entity in connection
with the execution, delivery and performance of the Merger Agreement, the Offer
and the consummation of the transactions contemplated by the Merger Agreement
shall not have been made or obtained and such failure could reasonably be
expected to have a Company Material Adverse Effect; or
(h) any change shall have occurred since the date of the Merger
Agreement that individually or in the aggregate constitutes a Company Material
Adverse Effect.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and, subject to the terms of the Merger Agreement, may be asserted by
either of them or 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.
The failure by Parent or Merger Sub at any time to
A-2
<PAGE>
exercise any such rights shall not be deemed a waiver of any right and each
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
A-3
<PAGE>
Exhibit 99(B)
TRIANGLE PACIFIC CORP.
16803 Dallas Parkway
Dallas, Texas 75248
CERTAIN SECTIONS OF
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held on May 5, 1998
Compensation of Directors
Fees. Directors who are not also employees of the Company receive an annual
retainer of $30,000, or $35,000 in the event that the director is a committee
chairman, for serving as such plus $1,000 per meeting attended for each meeting
of the Finance/Audit Committee or the Compensation Committee not held in
conjunction with a regularly scheduled quarterly meeting of the Board of
Directors.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of March 23, 1998 information with respect
to the only persons who were known to the Company to be the beneficial owners of
more than five percent of the outstanding shares of Common Stock.
Common Stock Beneficially Owned (1)
-----------------------------------
Name and Address of Number Percent of
Beneficial Owner of Shares Class
- ------------------- ------------- -----------
The TCW Group, Inc. (through certain
affiliates which act as general partners
of limited partnerships, trustees of
certain trusts and investment managers
of third party accounts which hold shares
of Common Stock) (2) 5,909,184 40.1%
865 South Figueroa Street
Los Angeles, California 90017
Hibridge Capital Corporation (3) 804,146 5.5%
Seven Mile Beach
Grand Cayman, Cayman Islands
British West Indies
United High Income Fund, Inc.
and United High Income Fund II, Inc. 788,286 5.3%
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
BEA Associates 774,879 5.3%
153 East 53rd Street
One City Corp. Center
New York, New York 10022
[FN]
- ----------
(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Certain information with respect to the beneficial ownership of any
beneficial owner is based upon filings made by such beneficial owner with
the Securities and Exchange Commission (the "SEC") and, unless otherwise
indicated, each beneficial owner has sole voting and investment power
with respect to shares listed as beneficially owned by such beneficial
owner.
(2) The TCW Group, Inc. ("TCW") and its affiliates may be deemed to be
beneficial owners of all shares of Common Stock currently held by such
limited partnerships, third party accounts and trusts for purposes of the
reporting requirements of the Exchange Act. In the most recent Schedule
13D filed by TCW, TCW stated that the filing of the Schedule 13D shall
not be construed as an admission that TCW or any of its affiliates is,
for purposes of Section 13(d) or for any other purpose under the Exchange
Act, the beneficial owner of any securities covered by the Schedule 13D.
Oaktree and TCW affiliates provide investment advice and management
services to entities that own 5,570,131 of the shares of Common Stock
included in the table. Oaktree may be deemed to be a beneficial owner of
an additional 159,716 shares of Common Stock owned by a third party
managed account for which Oaktree provides investment advisory and
management services.
(3) Hibridge Capital Corporation may be deemed to beneficially own the number
of shares of Common Stock shown opposite its name in the table by virtue
of the ownership of certain warrants to purchase such shares which have
exercise prices that range from $22.39 to $37.31 per share.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 23, 1998, the beneficial
ownership of Common Stock by each director of the Company, each named executive
officer listed in the Summary Compensation Table appearing elsewhere in this
proxy statement, and all directors and executive officers as a group.
Common Stock Beneficially Owned (1)
--------------------------------------
Number Percent of
Name of Shares Class
- ---- -------------- -----------
Directors
B. William Bonnivier (2) 13,000 *
Charles M. Hansen, Jr. (2) 8,000 *
David R. Henkel (2) 13,000 *
Bruce A. Karsh (3) 124,278 *
Jack L. McDonald (2) 8,000 *
M. Joseph McHugh (4) 176,831 1.2%
Carson R. McKissick (2) 9,000 *
Karen Gordon Mills (2) 10,867 *
Floyd F. Sherman (4) 225,618 1.5%
Named Executive Officers (excluding
any director named above)
Robert J. Symon (4) 135,331 *
Michael J. Kearins (4) 91,102 *
Charles A. Engle (4) 66,862 *
All directors and executive
officers as a group (20 persons) 1,116,539 7.6%
* less than 1%
[FN]
____________
(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Exchange Act. All information with respect to the beneficial
ownership of any director or named executive officer has been furnished
by such director or named executive officer and, unless otherwise
indicated, each director or named executive officer has sole voting and
investment power with respect to shares listed as beneficially owned by
such director or named executive officer.
(2) The number of shares set forth above as being beneficially owned by Mrs.
Mills and Messrs. Bonnivier, Hansen, Henkel, McKissick and McDonald
include 8,000 shares issuable to each of such individuals upon exercise
of stock options granted to them under the Company's Nonemployee Director
Stock Option Plan.
(3) Does not include 5,729,847 shares (38.9%) of the outstanding Common Stock
of which Oaktree or TCW and its affiliates may be deemed the beneficial
owners, as further described in footnote (2) under "Security Ownership of
Certain Beneficial Owners" above.
(4) The number of shares set forth above as being beneficially owned by
Messrs. Sherman, McHugh, Symon, Kearins and Engle include 163,818,
107,618, 78,118, 59,776 and 48,391 shares, respectively, issuable to such
individuals upon exercise of stock options held by them, as determined in
accordance with Rule 13d-3 under the Exchange Act.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth summary compensation data for the Chief
Executive Officer of the Company and each of the other four most highly-paid
executive officers of the Company (collectively, the "named executive officers"
for the 1997 fiscal year).
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------- ----------------------
Other Options
Annual (number All other
Name and Compen- of Compen-
Principal Position Year Salary Bonus sation shares) sation(1)
- ------------------ ---- ------ ----- ------- ------- ---------
Floyd F. Sherman 1997 $400,000 $448,720 $45,280 -- $12,638
Chairman of the Board 1996 350,000 394,940 50,484 45,000 12,210
and Chief Executive 1995 300,000 275,000 52,070 -- 12,037
Officer
M. Joseph McHugh 1997 $300,000 $352,230 $22,296 -- $12,638
President and 1996 265,000 299,026 22,106 35,000 12,206
Chief Operating 1995 225,000 200,000 25,221 -- 12,037
Officer
Robert J. Symon 1997 $240,000 $281,784 $24,722 -- $12,638
Executive Vice 1996 215,000 242,606 23,151 20,000 12,203
President, Treasurer 1995 190,000 135,000 24,789 -- 12,037
and Chief Financial
Officer
Michael J. Kearins 1997 $168,000 $185,842 $27,609 20,000 $12,638
Vice President 1996 160,000 169,824 26,510 20,000 12,201
1995 155,000 104,718 29,064 -- 12,037
Charles A. Engle 1997 $178,333 $109,613 $28,980 20,000 $12,638
Vice President 1996 165,000 82,533 21,799 20,000 12,201
1995 123,000 84,194 23,525 -- 9,496
[FN]
(1) Amounts shown for each officer consist of amounts contributed by the
Company to the Company's Profit Sharing Plan and to the Company's
Supplemental Profit Sharing and Deferred Compensation Plan that are
allocable to such officer for fiscal 1995, 1996 and 1997.
<PAGE>
OPTIONS GRANTED IN 1997
Potential realized
value at assumed
rates of stock price
% of appreciation for
Number Total Exer- Expir- stock option terms
of Options cise ation --------------------
Name Shares Granted Price Date 5% 10%
- ------------------ ------ ------- ----- ------- --------- --------
Floyd F. Sherman -- -- -- -- -- --
M. Joseph McHugh -- -- -- -- -- --
Robert J. Symon -- -- -- -- -- --
Michael J. Kearins 20,000 7.2% $28.375 5/07/07 $356,898 $904,449
Charles A. Engle 20,000 7.2% $28.375 5/07/07 $356,898 $904,449
The following table sets forth certain information with respect to options
exercised and value realized during the 1997 fiscal year, and the unexercised
options held at January 2, 1998, and the value thereof, by each of the named
executive officers.
OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT JANUARY 2, 1998
Options Value of Unexercised
at 1/2/98 In-the-Money
(Number Options at
of Shares) 1/2/98
--------------- -----------------
Shares
Acquired
Date on
of Exer Value Exer- Unexer- Exer- Unexer-
Name Grant -cise Realized cisable cisable -cisable -cisable
- ---------------- ------- ------ -------- ------- ------- -------- --------
Floyd F. Sherman 6/10/92 -- -- 35,018 -- $1,081,531 --
2/16/94 -- -- 6,300 -- 118,125 --
3/21/94 -- -- 75,000 25,000 1,457,813 $485,938
2/15/96 -- -- 11,250 33,750 196,875 590,625
M. Joseph McHugh 6/10/92 8,600 $243,036 26,418 -- $ 815,920 --
2/16/94 -- -- 3,700 -- 69,375 --
3/21/94 -- -- 45,000 15,000 874,688 $291,563
2/15/96 -- -- 8,750 26,250 153,125 459,375
Robert J. Symon 6/10/92 3,400 $ 93,534 28,418 -- $ 877,690 --
2/16/94 -- -- 3,700 -- 69,375 --
3/21/94 -- -- 30,000 10,000 583,125 $194,375
2/15/96 -- -- 5,000 15,000 87,500 262,500
Michael J. Kearins 6/10/92 2,500 $ 72,838 7,076 -- $ 218,542 --
2/16/94 -- -- 2,700 -- 50,625 --
3/21/94 -- -- 26,250 8,750 510,234 $170,078
2/15/96 -- -- 5,000 15,000 87,500 262,500
5/7/97 -- -- -- 20,000 -- 110,000
Charles A. Engle 6/10/92 1,000 $ 28,260 8,931 -- $ 275,834 --
3/21/94 -- -- 18,750 6,250 364,453 $121,484
2/15/96 -- -- 5,000 15,000 87,500 262,500
5/7/97 -- -- -- 20,000 -- 110,000
<PAGE>
Employment Agreements
In March 1995, the Company entered into amended and restated employment
agreements with Floyd F. Sherman, M. Joseph McHugh and Robert J. Symon, and new
employment agreements with Michael J. Kearins, Charles A. Engle and five other
current executive officers of the Company (each an "Employment Agreement" and
collectively the "Employment Agreements"). The Employment Agreements provide for
base compensation at the employees' then current annual rates through the end of
1995, with annual percentage increases not less than the percentage increase in
the Consumer Price Index, as defined in the Employment Agreements. In addition,
the Employment Agreements provide that the employees are entitled to participate
in the Annual Cash Incentive Bonus System and all other incentive compensation
plans for executive employees in effect from time to time.
Each Employment Agreement provides for an initial employment term of three
years (for Messrs. Sherman, McHugh and Symon) or two years (for Messrs. Kearins,
Engle and other executive officers). On each anniversary of the effective date
of the Employment Agreements (March 8, 1995), the employment term will be
automatically extended for one year, unless either party gives notice not to
extend. The Company may terminate the executive's employment for "cause,"
"total disability" or "inadequate performance," and the executive may terminate
his employment for any reason within six months following a "change of control"
or at any time for "good reason" (as such events permitting termination are
defined in the Employment Agreements). Mr. Symon's agreement has been modified
to the extent that it will remain in full force and effect except as amended to
allow for his retirement on December 31, 1998, whereupon it will terminate.
Thereafter, Mr. Symon will provide services for a period of five months as a
consultant to the Company.
If the Company terminates the executive's employment other than for cause,
total disability, or inadequate performance, or employment of the executive
terminates (other than voluntarily) within six months following a change of
control, or if the executive terminates employment for good reason, the Company
is required to pay the executive certain amounts, including a lump sum cash
payment equal to three times (for Messrs. Sherman, McHugh and Symon) or two
times (for the other executives) the executive's average annual compensation for
the preceding five years and certain benefits under the incentive compensation
plans. If the Company terminates the executive's employment for inadequate
performance, or if the executive voluntarily terminates employment following a
change of control, the Company is required to pay the executive certain amounts,
including a lump sum cash payment equal to two times (for Messrs. Sherman,
McHugh and Symon) or one and one-half times (for the other executives) the
executive's average annual compensation and certain benefits under the incentive
compensation plans. If any executive's employment is terminated by reason of
death or total disability, the executive or his estate is entitled to receive a
lump sum payment equal to the sum of (i) one year's base salary plus (ii) the
incentive compensation that would have accrued to the executive's benefit at the
end of the year of termination had his employment continued until then.
In addition, if the Company terminates the executive's employment (other than
for cause, total disability or inadequate performance), or if the executive
terminates employment for good reason, or if a change of control occurs during
the term of the Employment Agreements, (i) all stock options and other awards
the executives hold under any Company incentive compensation or benefit plans
will become fully vested and exercisable or their market value payable and (ii)
the executive will have the right to sell to the Company any or all shares of
Common Stock held by the executive at market value. The total payments to be
received by the executive following a change of control are restricted to the
maximum amount which could be deducted by the Company for federal income tax
purposes.
<PAGE>
EXHIBIT 99.(C)
SPECIAL SEVERANCE PROGRAM
-------------------------
Triangle Pacific Corporation (the "Corporation") has adopted this
Special Severance Program in order to encourage loyalty, continuity of service
and productivity and to provide enhanced benefits to Eligible Employees (as
hereinafter defined) should a Change in Control (as defined in the Triangle
Pacific Corp. 1993 Long-Term Incentive Plan) occur as a result of action taken
further to resolutions adopted by the Board of Directors on February 18, 1998,
to explore, on a limited and confidential basis, a possible sale of the
Corporation (the "Action"). Such Change in Control occurring as a result of the
Action is hereinafter referred to as a "Transaction Change".
1. Effective Date. This Special Severance Program shall
--------------
automatically take effect only upon the occurrence of a Transaction Change.
This Program shall not be construed as requiring the payment of severance or
similar payments in the absence of a Transaction Change.
2. Eligible Employees. All full time salaried employees of the
------------------
Corporation, or any subsidiary thereof (any corporation or other organization
whether incorporated or unincorporated, which is directly or indirectly
majority-owned or controlled by the Corporation, a "Subsidiary") who are
employed by the Corporation or any Subsidiary upon the occurrence of a
Transaction Change and whose employment is terminated within one year after the
occurrence of such Transaction Change, except for any employees who i) have
employment agreements with the Corporation dated March 8, 1995, ii) voluntarily
separate from the Corporation, iii) do not accept an offer of similar position
with the Corporation, a Subsidiary or a successor organization with comparable
responsibilities and compensation in the same geographic area, iv) are included
in a bargaining unit of employees represented by a labor organization for
purposes of collective bargaining or v) whose employment terminates due to death
or disability, are eligible to receive a Severance Payment (as hereinafter
defined) pursuant to this Special Severance Program. Such employees who are
eligible to receive a Severance Payment pursuant to this Special Severance
Program are hereinafter called "Eligible Employee(s)".
3. Termination of Employment. The Corporation will make a single
-------------------------
lump-sum payment (the "Severance Payment") to each Eligible Employee whose
employment with the Corporation, a Subsidiary or its or their successor is
involuntarily terminated within one year after a Transaction Change. The
Corporation, a Subsidiary or its successor as appropriate, will take appropriate
deductions from such Severance Payments for required income and payroll tax
withholding.
4. Severance Payment. Severance Payments will equal two weeks' pay
-----------------
for each full and fractional year of an eligible employee's service with the
Corporation, a Subsidiary or its successor, as applicable, prior to the
employee's termination in accordance herewith, subject to a maximum payment of
100 weeks' pay and further
<PAGE>
subject to a minimum payment of at least 2 weeks' pay. Notwithstanding anything
to the contrary contained herein, each Eligible Employee who is a Vice President
of the Corporation shall receive at least 26 weeks' pay as the Severance Payment
pursuant to this Special Severance Program. For purposes of calculating the
Severance Payment hereunder, an Eligible Employee's pay shall be his or her
regular base salary as of the date of the occurrence of a Transaction Change or
such employee's termination date, whichever is greater.
5. Continuation of Benefits. The Corporation, Subsidiary or its or
------------------------
their successor, as appropriate, shall also continue to provide medical, dental
and group term life insurance benefits to an Eligible Employee who receives a
Severance Payment in accordance with paragraph 4 hereof for the number of weeks
equal to the number of weeks of pay for which the Severance Payment is
calculated under paragraph 4, subject to the Eligible Employee's payment of any
employee co-payment or contribution for such coverage as was required
immediately prior to such employee's termination of employment. The
continuation of medical and dental benefits hereunder shall not run concurrently
with any Eligible Employee's right to continued medical coverage under COBRA.
6. No Contract of Employment. Nothing contained in this Special
-------------------------
Severance Program shall be deemed to give any Eligible Employee the right to be
retained in the employ of the Corporation, any Subsidiary or its or their
successor or to interfere with the right of the Corporation, a Subsidiary or its
or their successor to discharge any such employee at any time. No person shall
have any right to any benefits under the Special Severance Program, except to
the extent expressly provided herein.
7. Amendment or Termination. The Board of Directors may amend or
------------------------
terminate this Special Severance Program at any time, provided, however, that
the Special Severance Program may not be terminated or amended on or after the
date of the occurrence of a Transaction Change in any manner that reduces the
potential benefits to be provided to eligible employees.
2
<PAGE>
EXHIBIT 99.(D)
FORM OF TRIANGLE PACIFIC CORP.
STOCK OPTION PLAN
Triangle Pacific Corp. hereby adopts the Triangle Pacific Corp. Stock
Option Plan on this ____ day of __________, 1992.
ARTICLE I. DEFINITIONS
1.1 Definitions. For purposes of this Plan, the following terms
-----------
shall have the meanings set forth below, except as otherwise specified or as the
context may otherwise require:
"Beneficiary" means the person(s) or trust(s) by will or the laws of
descent and distribution or the estate or personal representative entitled to
receive the benefits specified under this Plan in the event of the Participant's
death.
"Board" means the Board of Directors of the Company.
"Change of Control Event" shall mean any of the
following:
(1) Approval by the stockholders of the Company of the dissolution or
liquidation of the Company;
(2) Approval by the stockholders of the Company of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not subsidiaries, as a result of which less than 50% of
the outstanding voting securities of the surviving or resulting entity
immediately after the reorganization are, or will be, owned by stockholders
of the Company immediately before such reorganization;
(3) Approval by the stockholders of the Company of the sale of
substantially all of the Company's business and/or assets to a person or
entity which is not a subsidiary; or
(4) Any of the events set forth in paragraphs (l), (m) or (n) of the
Tranche I Events of Default set forth in Exhibit E to the Credit and
Guaranty Agreement dated as of September 9, 1988, as amended through the
A-1
<PAGE>
Restructuring Date, among the Company, a subsidiary of the Company and
certain financial institutions.
"Closing Date" has the meaning set forth in the Management Equity
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
References to Sections of the Code shall be deemed to refer to such Sections as
in effect on the date this Plan is adopted as such Sections may, from time to
time, be amended.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company, which consists of Series A Common Stock and Series B Common Stock.
"Committee" means the Committee appointed by the Board as from time to
time constituted; provided, however, that during any such time as one or more
Participants may be subject to Section 16 of the Exchange Act, the members of
the Committee shall be each of the directors then serving on the Board who is a
disinterested person within the meaning of the rules and regulations promulgated
under, and any other applicable authoritative interpretations of, such Section
16.
"Company" means Triangle Pacific Corp. a Delaware corporation, and its
successors and assigns.
"Consolidated Adjusted Operating Income" for any period means the
consolidated operating income of the Company and its Subsidiaries adjusted for
LIFO, calculated in accordance with the methods used for purposes of those
certain Projected Financial Statements for the Company and its Subsidiaries For
Each of the Five Years Ending December 31, 1996 and attached hereto as Schedule
II.
"Eligible Employee" means only each of the persons identified on
Schedule I hereto, if such person is an employee of the Company or a Subsidiary
on the date an Option hereunder is granted.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exercise Price" means the purchase price per share of Series A Common
Stock in accordance with Section 3.2, as the same may be adjusted pursuant to
Article V.
