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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
SUN COAST INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
SUN COAST INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE (AND STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
866670 20 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
EDDIE LESOK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUN COAST INDUSTRIES, INC.
2700 SOUTH WESTMORELAND
DALLAS, TEXAS 75233
(214) 373-7864
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF
OF THE PERSON(S) FILING STATEMENT)
COPIES TO:
JOE DANNENMAIER
DAVID L. EMMONS
THOMPSON & KNIGHT, P.C.
1700 PACIFIC AVENUE
SUITE 3300
DALLAS, TEXAS 75201
(214) 969-1700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Sun Coast Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 2700 South Westmoreland, Dallas, Texas 75233. The
title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the common stock, par value $.01 per share (the "Common Stock"), of
the Company and the associated Stock Purchase Rights (the "Rights") to
purchase shares of Common Stock, issued pursuant to the Rights Agreement,
dated as of June 6, 1995, as amended (the "Rights Agreement"), between the
Company and American Stock Transfer & Trust Company, as Rights Agent. Unless
the context otherwise requires, all references herein to the Common Stock
shall include the associated Rights.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated February 3, 1998 (the "Schedule 14D-1") of
Kerr Group, Inc., a Delaware corporation ("Kerr" or "Parent"), and its wholly
owned subsidiary, Saffron Acquisition Corp., a Delaware corporation (the
"Purchaser"), to purchase all of the outstanding shares of Common Stock (the
"Shares") at a price of $10.75 per share, net to the seller, in cash upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
February 3, 1998 (the "Offer to Purchase") and the related Letters of
Transmittal and any supplement thereto (which together constitute the
"Offer"). The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of January 28, 1998 (the "Merger Agreement"), among the Company, Kerr
and the Purchaser.
According to the Schedule 14D-1, the address of the principal executive
offices of Kerr and the Purchaser is 500 New Holland Avenue, Lancaster,
Pennsylvania 17602.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) (i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and
executive officers are described in Schedule II hereto and are incorporated
herein by reference. Except as described herein (including in Schedule II
hereto), to the knowledge of the Company, as of the date hereof there exists
no material contract, agreement, arrangement or understanding and no actual or
potential conflict of interest between the Company or its affiliates and (i)
the Company's executive officers, directors or affiliates, or (ii) the
Purchaser or the Purchaser's executive officers, directors or affiliates.
(ii) THE MERGER AGREEMENT.
The following is a summary of certain portions of the Merger Agreement. The
summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Securities and Exchange Commission (the "Commission") as Exhibit 1 to
this Statement. Capitalized terms not otherwise defined below shall have the
meaning set forth 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 the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The obligation of the Purchaser to
accept for payment and pay for Shares tendered is subject to there being
tendered, and not withdrawn prior to the expiration of the Offer, that number
of Shares which represents at least a majority of the Shares then outstanding
on a fully diluted basis (after giving effect to the conversion or exercise of
all outstanding options, warrants and other rights and securities exercisable
or convertible into Shares) (the "Minimum Condition"), and to the satisfaction
of the other conditions set forth in Annex I to the Merger Agreement described
in the following paragraph. The Merger Agreement provides that the Purchaser
may not amend or waive the Minimum Condition, decrease the Offer
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Price or decrease the number of Shares sought or otherwise amend any other
condition of the Offer in any manner adverse to the holders of the Shares
without the prior written consent of the Company; provided, that the Purchaser
may, in its sole discretion, extend the expiration date of the Offer for a
period not to exceed five (5) business days.
Conditions of the Offer. Notwithstanding any other provisions of the Offer,
and in addition to (and not in limitation of) the Purchaser's rights to extend
and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement). 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 or amend the Offer as to any
Shares not then paid for, if (i) any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
has not expired or terminated, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date of the Merger Agreement
and before the time of acceptance for payment for any such Shares, any of the
following events exists:
(a) there shall be threatened or pending any suit, action or proceeding
by any Governmental Entity against the Purchaser, Parent, the Company or
any Subsidiary of the Company (i) seeking to prohibit or impose any
material limitations on Parent's or the Purchaser's ownership or operation
(or that of any of their respective Subsidiaries or affiliates) of all or a
material portion of their or the Company's businesses or assets, or to
compel Parent or the Purchaser or their respective Subsidiaries and
affiliates to dispose of or hold separate any material portion of the
business or assets of the Company or Parent and their respective
Subsidiaries, in each case taken as a whole, (ii) seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company, Parent or the Purchaser
any damages that are material in relation to the Company and its
Subsidiaries taken as a whole, (iii) seeking to impose material limitations
on the ability of the Purchaser, or render the Purchaser unable, to accept
for payment, pay for or purchase some or all of the Shares pursuant to the
Offer and the Merger, (iv) seeking to impose material limitations on the
ability of Purchaser or Parent effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
the Shares purchased by it on all matters properly presented to the
Company's shareholders, (v) seeking to impose circumstances under which the
purchase or payment for some or all of the Shares pursuant to the Offer and
the Merger could have a material adverse effect on Purchaser or Parent, or
(vi) which otherwise is reasonably likely to have a Company Material
Adverse Effect (as used in this Offer to Purchase, "Company Material
Adverse Effect" means any event, change in or effect on the business of the
Company or its Subsidiaries, taken as a whole, that is or could reasonably
be expected to be materially adverse to (i) the business, operations,
properties (including intangible properties), condition (financial or
otherwise), results of operations, assets, liabilities, regulatory status
or prospects of the Company and its Subsidiaries, taken as a whole, or (ii)
the ability of the Company to consummate any of the transactions
contemplated by the Merger Agreement or any of the related agreements, or
to perform its obligations under the Merger Agreement or the Option
Agreement);
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by
any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (vi) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ Stock Market for a period in excess
of 24 hours (excluding suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to market
conditions), (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not
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mandatory), (iii) a commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any United
States governmental authority on the extension of credit generally by banks
or other financial institutions, or (v) a change in general financial, bank
or capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans or (vi) in the case of any of the foregoing existing at the
time of the execution of the Merger Agreement, a material acceleration or
worsening thereof;
(d) since January 28, 1998, there shall have occurred any change that
constitutes a Company Material Adverse Effect;
(e) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Takeover Proposal or (ii)
the Company shall have entered into any agreement with respect to any
Superior Proposal in accordance with Section 5.3(b) of the Merger
Agreement;
(f) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and correct, in all material respects,
in each case (i) as of the date referred to in any representation or
warranty which addresses matters as of a particular date, or (ii) as to all
other representations and warranties, as of the date of the Merger
Agreement and as of the scheduled expiration of the Offer (without giving
effect to any materiality qualification or standard contained in any such
representation or warranty);
(g) the Company shall have failed to perform in all material respects any
obligation or to comply with any agreement or covenant to be performed or
complied with by it under the Merger Agreement (without giving affect to
any materiality qualification or standard contained in any such
representation or warranty);
(h) the Purchaser shall have failed to receive a certificate executed by
the President or a Vice President of the Company, dated as of the scheduled
expiration of the Offer, to the effect that the conditions set forth in
paragraphs (f) and (g) above have not occurred;
(i) all consents, permits and approvals of Governmental Authorities and
other Persons listed in Section 3.4 of the Company Disclosure Schedule and
identified with an asterisk shall not have been obtained with no material
adverse conditions attached and no material expense imposed on the Company
or any of its Subsidiaries;
(j) the transactions contemplated under the Company's agreement with
Borden Chemical, Inc. (the "Borden Agreement") shall not have been
consummated pursuant to and substantially in accordance with the terms set
forth in the Borden Agreement without waiver of a material term by any
party thereto;
(k) any Person or Group (as defined in Section 13(d)(3) of the Exchange
Act) other than Parent or the Purchaser or any of their respective
subsidiaries or affiliates shall have become the beneficial owner (as
defined in Rule 13d-3 promulgated under the Exchange Act) of more than 15%
of the outstanding Shares (either on a primary or a fully diluted basis;
provided, however, that this provision shall not apply to any Person that
beneficially owns more than 15% of the outstanding Shares on January 28,
1998; provided, further, that such Person does not further increase its
beneficial ownership beyond the number of Shares such Person beneficially
owns on January 28, 1998; or
(l) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser) and may be waived by
Parent or the Purchaser in whole or in part at any time and from time to time
in the good faith of Parent or the Purchaser, subject in each case to the
terms of the Merger Agreement. The failure by 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.