"Fair Equity Value of the Company" means, at any date of
determination, (i) at any time when there is not a public market for shares of
either series of Common Stock,
A-2
<PAGE>
the fair market value of the equity of the Corporation as reasonably determined
in good faith by the Board; (ii) at any time when there is a public market for
shares of one series of Common Stock, the sum of (x) the fair market value of
the series of Common Stock for which there is not a public market as reasonably
determined by the Board and (y) the aggregate value of that series of Common
Stock for which there is a public market derived from the average (weighted by
daily trading volume) of the daily closing prices per share of that series of
Common Stock for the 30 consecutive trading days as reported on the Composite
Transactions tape commencing 45 days before such date, or, if shares of that
series of Common Stock are not reported on the Composite Transactions tape, on
the principal securities exchange on which shares of that series of Common Stock
are listed for or admitted to trading, or, if shares of that series of Common
Stock are not listed for or admitted to trading on any such securities exchange,
the average of the highest reported bid and lowest reported ask prices as
furnished by the National Association of Securities Dealers through NASDAQ, or,
if NASDAQ is no longer reporting such information, any other similar
organization; and (iii) at a time when there is a public market for shares of
each series of Common Stock, the sum of the aggregate value of each series of
Common Stock determined as set forth in subclause (y) of clause (ii) above. The
aggregate value of a series of Common Stock shall be derived from the foregoing
market price per share of such series of Common Stock by multiplying such per
share price by the sum of (x) all outstanding shares of such series of Common
Stock and (y) all shares of such series of Common Stock issuable upon the
exercise of all options and warrants or the conversion of all convertible
securities.
"Incentive Stock Option" means an Option that satisfies the
requirements of Section 422 of the Code.
"Management Equity Agreement" means that certain agreement made and
entered into as of June 1, 1992 by and among the Company and each of the
individuals and limited partnerships identified on the signature pages thereto.
"Option" means an option, granted to a Participant hereunder, to
purchase Series A Common Stock.
"Participant" means an Eligible Employee who has been granted an
Option pursuant to this Plan.
"Plan" means the Triangle Pacific Corp. Stock Option Plan as set forth
herein.
A-3
<PAGE>
"Restructuring Date" has the meaning set forth in the Management
Equity Agreement.
"Series A Common Stock" means the Series A Common Stock, par value
$0.01 per share, of the Company.
"Stock Option Agreement" means an agreement evidencing the grant of
one or more Options in the form of Exhibit A hereto.
"Subsidiary" means any corporation or other entity a majority or more
of whose outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Company.
ARTICLE II. THE PLAN
2.1 Purpose. The purpose of this Plan is to promote the success of the
-------
Company by providing an additional means to retain key personnel through long
term incentive for high levels of performance and for significant efforts to
improve the financial performance of the Company by granting Options.
2.2 Administration. This Plan shall be administered by the Committee.
--------------
Action of the Board or the Committee with respect to this Plan shall be taken
pursuant to a majority vote or the written consent of all of its members. In
the event action by the Board or the Committee is taken by written consent of
all of its members, the action by the Board or Committee shall be deemed to have
been taken at the time specified in the consent or, if none is specified, at the
time of the last signature. The Committee may delegate administrative functions
to individuals who are officers or employees of the Company.
Subject to applicable law, no member of the Board or the Committee, or
officer of the Company or a Subsidiary, shall be liable for any action or
inaction relating to this Plan of the entity or body, of another person, or,
except in circumstances involving bad faith, of himself or herself. Subject
only to compliance with the express provisions hereof, the Board and the
Committee may act in their absolute discretion in matters related to this Plan.
2.3 Series A Common Stock Subject to this Plan. The stock to be offered
------------------------------------------
under this Plan shall be treasury shares or shares of the Company's authorized
but unissued Series A Common Stock. The aggregate amount of Series A Common
Stock that may be issued or transferred pursuant to Options granted under this
Plan shall not exceed 300,000 shares,
A-4
<PAGE>
subject to adjustment in accordance with Article V. If any Option shall expire
without having become exercisable or without having been exercised in full, the
shares subject thereto shall be available for purposes of additional Options
under this Plan. All Options granted under this Plan and all shares of Series A
Common Stock issued or transferred pursuant to Options granted under this Plan
shall be subject to the provisions of the Management Equity Agreement as
provided therein.
ARTICLE III. OPTIONS
3.1 Granting of Options.
-------------------
(a) Incentive Stock Options. It is intended that Options granted
-----------------------
under this Plan on the Closing Date shall constitute Incentive Stock Options
within the meaning of Section 422 of the Code. Options granted under this Plan
on or after the Closing Date shall constitute Incentive Stock Options only if
they satisfy the requirements therefor under Section 422 of the Code.
(b) Closing Date Grants. Options to purchase Series A Common Stock
-------------------
shall be granted on the Closing Date to each Eligible Employee to purchase the
number of shares of Series A Common Stock listed in Schedule I hereto next to
such Eligible Employee's name. In order for one or more Options to be granted
to an Eligible Employee, the Eligible Employee must enter into a Stock Option
Agreement with the Company supplied by the Committee in the form attached hereto
as Exhibit A.
(c) Subsequent Grants. If, at any time following the Closing Date
-----------------
and before January 1, 1998, shares of Series A Common Stock become available for
purposes of additional Options under this Plan in accordance with Section 2.3,
then, as soon as practicable, the Committee shall grant each Participant, who is
then an Eligible Employee, Options to purchase a portion of the number of
available shares, equal to the ratio of the number of shares listed in Schedule
I next to such Eligible Employee's name to the aggregate number of shares next
to the names of all such Eligible Employees, rounded to the nearest whole number
of shares (but not, in the aggregate for all such Eligible Employees a number of
shares in excess of those available). In order for one or more Options to be
granted to an Eligible Employee under this paragraph, the Eligible Employee must
enter into a Stock Option Agreement with the Company supplied by the Committee
in the form attached hereto as Exhibit A. The number of shares of Series A
Common Stock covered by Options granted to an Eligible
A-5
<PAGE>
Employee under this paragraph shall be equally divided among such of the five
Options described in the Stock Option Agreement as are not then immediately
exercisable.
(d) Limitation on Amounts. Notwithstanding anything to the contrary
---------------------
herein or in the Stock Option Agreements, if it is ultimately determined that
the aggregate fair market value (determined as of the date of grant) of the
stock with respect to which Incentive Stock Options would, but for this
paragraph, be exercisable for the first time by a Participant during any
calendar year exceeds $100,000, the portion of such Participant's Options which
cause such fair market value to exceed $100,000 shall not be treated as, and
shall not constitute, Incentive Stock Options.
3.2 Exercise Price. The per share purchase price for Series A Common
--------------
Stock covered by an Option (including an Option granted on the Closing Date or
on any subsequent date) is set forth in Section 2 of the applicable Stock Option
Agreement and is subject to adjustment in accordance with Article V. The
Committee shall determine the adjustments to be made to the Exercise Price and
to the number of shares of Series A Common Stock subject to outstanding Options
in accordance with Article V. Notwithstanding any provision of the Plan to the
contrary, the Exercise Price shall not be less than the par value of a share of
Series A Common Stock.
3.3 Shares Exercisable. Each Option to purchase shares of Series A Common
------------------
Stock shall become exercisable in accordance with the terms of the Stock Option
Agreement to be supplied by the Committee, the form of which is attached hereto
as Exhibit A.
3.4 Expiration of Options.
---------------------
(a) Tenth Anniversary. Each Option, unless expired sooner pursuant
-----------------
to this Section 3.4, shall expire on the date which is the tenth anniversary of
the Restructuring Date.
(b) Failure to Become Exercisable. Each Option that does not become
-----------------------------
exercisable in accordance with Section 3.3 on or before December 31, 1997 shall
expire on January 1, 1998, unless expired sooner pursuant to this Section 3.4.
(c) Termination of Employment. Each Option granted to a Participant
-------------------------
that has not become exercisable shall expire as of the date of such
Participant's termination of employment with the Company and its
A-6
<PAGE>
Subsidiaries for any reason. Each Option granted to a Participant that has
become exercisable shall continue to be exercisable following such Participant's
termination of employment, subject to expiration in accordance with paragraph
(a) of this Section 3.4.
3.5 Exercise of Options. An Option may be exercised in whole or in part
-------------------
(provided that an Option may not be exercised to purchase any fractional shares)
only after such Option has become exercisable in accordance with Section 3.3 and
before the expiration of such Option in accordance with Section 3.4. Each
Option may be exercised only by the Participant during his lifetime. In the
event of the death of a Participant, the Participant's Beneficiary shall be
entitled, subject to Section 6.7, to exercise the Options granted to such
Participant that became exercisable on or before the date of such Participant's
death. Any person so desiring to exercise such Options as Beneficiary of the
Participant shall be required, as a condition to the exercise of such Options,
to furnish the Committee such documentation as shall be reasonably necessary to
evidence the authority of such person to exercise such Options.
3.6 Manner of Exercise and Payment for Shares. An Option may be exercised
-----------------------------------------
in whole or in part (provided that an Option may not be exercised to purchase
any fractional shares) by giving written notice to the Secretary of the Company
stating the number of shares of Series A Common Stock with respect to which the
Option is being exercised and tendering the Exercise Price for the shares.
Subject to Sections 5.6 and 6.7 and the Management Equity Agreement, as soon as
reasonably possible following such exercise, a certificate representing shares
of Series A Common Stock purchased, registered in the name of the purchaser,
shall be delivered to the purchaser.
3.7 Acceleration Upon a Change of Control Event. In order to protect
-------------------------------------------
the holders of Options, immediately prior to the occurrence of a Change of
Control Event a number of Options granted to a Participant shall become
exercisable equal to the product of (i) the number of Options granted to such
Participant for which no determination as to exercisability has been made
pursuant to Section 2 of the applicable Stock Option Agreement and (ii) a
fraction, the numerator of which is the number of Options granted to such
Participant which have previously become exercisable, and the denominator of
which is the number of Options granted to such Participant for which the first
determination as to exercisability has been made pursuant to Section 2 of the
applicable Stock Option Agreement; provided that (x) if no determination as to
--------
exercisability has been made pursuant to Section 2 of the
A-7
<PAGE>
applicable Stock Option Agreement, the fraction set forth in clause (ii) above
shall be deemed to be one, and (y) if, in connection with such Change of Control
Event a record date or effective date (if no record date is fixed) is
established, the number of Options determined above shall become exercisable ten
business days prior to such record date or effective date.
ARTICLE IV. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES
4.1 No Right to Continued Employment. Nothing contained in this Plan or
--------------------------------
in the Stock Option Agreements or in any other documents related to this Plan
shall confer upon any Eligible Employee or Participant any right to continue in
the employ of the Company or its Subsidiaries or constitute any contract or
agreement of employment, or interfere in any way with the right of the Company
to reduce such person's compensation or to terminate the employment of such
person, with or without cause.
4.2 Options Not Transferable. No Option may be transferred, assigned,
------------------------
pledged or hypothecated (whether by operation of law or otherwise), except as
provided by will or the applicable laws of descent or distribution, and no
Option shall be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of an
Option, or levy of attachment or similar process upon an Option, shall be null
and void and without effect.
4.3 No Trust Created. No Participant, Beneficiary or other person shall
----------------
have any right, title or interest in any fund or in any specific asset
(including shares of Series A Common Stock) of the Company by reason of any
Option granted hereunder. There shall be no funding of any benefits which may
become payable hereunder. Neither the provisions of this Plan (or of any
documents related hereto), nor the creation or adoption of this Plan, nor any
action taken pursuant to the provisions of this Plan shall create, or be
construed to create, a trust of any kind or a fiduciary relationship between the
Company and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive a benefit
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
A-8
<PAGE>
ARTICLE V. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
5.1 Changes in Shares Outstanding. In case the Company shall at any time
-----------------------------
after the date hereof (i) declare a dividend or make a distribution on shares of
Common Stock payable in Common Stock, (ii) subdivide the outstanding shares of
Common Stock, (iii) combine the outstanding shares of Common Stock into a
smaller number of shares or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), the Exercise Price in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted so that the
exercise of Options after such time shall entitle the Participant to receive,
for the same aggregate Exercise Price, the aggregate number of shares of Common
Stock or other securities of the Company (or shares of any security into which
such shares of Common Stock have been reclassified pursuant to clause (iv)
above) which, if the Options had been exercised immediately prior to such time,
such Participant would have owned upon such exercise and been entitled to
receive by virtue of such dividend, distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
5.2 Changes Due to Distributions or Redemptions. In case the Company
-------------------------------------------
shall (x) fix a record date for the making of a distribution to all holders of
Common Stock (including any such distribution made in connection with an
amalgamation, arrangement, consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, assets or other property
(other than (I) cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or (II) dividends payable in shares of Common Stock)
or (y) redeem shares of Common Stock, the Exercise Price to be in effect after
such record date (in the case of clause (x)) or the date of such redemption (in
the case of clause (y)) shall be determined by multiplying the Exercise Price in
effect immediately prior to such date by a fraction, the numerator of which
shall be the Fair Equity Value of the Company immediately prior to such date,
less the fair market value of the portion of the assets, other property or
evidences of indebtedness so to be distributed, and the denominator of which
shall be such Fair Equity Value of the Company immediately prior to such date.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise
A-9
<PAGE>
Price which would then be in effect if such record date had not been fixed.
5.3 Limitations on Adjustments to Exercise Price. No adjustment in the
--------------------------------------------
Exercise Price pursuant to Sections 5.1 or 5.2 shall be required unless such
adjustment would require an increase or decrease of at least one percent in such
price; provided, however, that the Committee may determine that such adjustment
shall be made. All calculations under this Article V shall be made to the
nearest cent or to the nearest hundredth of a share, as the case may be.
5.4 Other Shares of Capital Stock. In the event that, at any time as a
-----------------------------
result of an adjustment made pursuant to Section 5.1, the holder of any Option
thereafter exercised shall become entitled to receive any shares of capital
stock of the Company other than shares of Common Stock, the number of such other
shares so receivable upon exercise of any Option shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this Agreement.
5.5 Effect on Outstanding Options. Upon each adjustment of the Exercise
-----------------------------
Price as a result of the calculations made in Sections 5.1 or 5.2, each Option
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares of Series A Common Stock obtained by (x) multiplying the number of shares
covered by such Option immediately prior to this adjustment of the number of
shares by the Exercise Price in effect immediately prior to such adjustment of
the Exercise Price and (y) dividing the product so obtained by the Exercise
Price in effect immediately after such adjustment of the Exercise Price.
5.6 Issuance of Stock. In any case in which this Article V shall require
-----------------
that an adjustment in the Exercise Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the Participant, upon the exercise of an Option after
such record date, of the number of shares of Series A Common Stock and other
capital stock of the Company, if any, issuable upon such exercise over and above
the shares of Series A Common Stock and other capital stock of the Company, if
any, issuable upon such exercise on the basis of the Exercise Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such Participant a due bill or other appropriate instrument evidencing the
Participant's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
A-10
<PAGE>
ARTICLE VI. MISCELLANEOUS PROVISIONS
6.1 Government Regulation. This Plan, the granting of Options and
---------------------
issuance or transfer of shares of Common Stock pursuant thereto are subject to
all applicable Federal and state laws, rules and regulations and to such
approvals by any regulatory or governmental agency (including without limitation
"no action" positions of the Securities and Exchange Commission) which may, in
the opinion of counsel for the Company, be necessary or advisable in connection
therewith. Without limiting the generality of the foregoing, no Options may be
granted under this Plan, and no shares of Common Stock shall be issued or
transferred by the Company, pursuant to or in connection with any such Option or
the exercise thereof, unless and until, in each such case, all legal
requirements applicable to the issuance or payment have, in the opinion of
counsel to the Company, been complied with. In connection with any stock
issuance or transfer, the person acquiring the shares of Common Stock shall, if
requested by the Company, give assurances satisfactory to counsel to the Company
in respect of such matters as the Company may deem desirable to assure
compliance with all applicable legal requirements.
6.2 Amendment. The Board may, at any time or from time to time, amend or
---------
modify this Plan in order to effectuate the intent of this Plan, subject to the
terms of this Section 6.2. The Board or the Committee, with the consent of the
Participant, may make such modifications to the terms and conditions of such
Participant's Option as it shall deem advisable. The amendment or modification
of this Plan shall not, without the consent of the Participant, alter or impair
any rights or obligations pertaining to any Options granted under this Plan
prior to such amendment or modification, including, without limitation, rights
that may arise in the future to exercise any Option or rights that may arise in
the future to be granted additional Options, except to the extent necessary to
ensure compliance of any Participant with Section 16 of the Exchange Act, to the
extent applicable to such Participant. Unless approved by the shareholders, and
except to the extent provided in Article V, no amendment or modification of this
Plan may (i) increase the total number of shares of Common Stock available for
granting Options under the Plan as set forth in Section 2.3; (ii) extend the
duration of the Plan; (iii) increase the maximum term of Options; or (iv) change
the class of employees eligible to be granted Options under the Plan.
A-11
<PAGE>
6.3 Effective Date of This Plan. This Plan shall be effective on the date
---------------------------
on which it is approved by the holders of a majority of the shares of Common
Stock of the Company.
6.4 Term of This Plan. This Plan shall terminate upon the earlier to
-----------------
occur of the exercise in whole or expiration of the last Option outstanding
hereunder.
6.5 Notices.
-------
(a) In the event:
(1) that the Company shall authorize the distribution to holders
of shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
retained earnings or dividends payable in shares of Common Stock) or the
redemption of shares of Common Stock; or
(2) of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of the Options represented hereby
(other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination); or
(3) of any Change of Control Event that accelerates the
exercisability of Options ten business days prior to the record date or
effective date pursuant to the proviso in Section 3.7 hereof; or
(4) that the Company proposes to take any other action which
would require an adjustment of the Exercise Price pursuant to Article V
hereof;
then the Company shall cause to be given to each Participant, at least 30 days
prior to the applicable record date or effective date, if no record date is
fixed, hereinafter specified (by certified mail, postage prepaid) a written
notice stating the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such rights, warrants or distributions are
to be determined. The failure to give the notice required by this Section 6.5
or any defect therein shall not affect the legality or validity of any
distribution, right or warrant, or the vote upon any action.
(b) Any notice or demand authorized or required pursuant to this Plan
to be given or made shall be sufficiently given or made if sent by first-class
or
A-12
<PAGE>
registered mail, postage prepaid, addressed, if to the Company, as follows:
Triangle Pacific Corp.
P.O. Box 660200
Dallas, Texas 75266-0100
Attention: General Counsel
with a copy to:
O'Melveny & Myers
555 13th Street, N.W.
Washington, D.C. 20004
Attention: Jeffrey J. Rosen, Esq.
and if to an Eligible Employee, Participant or Beneficiary to his last known
address in the books and records of the Company.
(c) Every direction, revocation or notice authorized or required by
the Plan shall be deemed delivered to the Company (a) on the date it is
personally delivered to the Secretary of the Company at its principal executive
offices, or (b) three business days after it is sent by registered or certified
mail, postage prepaid, addressed to the Secretary at such offices; and shall be
deemed delivered to an Eligible Employee, a Participant or a Beneficiary (a) on
the date it is personally delivered to him or her, or (b) three business days
after it is sent by registered or certified mail, postage prepaid, addressed to
him or her at the last address shown for him or her on the records of the
Company.
6.6 Governing Law. This Plan and the documents evidencing Options and all
-------------
other related documents shall be governed by and construed in accordance with,
the laws of the State of Texas, without regard to the principles of conflicts of
laws thereof which might refer such interpretation to the laws of a different
state or jurisdiction. If any provision of this Plan shall be held by a court
of competent jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue to be fully effective.
6.7 Management Equity Agreement. So long as the Management Equity
---------------------------
Agreement is in effect, the Company shall be under no obligation to sell or
deliver shares of Common Stock under the Plan to a Participant or Beneficiary
unless such Participant or Beneficiary shall be a party to the Management Equity
Agreement.
A-13
<PAGE>
6.8 Disputes. In the event of any dispute between a Participant and
--------
the Board, the Committee or the Company in connection with such Participant's
rights under this Plan, the Company agrees to reimburse such Participant for any
expenses, including legal fees, incurred by such Participant in connection with
such dispute.
A-14
<PAGE>
TRIANGLE PACIFIC CORP.
STOCK OPTION PLAN
Schedule I
Eligible Employees and Shares Subject to Options
------------------------------------------------
Number
of
Eligible Employee Shares
- ----------------- ------
Floyd Sherman 46,425
M. Joseph McHugh 46,425
Joseph W. Nussbaum 46,425
Robert J. Symon 46,425
Darryl Marchand 8,425
Melvin Burkhardt 4,774
John G. Conklin 16,008
Charles Engle 16,008
John W. Esch 4,774
James T. Fidler 8,425
George W. Kaplan 4,774
Michael Kearins 16,008
Alan M. Kurzman 4,774
Dwain Plaster 4,774
James Price 4,774
Burt Root 4,774
Allen Silver 16,008
<PAGE>
TRIANGLE PACIFIC CORP.
STOCK OPTION PLAN
Schedule II
Projected Financial Statements for the Company
and Its Subsidiaries for Each of the Five
Years Ending December 31, 1996
----------------------------------------------
<PAGE>
EXHIBIT A TO
TRIANGLE PACIFIC CORP.
STOCK OPTION PLAN
FORM OF STOCK OPTION AGREEMENT
NO OPTION GRANTED UNDER THIS AGREEMENT MAY BE TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED (WHETHER BY OPERATION OF LAW OR OTHERWISE), EXCEPT
AS PROVIDED BY WILL OR THE APPLICABLE LAWS OF DESCENT OR DISTRIBUTION, AND
NO SUCH OPTION SHALL BE SUBJECT TO EXECUTION, ATTACHMENT OR SIMILAR
PROCESS. ANY ATTEMPTED ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF ANY SUCH OPTION, OR LEVY OF ATTACHMENT OR SIMILAR
PROCESS UPON ANY SUCH OPTION, SHALL BE NULL AND VOID AND WITHOUT EFFECT.
Stock options (the "Options") are hereby granted on _______________
__, 199_ by Triangle Pacific Corp., a Delaware corporation (the "Company"), to
the person identified as the Participant on the signature page hereof (the
"Participant"), for and with respect to Series A Common Stock, par value $0.01
per share (the "Series A Common Stock"), of the Company, subject to the
following terms and conditions:
Section 1. Governing Plan
--------------
This Stock Option Agreement (the "Agreement") and the Options granted
hereby are subject to the terms and conditions of the Triangle Pacific Corp.
Stock Option Plan (the "Plan"), the terms of which are hereby incorporated by
reference. For purposes of this Agreement, the capitalized terms defined in the
Plan shall have the meanings ascribed to them in the Plan, except as otherwise
specified.
Section 2. Grant and Exercise of Options
-----------------------------
Subject to the provisions set forth herein and the terms and
conditions of the Plan, and in consideration of the agreements of the
Participant herein provided, the Company hereby grants to the Participant
Options to purchase from the Company the number of shares of Series A Common
Stock, at the Exercise Price per share, as set forth below and in the Plan.
Each Option granted hereby will become exercisable, if at all, in whole or in
part (provided that an Option may not be exercised to purchase any fractional
shares) by the Participant or his Beneficiary only at the times and in the
amounts set forth in this Section 2 and the
A-A-1
<PAGE>
Plan. Subject to adjustment in accordance with Article V of he Plan, the
Exercise Price per share of Series A Common Stock subject to each Option granted
hereby is the sum of (x) $2.00 plus (y) if at any time during the seven months
following the Restructuring Date the Series A Common Stock is publicly traded
for 20 trading days, the amount, if any, by which the average sale price over
the first 20 such trading days exceeds $2.00 per share; provided, however, that
--------
in no event will the amount of the increase under this clause (y) exceed $2.00.
The target for the Company's Consolidated Adjusted Operating Income for each
fiscal year (the "Target" for such fiscal year) during the relevant period and
target for the Company's cumulative Consolidated Adjusted Operating Income for
each fiscal year (the "Cumulative Target" for such fiscal year) during the
relevant period are set forth in Section 3.
(a) Option 1.
--------
The number of shares of
Series A Common Stock subject
to Option 1 is: ___________ shares
The option to acquire shares of Series A Common Stock subject to
Option 1 (the "Option 1 shares") will become exercisable upon the earliest
to occur of (x) the Company's Consolidated Adjusted Operating Income for
fiscal year 1992 equalling or exceeding the fiscal year 1992 Target or (y)
the Company's cumulative Consolidated Adjusted Operating Income for fiscal
year 1993 or any later fiscal year identified in Section 3 equalling or
exceeding the Cumulative Target applicable to such fiscal year.
(b) Option 2.
--------
The number of shares of
Series A Common Stock subject
to Option 2 is: ___________ shares
The option to acquire shares of Series A Common Stock subject to
Option 2 (the "Option 2 shares") will become exercisable upon the earliest
to occur of (x) the Company's Consolidated Adjusted Operating Income for
fiscal year 1993 equalling or exceeding the fiscal year 1993 Target or (y)
the Company's cumulative Consolidated Adjusted Operating Income for fiscal
year 1993 or any later fiscal year identified in Section 3 equalling or
exceeding the Cumulative Target applicable to such fiscal year.
A-A-2
<PAGE>
(c) Option 3.
--------
The number of shares of
Series A Common Stock subject
to Option 3 is: _____________ shares
The option to acquire shares of Series A Common Stock subject to
Option 3 (the "Option 3 shares") will become exercisable upon the earliest
to occur of (x) the Company's Consolidated Adjusted Operating Income for
fiscal year 1994 equalling or exceeding the fiscal year 1994 Target or (y)
the Company's cumulative Consolidated Adjusted Operating Income for fiscal
year 1994 or any later fiscal year identified in Section 3 equalling or
exceeding the Cumulative Target applicable to such fiscal year.
(d) Option 4.
--------
The number of shares of
Series A Common Stock subject
to Option 4 is: _____________ shares
The option to acquire shares of Series A Common Stock subject to
Option 4 (the "Option 4 shares") will become exercisable upon the earliest
to occur of (x) the Company's Consolidated Adjusted Operating Income for
fiscal year 1995 equalling or exceeding the fiscal year 1995 Target or (y)
the Company's cumulative Consolidated Adjusted Operating Income for fiscal
year 1995 or fiscal year 1996 equalling or exceeding the Cumulative Target
applicable to such fiscal year.
(e) Option 5.
--------
The number of shares of
Series A Common Stock subject
to Option 5 is: _____________ shares
The option to acquire shares of Series A Common Stock subject to
Option 5 (the "Option 5 shares") will become exercisable upon the earliest
to occur of (x) the Company's Consolidated Adjusted Operating Income for
fiscal year 1996 equalling or exceeding the fiscal year 1996 Target or (y)
the Company's cumulative Consolidated Adjusted Operating Income for fiscal
year 1996 equalling or exceeding the Cumulative Target applicable to fiscal
year 1996.
A-A-3
<PAGE>
Section 3. Targets and Cumulative Targets
------------------------------
(a) For fiscal year 1992, the fiscal year 1992 Target is $16,163,000.
(b) For fiscal year 1993, the fiscal year 1993 Target is $34,326,000
and the fiscal year 1993 Cumulative Target is $50,489,000.
(c) For fiscal year 1994, the fiscal year 1994 Target is $47,848,000
and the fiscal year 1994 Cumulative Target is $98,337,000.
(d) For fiscal year 1995, the fiscal year 1995 Target is $57,210,000
and the fiscal year 1995 Cumulative Target is $155,547,000.
(e) For fiscal year 1996, the fiscal year 1996 Target is $57,210,000
and the fiscal year 1996 Cumulative Target is $212,757,000.
(f) The Board and the Participant recognize that the Targets and
Cumulative Targets set forth in this Section 3 were derived from those certain
Projected Financial Statements for the Company and its Subsidiaries For Each of
the Five Years Ending December 31, 1996 and attached to the Plan as Schedule II
(the "Projections"). The Board agrees with the Participant that, to the extent
that a material portion of the assets or businesses of the Company is sold or
otherwise transferred, the Targets and Cumulative Targets set forth in this
Section 3 will be revised to reflect such sale or other transfer by revising the
Projections to exclude the operating income attributable to such assets or
businesses for a ratable portion of the year in which such sale or other
transfer takes place and for all subsequent years or to otherwise renegotiate
the Targets and Cumulative Targets in good faith; provided, however, that any
such revision to the Projections will reflect a downward adjustment to the
Targets and Cumulative Targets for the amount of the fixed overhead costs
allocated for purposes of the Projections to such portion of the assets or
businesses sold or transferred and reallocated to the remaining assets and
businesses for purposes of the revisions to the Projections.
Section 4. Notice to Participant.
---------------------
Promptly after the completion of the audited financial statements for
each of the fiscal years 1992, 1993, 1994, 1995 and 1996 of the Company, the
Company shall determine (x) the annual Consolidated Adjusted Operating Income
for such fiscal year, (y) the cumulative Consolidated
A-A-4
<PAGE>
Adjusted Operating Income for fiscal year 1992 through the fiscal year to which
such financial statements relate, and (z) whether, in each case, the Target and
Cumulative Target set forth in Section 3 have been equalled or exceeded. Any
such determinations by the Company shall be conclusive absent arithmetic error.
Promptly after making such determination, the Company shall notify the
Participant whether any Options granted hereby have become exercisable.
Section 5. Certain Terms of the Options.
----------------------------
(a) The exercise of an Option granted hereby is conditioned upon the
acceptance by the Participant of the terms and conditions of this Agreement and
the Plan (including, without limitation, the terms and conditions pursuant to
which the Option shall become exercisable, if at all, the terms for exercising
the Option and the terms pursuant to which the Option will expire or be
cancelled) as evidenced by the Participant's execution of this Agreement in the
space provided therefor at the end hereof and the return of an executed copy of
this Agreement to the Secretary of the Company. An Option may be exercised in
whole or in part (provided that an Option may not be exercised to purchase any
fractional shares) by giving written notice to the Secretary of the Company
stating the number of shares of Series A Common Stock with respect to which the
Option is being exercised and tendering the Exercise Price for the shares, all
in accordance with the Plan.
(b) No Option granted hereby may be transferred, assigned, pledged or
hypothecated (whether by operation of law or otherwise), except as provided by
will or the applicable laws of descent or distribution, and no Option granted
hereby shall be subject to execution, attachment or similar process. An
attempted assignment, transfer, pledge, hypothecation or other disposition of an
Option granted hereby, or levy or attachment or similar process upon an Option,
shall be null and void and without effect. An Option granted hereby may be
exercised only by the Participant during his lifetime, or his Beneficiary in the
event of the Participant's death.
(c) Neither the Participant nor his Beneficiary shall be, or have any
of the rights or privileges of, a shareholder of the Company in respect of any
of the shares of Series A Common Stock issuable upon exercise of an Option
granted hereby, unless and until the Exercise Price for such shares shall have
been paid in full.
(d) In the event an Option granted hereby is exercised in whole or in
part and there shall remain one or
A-A-5
<PAGE>
more Options or part thereof outstanding, this Agreement shall be delivered by
the Participant to the Company for the purpose of making appropriate notation
thereon, or of otherwise reflecting, in such manner as the Company shall
determine, the exercise or partial exercise of the Options granted hereby.
(e) If this Agreement is mutilated, lost, stolen or destroyed, the
Company shall issue, without payment of any service charge, in exchange and
substitution for and upon cancellation of the mutilated Agreement, or in lieu of
and in substitution for the Agreement lost, stolen or destroyed, a new Agreement
of like tenor and representing like Options, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction of
such Agreement and indemnity, if requested, also reasonably satisfactory to it.
Section 7. Reservation and Availability of Shares of
-----------------------------------------
Series A Common Stock
---------------------
(a) The Company will at all times reserve and keep available out of
its authorized and unissued shares of Series A Common Stock, free from
preemptive rights, solely for the purpose of issue upon exercise of the Options
granted hereby, the full number of shares of Series A Common Stock deliverable
upon the exercise of the Options granted hereby.
(b) Before taking any action which could cause an adjustment pursuant
to Article V of the Plan reducing the Exercise Price below the then par value
(if any) of the shares of Common Stock issuable upon exercise of the Options
granted hereby, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that upon any such exercise the
Company may validly and legally issue fully paid and nonassessable shares of
Series A Common Stock at the Exercise Price as so adjusted.
(c) The Company covenants that all shares of Series A Common Stock
issued upon due exercise of any Options granted hereby shall, when issued, be
validly issued, fully paid and nonassessable.
Section 8. Consolidation, Merger or Sale of Assets.
---------------------------------------
If, at any time when any Options are outstanding, the Company shall
consolidate or merge with one or more other corporations (other than a merger or
consolidation of the Company in which the Company is the continuing corporation
and which does not result in any reclassification or change of its outstanding
Common Stock
A-A-6
<PAGE>
(including converting such Common Stock into cash)), the holder of any Options
will thereafter receive, upon the exercise thereof in accordance with the terms
of this Agreement, the securities or property (including cash) to which the
holder of the number of shares of Series A Common Stock then deliverable upon
the exercise of such Options would have been entitled upon such consolidation or
merger, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of the
Options. A sale of all or substantially all the assets of the Company for a
consideration (apart from the assumption of obligations) consisting primarily of
securities shall be deemed a consolidation or merger for the foregoing purposes.
The provisions of this Section 8 shall similarly apply to successive mergers,
consolidations, sales or other transfers.
A-A-7
<PAGE>
IN WITNESS WHEREOF, Triangle Pacific Corp. has caused this Agreement
to be signed by its President.
Dated: _____________ __, 1992
TRIANGLE PACIFIC CORP.
By: ________________________
Its: _______________________
IN WITNESS WHEREOF, the undersigned Participant hereby accepts the
foregoing Agreement and the terms and conditions of the foregoing Agreement and
the Plan.
By: ________________________
Name:_______________________
S-1
<PAGE>
EXHIBIT 99.(E)
TRIANGLE PACIFIC CORP.
1993 LONG-TERM INCENTIVE COMPENSATION PLAN
SECTION 1. PURPOSE. The purpose of this 1993 Long-Term Incentive
Compensation Plan (the "Plan") of Triangle Pacific Corp., a Delaware corporation
(the "Company"), is to increase stockholder value and to advance the interests
of the Company and its subsidiaries by furnishing a variety of economic
incentive awards ("Incentive Awards") designed to attract, retain and motivate
selected employees of the Company and its subsidiaries. Incentive Awards may
consist of opportunities to purchase or receive shares of Common Stock, $.01 par
value per share, of the Company ("Common Stock"), monetary payments or both on
terms determined under the Plan. As used in the Plan, the term "subsidiary"
means any corporation of which the Company owns, directly or indirectly (within
the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code")), 50% or more of the total combined voting power of all classes of
stock.
SECTION 2. ADMINISTRATION.
2.1 COMPOSITION OF COMMITTEE. The Plan shall be administered, and the
decisions concerning the Plan shall be made solely, by the Compensation
Committee of the Board of Directors of the Company (the "Committee"), which
Committee shall consist of two or more directors of the Company, all of whom are
"disinterested persons", as such term is defined under Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended. Each member of the
Committee shall be appointed by and shall serve at the pleasure of the Board of
Directors of the Company as the same may be constituted from time to time (the
"Board"). The Board shall have the sole continuing authority to appoint members
of the Committee.
2.2 COMMITTEE PROCEDURES. The Committee shall elect one of its members as
its chairman and shall hold its meetings at such times and places as it may
determine. A majority of the members of the Committee shall constitute a
quorum. All decisions and determinations of the Committee shall be made by the
majority vote or decision of the members present at any meeting at which a
quorum is present; provided, however, that any decision or determination reduced
to writing and signed by all members of the Committee shall be as fully
effective as if it had been made by a majority vote or decision at a meeting
duly called and held. The Committee may make any rules and regulations for the
conduct of its business that are not inconsistent with the express provisions of
the Plan, the Restated Certificate of Incorporation or Bylaws of the Company or
any resolutions of the Board.
2.3 COMMITTEE AUTHORITY. The Committee shall have plenary and discretionary
authority (a) to grant Incentive Awards under the Plan, including the authority
to determine the eligible participants to whom, and the time or times at which,
Incentive Awards shall be granted, (b) to interpret the Plan, (c) to establish
any rules or regulations relating to and not inconsistent with the
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Plan that it determines to be appropriate and (d) to make any other
determination that it believes necessary or advisable for the proper
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any agreement relating
thereto in the manner and to the extent it shall deem expedient to carry it into
effect, and it shall be the sole and final judge of such expediency. The
Committee's decisions in matters relating to the Plan shall be final and binding
on the Company and participants.
SECTION 3. ELIGIBLE PARTICIPANTS. The persons who shall be eligible to
receive Incentive Awards under the Plan shall be regular salaried full-time
officers or key employees of the Company or one or more of its subsidiaries.
Qualifications of a key employee may be set by the Board from time to time. In
making grants of Incentive Awards, the Committee shall take into consideration
the contribution the person has made or may make to the success of the Company
or its subsidiaries and such other considerations as the Board may from time to
time specify.
SECTION 4. TYPES OF INCENTIVE AWARDS; DATE OF GRANT. Incentive Awards
under the Plan may be granted in any one or a combination of the following
forms: (a) incentive stock options; (b) nonqualified stock options; (c) stock
appreciation rights ("SARs"); (d) stock awards; (e) restricted stock; (f)
performance shares; and (g) cash awards. The date on which the Committee
completes all action constituting an offer of an Incentive Award to a person
shall constitute the date on which such Incentive Award is granted.
SECTION 5. SHARES SUBJECT TO THE PLAN.
5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 11.5,
the number of shares of Common Stock that may be issued under the Plan shall not
exceed a maximum of [up to 1,000,000] shares of Common Stock in the aggregate.
5.2 CANCELLATION. To the extent that cash in lieu of shares of Common
Stock is delivered upon the exercise of an SAR pursuant to Section 7.4, the
Company shall be deemed, for purposes of applying the limitation on the number
of shares contained in Section 5.1, to have issued the greater of the number of
shares of Common Stock which it was entitled to issue upon such exercise or on
the exercise of any related stock option. If a stock option, SAR or performance
share granted hereunder expires or is terminated or cancelled as to any shares
of Common Stock still subject thereto, such shares may again be issued under
the Plan, either pursuant to stock options, SARs or otherwise. If shares of
Common Stock are issued as restricted stock and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance thereof,
such forfeited or reacquired shares may again be issued under the Plan, either
as restricted stock or otherwise. The Committee also may determine to cancel,
and agree to the cancellation of, stock options in order to grant new stock
options to the same participant at a lower price than the option price of the
stock options to be cancelled.
5.3 TYPE OF COMMON STOCK. Common Stock issued under the Plan in
connection with Incentive Awards may be authorized and unissued shares or issued
shares held as treasury shares.
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SECTION 6. STOCK OPTIONS. A stock option is a right to purchase shares of
Common Stock from the Company. Each stock option granted by the Committee under
the Plan shall be subject to the following terms and conditions:
6.1 OPTION PRICE. The option price for each share of Common Stock subject
to the stock option shall be determined by the Committee at the time of grant;
provided, however, that such option price shall not be less than the greater of
(a) the par value of a share of Common Stock or (b) 85% of the Fair Market Value
(as defined in Section 11.16) of a share of Common Stock on the date of grant.
The option price shall be subject to adjustment as provided in Section 11.5.
6.2 NUMBER OF SHARES. The number of shares of Common Stock subject to the
stock option shall be determined by the Committee at the time of grant, subject
to adjustment as provided in Section 11.5. The number of shares of Common Stock
subject to a stock option shall be reduced by the same number of shares with
respect to which the holder thereof exercises an SAR if the SAR is granted in
conjunction with such stock option.
6.3 DURATION AND TIME FOR EXERCISE. Subject to earlier termination as
provided in Section 11.3, the term of each stock option shall be determined by
the Committee at the time of grant; provided, however, that such term shall not
be longer than ten years from the date of grant. If a stock option is granted
with a term shorter than ten years, the Committee may extend the term of the
stock option and any SARs that relate to such stock option, but for not more
than ten years from the date when the stock option was originally granted. Each
stock option shall become exercisable at such time or times during its term, to
such extent and upon such terms and conditions as shall be determined by the
Committee at the time of grant.
6.4 MANNER OF EXERCISE. A stock option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of shares
of Common Stock to be purchased. The exercise notice shall be accompanied by
payment in full of the option price of such shares. The option price shall be
payable in United States dollars and may be paid (a) in cash or by check, (b)
with the consent of the Committee, by delivery of shares of Common Stock owned
by the participant, including an actual or deemed multiple series of exchanges
of such shares, in payment of all or any part of the option price, which shares
shall be valued for this purpose at the Fair Market Value thereof on the date
the stock option is exercised, or (c) in such other manner as may be authorized
from time to time by the Committee. No shares of Common Stock shall be issued
pursuant to the exercise of a stock option until full payment therefor has been
made. Prior to the issuance of shares of Common Stock, the holder of a stock
option shall have no rights as a stockholder of the Company.
Notwithstanding anything in the Plan to the contrary, at the request of a
participant and to the extent permitted by applicable law, the Committee may, in
its sole and absolute discretion, selectively approve arrangements with a
brokerage firm or firms under which any such brokerage firm shall, on behalf of
the participant, make payment in full to the Company of the option price of
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the shares then being purchased by the participant pursuant to the exercise of a
stock option, and the Company, pursuant to an irrevocable notice in writing from
the participant, shall make prompt delivery of one or more certificates for the
appropriate number of shares of Common Stock to such brokerage firm. Payment in
full for purposes of the immediately preceding sentence shall mean payment in
United States dollars of the full amount due, either in cash or by certified
check or cashier's check.
As promptly as may be practicable after a stock option has been exercised
as hereinabove provided, the Company shall make delivery of one or more
certificates for the appropriate number of shares of Common Stock. In the event
that a participant exercises both an incentive stock option and a nonqualified
stock option, separate stock certificates shall be issued, one for the shares
subject to the incentive stock option and one for the shares subject to the
nonqualified stock option. No fractional shares of Common Stock shall be issued
upon the exercise of a stock option; instead, the holder of the stock option
shall be entitled to receive a cash adjustment equal to the value of the
fractional share based on the Fair Market Value of a share of Common Stock on
the date of exercise or, with the consent of the Committee, to purchase the
portion necessary to make a whole share at its Fair Market Value on such date.