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Designation of Directors. The Merger Agreement provides that, promptly after
the purchase of Shares pursuant to the Offer (the Minimum Condition having
been satisfied), Parent shall be entitled to designate that number of
directors on the Board of Directors of the Company as will give Parent
representation proportionate to its ownership interest. To this end, the
Company has agreed to expand the size of the Board of Directors of the Company
or to seek the resignation of one or more of the current directors, as
requested by Parent. However, in the event that Parent's designees are elected
to the Board of Directors of the Company, and until the Effective Time, the
Board of Directors of the Company must include at least one director who is a
director as of the date of execution of the Merger Agreement and who may be
Steve Bartlett, James D. Ireland III, James H. Miller and Wayne Kern or
otherwise is neither an officer of the Company nor a designee, stockholder,
affiliate or associate of Parent (one or more of such directors being the
"Independent Directors"). If no Independent Directors remain, the other
directors may designate one person to fill a vacancy created by resignation of
one or more directors, who is neither an officer of the Company nor a
designee, stockholder, affiliate or associate of the Purchaser, such person so
designated being deemed an Independent Director. The Company's obligation to
appoint Parent's designees to the Board of Directors of the Company is subject
to compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Following the election of Parent's designees, any
action to amend or terminate the Merger Agreement on behalf of the Company, to
exercise or waive any of the Company's rights, benefits or remedies
thereunder, to extend the time for the performance of the Purchaser's
obligations thereunder or to take other action by the Company under the Merger
Agreement may be effected only by the action of a majority of the directors of
the Company then in office who are Independent Directors.
The Merger. The Merger Agreement provides that, at the Effective Time (as
defined below) the Purchaser will be merged with and into the Company, and the
Company will continue as the Surviving Corporation. The Merger will become
effective at the time of filing with the Secretary of State of the State of
Delaware of a Certificate of Merger, or at such later time as may be specified
in the Certificate of Merger (the "Effective Time"). The parties expect to
file the Certificate of Merger as soon as practicable following the closing of
the Merger, which will take place on the second business day after the
conditions to the parties' obligation to effect the Merger have been satisfied
or waived, unless another date is otherwise agreed.
Each Share issued and outstanding immediately prior to the Effective Time
(other than Shares with respect to which appraisal rights have been properly
exercised and Cancelled Shares (as defined below)) will be converted into the
right to receive the Offer Price. Each Share issued and outstanding
immediately prior to the Effective Time owned by Parent or the Purchaser, or
any subsidiary of the Company, Parent or the Purchaser, and each Share held in
the treasury of the Company immediately prior to the Effective Time
(collectively, the "Cancelled Shares") will be cancelled and cease to exist.
Each share of Common Stock of the Purchaser issued and outstanding immediately
prior to the Effective Time will automatically be converted into one share of
Common Stock of the Surviving Corporation.
The Merger Agreement provides that the Certificate of Incorporation and By-
laws of the Purchaser shall be the Certificate of Incorporation and By-laws of
the Surviving Corporation unless otherwise determined by the Purchaser prior
to the Effective Time; provided that such Certificate of Incorporation and By-
Laws shall be amended to incorporate the provisions of the Certificate of
Incorporation and By-Laws of the Company regarding indemnification of officers
and directors. The Merger Agreement also provides that the directors of the
Purchaser at the Effective Time will be the directors of the Surviving
Corporation and that the officers of the Company at the Effective Time will be
the officers of the Surviving Corporation.
The respective obligations of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) Parent or the Purchaser or
their affiliates shall have made or cause to be made, the Offer and shall have
purchased Shares pursuant to the Offer, unless such failure to purchase is a
result of a breach of Parent's and the Purchaser's obligations under the
Merger Agreement, (ii) the Merger Agreement shall have been approved and
adopted by the requisite vote of the holders of Shares, if required by
applicable law, in order to consummate the Merger; (iii) no statute, rule or
regulation shall have been enacted or
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promulgated by any governmental authority which prohibits the consummation of
the Merger, and there shall be no order or injunction of a court of competent
jurisdiction in effect precluding the consummation of the Merger and (iv) the
applicable waiting period under the HSR Act shall have expired or been
terminated.