6.5 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant of stock
options that are intended to qualify as "incentive stock options" (as such term
is defined in Section 422 of the Code):
(a) Any incentive stock option authorized under the Plan shall contain
such other provisions as the Committee shall deem advisable, but shall in all
events be consistent with and contain or be deemed to contain all provisions
required in order to qualify the stock option as an incentive stock option.
(b) All incentive stock options must be granted within ten years from the
date on which the Plan was adopted by the Board.
(c) The option price for each share of Common Stock subject to an
incentive stock option shall not be less than the greater of (i) the par value
of a share of Common Stock or (ii) 100% of the Fair Market Value of a share of
Common Stock on the date of grant.
(d) No incentive stock option shall be granted to any participant who, at
the time such incentive stock option is granted, owns (within the meaning of
Sections 422 and 424 of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the employer corporation or of
its parent or subsidiary corporation, unless the option price under such
incentive stock option is at least 110% of the Fair Market Value of the shares
subject to such incentive stock option on the date of its grant and such
incentive stock option is not exercisable after the expiration of five years
from the date of its grant.
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SECTION 7. STOCK APPRECIATION RIGHTS. An SAR is a right to receive,
without payment to the Company, a number of shares of Common Stock, cash or a
combination thereof, the amount of which is determined pursuant to the formula
set forth in Section 7.4. An SAR may be granted either (a) in conjunction with
a stock option granted under the Plan, either (i) concurrently with the grant of
such stock option (not including any subsequent modification that may be treated
as a new grant of an incentive stock option for purposes of Section 424(h) of
the Code) or (ii) with respect to nonqualified stock options, at such later time
as determined by the Committee (in either case, as to all or any portion of the
shares of Common Stock subject to the stock option), or (b) alone, without
reference to any stock option. Each SAR granted by the Committee under the Plan
shall be subject to the following terms and conditions:
7.1 NUMBER OF SHARES. Each SAR granted to a participant shall relate to
such number of shares of Common Stock as shall be determined by the Committee at
the time of grant, subject to adjustment as provided in Section 11.5. In the
case of an SAR granted in conjunction with a stock option, the number of shares
of Common Stock to which the SAR pertains shall be reduced by the same number of
shares with respect to which the holder thereof exercises the related stock
option.
7.2 DURATION AND TIME FOR EXERCISE. Subject to earlier termination as
provided in Section 11.3, the term of each SAR shall be determined by the
Committee at the time of grant; provided, however, that such term shall not be
longer than ten years from the date of grant. If an SAR is granted with a term
shorter than ten years, the Committee may extend the term of the SAR, but for
not more than ten years from the date when the SAR was originally granted. Each
SAR shall become exercisable at such time or times during its term, to such
extent and upon such terms and conditions as shall be determined by the
Committee at the time of grant. Notwithstanding the foregoing provisions of this
Section 7.2, each SAR granted in conjunction with a stock option shall, as
nearly as practicable, become exercisable at such time or times during its term,
to such extent and upon such terms and conditions as the stock option to which
it relates is exercisable, and such SAR shall expire no later than the
expiration of the related stock option.
7.3 MANNER OF EXERCISE. An SAR may be exercised, in whole or in part, by
giving written notice to the Company, specifying the number of shares of Common
Stock as to which the SAR is exercised. The date that the Company receives such
written notice is hereinafter referred to as the "Exercise Date". As promptly
as may be practicable after the Exercise Date, the Company shall deliver to the
exercising holder a certificate or certificates for the shares of Common Stock
or cash, or both, as determined by the Committee, to which the holder is
entitled pursuant to Section 7.4.
7.4 PAYMENT. Subject to the right of the Committee to deliver cash in
lieu of shares of Common Stock, the number of shares of Common Stock that are
issuable upon the exercise of an SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this purpose,
the "appreciation" shall be the amount by which the Fair Market Value of a share
of Common
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Stock on the Exercise Date exceeds (i) in the case of an SAR related to a stock
option, the per share option price of the stock option, or (ii) in the case of
an SAR granted alone, without reference to a stock option, an amount that shall
be determined by the Committee at the time of grant, subject to adjustment as
provided in Section 11.5); by
(b) the Fair Market Value of a share of Common Stock on the Exercise Date.
In lieu of issuing shares of Common Stock upon the exercise of an SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the Exercise Date of any or all of the shares that would otherwise be
issuable. No fractional shares of Common Stock shall be issued upon the
exercise of an SAR; instead, the holder of the SAR shall be entitled to receive
a cash adjustment equal to the value of the fractional share based on the Fair
Market Value of a share of Common Stock on the Exercise Date or, with the
consent of the Committee, to purchase the portion necessary to make a whole
share at its Fair Market Value on the Exercise Date.
SECTION 8. STOCK AWARDS AND RESTRICTED STOCK. A stock award consists of
shares of Common Stock that are issued by the Company to a participant, without
other payment therefor, as additional compensation for his or her services to
the Company or its subsidiaries. Restricted stock consists of shares of Common
Stock that (a) are issued by the Company to a participant for services
previously provided to the Company or its subsidiaries by the participant or (b)
are sold by the Company to a participant at a price below the Fair Market Value
thereof, but in each case subject to the restrictions referred to in Section
8.3. The issuance of Common Stock pursuant to stock awards and the issuance and
sale of restricted stock shall be subject to the following terms and conditions:
8.1 NUMBER OF SHARES. The number of shares of Common Stock to be issued
or sold by the Company to a participant pursuant to a stock award or as
restricted stock shall be determined by the Committee at the time of grant.
8.2 SALES PRICE. Shares of restricted stock to be sold to a participant
shall be sold to him or her at such price as the Committee shall determine,
which price shall not be less than the greater of (a) 85% of the Fair Market
Value of such shares on the date of grant of the restricted stock or (b) the par
value of such shares. A participant shall pay the sales price not later than 30
days after the date of grant of the restricted stock. The sales price shall be
payable in United States dollars and shall be paid in cash or by check. No
shares of Common Stock shall be issued pursuant to the grant of such restricted
stock until full payment therefor has been made. If full payment is not made
prior to the expiration of the 30-day period referred to above, the grant of
restricted stock shall be void.
8.3 RESTRICTIONS. All shares of restricted stock issued or sold under the
Plan shall be subject to such restrictions, including forfeitures, as the
Committee may determine, including, without limitation, any or all of the
following:
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(a) a requirement that the holder of shares of restricted stock render
services to the Company or one or more of its subsidiaries for a specified time;
(b) a requirement that the holder of shares of restricted stock forfeit,
or (in the case of shares sold to a participant) resell to the Company at his or
her cost, all or any part of such shares in the event of termination of his or
her employment with the Company and its subsidiaries during any period in which
such shares are subject to restrictions;
(c) a prohibition against employment of the holder of shares of restricted
stock by any competitor of the Company or its subsidiaries or against such
holder's dissemination of any secret or confidential information belonging to
the Company or its subsidiaries, and a requirement that such holder forfeit, or
(in the case of shares sold to a participant) resell to the Company at his or
her cost, all or any part of such shares in the event of a breach of such
provisions by such holder; or
(d) a prohibition against the sale, assignment, transfer, pledge or other
encumbrance of the shares of restricted stock, such prohibition to lapse at such
time or times as the Committee shall determine (whether in annual or more
frequent installments, at the time of the death, disability or retirement of the
holder of such shares, or otherwise).
8.4 ESCROW. In order to enforce the restrictions imposed by the Committee
pursuant to Section 8.3, the participant receiving restricted stock shall enter
into an agreement with the Company, in such form as the Committee shall
prescribe, setting forth the restrictions, terms and conditions of the
restricted stock grant. Shares of restricted stock (a) shall be registered in
the name of the participant and (b) shall, if the Committee requires, at the
time of issuance thereof or at any time thereafter, be deposited, together with
a stock power or other instruments of transfer, appropriately endorsed in blank,
with the Company or an escrow agent designated by the Company under an escrow
agreement, not inconsistent with the terms of the Plan, in such form as the
Committee shall prescribe. Each certificate representing shares of restricted
stock shall bear a legend in substantially the following form:
The shares represented by this certificate have been issued pursuant to the
terms of the 1993 Long-Term Incentive Compensation Plan of Triangle Pacific
Corp. (the "Company") and may not be sold, assigned, transferred, pledged
or otherwise encumbered or disposed of except as set forth in the terms of
an agreement entered into between the registered owner hereof and the
Company. A copy of such Plan and agreement are on file at the principal
executive offices of the Company.
8.5 TERMINATION OF RESTRICTIONS. Subject to Section 11.3, at the end of
any period during which shares of restricted stock are subject to forfeiture and
restrictions on transfer, such shares shall be delivered free of all
restrictions to the participant or to the participant's legal representative,
beneficiary or heir. The Committee shall have the authority to cancel all or
any portion of any
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outstanding restrictions prior to the expiration of such restrictions with
respect to any or all shares of restricted stock on such terms and conditions as
the Committee may deem appropriate.
8.6 STOCKHOLDER. Subject to the terms and conditions of the Plan and the
agreements, including any escrow agreement, referred to in Section 8.4, each
participant receiving restricted stock shall have all the rights of a
stockholder with respect to shares of Common Stock during any period in which
such restricted stock is subject to forfeiture and restrictions on transfer,
including, without limitation, the right to vote such shares and the right,
subject to the terms of any escrow agreement, to receive dividends or other
distributions made or paid with respect to such shares. Dividends paid in cash
with respect to shares of restricted stock shall be paid to the participant
currently.
SECTION 9. PERFORMANCE SHARES. A performance share is an Incentive Award
payable in shares of Common Stock (which may be shares of restricted stock)
based on and subject to the achievement of performance objectives, as described
in Section 9.1, established by the Committee at the time of grant. The grant of
performance shares shall be subject to such additional terms and conditions as
the Committee deems appropriate.
9.1 PERFORMANCE OBJECTIVES. Each performance share shall be subject to
the achievement by the end of a specified period of performance objectives (a)
for the Company, its securities or one or more of its operating divisions, units
or subsidiaries, (b) for the participant or other individuals or a group of
individuals or (c) for or relating to the industry or industries in which the
Company or its subsidiaries operate or a group of peer companies as the
Committee believes are relevant to the Company's business objectives. The
number of performance shares granted to a participant shall be determined by the
Committee at the time of grant. If the performance objectives are achieved, the
participant shall be paid in shares of Common Stock equal to the number of
performance shares initially granted to the participant. If such objectives are
not achieved, each grant of performance shares may provide for lesser payments
in accordance with formulae established by the Committee at the time of grant.
The extent to which performance objectives have been achieved shall be
determined by the Committee in its sole discretion.
9.2 DIVIDEND EQUIVALENT PAYMENTS. Unless a performance share is granted
by the Committee in conjunction with dividend equivalent payment rights or other
similar rights, no adjustment shall be made in any outstanding performance
shares on account of cash or other dividends or distributions which may be made
or paid to the holders of Common Stock prior to the end of any period for which
performance objectives have been established.
9.3 MODIFICATION. If the Committee determines, in its sole discretion,
that any performance objectives established pursuant to Section 9 or 10 are no
longer suitable to the Company's or a subsidiary's objectives because of a
change in the Company's or a subsidiary's business, operations, corporate
structure, capital structure or other conditions deemed appropriate by the
Committee, the Committee may modify such performance objectives as considered
appropriate.
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SECTION 10. CASH AWARDS. A cash award consists of a monetary payment made
or to be made by the Company or a subsidiary to a participant as additional
compensation for his or her services to the Company or one or more of its
subsidiaries. Payment of a cash award may depend on achievement of performance
objectives as described in Section 9.1. The amount of any monetary payment
constituting a cash award shall be determined by the Committee in its sole
discretion. Cash awards may be subject to other terms and conditions, which may
vary from time to time and among participants, as the Committee determines to be
appropriate.
SECTION 11. GENERAL.
11.1 DURATION.
(a) The Plan was adopted by the Board on June 14, 1993, and shall be
submitted to the stockholders of the Company for approval and adoption pursuant
to written consent. Such approval and adoption shall require the written
consent of the holders of a majority of the outstanding shares of capital stock
of the Company. If the Plan is approved and adopted by the stockholders of the
Company as provided above, the Plan shall become effective on the date of and
concurrently with the consummation of the public offerings of the Company's
equity and debt securities registered with the Securities and Exchange
Commission pursuant to Registration Statement No. 33-64530 and Registration
Statement No. 33-64598 (collectively, the "Offerings"). If (i) the Plan is not
approved and adopted by the stockholders of the Company as provided above within
90 days following the date of adoption of the Plan by the Board or (ii) the
Offerings are not consummated within 180 days of the date of adoption of the
Plan by the Board, the Plan shall terminate and be of no further force or
effect. No grants of Incentive Awards shall be made under the Plan prior to the
date of effectiveness of the Plan.
(b) The Plan shall remain in effect until all Incentive Awards granted
under the Plan have either been satisfied by the issuance of shares of Common
Stock or the payment of cash or been terminated under the terms of the Plan and
all restrictions imposed on shares of Common Stock in connection with their
issuance under the Plan have lapsed. No Incentive Awards may be granted under
the Plan after the tenth anniversary of the date of effectiveness of the Plan.
11.2 NONTRANSFERABILITY OF INCENTIVE AWARDS. No stock option, SAR,
performance share or cash award granted under the Plan shall be transferred,
pledged or assigned by the holder thereof (except, in the event of the holder's
death, by will or pursuant to the applicable laws of descent and distribution to
the limited extent provided in the Plan or in the agreement evidencing the
Incentive Award), and the Company shall not be required to recognize any
attempted assignment of such Incentive Awards by any participant. During a
participant's lifetime, a stock option or SAR may be exercised only by such
participant or his or her guardian or legal representative on his or her behalf.
11.3 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. If a participant
ceases to be an employee of at least one of the Company or its subsidiaries, for
any reason, including death, any outstanding Incentive Awards held by such
participant may be exercised or paid or shall continue,
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expire or terminate at or during such times or periods of time, not inconsistent
with the terms of the Plan, as shall be determined by the Committee and set
forth in the agreement evidencing the Incentive Award.
11.4 ADDITIONAL CONDITIONS. Notwithstanding anything in the Plan to the
contrary: (a) the Company may, if it shall determine it necessary or desirable
for any reason, at the time of grant of any Incentive Award or the issuance of
any shares of Common Stock pursuant to any Incentive Award, require the
recipient of the Incentive Award or such shares of Common Stock, as a condition
to the receipt thereof, to deliver to the Company a written representation of
present intention to acquire the Incentive Award or such shares of Common Stock
for his or her own account for investment and not for distribution; and (b) if
at any time the Company further determines, in its sole discretion, that the
listing, registration or qualification (or any updating of any such document) of
any Incentive Award or shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or market or under any federal or state
securities or blue sky laws, or that the consent or approval of any governmental
or regulatory body is necessary or desirable as a condition of, or in connection
with, the grant of any Incentive Award, the issuance of shares of Common Stock
pursuant thereto or the removal of any restrictions imposed on such shares, such
Incentive Award shall not be awarded or such shares of Common Stock shall not be
issued or such restrictions shall not be removed, as the case may be, in whole
or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
11.5 ADJUSTMENTS. If the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind of shares or
other securities, or if additional, new or different shares or other securities
are distributed with respect to the outstanding shares of Common Stock, through
merger, consolidation, sale of all or substantially all the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other distribution with respect to such
shares of Common Stock, an appropriate adjustment in order to preserve the
benefits or potential benefits intended to be made available under the Plan to
participants may be made, in the discretion of the Committee, in any or all of
the following: (a) the maximum number and kind of shares provided for in Section
5.1; (b) the number and kind of shares or other securities subject to then
outstanding Incentive Awards; (c) the price for each share subject to then
outstanding Incentive Awards; and (d) the performance objectives with respect to
then outstanding Incentive Awards. The Committee may also make any other
adjustments, or take such other action, as the Committee, in its discretion,
deems necessary or appropriate in order to preserve the benefits or potential
benefits intended to be made available under the Plan to participants. The
Committee's determination as to what adjustments shall be made under this
Section 11.5 and the extent of such adjustments shall be final, binding and
conclusive.
11.6 INCENTIVE AWARD AGREEMENTS. Except in the case of stock awards and
(unless otherwise determined by the Committee) cash awards, the terms of each
Incentive Award shall be stated in an agreement in such form as the Committee
shall prescribe and entered into by the participant who receives such Incentive
Award. The Committee may also determine to enter into
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agreements with holders of stock options to reclassify or convert certain
outstanding stock options, within the terms of the Plan, as incentive stock
options or as nonqualified stock options and in order to eliminate SARs with
respect to all or any part of related stock options.
11.7 WITHHOLDING. The Company or a subsidiary, as appropriate, shall have
the right to deduct from all Incentive Awards paid in cash any federal, state,
local or foreign taxes as required by law to be withheld with respect to such
cash payments. In the case of Incentive Awards paid in shares of Common Stock
(whether on account of exercise of an Incentive Award or otherwise), the
participant or other person receiving such shares shall be required to pay to
the Company or a subsidiary, as appropriate, in cash the amount of any such
taxes that the Company or subsidiary is required to withhold with respect to
such shares; provided, however, that, with the consent of the Committee, the
participant or other person may (a) direct the Company or subsidiary to withhold
from such shares of Common Stock the number of shares necessary to satisfy the
Company's or subsidiary's obligation to withhold such taxes, such determination
to be based on the Fair Market Value of such withheld shares as of the date on
which tax withholding is to be made, or (b) deliver sufficient shares of Common
Stock owned by the participant or other person (based upon the Fair Market Value
thereof as of the date of withholding) to satisfy such tax withholding
obligations. An agreement evidencing an Incentive Award may contain such
provisions as the Committee deems appropriate to enable the Company or its
subsidiaries to satisfy such withholding obligations, including provisions
implementing the tax withholding methods described above. No payment shall be
made and no shares of Common Stock shall be issued under any Incentive Award
unless and until the applicable tax withholding obligations have been satisfied.
11.8 NO CONTINUED EMPLOYMENT. No participant under the Plan shall have
any right, because of his or her participation, to continue in the employ of the
Company or any subsidiary for any period of time or to continue his or her
present or any other rate of compensation from the Company or any subsidiary,
and nothing in the Plan or in any agreement relating thereto shall affect the
Company's or a subsidiary's right to terminate the employment of any participant
at any time with or without cause.
11.9 NO RIGHT TO STOCK. No participant and no beneficiary or other person
claiming under or through such participant shall have any right, title or
interest in any shares of Common Stock allocated or reserved under the Plan or
subject to any Incentive Award except as to such shares of Common Stock, if any,
that have been issued to such participant.
11.10 NO LIABILITY. Neither the members of the Board nor any member of
the Committee shall be liable for any act, omission or determination taken or
made in good faith with respect to the Plan or any Incentive Award granted
hereunder; and the members of the Board and the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expenses (including counsel fees) arising therefrom to the full extent
permitted by law and under any directors' and officers' liability or similar
insurance coverage that may be in effect from time to time.
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11.11 DEFERRAL PERMITTED. Payment of cash or distribution of any shares
of Common Stock to which a participant is entitled under any Incentive Award
shall be made as provided in the Incentive Award. Payment may be deferred at
the option of the participant if provided in the Incentive Award.
11.12 AMENDMENT OF THE PLAN. The Board may at any time amend, suspend
(and if suspended, may reinstate) or terminate the Plan; provided, however, that
after the stockholders have approved and adopted the Plan in accordance with
Section 11.1(a), the Board may not, without approval of the holders of the
outstanding shares of capital stock of the Company entitled to vote in the
election of directors generally, amend the Plan so as to (a) increase the
maximum number of shares of Common Stock subject to the Plan, except as
permitted in Section 11.5, or (b) reduce the option price for shares of Common
Stock covered by stock options granted under the Plan, or reduce the price at
which shares of restricted stock may be sold to participants under the Plan,
below the applicable prices specified in the Plan; and provided further, that
the Board may not modify, impair or cancel any outstanding Incentive Award
without the consent of the affected participant.
11.13 SEVERABILITY. If any provision of the Plan or any agreement
relating thereto is held to be illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining provisions of the Plan or such
agreement, as the case may be, but such provision shall be fully severable and
the Plan or such agreement, as the case may be, shall be construed and enforced
as if the illegal or invalid provision had never been included herein or
therein.
11.14 GOVERNING LAW. All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the State of
Delaware, except to the extent Delaware law is preempted by Federal law.
11.15 CORPORATE CHANGES. Upon (a) the dissolution or liquidation of the
Company; (b) a reorganization, merger or consolidation (other than a merger or
consolidation effecting a reincorporation of the Company in another state or any
other merger or consolidation in which the stockholders of the surviving
corporation and their proportionate interests therein immediately after the
merger or consolidation are substantially identical to the stockholders of the
Company and their proportionate interests therein immediately prior to the
merger or consolidation) of the Company with one or more corporations, following
which the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation in a transaction in which the stockholders of
the parent of the Company and their proportionate interests therein immediately
after the transaction are not substantially identical to the stockholders of the
Company and their proportionate interests therein immediately prior to the
transaction); (c) the sale of all or substantially all the assets of the
Company; or (d) the occurrence of a Change in Control (as defined below),
subject to the terms of any applicable agreement evidencing an Incentive Award,
the Committee serving prior to the date of the applicable event may, in its
discretion, without obtaining stockholder approval, take any one or more of the
following actions with respect to any participant:
(i) accelerate the exercise dates of any or all outstanding Incentive Awards;
12
<PAGE>
(ii) accelerate the restriction lapse period of any or all restricted stock
subject to restrictions;
(iii) pay cash to any or all holders of stock options in exchange for the
cancellation of their outstanding stock options; or
(iv) make payment for any or all outstanding performance shares or cash awards
based on such amounts as the Committee may determine.
A "Change in Control" shall be deemed to have occurred for purposes of this
Section 11.15 if (a) individuals who were directors of the Company immediately
prior to a Control Transaction (as defined below) shall cease, within one year
of such Control Transaction, to constitute a majority of the Board of Directors
of any successor to the Company or to a company which has acquired all or
substantially all its assets or (b) any entity, person or group acquires shares
of the Company in a transaction or series of transactions that result in such
entity, person or group directly or indirectly owning beneficially 50% or more
of the outstanding shares of Common Stock. As used in this Section 11.15, the
term "Control Transaction" shall mean (a) any tender offer for or acquisition of
capital stock of the Company, (b) any merger, consolidation or sale of all or
substantially all the assets of the Company, (c) any contested election of
directors of the Company or (d) any combination of the foregoing that results in
a change in voting power sufficient to elect a majority of the Board. The
Committee's determination as to what adjustments shall be made under this
Section 11.15 and the extent of such adjustments shall be final, binding and
conclusive.
11.16 DEFINITION OF FAIR MARKET VALUE. For purposes of the Plan, "Fair
Market Value" means the fair market value per share of Common Stock as
determined by the Committee in good faith; provided, however, that (a) if the
Common Stock is listed or admitted to trading on a securities exchange
registered under the Securities Exchange Act of 1934, the Fair Market Value per
share of Common Stock shall be the average of the reported high and low sales
prices of a share of Common Stock on the date in question (or if there was no
reported sale on such date, on the last preceding date on which any reported
sale occurred) on the principal securities exchange on which the Common Stock is
listed or admitted to trading, or (b) if the Common Stock is not listed or
admitted to trading on any such exchange but is listed as a national market
security on the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or any similar system then in use, the Fair Market
Value per share of Common Stock shall be the average of the reported high and
low sales prices of a share of Common Stock on the date in question (or if there
was no reported sale on such date, on the last preceding date on which any
reported sale occurred) on such system, or (c) if the Common Stock is not listed
or admitted to trading on any such exchange and is not listed as a national
market security on NASDAQ but is quoted on NASDAQ or any similar system then in
use, the Fair Market Value per share of Common Stock shall be the average of the
closing high bid and low asked quotations on such system for the Common Stock on
the date in question. For purposes of valuing shares to be made subject to
incentive stock options, the Fair Market Value per
13
<PAGE>
share of Common Stock shall be determined without regard to any restriction
other than one which, by its terms, will never lapse.
14
<PAGE>
EXHIBIT 99.(F)
TRIANGLE PACIFIC CORP.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
As Amended and Restated
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.01 Establishment. The Plan constitutes an amendment and
restatement of the Triangle Pacific Corp. Nonemployee Director Stock Option
Plan, which became effective on August 17, 1993 (the "Original Plan"). The
Plan shall become effective on the date (the "Plan Effective Date") of its
approval and adoption by the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote at the 1996 annual meeting
of stockholders of the Company. If not so approved, the Plan shall terminate,
all actions hereunder shall be null and void, and the Original Plan shall
remain in full force and effect.
1.02 Purpose. It is the purpose of the Plan to promote the interests
of the Company and its stockholders by attracting and retaining qualified
Nonemployee Directors by giving them the opportunity to acquire a proprietary
interest in the Company and an increased personal interest in its continued
success and progress. The Options granted hereunder shall not be qualified as
"incentive stock options" within the meaning of Section 422(b) of the Code.
ARTICLE II
DEFINITIONS
As used herein the following terms have the following meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the $.01 par value Common Stock of the
Company.
(d) "Company" means Triangle Pacific Corp., a Delaware corporation.
(e) "Fair Market Value" means, with respect to Options granted on
the Public Offering Effective Date, the initial public offering price per
share of the Common Stock offered in the Equity Offering. With respect to
<PAGE>
Options subsequently granted, "Fair Market Value" means the closing sales
price on the date in question (or, if there was no reported sale on such date,
on the last preceding day on which any reported sale occurred) of a share of
Common Stock as reported on the principal national stock exchange on which the
Common Stock is then listed or admitted to trading or, if the Common Stock is
not listed or admitted to trading on any national stock exchange but is listed
as a national market security on the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ"), as reported on NASDAQ;
or, if the Common Stock is not listed or admitted to trading on any such
exchange and is not listed as a national market security on NASDAQ, but is
quoted on NASDAQ or any similar system then in use, "Fair Market Value" shall
mean the average of the closing high bid and low asked quotations on such
system for the Common Stock on the date in question (or, if no such quotations
are available on such date, on the last preceding day on which such quotations
were available).
(f) "Grant Date" means, with respect to any Option granted under the
Plan, the date of grant of such Option.
(g) "Holder" means a Nonemployee Director to whom an Option has
been granted under the Plan.
(h) "Initial Option" means an Option granted under the Original
Plan as described in Section 4.02(a) hereof or an Option granted pursuant to
Section 4.02(b)(i) hereof.
(i) "Nonemployee Director" means, a member of the Board who (i) is
neither an employee nor an officer of the Company or any direct or indirect
majority-owned subsidiary of the Company and (ii) has not elected to decline
to participate in the Plan pursuant to the following sentence. A newly
elected director otherwise eligible to participate in the Plan may make an
irrevocable, one-time election, by written notice to the Company within ten
days after his or her initial election to the Board, to decline to participate
in the Plan. For purposes of the Plan, "employee" shall mean an individual
whose wages are subject to the withholding of federal income tax under Section
3402 of the Code, and "officer" shall mean an individual elected or appointed
by the Board or the board of directors of the subsidiary, as the case may be,
or chosen in such other manner as may be prescribed in the bylaws of the
Company or the subsidiary, to serve as such.
(j) "Option" means any option to purchase shares of Common Stock
granted under the Plan.
(k) "Plan" means this Triangle Pacific Corp. Nonemployee Director
Stock Option Plan, as amended and restated effective as of the Plan Effective
Date.
<PAGE>
(l) "Public Offering Effective Date" means August 17, 1993, the
date of consummation of the Public Offerings.
(m) "Public Offerings" means (i) the underwritten public offering
by the Company of shares of Common Stock registered with the Securities and
Exchange Commission (the "Commission") pursuant to a Registration Statement
No. 33-64530 filed by the Company with the Commission on June 16, 1993 (the
"Equity Offering"), and (ii) the underwritten public offering by the Company
of its senior notes registered with the Commission pursuant to a Registration
Statement No. 33-64598 filed by the Company with the Commission on June 18,
1993.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have no
authority, discretion or power to select the participants who will receive
Options, to set the number of shares to be covered by any Option, to set the
exercise price of any Option or to set the period within which Options may be
exercised, or to alter any other terms or conditions specified herein, except
in the sense of administering the Plan subject to the express provisions of
the Plan and except in accordance with Section 6.02 hereof. Subject to the
foregoing limitations, the Board shall have authority and power to adopt such
rules and regulations and to take such action as it shall consider necessary
or advisable for the administration of the Plan, and to construe, interpret
and administer the Plan. The decisions of the Board relating to the Plan
shall be final and binding upon the Company, the Holders and all other
persons. No member of the Board shall incur any liability by reason of any
action or determination made in good faith with respect to the Plan or any
stock option agreement entered into pursuant to the Plan.
ARTICLE IV
OPTIONS
4.01 Participation. Each Nonemployee Director who does not elect to
decline to participate in the Plan pursuant to paragraph (i) of Article II
hereof shall be granted Options to purchase Common Stock under the Plan on the
terms and conditions herein described.
4.02 Terms and Conditions of Options; Stock Option Agreements. Each
Option granted under the Plan shall be evidenced by a written stock option
agreement entered into by the Company and the Holder to whom the Option is
granted, which agreement shall include, incorporate or conform to the
<PAGE>
following terms and conditions, and such other terms and conditions not
inconsistent therewith or with the terms and conditions of the Plan as the
Board considers appropriate in each case:
(a) Option Grants Under Original Plan. Under the Original
Plan, an Option was granted automatically as of the Public Offering
Effective Date to each Nonemployee Director who is was serving the
Company as a director on such date. Thereafter, under the Original Plan,
an Option was granted automatically to each newly elected Nonemployee
Director who became a member of the Board after the Public Offering
Effective Date on the date that is was ten days after his or her initial
election as a director of the Company. Options granted under the
Original Plan shall be deemed to be Options granted under the Plan.
(b) Option Grants Commencing on Plan Effective Date.
Commencing on the Plan Effective Date:
(i) An Option shall be granted automatically under the
Plan to each Nonemployee Director who is newly elected to the
Board on or after the Plan Effective Date, irrespective of
whether such Nonemployee Director is elected by the Board or the
stockholders. The Grant Date of such Option shall be the date
that is ten days after such person's initial election as a
director of the Company, provided that such person has not
elected to decline to participate in the Plan pursuant to
paragraph (i) of Article II hereof. For purposes of this
Section 4.02(b)(i), the term "newly elected to the Board" shall
mean that the Nonemployee Director was not serving as a director
of the Company immediately prior to the time of his or her
election in respect of which such Option is granted.
(ii) Each Nonemployee Director to whom an Initial Option
has been granted shall, for so long as such person remains a
Nonemployee Director, automatically be granted an additional
Option under the Plan on the date of and immediately following
the 1996 annual meeting of stockholders of the Company and on
the date of and immediately following each subsequent annual
meeting of stockholders of the Company occurring after the Plan
Effective Date.
(c) Number of Shares. Each Initial Option shall entitle the
Holder to purchase, in accordance with the terms of such Initial Option
and the Plan, 5,000 shares of Common Stock, subject to adjustment in
accordance with Section 5.02 hereof. Each Option granted pursuant to
Section 4.02(b)(ii) hereof shall entitle the Holder to purchase, in
accordance with the terms of such Option and the Plan, 1,500 shares of
Common Stock, subject to adjustment in accordance with Section 5.02
<PAGE>
hereof.
(d) Price. The price at which each share of Common Stock
covered by an Option may be purchased pursuant to the Plan shall be the
Fair Market Value of a share of Common Stock on the Grant Date of the
Option.
(e) Option Period. The period within which each Option may be
exercised shall commence on the Grant Date of the Option and shall expire
on the tenth anniversary of such Grant Date (the "Option Period"), unless
terminated sooner pursuant to Section 4.02(f) hereof.
(f) Termination of Service, Death, Etc. The following
provisions shall apply with respect to the exercise of an Option granted
hereunder in the event that the Holder thereof ceases to be a director of
the Company for the reasons described in this Section 4.02(f):
(i) If the directorship of the Holder is terminated within
the Option Period on account of any act of (a) fraud or
intentional misrepresentation or (b) embezzlement,
misappropriation or conversion of assets or opportunities of the
Company or any direct or indirect majority-owned subsidiary of
the Company, the Option shall automatically terminate as of the
date of such termination;
(ii) If the Holder dies during the Option Period while such
Holder is a director of the Company (or during the additional
three-month period provided by paragraph (iii) of this Section
4.02(f)), the Option may be exercised, to the extent that the
Holder was entitled to exercise it at the date of the Holder's
death, within one year after such death (if within the Option
Period), but not thereafter, by the executor or administrator of
the estate of the Holder, or by the person or persons who shall
have acquired the Option directly from the Holder by bequest or
inheritance; or
(iii) If the directorship of the Holder is terminated for
any reason (other than the circumstances specified in paragraphs
(i) and (ii) of this Section 4.02(f)) within the Option Period,
including a failure by the stockholders of the Company to
reelect the Holder as a director, the Option may be exercised,
to the extent the Holder was entitled to do so at the date of
termination of the directorship, within three months after such
termination (if within the Option Period), but not thereafter.
(g) Transferability. An Option granted under the Plan shall
not be transferable by the Holder, otherwise than by will or pursuant to
<PAGE>
the laws of descent and distribution, and during the lifetime of the
Holder the Option shall be exercisable only by the Holder or his or her
guardian or legal representative.
(h) Requirement of Directorship. Except as provided in Section
4.02(f) hereof, an Option may not be exercised unless the Holder is at
the time of exercise serving as a director of the Company, and, except as
provided in Section 4.02(f) hereof, such Option shall terminate upon
termination of the Holder's service as a director of the Company.
(i) Exercise, Payments, Etc. Each Option granted hereunder may
be exercised, in whole or in part, by the Holder thereof at any time or
(with respect to partial exercises) from time to time during the Option
Period, subject to the provisions of the Plan and the stock option
agreement evidencing such Option, and the method for exercising an Option
shall be by the personal delivery to the Secretary of the Company of, or
by the sending by United States registered or certified mail, postage
prepaid, addressed to the Company (to the attention of its Secretary),
of, written notice signed by the Holder specifying the number of shares
of Common Stock with respect to which such Option is being exercised.
Such notice shall be accompanied by the full amount of the purchase price
of such shares, in cash and/or by delivery of shares of Common Stock
already owned by the Holder having an aggregate Fair Market Value
(determined as of the date of exercise) equal to the purchase price,
including an actual or deemed multiple series of exchanges of such
shares. Any such notice shall be deemed to have been given on the date
of receipt thereof (in the case of personal delivery as above-stated) or
on the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent as
above-stated. In addition to the foregoing, promptly after demand by the
Company, the exercising Holder shall pay to the Company an amount equal
to applicable withholding taxes, if any, due in connection with such
exercise. No shares of Common Stock shall be issued upon exercise of an
Option until full payment therefor and for all applicable withholding
taxes has been made, and a Holder shall have none of the rights of a
stockholder until shares of Common Stock are issued to such Holder.
ARTICLE V
AUTHORIZED COMMON STOCK
5.01 Common Stock. The total number of shares as to which Options
may be granted under the Plan shall be 100,000 shares of Common Stock, in the
aggregate, except as such number of shares shall be adjusted from and after
the Plan Effective Date in accordance with the provisions of Section 5.02
<PAGE>
hereof. If any outstanding Option under the Plan shall expire or be
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option shall again be available for grant under
the Plan.
5.02 Adjustments Upon Changes in Common Stock. In the event the
Company shall effect a split of the Common Stock or a dividend payable in
Common Stock, or in the event the outstanding Common Stock shall be combined
into a smaller number of shares, the maximum number of shares as to which
Options may be granted under the Plan shall be increased or decreased
proportionately. In the event that before delivery by the Company of all the
shares of Common Stock in respect of which any Option has been granted under
the Plan, the Company shall have effected such a split, dividend or
combination, the shares still subject to the Option shall be increased or
decreased proportionately and the purchase price per share shall be increased
or decreased proportionately so that the aggregate purchase price for all the
then optioned shares shall remain the same as immediately prior to such split,
dividend or combination.
In the event of a reclassification of the Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization, including a
merger, consolidation or sale of assets, the Board shall make such
adjustments, if any, as it may deem appropriate in the number, purchase price
and kind of shares covered by the unexercised portions of Options theretofore
granted under the Plan. The provisions of this Section 5.02 shall only be
applicable if, and only to the extent that, the application thereof does not
conflict with any valid governmental statute, regulation or rule.
ARTICLE VI
GENERAL PROVISIONS
6.01 Termination of Plan. The Plan shall terminate whenever the
Board adopts a resolution to that effect. If not sooner terminated in
accordance with the preceding sentence, the Plan shall wholly cease and expire
on the tenth anniversary of the Plan Effective Date. After termination of the
Plan, no Options shall be granted under the Plan, but the Company shall
continue to recognize, and perform its obligations with respect to, any
Options previously granted.
6.02 Amendment of Plan. The Board may from time to time amend,
modify or suspend the Plan. Nevertheless, (a) no such amendment, modification
or suspension shall impair any Options theretofore granted under the Plan or
deprive any Holder of any shares of Common Stock which such Holder might have
acquired through or as a result of the Plan, and (b) after the stockholders of
the Company have approved and adopted the Plan in accordance with Section 1.01
<PAGE>
hereof, no such amendment or modification shall be made without the approval
of the holders of the outstanding shares of capital stock of the Company
entitled to vote in the election of directors generally where such amendment
or modification would (i) increase the total number of shares of Common Stock
as to which Options may be granted under the Plan or decrease the exercise
price at which Options may be granted under the Plan (other than as provided
in Section 5.02 hereof), (ii) materially alter the class of persons eligible
to be granted Options under the Plan, (iii) materially increase the benefits
accruing to Holders under the Plan or (iv) extend the term of the Plan or the
Option Period specified in Section 4.02(e) hereof.
Notwithstanding the foregoing, the provisions of the Plan relating to (a)
the number of shares of Common Stock covered by, and the exercise price of,
Options granted under the Plan, (b) the timing of grants of Options under the
Plan and (c) the class of persons eligible to be granted Options under the
Plan shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.
6.03 Treatment of Proceeds. Proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of
the Company.
6.04 Section Headings. The section headings included herein are only
for convenience, and they shall have no effect on the interpretation of the
Plan.
<PAGE>
Exhibit 99.(G)
RESTATED CERTIFICATE OF INCORPORATION
OF
TRIANGLE PACIFIC CORP.
ARTICLE VI
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that such exemption from liability or limitation thereof
shall not be permitted under the General Corporation Law of the State of
Delaware as amended from time to time. Any repeal or modification of this
Article VI shall not adversely affect any right or protection of a director of
the Corporation in respect of any act or omission occurring prior to the time of
such repeal or modification. The provisions of this Article VI shall not be
deemed to limit or preclude indemnification of a director by the Corporation for
any liability of a director which has not been eliminated by the provisions of
this Article VI.
<PAGE>
Exhibit 99.(H)
BYLAWS
OF
TRIANGLE PACIFIC CORP.
(hereinafter the "Corporation")
ARTICLE VII
INDEMNIFICATION
Section 1. General. The Corporation shall indemnify, and advance
Expenses (as this and all other capitalized words used in this Article VII
and not previously defined in these Bylaws are defined in Section 14 of
this Article VII) to, Indemnitee to the fullest extent permitted by
applicable law in effect on the date of the effectiveness of these Bylaws, and
to such greater extent as applicable law may thereafter permit. The rights of
Indemnitee provided under the preceding sentence shall include, but not be
limited to, the right to be indemnified to the fullest extent permitted by
Section 145(b) of the D.G.C.L. in Proceedings by or in the right of the
Corporation and to the fullest extent permitted by Section 145(a) of the
D.G.C.L. in all other Proceedings. The provisions set forth below in this
Article VII are provided in furtherance, and not by way of limitation, of the
obligations expressed in this Section 1.
Section 2. Expenses Related to Proceedings. If Indemnitee is,
by reason of his or her Corporate Status, a witness in or a party to
and is successful, on the merits or otherwise, in any Proceeding, he or she
shall be indemnified against all Expenses actually and reasonably incurred
by him or her or on his or her behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to any Matter in such Proceeding, the Corporation
shall indemnify Indemnitee against all Expenses
-1-
<PAGE>
actually and reasonably incurred by him or her or on his or her behalf
relating to each Matter. The termination of any Matter in such a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such Matter.
Section 3. Advancement of Expenses. Indemnitee shall be advanced
Expenses within ten days after requesting them to the fullest extent
permitted by Section 145(e) of the D.G.C.L.
Section 4. Request for Indemnification. To obtain indemnification
Indemnitee shall submit to the Corporation a written request with such
information as is reasonably available to Indemnitee. The Secretary of the
Corporation shall promptly advise the Board of Directors of such request.
Section 5. Determining Entitlement to Indemnification if no Change of
Control. If there has been no Change of Control at the time the request for
indemnification is sent, Indemnitee's entitlement to indemnification shall be
determined in accordance with Section 145(d) of the D.G.C.L. If
entitlement to indemnification is to be determined by Independent Counsel,
the Corporation shall furnish notice to Indemnitee within ten days after
receipt of the request for indemnification, specifying the identity and
address of Independent Counsel. Indemnitee may, within fourteen days after
receipt of such written notice of selection, deliver to the Corporation a
written objection to such selection. Such objection may be asserted only on
the ground that the Independent Counsel so selected does not meet the
requirements of Independent Counsel and the objection shall set forth with
particularity the factual basis of such assertion. If there is an objection
to the selection of Independent Counsel,
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<PAGE>
either the Corporation or Indemnitee may petition the Court of Chancery of
the State of Delaware or any other court of competent jurisdiction for a
determination that the objection is without a reasonable basis and/or for
the appointment as Independent Counsel of a person selected by the court.