Recommendation. The Company represents in the Merger Agreement that the
Board of Directors of the Company has (i) determined that each of the Merger
and the Offer is fair to the stockholders of the Company, and (ii) resolved to
recommend acceptance of the Offer and approval and adoption of the Merger
Agreement by the Company's stockholders. The recommendation of the Board of
Directors of the Company may be withdrawn, modified or amended if the Board of
Directors of the Company determines in good faith, after receipt of a written
opinion of outside legal counsel to the Company, that the exercise of the
director's fiduciary duties requires such withdrawal, amendment or
modification. The Company has agreed to use its best efforts to file a
Solicitation/Recommendation Statement of Schedule 14D-9 containing such
recommendations with the Commission and to mail such Schedule 14D-9 to the
stockholders of the Company contemporaneously with the commencement of the
Offer.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company
has agreed that, except (i) as expressly contemplated by the Merger Agreement,
(ii) as set forth in Section 5.2 of the Company Disclosure Schedule, (iii) as
agreed to in writing by Parent, (iv) for the consummation of the Borden
Disposition--the sale of substantially all the assets of the Company's
chemical division to Borden Chemical, Inc. pursuant to the Borden Agreement--
pursuant to and in accordance with the terms of the Borden Agreement, or (v)
pursuant to Section 2.4 of the Merger Agreement, after the date of execution
of the Merger Agreement, and prior to the time the designees of the Purchaser
constitute a majority of the Company's Board of Directors (the "Appointment
Date"), the business of the Company will be conducted only in the ordinary and
usual course and to the extent consistent therewith, the Company will use its
best reasonable efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees,
creditors and business partners, and (a) the Company will not, directly or
indirectly, (i) issue, sell, transfer or pledge or agree to sell, transfer or
pledge any treasury stock of the Company beneficially owned by it, except upon
the exercise of the warrant issued pursuant to the terms of the Stock
Subscription Warrant dated January 9, 1988, among the Company, Pru Supply
Capital Assets, Inc. (assigned to The Prudential Insurance Company of America)
(the "Stock Subscription Warrant"), Options or other rights to purchase shares
of Common Stock pursuant to the Stock Plans and the Stock Subscription Warrant
outstanding on the date of the Merger Agreement; (ii) amend its Articles of
Incorporation or By-Laws or similar organizational documents; or (iii) split,
combine or reclassify the outstanding Shares of the Company; and (b) the
Company shall not (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock; (ii) issue, sell, pledge, dispose of or encumber any additional shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its Subsidiaries, other than Shares
reserved for issuance on the date of the Merger Agreement pursuant to the
exercise of the Stock Subscription Warrant or Options outstanding on the date
of the Merger Agreement; (iii) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any assets, other than in the ordinary and
usual course of business and consistent with past practice, or incur or modify
any indebtedness or other liability, other than in the ordinary and usual
course of business and consistent with past practice; (iv) redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock; (v) make
any change in the compensation payable or to become payable by the Company to
any of its officers, directors, employees, agents or consultants (other than
in ordinary course) or adopt any new or amend or otherwise increase or
accelerate the payment or vesting of the amounts payable or to become payable
under any existing bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement; (vi)
enter or amend any employment or severance agreement with or, except in
accordance with the existing written policies of the Company, grant any
severance or termination pay to, any officer, director or employee of the
Company; (vii) permit any insurance policy naming it as a beneficiary or a
loss payable payee to be cancelled or terminated without notice to Parent
except in the ordinary course of business and consistent with past practice;
(viii) modify, amend or terminate any of its material contracts or waive,
release or assign any material rights or claims, except in the ordinary course
of business and consistent with past practice; (ix) make any loans, advances
or capital
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contributions to or investments in any other person except in the ordinary
course of business and consistent with past practice; incur or assume any
long-term debt, or except in the ordinary course of business, incur or assume
any short-term indebtedness in amounts not consistent with past practice; or
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
except in the ordinary course of business and consistent with past practice;
(x) pay, discharge or satisfy any claims or liabilities (whether absolute,
accrued, asserted or unasserted, contingent or otherwise) other than in the
ordinary course of business and consistent with past practices or reflected or
reserved against in the consolidated financial statements of the Company; (xi)
adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company (other
than the Merger); (xii) take or agree to take, any action that would or is
reasonably likely to result in any of the conditions to the Merger not being
satisfied, or would make any representation or warranty of the Company
contained in the Merger Agreement inaccurate in any respect, at or prior to
the Effective Time, or that would materially impair the Company's ability to
consummate the Merger or materially delay such consummation; (xiii) change any
of the accounting methods used by it unless required by generally accepted
accounting principles ("GAAP"), make any material tax election, change any
material tax election already made, adopt any material tax accounting method,
change any material tax accounting method unless required by GAAP, enter into
any closing agreement, settle any tax claim or assessment or consent to any
tax claim or assessment or any waiver of the statute of limitations for any
such claim or assessment; or (xiv) enter into any agreement with respect to
the foregoing or take any action with the intent of causing any of the
conditions to the Offer not to be satisfied.