Section 6. Determining Entitlement to Indemnification if Change of
Control. If there has been a Change of Control at the time the request for
indemnification is sent, Indemnitee's entitlement to indemnification shall
be determined in a written opinion by Independent Counsel selected by
Indemnitee. Indemnitee shall give the Corporation written notice advising of
the identity and address of the Independent Counsel so selected. The
Corporation may, within seven days after receipt of such written notice of
selection, deliver to Indemnitee a written objection to such selection.
Indemnitee may, within five days after receipt of such objection from the
Corporation, submit the name of another Independent Counsel and the
Corporation may, within seven days after receipt of such written notice
of selection, deliver to Indemnitee a written objection to such selection.
Any objection is subject to the limitations in Section 5 of this Article
VII. Indemnitee may petition the Court of Chancery of the State of Delaware
or any other court of competent jurisdiction for a determination that the
Corporation's objection to the first and/or second selection of Independent
Counsel is without a reasonable basis and/or for the appointment as Independent
Counsel of a person selected by the court.
Section 7. Procedures of Independent Counsel. If there has been a
Change of Control before the time the request for indemnification is sent
by Indemnitee, Indemnitee shall be presumed (except as otherwise expressly
provided in this Article VII) to be entitled to indemnification upon
submission of a request for indemnification in accordance with Section 4 of
this Article VII, and thereafter the Corporation shall have the burden of proof
to overcome the presumption in reaching a determination contrary to the
presumption. The presumption shall be used by Independent Counsel as a basis for
a determination of entitlement to indemnification unless the Corporation
provides information sufficient to overcome such presumption by clear and
convincing evidence or the investigation, review and analysis of Independent
Counsel convinces him or her by clear and convincing evidence that the
presumption should not apply.
Except in the event that the determination of entitlement to indemnification
is to be made by Independent Counsel, if the person or persons empowered
under Section 5 or 6 of this Article VII to determine entitlement to
indemnification shall not have made and furnished to Indemnitee in writing
a determination within sixty days after receipt by the Corporation of the
request
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<PAGE>
therefor, the requisite determination of entitlement to indemnification shall be
deemed to have been made and Indemnitee shall be entitled to such
indemnification unless Indemnitee knowingly misrepresented a material fact in
connection with the request for indemnification or such indemnification is
prohibited by law. The termination of any Proceeding or of any Matter therein,
by judgment, order, settlement or conviction, or upon a plea of nolo contendere
or its equivalent, shall not (except as otherwise expressly provided in this
Article VII) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that (a) Indemnitee did not act in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, or (b) with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his or her
conduct was unlawful.
Section 8. Expenses of Independent Counse. The Corporation
shall pay any and all reasonable fees and expenses of Independent Counsel
incurred acting pursuant to this Article VII and in any proceeding to which
it is a party or witness in respect of its investigation and written report
and shall pay all reasonable fees and expenses incident to the procedures in
which such Independent Counsel was selected or appointed. No
Independent Counsel may serve if a timely objection has been made to his or her
selection until a court has determined that such objection is without a
reasonable basis.
Section 9. Trial De Novo. In the event that (a) a determination is
made pursuant to Section 5 or 6 of this Article VII that Indemnitee is not
entitled to indemnification under this Article VII, (b) advancement of
Expenses is not timely made pursuant to Section 3 of this Article VII,
(c) Independent Counsel has not made and delivered a written opinion
determining the request for indemnification (i) within ninety days after
being appointed by a court, (ii) within ninety days after objections to
his or her selection have been overruled by a court or (iii) within ninety days
after the time for the Corporation or Indemnitee to object to his or her
selection or (d) payment of indemnification is not made within five
days after a determination of entitlement to indemnification has been made
or deemed to have been made pursuant to Section 5, 6 or 7 of this Article
VII, Indemnitee shall be entitled to an adjudication in any court of
competent jurisdiction of his or her entitlement to such indemnification or
advancement of Expenses. In the event that a determination shall have been
made that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Section 9 shall
be conducted in all respects as a de novo trial on the merits, and Indemnitee
shall not be prejudiced by reason of that adverse determination. If a
Change of Control shall have occurred, in any judicial proceeding commenced
pursuant to this Section 9, the
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<PAGE>
Corporation shall have the burden of proving that Indemnitee is not entitled
to indemnification or advancement of Expenses, as the case may be. If a
determination shall have been made or deemed to have been made that
Indemnitee is entitled to indemnification, the Corporation shall be
bound by such determination in any judicial proceeding commenced pursuant
to this Section 9, or otherwise, unless Indemnitee knowingly misrepresented a
material fact in connection with the request for indemnification, or such
indemnification is prohibited by law.
The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 9 that the procedures and
presumptions of this Article VII are not valid, binding and enforceable and
shall stipulate in any such court that the Corporation is bound by all
provisions of this Article VII. In the event that Indemnitee, pursuant to
this Section 9, seeks a judicial adjudication to enforce his or her rights
under, or to recover damages for breach of, this Article VII, Indemnitee shall
be entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all Expenses actually and reasonably incurred
by him or her in such judicial adjudication, but only if he or she prevails
therein. If it shall be determined in such judicial adjudication that
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of Expenses sought, the Expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be
appropriately prorated.
Section 10. Non-Exclusivity. The rights of indemnification
and to receive advancement of Expenses as provided by this Article VII
shall not be deemed exclusive of any other rights to which Indemnitee may at
any time be entitled under applicable law, the Certificate of
Incorporation, these Bylaws, any agreement, a vote of stockholders, a
resolution of the Board of Directors or otherwise. No amendment, alteration or
repeal of this Article VII or any provision hereof shall be effective as
to any Indemnitee for acts, events and circumstances that occurred, in whole
or in part, before such amendment, alteration or repeal. The provisions
of this Article VII shall continue as to an Indemnitee whose Corporate Status
has ceased and shall inure to the benefit of his or her heirs, executors and
administrators.
Section 11. Insurance and Subrogation. To the extent the Corporation
maintains an insurance policy or policies providing liability insurance for
directors or officers of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, Indemnitee
shall be covered by such policy or policies in accordance with its or
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their terms to the maximum extent of coverage available for any such director
or officer under such policy or policies.
In the event of any payment hereunder, the Corporation shall be subrogated
to the extent of such payment to all the rights of recovery of Indemnitee, who
shall execute all papers required and take all action necessary to secure
such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
The Corporation shall not be liable under this Article VII to make any
payment of amounts otherwise indemnifiable hereunder if, and to the extent
that, Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
Section 12. Severability. If any provision or provisions of this Article
VII shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Article VII shall be construed
so as to give effect to the intent manifested by the provisions held invalid,
illegal or unenforceable.
Section 13. Certain Persons Not Entitled to Indemnification.
Notwithstanding any other provision of this Article VII, no person shall be
entitled to indemnification or advancement of Expenses under this Article VII
with respect to any Proceeding, or any Matter therein, brought or made by
such person against the Corporation.
Section 14. Definitions. For purposes of this Article VII:
"Change of Control" means a change in control of the Corporation
after the date of effectiveness of these Bylaws in any one of the following
circumstances: (a) there shall have occurred an event required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
whether or not the Corporation is then subject to such reporting
requirement; (b) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) shall have become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing 30% or more of the combined
voting power of the Corporation's then outstanding voting securities without
prior approval of at least two-thirds of the members of the Board
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<PAGE>
of Directors in office immediately prior to such person's attaining such
percentage interest; (c) the Corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter; or (d) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new
director whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board of
Directors.
"Corporate Status" describes a status of a person who is or was a director,
officer, or employee or agent of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the request of the Corporation.
"D.G.C.L." means the General Corporation Law of the State of Delaware, as
currently in effect or as amended from time to time.
"Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating or being or preparing to be a witness in
a Proceeding.
"Indemnitee" includes any person who is, or is threatened to be made, a
witness in or a party to any Proceeding as described in Section 1 or 2 of
this Article VII by reason of his or her Corporate Status.
"Independent Counsel" means a law firm, or member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor
in the five years previous to his or her selection or appointment has been,
retained to represent: (a) the Corporation or Indemnitee in any matter
material to either such party, (b) any other party to the Proceeding giving
rise to a claim for indemnification hereunder or (c) the beneficial owner,
directly or indirectly, of securities of the Corporation representing 5% or more
of the combined voting power of the Corporation's then outstanding voting
securities.
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<PAGE>
"Matter" is a claim, a material issue or a substantial request for
relief.
"Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or
any other proceeding, whether civil, criminal, administrative or
investigative, except one initiated by an Indemnitee pursuant to Section 9
of this Article VII to enforce his or her rights under this Article VII.
Section 15. Notices. Any notice or other communication required or
permitted to be given or made to the Corporation or Indemnitee pursuant to this
Article VII shall be given or made in writing by depositing the same in the
United States mail, with postage thereon prepaid, addressed to the person to
whom such notice or communication is directed at the address of such person on
the records of the Corporation, and such notice or communication
shall be deemed given or made at the time when the same shall be so deposited
in the United States mail. Any such notice or communication to the Corporation
shall be addressed to the Secretary of the Corporation.
Section 16. Contractual Rights. The right to be indemnified or
to the advancement or reimbursement of Expenses under this Article VII (i)
is a contract right based upon good and valuable consideration, pursuant to
which Indemnitee may sue as if these provisions were set forth in a
separate written contract between him or her and the Corporation, (ii) is and
is intended to be retroactive and shall be available as to events occurring
prior to the effectiveness of these provisions and (iii) shall continue
after any rescission or restrictive modification of such provisions as to
events occurring prior thereto.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of law and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, and may be paid in cash, in property or in shares
of the capital stock. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for any
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
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<PAGE>
EXHIBIT 99.(I)
INDEMNITY AGREEMENT
THIS AGREEMENT made and entered into this _____ day of ________, 1993, by
and between TRIANGLE PACIFIC CORP., a Delaware corporation (hereinafter called
the "Company"), and __________________, who is presently serving the Company in
the capacity of an officer and/or director thereof (hereinafter "Indemnitee");
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors or officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder and derivative lawsuits against
publicly-held corporations, their directors and officers for line-of-duty
decisions and actions have increased in number in recent years for damages in
amounts which have no reasonable or logical relationship to the amount of
compensation received by the directors or officers from the corporation; and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware under which the Company is organized, empowers corporations to
indemnify persons serving as a director, officer, employee or agent of the
corporation or a person who serves at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, and further specifies that the
indemnification set forth in said section "shall not be deemed exclusive to any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise"; and said section further empowers a corporation to "purchase and
maintain insurance" (on behalf of such persons) "against any liability asserted
against him or incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provision of said laws"; and
WHEREAS, the Company desires to have Indemnitee serve or continue to serve
as an officer and/or director of the Company or of any other corporation,
subsidiary, partnership, joint venture, trust or other enterprise (hereinafter
called "Affiliate of the Company") of which he or she has been or is serving at
the request, for the convenience of or to represent the interests of the
Company, free from undue concern for unpredictable, inappropriate or
unreasonable claims for damages by reason of his or her being a director or
officer of the Company or of an Affiliate of the Company or by reason of his or
her decisions or actions on their behalf; and Indemnitee desires to serve, or to
continue to serve (provided that he or she is furnished the indemnity provided
for hereinafter), in one or more of such capacities;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1
<PAGE>
ARTICLE I
AGREEMENT TO SERVE
Section 1.1. Agreement to Serve. Indemnitee will serve and/or
------------------
continue to serve, at the will of the Company or under separate contract, if
such exists, the Company or an Affiliate of the Company as an officer and/or
director of the Company faithfully and to the best of his or her ability so long
as he or she is duly elected and qualified in accordance with the provisions of
the Bylaws thereof or until such time as he or she tenders his or her
resignation in writing.
ARTICLE II
INDEMNIFICATION
Section 2.1. General. The Company shall indemnify, and advance
-------
Expenses (as this and all other capitalized words used in this Agreement and not
previously defined in this Agreement are defined in Section 2.14 of this
Agreement) to, Indemnitee to the fullest extent permitted by applicable law in
effect on the date of this Agreement, and to such greater extent as applicable
law may thereafter permit. The rights of Indemnitee provided under the
preceding sentence shall include, but not be limited to, (i) the right to be
indemnified to the fullest extent permitted by Section 145(b) of the DGCL, as in
effect on the date of this Agreement, and to such greater extent as Section
145(b) may thereafter permit, in Proceedings by or in the right of the Company,
and (ii) the right to be indemnified to the fullest extent permitted by Section
145(a) of the DGCL, as in effect on the date of this Agreement, and to such
greater extent as Section 145(a) may thereafter permit, in all other
Proceedings. The provisions set forth below in this Article II are provided in
furtherance, and not by way of limitation, of the obligations expressed in this
Section 2.1.
Section 2.2. Expenses Related to Proceedings. Without limiting in
-------------------------------
any way the rights of Indemnitee provided under Section 2.1 of this Agreement,
(i) if Indemnitee is, by reason of his or her Corporate Status, a witness in or
a party to and is successful, on the merits or otherwise, in any Proceeding, he
or she shall be indemnified against all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection therewith, and (ii)
if Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to any Matter in such Proceeding, the Company shall
indemnify Indemnitee against all Expenses actually and reasonably incurred by
him or her or on his or her behalf relating to each Matter. The termination of
any Matter in such a Proceeding by dismissal, with or without prejudice, shall
be deemed to be a successful result as to such Matter.
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<PAGE>
Section 2.3. Advancement of Expenses. Indemnitee shall be advanced
-----------------------
Expenses within ten days after requesting them to the fullest extent permitted
by Section 145(e) of the DGCL, as in effect on the date of this Agreement, and
to such greater extent as Section 145(e) may thereafter permit.
Section 2.4. Conduct of Litigation.
---------------------
(a) If any claim is made or action brought against Indemnitee for
which Indemnitee intends to seek indemnification by the Company hereunder,
Indemnitee, to the extent not inconsistent with any private insurance
coverage obtained by the Company:
(i) shall retain counsel reasonably acceptable to Indemnitee and
the Company to defend such claim or action, and shall permit the
Company to monitor and direct the defense of such claim or action; or
(ii) at the Company's option, shall permit the Company, at its
expense and with the use of counsel selected by it and reasonably
acceptable to Indemnitee, to conduct the defense of such claim or
action.
The option given the Company under subsection (a)(ii) of this Section 2.4
shall be available to the Company at any time even if Indemnitee has
proceeded initially to retain his or her own counsel pursuant to subsection
(a)(i) of this Section 2.4.
(b) If the Company elects to proceed under subsection (a)(ii) of this
Section 2.4, Indemnitee shall cooperate in all reasonable respects with the
Company in the defense of the claim or action in question. If the Company
permits Indemnitee initially to proceed under subsection (a)(i) of this
Section 2.4 and then the Company elects to proceed under subsection (a)(ii)
of this Section 2.4, the Company's indemnification and advancement of
Expenses pursuant to this Agreement shall include the reasonable costs,
including, without limitation, reasonable attorneys' fees, incurred by
Indemnitee in initially proceeding under subsection (a)(i) of this Section
2.4 and in facilitating the Company's conduct of the defense after it has
elected to proceed under subsection (a)(ii) of this Section 2.4.
(c) Indemnitee shall have the right to employ his or her own counsel
in any Proceeding; however, except as otherwise provided in subsection (b)
of this Section 2.4, any fees and expenses of such counsel incurred after
the Company elects to proceed under subsection (a)(ii) of this Section 2.4
shall be paid by Indemnitee, unless:
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(i) the employment of separate counsel by Indemnitee is
authorized in writing by the Company; or
(ii) the parties to such Proceeding include Indemnitee, the
Company and/or other parties, and the Company has retained the same
counsel for Indemnitee, the Company and/or such other parties, and
Indemnitee shall have been advised by counsel that one or more legal
defenses may be available to him or her which may not be available to
the Company and/or such other parties; or
(iii) the Company shall not in fact have selected and employed
counsel to assume the defense of such Proceeding; or
(iv) the parties to such Proceeding include Indemnitee, the
Company and/or other parties, and the Company has retained the same
counsel for Indemnitee, the Company and/or such other parties, and
Indemnitee shall have been advised by counsel that under applicable
rules of ethical conduct such retained counsel may not represent all
of such parties and no permitted waiver of such rules has occurred;
in each of which cases the fees and expenses of Indemnitee's counsel shall
be paid by the Company.
Section 2.5. Notice of Claims and Request for Indemnification. If
------------------------------------------------
Indemnitee receives a written complaint, written claim, or other written notice
of any loss, claim, damage, or liability giving rise to a claim for
indemnification or advancement of Expenses under this Agreement, Indemnitee
shall promptly notify the Company of such complaint, claim, or other notice in
writing, but the omission to so notify the Company shall not relieve the Company
from any liability under this Agreement, unless it is materially prejudiced by
such omission and had no actual knowledge of such complaint, claim, or other
notice. In no event shall the Company be obligated to indemnify Indemnitee for
any amounts paid in settlement of any claim or action effected without the
Company's prior written consent, which shall not be unreasonably withheld. The
Company shall not settle any claim or action in any manner which would result in
the imposition of any penalty, fine, or limitation on, or otherwise adversely
affect, Indemnitee without his or her prior written consent, which shall not be
unreasonably withheld; provided that, the Company shall not be required to
obtain the consent of Indemnitee to the settlement of any claim or action which
the Company has undertaken to defend if the Company assumes full and sole
responsibility for such settlement and the settlement grants Indemnitee an
unqualified release in respect of all liabilities at issue in such claim or
action.
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Section 2.6. Determining Entitlement to Indemnification if no Change of
----------------------------------------------------------
Control. If there has been no Change of Control at the time the request for
- -------
indemnification is sent, Indemnitee's entitlement to indemnification shall be
determined in accordance with Section 145(d) of the DGCL, as currently in
effect. If entitlement to indemnification is to be determined by Independent
Counsel, the Company shall furnish notice to Indemnitee within ten days after
receipt of the request for indemnification, specifying the identity and address
of Independent Counsel. Indemnitee may, within fourteen days after receipt of
such written notice of selection, deliver to the Company a written objection to
such selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of Independent
Counsel, and the objection shall set forth with particularity the factual basis
of such assertion. If there is an objection to the selection of Independent
Counsel, either the Company or Indemnitee may petition the Court of Chancery of
the State of Delaware or any other court of competent jurisdiction for a
determination that the objection is without a reasonable basis and/or for the
appointment as Independent Counsel of a person selected by the court.
Section 2.7. Determining Entitlement to Indemnification if Change of
-------------------------------------------------------
Control. If there has been a Change of Control at the time the request for
- -------
indemnification is sent, Indemnitee's entitlement to indemnification shall be
determined in a written opinion by Independent Counsel selected by Indemnitee.
Indemnitee shall give the Company written notice advising of the identity and
address of the Independent Counsel so selected. The Company may, within seven
days after receipt of such written notice of selection, deliver to Indemnitee a
written objection to such selection. Indemnitee may, within five days after
receipt of such objection from the Company, submit the name of another
Independent Counsel, and the Company may, within seven days after receipt of
such written notice of selection, deliver to Indemnitee a written objection to
such selection. Any objection is subject to the limitations in Section 2.6 of
this Agreement. Indemnitee may petition the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction for a determination that
the Company's objection to the first and/or second selection of Independent
Counsel is without a reasonable basis and/or for the appointment as Independent
Counsel of a person selected by the court.
Section 2.8. Procedures of Independent Counsel. If there has been a
---------------------------------
Change of Control before the time the request for indemnification is sent by
Indemnitee, Indemnitee shall be presumed (except as otherwise expressly provided
in this Agreement) to be entitled to indemnification upon submission of a
request for indemnification in accordance with Section 2.5 of this Agreement,
and thereafter the Company shall have the burden of proof to overcome the
presumption in reaching a determination contrary to the presumption. The
presumption shall be used by Independent Counsel as a basis for a determination
of entitlement to indemnification unless the Company provides information
sufficient to overcome such presumption by clear and convincing evidence or the
investigation, review and analysis of Independent
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Counsel convinces him or her by clear and convincing evidence that the
presumption should not apply.
Except in the event that the determination of entitlement to
indemnification is to be made by Independent Counsel, if the person or persons
empowered under Section 2.6 or 2.7 of this Agreement to determine entitlement to
indemnification shall not have made and furnished to Indemnitee in writing a
determination within sixty days after receipt by the Company of the request
therefor, the requisite determination of entitlement to indemnification shall be
deemed to have been made and Indemnitee shall be entitled to such
indemnification unless Indemnitee knowingly misrepresented a material fact in
connection with the request for indemnification or such indemnification is
prohibited by law. The termination of any Proceeding or of any Matter therein,
by judgment, order, settlement or conviction, or upon a plea of nolo contendere
or its equivalent, shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnitee to indemnification
or create a presumption that (a) Indemnitee did not act in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, or (b) with respect to any criminal Proceeding, that
Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
Section 2.9. Expenses of Independent Counsel. The Company shall pay any
-------------------------------
and all reasonable fees and expenses of Independent Counsel incurred acting
pursuant to this Agreement and in any proceeding to which it is a party or
witness in respect of its investigation and written report and shall pay all
reasonable fees and expenses incident to the procedures in which such
Independent Counsel was selected or appointed. No Independent Counsel may serve
if a timely objection has been made to his or her selection until a court has
determined that such objection is without a reasonable basis.
Section 2.10. Trial De Novo. In the event that (a) a determination is
-------------
made pursuant to Section 2.6 or 2.7 of this Agreement that Indemnitee is not
entitled to indemnification under this Agreement, (b) advancement of Expenses is
not timely made pursuant to Section 2.3 of this Agreement, (c) Independent
Counsel has not made and delivered a written opinion determining the request for
indemnification (i) within ninety days after being appointed by a court, (ii)
within ninety days after objections to his or her selection have been overruled
by a court or (iii) within ninety days after the time for the Company or
Indemnitee to object to his or her selection or (d) payment of indemnification
is not made within five days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant to Section
2.6, 2.7 or 2.8 of this Agreement, Indemnitee shall be entitled to an
adjudication in any court of competent jurisdiction of his or her entitlement to
such indemnification or advancement of Expenses. In the event that a
determination shall have been made that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration
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<PAGE>
commenced pursuant to this Section 2.10 shall be conducted in all respects as a
de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding commenced pursuant to this Section 2.10, the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be. If a determination shall have been
made or deemed to have been made that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 2.10, or otherwise, unless Indemnitee
knowingly misrepresented a material fact in connection with the request for
indemnification, or such indemnification is prohibited by law.
The Company shall be precluded from asserting in any judicial proceeding
commenced pursuant to this Section 2.10 that the procedures and presumptions of
this Agreement are not valid, binding and enforceable and shall stipulate in any
such court that the Company is bound by all provisions of this Agreement. In
the event that Indemnitee, pursuant to this Section 2.10, seeks a judicial
adjudication to enforce his or her rights under, or to recover damages for
breach of, this Agreement, Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all Expenses
actually and reasonably incurred by him or her in such judicial adjudication,
but only if he or she prevails therein. If it shall be determined in such
judicial adjudication that Indemnitee is entitled to receive part but not all of
the indemnification or advancement of Expenses sought, the Expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
appropriately prorated.
Section 2.11. Non-Exclusivity; Conflicts. The rights of indemnification
--------------------------
and to receive advancement of Expenses as provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Restated Certificate of Incorporation or
Bylaws of the Company, any agreement, a vote of stockholders, a resolution of
the Board of Directors of the Company or otherwise. No amendment, alteration or
repeal of this Agreement or any provision hereof shall be effective as to
Indemnitee for acts, events and circumstances that occurred, in whole or in
part, before such amendment, alteration or repeal. If any provision of this
Agreement shall be in conflict with, limit in any way, or be more restrictive
than any provision of any applicable statute in effect as of the date hereof or
hereafter under the laws of the State of Delaware, then the provision that is
more favorable to Indemnitee shall govern. The parties to this Agreement agree
to amend this Agreement from time to time in order that its provisions remain
consistent with the most favorable applicable statutory provisions or judicial
determinations relating to indemnification of directors and/or officers under
the laws of the State of Delaware.
Section 2.12. Insurance and Subrogation. To the extent the Company
-------------------------
maintains an insurance policy or policies providing liability insurance for
directors or
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officers of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of coverage
available for any such director or officer under such policy or policies.
The Company shall (a) through an appropriate provision in its Bylaws,
indemnify the Indemnitee to the maximum extent permitted by Delaware law and (b)
acquire and maintain directors and officers liability insurance covering the
Indemnitee (and to the extent it desires, other directors and officers of the
Company), to the extent it is available at commercially reasonable rates (but in
no event shall the Company be required to purchase such insurance in the amount
of coverage exceeding that which can be purchased by the Company at aggregate
premiums of $150,000 per year).
In the event of any payment hereunder, the Company shall be subrogated to
the extent of such payment to all the rights of recovery of Indemnitee, who
shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the
Company to bring suit to enforce such rights.
The Company shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if, and to the extent that, Indemnitee
has otherwise actually received such payment under any insurance policy,
contract, agreement, the Restated Certificate of Incorporation or Bylaws of the
Company or otherwise.
Section 2.13. Certain Persons Not Entitled to Indemnification.
-----------------------------------------------
Notwithstanding any other provision of this Agreement, no person shall be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any Matter therein, brought or made by such person
against the Company.
Section 2.14. Definitions. For purposes of this Agreement:
-----------
"Change of Control" means a change in control of the Company after the date
of this Agreement in any one of the following circumstances: (a) there shall
have occurred an event required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement; (b) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) shall have become the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding voting securities without prior approval of at
least two-thirds of the members of the Board of Directors of
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<PAGE>
the Company in office immediately prior to such person's attaining such
percentage interest; (c) the Company is a party to a merger, consolidation, sale
of assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors of the Company in office immediately prior to
such transaction or event constitute less than a majority of the Board of
Directors thereafter; or (d) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
"Corporate Status" describes a status of a person who is or was a director,
officer, or employee or agent of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the request of the Company.
"DGCL" means the General Corporation Law of the State of Delaware.
"Expenses" shall include all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating or being or preparing to be a witness in a
Proceeding.
"Indemnitee", for purposes of Article II hereof, means the Indemnitee named
in the opening paragraph of this Agreement who is, or is threatened to be made,
a witness in or a party to any Proceeding as described in Section 2.1 or 2.2
hereof by reason of his or her Corporate Status.
"Independent Counsel" means a law firm, or member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the
five years previous to his or her selection or appointment has been, retained to
represent: (a) the Company or Indemnitee in any matter material to either such
party, (b) any other party to the Proceeding giving rise to a claim for
indemnification hereunder or (c) the beneficial owner, directly or indirectly,
of securities of the Company representing 5% or more of the combined voting
power of the Company's then outstanding voting securities.
"Matter" is a claim, a material issue or a substantial request for relief.
"Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether
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<PAGE>
civil, criminal, administrative or investigative, except one initiated by
Indemnitee pursuant to Section 2.10 of this Agreement to enforce his or her
rights under this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1. Notices. Any notice or other communication required or
-------
permitted to be given or made to the Company or Indemnitee pursuant to this
Agreement shall be given or made in writing by depositing the same in the United
States mail, with postage thereon prepaid, addressed to the person to whom such
notice or communication is directed at the address of such person on the records
of the Company, and such notice or communication shall be deemed given or made
at the time when the same shall be so deposited in the United States mail. Any
such notice or communication to the Company shall be addressed to the Secretary
of the Company.
Section 3.2. Contractual Rights. The right to be indemnified or to the
------------------
advancement or reimbursement of Expenses under this Agreement (i) is a contract
right based upon good and valuable consideration, pursuant to which Indemnitee
may sue, (ii) is and is intended to be retroactive and shall be available as to
events occurring prior to the date of this Agreement and (iii) shall continue
after any rescission or restrictive modification of this Agreement as to events
occurring prior thereto.
Section 3.3. Severability. If any provision or provisions of this
------------
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Agreement shall be construed so
as to give effect to the intent manifested by the provisions held invalid,
illegal or unenforceable.
Section 3.4. Successors; Binding Agreement. The Company shall require
-----------------------------
any successor to all or substantially all of the business and/or assets of the
Company (whether direct or indirect, by purchase, merger, consolidation or
otherwise), by agreement in form and substance reasonably satisfactory to
Indemnitee, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in this Section 3.4 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
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<PAGE>
This Agreement shall inure to the benefit of and be enforceable by (a)
Indemnitee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, and (b) the Company's
successors and assigns.
Section 3.5. Counterparts, Modification, Headings, Gender.
--------------------------------------------
(a) This Agreement may be executed in any number of counterparts, each
of which shall constitute one and the same instrument, and any party hereto
may execute this Agreement by signing any such counterpart.
(b) No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Indemnitee and an appropriate officer of the Company.
No waiver by any party at any time of any breach by any other party of, or
compliance with, any condition or provision of this Agreement to be
performed by any other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
(c) Section headings are not to be considered part of this Agreement,
are solely for convenience of reference, and shall not affect the meaning
or interpretation of this Agreement or any provision set forth herein.
(d) Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context
otherwise requires.
Section 3.6. Entire Agreement; Assignability. This Agreement constitutes
-------------------------------
the entire agreement of the parties hereto relating to the subject matter hereof
and there are no written or oral terms or representations made by either party
other than those contained herein. This Agreement shall not be assignable by
either party without the consent of the other.
Section 3.7. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED TO REQUIRE ANY UNLAWFUL ACTION OR
INACTION BY ANY PARTY.
Section 3.8. Termination.
-----------
(a) This Agreement shall terminate upon the mutual agreement of the
parties that this Agreement shall terminate or upon the death of Indemnitee
or
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<PAGE>
the resignation, retirement, removal or replacement of Indemnitee from all
of his or her positions as a director and/or officer of the Company.
(b) The termination of this Agreement shall not terminate:
(i) the Company's liability for claims or actions against
Indemnitee arising out of or related to acts, omissions, occurrences,
facts or circumstances occurring or alleged to have occurred prior to
such termination; or
(ii) the applicability of the terms and conditions of this
Agreement to such claims or actions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
TRIANGLE PACIFIC CORP.
By:
Name:
Title:
INDEMNITEE
Name:
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<PAGE>
Exhibit 99.(J)
CONFIDENTIAL
- ------------
April 6, 1998
Armstrong World Industries
313 West Liberty Street
Lancaster, PA 17603
Attention: Frank A. Riddick, III
Senior Vice President and Chief Financial Officer
Dear Sirs and Madams:
You have requested information from Triangle Pacific Corp. (the "Company") in
connection with your consideration of a possible acquisition by you of the
Company (an "Acquisition Transaction"). As a condition to our furnishing such
information to you, we are requiring that you agree, as set forth below, to
treat confidentially such information, whether written or oral, and any other
information that the Company, its agents or its representatives (including
attorneys and financial advisors) furnishes to you or your directors, officers,
employees, agents, advisors, prospective bank or institutional lenders,
affiliates or representatives of your agents, advisors or prospective lenders
(all of the foregoing collectively referred to as "your Representatives"),
whether furnished before or after the date of this letter, and all notes,
analyses, compilations, forecasts, studies or other documents or records,
whether prepared by you or others, which contain or otherwise reflect or are
generated in whole or in part from such information including that stored on any
computer, word processing or similar device (collectively, the "Evaluation
Material").
The term "Evaluation Material" does not include information which (i) becomes
generally available to the public other than as a result of a disclosure by you
or your Representatives, (ii) was in your possession on a non-confidential basis
prior to its disclosure to you by the Company, its representatives or its agent,
or (iii) becomes available to you on a non-confidential basis from a source
other than the Company, its representatives or its agents, provided that such
source is not, to your knowledge after due inquiry, bound by a confidentiality
agreement with the Company, its representatives or its agents or otherwise, to
your knowledge after due inquiry, prohibited from transmitting the information
to you or your Representatives by a contractual, legal or fiduciary obligation.
It is understood that you may disclose any of the Evaluation Material to those
of your Representatives who require such material for the purpose of evaluating
a possible Acquisition Transaction (provided that such Representatives shall be
informed by you of the confidential nature of the Evaluation Material and agree
to be bound by the terms of this Agreement as though they were parties hereto).
You agree that the Evaluation Material will be kept
<PAGE>
-2-
confidential by you and your Representatives and, except with the specific prior
written consent of the Company or as expressly otherwise permitted by the terms
hereof, will not be disclosed by you or your Representatives. You further agree
that you and your Representatives will not use any of the Evaluation Material
for any reason or purpose other than to evaluate a possible Acquisition
Transaction. You agree that you will be responsible for any breach of the
Agreement by your Representatives.
Without the prior written consent of the Company, you and your Representatives
will not disclose to any person (1) the fact that the Evaluation Material has
been made available to you or that you have inspected any portion of the
Evaluation Material, (2) the fact that any discussions or negotiations are
taking place concerning a possible Acquisition Transaction, or (3) any of the
terms, conditions or other facts with respect to any possible Acquisition
Transaction, including the status thereof, unless and only to the extent that
such disclosure (after making reasonable efforts to avoid such disclosure and
after advising and consulting with the Company about your intention to make, and
the proposed contents of such disclosure) is, in the reasonable opinion of your
counsel, required by applicable United States securities laws. The term
"person" as used in this letter shall be broadly interpreted to include without
limitation any corporation, company, partnership and individual.
In the event that you or any of your Representatives are requested or required
(by oral questions, interrogatories, requests for information or documents,
subpoena, Civil Investigative Demand or similar process) to disclose any of the
Evaluation Material, it is agreed that you or such Representative, as the case
may be, will provide the Company with prompt notice of such request(s) so that
it may seek an appropriate protective order or other appropriate remedy and/or
waive your or such Representative's compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the Company grants a waiver hereunder, you or such
Representative may furnish that portion (and only that portion) of the
Evaluation Material which, in the written opinion of your counsel, you are
legally compelled to disclose and will exercise your best efforts to obtain
reliable assurance that confidential treatment will be accorded any Evaluation
Material so furnished.
In addition, you hereby acknowledge that you are aware (and that your
Representatives who are apprised of this matter have been or will be advised)
that the United States securities laws restrict persons with material non-public
information about a company obtained directly or indirectly from that company
from purchasing or selling securities of such company, or from communicating
such information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities.
You agree that for a period of two years from the date of this letter agreement,
neither you nor any of your affiliates or Representatives, alone or with others,
will in any manner (1) acquire, agree to acquire, or make any proposal (or
request permission to make any proposal) to acquire any securities (or direct or
indirect rights, warrants or options to acquire any securities) or property of
the Company (other than property transferred in the ordinary course of the
<PAGE>
-3-
Company's business), unless such acquisition, agreement or making of a proposal
shall have been expressly first approved (or in the case of a proposal,
expressly first invited) by the Company's Board of Directors, (2) except at the
specific written request of the Company, propose to enter into, directly or
indirectly, any merger or business combination involving the Company or any of
its subsidiaries, (3) solicit proxies from shareholders of the Company or
otherwise seek to influence or control the management or policies of the Company
or any of its affiliates, (4) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934)
with respect to any voting securities of the Company or any of its subsidiaries,
(5) otherwise act, alone or in concert with others, to seek to control or
influence the management, Board of Directors or policies of the Company, (6)
disclose any intention, plan or arrangement inconsistent with the foregoing or
(7) assist, advise or encourage (including by knowingly providing or arranging
financing for that purpose) any other person in doing any of the foregoing. You
also agree during such period not to take any action which might require the
Company to make a public announcement regarding the possibility of a business
combination, merger or extraordinary transaction. You hereby represent that
neither you nor your affiliates beneficially own any shares of the Common Stock
of the Company.
You agree that, without the prior written consent of the Company, neither you
nor those of your Representatives who are aware of the Evaluation Material
and/or the possibility of an Acquisition Transaction will initiate or cause to
be initiated or maintain (other than through Salomon Smith Barney) any
communications with any officer, director, agent or employee of the Company
concerning the Company's business, operations, prospects or finances or the
Evaluation Material or any possible Acquisition Transaction. Moreover, you
further agree that Salomon Smith Barney will arrange for appropriate contacts
for due diligence purposes and that all (a) communications regarding any
possible Acquisition Transaction, (b) requests for additional information, (c)
requests for facility tours or management meetings and (d) discussions or
questions regarding procedures, will be submitted or directed to Salomon Smith
Barney.
You agree that, for a period of eighteen months from the date hereof, without
the prior written consent of the Company, you will not solicit or cause to be
solicited any person employed by the Company or its subsidiaries or affiliates
at any time during such period and to whom you had been directly or indirectly
introduced or otherwise had contact with during or as the result of your review
of the Evaluation Material or your consideration of an Acquisition Transaction.
You will promptly upon the written request of the Company deliver to the Company
all documents or other matter furnished by the Company to you or your
Representatives constituting Evaluation Material, together with all copies
thereof in the possession of you or your Representatives. In the event of such
request, all other documents or other matter constituting Evaluation Material,
or any analyses, compilations, studies or other documents containing or
reflecting your use of the Evaluation Material, in the possession of you or your
Representatives
<PAGE>
-4-
will be destroyed, with any such destruction confirmed by you in writing to the
Company.
Although you understand that the Company has endeavored to include in the
Evaluation Material information known to it which it believes to be relevant for
the purpose of your investigation, you further understand that neither the
Company nor its agents or its representatives makes any representation or
warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material (and you may not rely on any statement to the contrary).
You agree that neither the Company nor its employees, officers, directors,
stockholders, owners, affiliates, agents or representatives shall have any
liability to you or any of your Representatives or any other person resulting
from the use of the Evaluation Material by you or such representatives. Only
those representations and warranties that may be made to you or affiliates in
definitive written agreement for an Acquisition Transaction, when, as and if
executed and subject to such limitations and restrictions as may be specified
therein, shall have any legal effect, and you agree that if you determine to
engage in an Acquisition Transaction such determination will be based solely on
the terms of such written agreement and on your own investigation, analysis and
assessment of the business to be acquired.
You also hereby agree that no contract or agreement providing for an Acquisition
Transaction will be deemed to exist between you and the Company and/or the
owners or stockholders of the Company unless and until a definitive written
agreement has been signed, executed and delivered by you and the Company and/or
such owners or stockholders. Moreover, unless and until such a definitive
written agreement is entered into, executed and delivered, none of the Company,
its stockholders or its affiliates or you will be under any legal obligation of
any kind whatsoever with respect to any Acquisition Transaction except for the
matters specifically agreed to in this Agreement. You also hereby waive, in
advance, any claims (including, without limitation, claims for breach of
contract) in connection with any Acquisition Transaction or any other
transaction unless and until such a definitive, written agreement is entered
into, executed and delivered. For the purposes of this paragraph, a "definitive
written agreement" does not include an executed letter of intent or any other
preliminary written agreement, nor does it include any written or oral
acceptance of any offer or bid.
You understand that (a) the Company shall be free to conduct any process with
respect to a possible Acquisition Transaction as the Company in its sole
discretion shall determine (including, without limitation, by negotiating with
any prospective party and entering into a definitive written agreement without
prior notice to you or any other person), (b) any procedures relating to such
Acquisition Transaction may be changed at any time without notice to you or any
other person and (c) you shall not have any claim whatsoever against the Company
or Salomon Smith Barney or any of their respective directors, officers,
stockholders, owners, affiliates, agents or representatives, arising out of or
relating to any possible or actual Acquisition Transaction (other than those as
against parties to a definitive written agreement with you in accordance with
the terms thereof). You further understand that the Company is under no
obligation to commence or continue discussions with any person or to enter into
a transaction with the highest bidder. The Company may terminate discussions
with any person at any time
<PAGE>
-5-
and for any reason or no reason in its sole discretion.
You hereby agree to indemnify and hold harmless the Company from any damage,
loss, cost or liability (including legal fees and the cost of enforcing this
indemnity) arising out of or resulting from any unauthorized use or disclosure
by you or your Representatives of the Evaluation Material.
You also acknowledge that money damages would be both incalculable and an
insufficient remedy for any breach of this Agreement by you or your
Representatives and that any such breach would cause the Company irreparable
harm. Accordingly, you agree that in the event of any breach of threatened
breach of this Agreement, the Company, in addition to any other remedies at law
or in equity it may have, shall be entitled, without the requirement of posting
a bond or other security, to equitable relief, including injunctive relief and
specific performance.
You also hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Texas and of the United
States of America located in the City of Dallas for any actions, suits or
proceedings arising out of or relating to this Agreement and the transactions
contemplated hereby (and you agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice or document by U.S. registered mail to
your address set forth above shall be effective service of process for any
action, suit or proceeding brought against you in any such court. You hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Texas or the United States of
America located in the City of Dallas, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
The agreements set forth in this Agreement may be modified or waived only by a
separate writing signed by the Company and you expressly so modifying or waiving
such agreements.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this letter
agreement, which shall remain in full force and effect.
This Agreement reflects the entire agreement among their parties with respect to
the subject matter hereof and all prior agreements among the parties with
respect to such subject matter are hereby superseded and replaced in their
entirety with this Agreement.
<PAGE>
-6-
You may not assign any rights or benefits hereunder without the written consent
of the Company. The Company may assign rights or benefits hereunder to any
party acquiring rights in the business or assets of the Company.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas.
<PAGE>
-7-
If you are in agreement with the foregoing, please sign and return one copy of
this letter, which thereupon will constitute our Agreement with respect to the
subject matter hereof.
Very truly yours,
Triangle Pacific Corp.
Salomon Brothers Inc
Smith Barney Inc.
/s/ Richard L. Moriarty
By ____________________________
Salomon Brothers Inc
on behalf of
Triangle Pacific Corp.
Confirmed and agreed to as of
the date first above written:
/s/ Frank A. Riddick, III
_____________________________
Senior Vice President, Finance
By __________________________________
Title: and Chief Financial Officer
<PAGE>
EXHIBIT 99.(K)
SALOMON SMITH BARNEY
--------------------
A Member of TravelersGroup LOGO
June 12, 1998
Board of Directors
Triangle Pacific Corp.
16803 Dallas Parkway
Dallas, Texas 75248
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of shares of common stock, par
value $0.01 per share ("Company Common Stock"), of Triangle Pacific Corp. (the
"Company") of the consideration to be received by such holders in the proposed
acquisition of the Company by Armstrong World Industries, Inc. ("Acquiror")
pursuant to the Agreement and Plan of Merger (the "Agreement"), dated as of
June 12, 1998, among the Company, Acquiror and Sapling Acquisition, Inc.
("Merger Sub").
As more specifically set forth in the Agreement, Merger Sub will commence a
tender offer (the "Proposed Tender Offer") to purchase all outstanding shares
of Company Common Stock at a price of $55.50 per share (the "Offer Price").
Following consummation of the Proposed Tender Offer, Merger Sub will be merged
with and into the Company (the "Proposed Merger" and, collectively with the
Proposed Tender Offer, the "Proposed Transaction") and each then outstanding
share of Company Common Stock (other than shares held in the treasury of the
Company, shares owned by Acquiror, Merger Sub or any other direct or indirect
wholly owned subsidiary of Acquiror or of the Company, and shares as to which
appraisal rights have been properly exercised under applicable law) will be
converted into the right to receive, in cash, merger consideration equal to
the Offer Price.
In connection with rendering our opinion, we have reviewed and analyzed
material bearing upon the financial and operating condition and prospects of
the Company including, among other things, the following: (i) a draft dated
June 11, 1998 of the Agreement; (ii) certain publicly available information
concerning the Company, including the Annual Report on Form 10-K of the
Company for each of the years in the three-year period ended January 2, 1998
and the Quarterly Report on Form 10-Q of the Company for the quarter ended
April 3, 1998; (iii) certain internal information of the Company, primarily
financial in nature, including projections, concerning the business and
operations of the Company furnished to us by the Company for purposes of our
analysis; (iv) certain publicly available information concerning the trading
of, and the trading market for, the Company Common Stock; (v) certain publicly
available information with respect to certain publicly traded companies that
we believe to be comparable to the Company and the trading markets for certain
of such other companies' securities; and (vi) certain publicly available
information concerning the nature and terms of certain other transactions that
we consider relevant to our inquiry. We have also considered such other
information, financial studies, analyses, investigations and financial,
economic and market criteria that we deemed relevant. We have also discussed
the foregoing, as well as other matters we believe relevant to our inquiry,
with the management of the Company and Acquiror.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and
other information provided to us or publicly available and have neither
attempted independently to verify nor assumed any responsibility for verifying
any of such information and have further relied upon the assurances of
management of the Company that they are not aware of any facts that would make
any of such information inaccurate or misleading. We have not conducted a
detailed physical inspection of any of the properties or facilities of the
Company, nor have we made or obtained or assumed any responsibility for making
or obtaining any independent evaluations or appraisals of any of such
properties or
SALOMON BROTHERS INC Seven World Trade Center, New York, NY 10048
<PAGE>
facilities, nor have we been furnished with any such evaluations or
appraisals. With respect to projections, we have, upon the advice and consent
of management of the Company, assumed that such projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgment of the Company's management as to the future financial performance of
the Company and we express no view with respect to such projections or the
assumptions on which they were based. We have also assumed that the definitive
Agreement will not, when executed, contain any terms or conditions that differ
materially from the terms and conditions contained in the draft of such
document we have reviewed and that the Proposed Acquisition will be
consummated in a timely manner and in accordance with the terms of the
Agreement, without waiver of any of the conditions precedent to the Proposed
Acquisition contained in the Agreement.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following:
(i) the historical and current financial position and results of operations of
the Company; (ii) the business prospects of the Company; (iii) the historical
and current market for the Company Common Stock and for the equity securities
of certain other companies that we believe to be comparable to the Company;
and (iv) the nature and terms of certain other acquisition transactions that
we believe to be relevant. We have also taken into account our assessment of
general economic, market and financial conditions as well as our experience in
connection with similar transactions and securities valuation generally. We
have not been asked to consider, and our opinion does not address, the
relative merits of the Proposed Transaction as compared to any alternative
business strategy that might exist for the Company. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof
and we assume no responsibility to update or revise our opinion based upon
circumstances or events occurring after the date hereof. Our opinion is, in
any event, limited to the fairness, from a financial point of view, of the
consideration to be received by the holders of Company Common Stock in the
Proposed Tender Offer and the Proposed Merger and does not address the
Company's underlying business decision to effect the Proposed Transaction or
constitute a recommendation to any holder of Company Common Stock as to
whether such holder should tender such stock in the Proposed Tender Offer or
to any holder of Company Common Stock as to how such holder should vote with
respect to the Proposed Merger, if such a vote is taken.
As you are aware, Salomon Brothers Inc and Smith Barney Inc. (collectively
with all other entities doing business as Salomon Smith Barney, "Salomon Smith
Barney"), is acting as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for its services, a substantial
portion of which is contingent upon consummation of the Proposed Transaction.
Additionally, Salomon Smith Barney or its affiliates have previously rendered
certain investment banking and financial advisory services to the Company and
Acquiror, for which we received customary compensation. In addition, in the
ordinary course of our business, Salomon Smith Barney may hold or actively
trade the debt and equity securities of the Company and Acquiror for its own
account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities. Salomon Smith Barney and its
affiliates (including Travelers Group Inc.) may have other business
relationships with the Company and Acquiror.
This opinion is intended for the benefit and use of the Company (including
its management and directors) in considering the transaction to which it
relates and may not be used by the Company for any other purpose or
reproduced, disseminated, quoted or referred to by the Company at any time, in
any manner or for any purpose, without the prior written consent of Salomon
Smith Barney, except that this opinion may be reproduced in full in, and
references to the opinion and to Salomon Smith Barney and its relationship
with the Company (in each case in such form as Salomon Smith Barney shall
approve) may be included in, the Solicitation/Recommendation Statement on
Schedule 14D-9 the Company distributes to holders of Company Common Stock in
connection with the Proposed Tender Offer.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the consideration to be received by the
holders of Company Common Stock in the Proposed Tender Offer and the Proposed
Merger is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Salomon Smith Barney
Salomon Smith Barney
2
<PAGE>
EXHIBIT 99.(L)
Triangle Pacific Corp.
16803 Dallas Parkway
Dallas, TX 75248
June 19, 1998
Dear Stockholder:
I am pleased to inform you that on June 12, 1998, Triangle Pacific
Corp. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Armstrong Worldwide Industries, Inc. and Sapling Acquisition,
Inc. ("Purchaser"). Pursuant to the Merger Agreement, Purchaser today commenced
a tender offer to purchase all outstanding shares of the Company's Common Stock
(the "Shares") for $55.50 per share in cash. Under the Merger Agreement, if at
least a majority of the Shares are tendered, the tender offer will be followed
by a merger of Purchaser into the Company. In the merger, each share of Common
Stock will be converted into the same consideration as is paid in the tender
offer (other than shares held by the Purchaser and by dissenting stockholders,
if any).
THE BOARD OF DIRECTORS OF THE COMPANY (WITH ONE DIRECTOR ABSENT) HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THE MERGER AGREEMENT, AND HAS UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER
AGREEMENT, THE TENDER OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY (WITH
ONE DIRECTOR ABSENT) UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER,
TENDER THEIR SHARES AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.
In arriving at its recommendations, the Board of Directors gave
careful consideration to a number of factors. These factors included the
opinion dated June 12, 1998 of Salomon Smith Barney, financial advisor to the
Company, to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the cash consideration of $55.50 per
share to be received by the Company stockholders in the offer and the merger was
fair from a financial point of view to such stockholders.
Accompanying this letter is a Schedule 14D-9, which describes the
board's decision to recommend the tender offer and the merger. This document
contains important information relating to the transaction, and we urge you to
read it carefully.
Sincerely,
/s/ Floyd F. Sherman
Floyd F. Sherman
Chairman of the Board of Directors and
Chief Executive Officer
<PAGE>
EXHIBIT 99.(M)
ARMSTRONG WORLD INDUSTRIES TO ACQUIRE TRIANGLE PACIFIC CORP. FOR $55.50 PER
SHARE IN TRANSACTION VALUED AT $890 MILLION
- --Transaction Will Make Armstrong the World Leader in Wood Flooring--
LANCASTER, PA, AND DALLAS, TX, JUNE 13, 1998 -- Armstrong World Industries,
Inc., (NYSE:ACK) and Triangle Pacific Corporation (NASDAQ:TRIP) announced today
that they have signed a definitive merger agreement for Armstrong to acquire all
the outstanding shares of Triangle Pacific Corporation at a price of $55.50 per
share, or a total of approximately $890 million in cash on a fully diluted
basis. Triangle Pacific is the leading manufacturer of hardwood flooring
products and a substantial manufacturer of kitchen and bathroom cabinets.
Including the assumption of Triangle Pacific's net debt of about $260 million,
the total value of the transaction will be $1,150 million.
Following the combination and the completion of the pending acquisition of DLW,
Armstrong will become the world's leading manufacturer of hard surface flooring.
The transaction has been unanimously approved by the Boards of Directors of both
companies. Armstrong will commence a cash tender offer for all outstanding
Triangle Pacific shares for $55.50 per share within five business days. The
offer is contingent upon a majority of the shares on a fully diluted basis being
tendered and other customary conditions. Certain principal stockholders of
Triangle Pacific have agreed to tender their shares into the offer (representing
approximately 35% of Triangle Pacific's outstanding common stock on a fully
diluted basis). The tender will be followed by a merger in which any untendered
shares will be converted into the right to receive the same price in cash. The
agreement is not subject to any financing condition, and Armstrong has already
received bank commitments from J.P. Morgan, Chase Manhattan, and Bank of
America.
George A. Lorch, Chairman and Chief Executive Officer of Armstrong, said,
"Triangle Pacific is one of the best companies in the building materials
industry, and this acquisition will mark a major addition to Armstrong's core
flooring business. Together with the announcement just last week of our
agreement to acquire DLW, the third largest flooring manufacturer in Europe,
Triangle Pacific will make Armstrong the preeminent manufacturer of flooring
products worldwide. Importantly, both announcements reaffirm our commitment to
be a major force in the consolidating global building materials industry.
"Hardwood flooring comprises 7 percent of the U.S. flooring market and is one of
the most rapidly growing segments. Hardwood flooring is increasingly being
chosen by residential purchasers willing to spend more in order to obtain wood
flooring's beauty and durability. Triangle Pacific is clearly the leader in
this area, with its highly regarded brands, outstanding manufacturing
technology, low cost producer status, broad and innovative product line, and its
excellent reputation for value and service."
Triangle Pacific sells three types of flooring products--solid hardwood,
engineered hardwood, and laminate--which together account for approximately 72%
of its revenues. Its brands include Bruce, the leading name in hardwood
flooring, as well as Hartco, Robbins, Premier, and Traffic Zone. In total,
Triangle Pacific accounts for approximately 46% of the U.S. hardwood flooring
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<PAGE>
segment. Triangle Pacific is also a substantial manufacturer of cabinets for
kitchens and bathrooms, targeted primarily toward the relatively higher-end,
single-family and multi-family markets. Cabinets account for approximately 28%
of Triangle Pacific's revenues.
Lorch said, "Triangle Pacific has also been guided by an outstanding management
team, led by Floyd Sherman, and we are pleased that they will join the combined
company."
Mr. Sherman, current Chairman and CEO of Triangle Pacific, will play an
important role in developing and implementing the growth plan, and will become
President, Wood Flooring and Cabinet Operations at Armstrong, reporting directly
to Armstrong's Chairman and CEO.
Lorch continued, "The combination of Armstrong's and Triangle Pacific's
strengths will provide an excellent strategic platform for additional profitable
growth. Armstrong will support Triangle Pacific's future growth consistent with
their current plans. In addition, significant new growth opportunities exist in
the commercial and international markets, and we expect to capitalize on
Armstrong's existing presence in these markets. Internationally, for example,
particularly in Europe, Canada and Japan, wood generally commands a much higher
share of the flooring market than in the U.S.
"In addition to the sales opportunities, we will also be able to achieve
significant cost savings in logistics and marketing in the combined company.
Armstrong plans to invest in brand development, capacity, technology, and new
products and systems to support the growth of wood flooring around the world,"
Lorch said. While a coordinated approach to marketing wood and vinyl products
is envisioned, there are no plans to eliminate or change any brands or
distribution systems.
Floyd Sherman, Chairman of Triangle Pacific, said, "We are very pleased to have
entered into this agreement. For our shareholders, it offers excellent value
and an attractive premium for their shares. For Triangle employees, customers
and suppliers, it provides a strong future as part of the preeminent name in the
flooring industry, under a management that has been squarely focused on how to
make their company efficient, innovative and customer-driven."
Armstrong expects that the two recently announced acquisitions, Triangle Pacific
and DLW, will be modestly dilutive to earnings in 1998, but accretive beginning
in 1999. The company also expects to earn in excess of its cost of capital on
both investments.
"We continue to transform Armstrong into a growth and results-oriented,
financially strong and highly efficient manufacturer and marketer of name
brands, offering around the globe the kinds of products and values that
customers want," Lorch concluded. Upon completion of the two transactions,
Armstrong will have total flooring sales of $2.1 billion, with about 57% in
vinyl, 23% in hardwood, 14% in European carpet, and 6% in linoleum. Consolidated
sales will be approximately $3.5 billion with about 60% in floor products.
In fiscal year 1997, Triangle Pacific had total revenues of $652.9 million.
Headquartered in Dallas, Texas, it has a total of 5,400 employees. Flooring
products accounted for $469.1 million of 1997 sales, and have grown at a
compounded annual rate of 26% since 1991. Net income in 1997 of $31.8 million
has grown at a compounded annual rate of 19% since 1994. Triangle Pacific
manufactures all of its flooring products in the U.S. in 15 plants in 11
geographically diverse locations, except for its Coastal Woodlands branded
products which are imported from Indonesia, Traffic Zone laminate products which
are imported from Germany, and a very limited amount of teak parquet imported
from Thailand. Imported products accounted for around 3% of total units sold in
1997.
Triangle Pacific's kitchen and bathroom cabinets are manufactured in
approximately 100 different styles and colors and marketed under the Bruce and
IXL brand names. The company operates four cabinet manufacturing plants
throughout the U.S. Sales in 1997 were $183.8 million, for a U.S. market share
of approximately 3%.
J.P. Morgan acted as financial advisor for Armstrong and Salomon Smith Barney
acted as financial advisor to Triangle Pacific in this transaction.
Armstrong World Industries is a global leader in the design, innovation and
manufacture of interior finishing solutions, most notably floors and ceilings.
It is also a world leader in the innovation and manufacture of pipe insulation,
gasket material and textile machine parts. Based in Lancaster, PA, Armstrong
has approximately 10,600 employees worldwide. In 1997 its net sales totaled
$2.2 billion.
Note: Safe Harbor Statement under the Private Securities Litigation Reform Act
- -----
of 1995:
2 of 3
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PAGE>
This press release contains forward-looking statements regarding Armstrong World
Industries, Inc.'s results and trends in its business. These statements are
based largely on the company's expectations and are subject to a number of risks
and uncertainties, many of which are beyond the company's control. Such risks
include the successful consummation of the tender offer, managements' ability to
integrate the company's flooring operations with Triangle Pacific, the company's
ability to achieve the anticipated economies of scale and profitability margins
and employee satisfaction with the transactions, among others. These risks and
uncertainties could cause actual results to differ materially from those in the
forward-looking statements. We also refer to the company's filings with the
Securities and Exchange Commission, which include descriptions of additional
risks and uncertainties.
SOURCE Armstrong World Industries
3 of 3
<PAGE>
EXHIBIT 99.(N)
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE
- ---------------------------------------------x
:
PINNA YOSEVITZ, :
:
Plaintiff, :
:
v. :
:
FLOYD F. SHERMAN, M. JOSEPH McHUGH, :
BRUCE A. KARSH, DAVID R. HENKEL, KAREN :
GORDON MILLS, CARSON S. McKISSICK, :
B. WILLIAM BONNIVIER, CHARLES M. HANSEN :
JR,, JACK L. MCDONALD, TRIANGLE PACIFIC :
CORP., and ARMSTRONG WORLD INDUSTRIES, INC. :
:
Defendants. :
- ---------------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of Triangle
Pacific Corp. ("Triangle" or the "Company") since prior to the transaction
herein complained of and continuously to date.
2. Triangle is a corporation duly organized and existing under the
laws of the State of Delaware. The Company makes hardwood flooring products and
kitchen and bathroom cabinets at 15 plants, primarily in the United States. The
Company maintains its headquarters at 16803 Dallas Parkway, Dallas, Texas.
3. Armstrong World Industries, Inc. ("Armstrong") is a Pennsylvania
corporation based in Lancaster, Pennsylvania and is North America's largest
maker of floor coverings. It
<PAGE>
manufactures vinyl flooring, ceramic tile and other building products.
4. Defendant Floyd F. Sherman is Chairman of the Board, Chief
Executive Officer and a Director of Triangle.
5. Defendant M. Joseph McHugh is President, Chief Operating Officer
and Director of Triangle.
6. Defendants Bruce A. Karsh, David R. Henkel, Karen Gordon Mills,
Carson R. McKissick, B. William Bonnivier, Charles M. Hansen, and Jack L.
McDonald are Directors of Triangle.
7. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of Triangle and owe them the highest
obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
------------------------
8. Plaintiff brings this action on her own behalf and as a class
action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of
all common stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
9. This action is properly maintained as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of March 23, 1998, there were approximately 14,749,845 shares
of Triangle common stock
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<PAGE>
outstanding owned by hundreds, if not thousands, of record and beneficial,
holders;
(b) There are questions of law and fact which are common to the
class including, inter alia, the following: (i) whether defendants have breached
----- ----
their fiduciary duty and other common law duties owed by them to plaintiff and
the members of the class; and (ii) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by defendants.
(c) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
(d) Defendants have acted in a manner which affected plaintiff and
all members of the class alike, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the class as a whole.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would, as a practical matter, be dispositive of the
interests of other members or substantially impair or impede their ability to
protect their interests.
3
<PAGE>
SUBSTANTIVE ALLEGATIONS
-----------------------
10. On June 15, 1998, Triangle and Armstrong announced that they had
entered into a definitive merger agreement whereby Armstrong will acquire
Triangle in a transaction valued at approximately $1.15 billion. Under the
terms of the transaction as presently proposed, Armstrong will commence a cash
tender offer for all of Triangle's outstanding common shares at a price of
$55.50 per share. Armstrong will also assume $260 million of Triangle debt.
11. By entering into the agreement with Armstrong, the Triangle Board
has initiated a process to sell the Company which imposes heightened fiduciary
responsibilities and requires enhanced scrutiny by the Court. However, the
terms of the proposed transaction were not the result of an auction process or
active market check; they were arrived at without a full and thorough
investigation by the Individual Defendants; and they are intrinsically unfair
and inadequate from the standpoint of the Triangle shareholders.
12. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of Triangle's
highest transactional value.
13. The Individual Defendants have violated the fiduciary duties owed
to the public shareholders of Triangle. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the Company
and invite other
4
<PAGE>
bidders, a defendants' failure to provide a market check demonstrate a clear
absence of the exercise of due care and of loyalty to Triangle's public
shareholders.
14. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of Triangle's net worth
as a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an
attempt to obtain the best value for Triangle's public shareholders.
15. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Armstrong without making the requisite effort to obtain
the best offer possible.
16. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of Triangle's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of Triangle common stock.
17. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Triangle's common stock is materially in
excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company;
5
<PAGE>
(b) The merger price is not the result of an appropriate consideration
of the value of Triangle because the Triangle Board approved the proposed merger
without undertaking steps to accurately ascertain Triangle's value through open
bidding or at least a "market check mechanism"; and
(c) By entering into the agreement with Armstrong, the Individual
Defendants have allowed the price of Triangle stock to be capped, thereby
depriving plaintiff and the Class of the opportunity to realize any increase in
the value of Triangle stock.
18. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
19. Plaintiff and other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a class
action and certifying plaintiff as the representative of the
Class;
b. Preliminary and permanently enjoining the defendants and their
counsel, agents, employees and all persons acting under, in
concert with, or for them, from proceeding with, consummating, or
closing the proposed transaction;
6
<PAGE>
c. In the event that the proposed transaction is consummated,
rescinding it and setting it aside, or awarding rescissory
damages to the Class;
d. Awarding compensatory damages against defendants, individually
and severally, in an amount to be determined at trial, together
with pre-judgment and post-judgment interest at the maximum rate
allowable by law, arising from the proposed transaction;
e. Awarding plaintiff its costs and disbursements and reasonable
allowances for fees of plaintiff's counsel and experts and
reimbursement of expenses; and
f. Granting plaintiff and the Class such other and further relief as
the Court may deem just and proper.
Dated: June 15, 1998
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
/s/ Norman M. Monhait
By: ____________________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
7