Company Stockholder Meeting. If required by applicable law, the Company has
agreed to: (i) hold a special meeting of stockholders (the "Special Meeting")
as soon as practicable following acceptance for payment of Shares pursuant to
the Offer for the purpose of taking action upon the Merger Agreement; (ii)
prepare and file with the Commission a preliminary proxy statement or
information statement relating to the Merger Agreement and use its best
efforts to (A) cause a definitive proxy statement to be mailed to stockholders
following acceptance for payment of Shares pursuant to the Offer and (B)
obtain the necessary approvals of the Merger Agreement by stockholders. Parent
and the Purchaser have agreed to vote all Shares owned by them in favor of
approval of the Merger Agreement at any such meeting. However, in the event
that Parent or the Purchaser shall acquire at least 90 percent of the
outstanding Shares, the parties will, at the request of Parent, take action to
cause the Merger to become effective as soon as practicable after such
acquisition without a meeting of stockholders of the Company in accordance
with the Delaware General Corporation Law.
Stock Options, Stock Appreciation Rights and Stock Purchase Plan. The Merger
Agreement provides that, at the Effective Time, the Company will take all
actions necessary to provide that (i) each then-outstanding option to purchase
Shares (the "Options") and each outstanding Stock Appreciation Right (the
"SARs") granted under any of the Company's 1994 Director Stock Option Plan,
1994 Long-Term Incentive Plan, 1993 Incentive and Non-Statutory Stock Option
Plan, 1987 Incentive Stock Option Plan, 1984 Incentive Stock Option Plan and
any other stock-based incentive plan or agreement of the Company
(collectively, the "Stock Plans"), whether or not then exercisable or vested,
shall be cancelled and (ii) in consideration of such cancellation, the holders
of such Options and SARs shall receive for each Share subject to such Option
or SAR an amount (subject to any applicable withholding tax) in cash equal to
the product of (A) the excess, if any, of the Offer Price over the per Share
exercise price of such Option or the per Share base-price of such SAR, as
applicable, and (B) the number of Shares subject to such Option or SAR whether
or not vested. The Company will use all reasonable efforts to obtain all
necessary consents or releases from holders of the Options or SAR to effect
the foregoing. The surrender of an Option or SAR to the Company will be deemed
a release of any and all rights a holder had or may have had in respect of
such Option or SAR. Except as may be otherwise agreed to by Parent or the
Purchaser and the Company, the Company (i) shall cause the Stock Plans to
terminate as of the Effective Time, and (ii) following the Effective Time,
shall take all actions necessary to ensure that no holder of Options or SARs
or any participant in the Stock Plans shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof. The Company will take all actions necessary to provide
that at or immediately prior to the Effective Time, (i) each then outstanding
option or right to acquire Shares under the Company's Employee Stock Purchase
Plan (the "Stock Purchase Plan") will automatically be
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exercised or deemed exercised and (ii) in lieu of the issuance of
certificates, each option or right holder shall receive an amount in cash
(subject to any applicable withholding tax) equal to the product of (x) the
number of Shares otherwise issuable upon such exercise and (y) the Merger
Consideration. The Company shall use all reasonable efforts to effectuate the
foregoing, including without limitation amending the Stock Purchase Plan and
obtaining any necessary consents from holders of such options or rights. The
Company (i) will not permit the commencement of any new offering period under
the Stock Purchase Plan following the date of the Merger Agreement, (ii) will
not permit any optionee or right holder to increase his or her rate of
contributions under the Stock Purchase Plan following the date of the Merger
Agreement, (iii) will terminate the Stock Purchase Plan as of the Effective
Time, and (iv) will take any other actions necessary to provide that as of the
Effective Time no holder of options or rights under the Stock Purchase Plan
will have any right to receive shares of common stock of the Surviving
Corporation upon exercise of any such option or right.
No Solicitation. In the Merger Agreement, the Company has agreed to notify
the Purchaser immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated
or continued with the Company or its representatives, in each case in
connection with any Acquisition Proposal (as defined below) or the possibility
or consideration of making an Acquisition Proposal ("Acquisition Proposal
Interest") indicating, in connection with such notice, the name of the Person
indicating such Acquisition Proposal Interest and the terms and conditions of
any proposals or offers. The Company has agreed that it will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted prior to the date of the Merger
Agreement with respect to any Acquisition Proposal Interest and that it will
keep Parent informed, on a current basis, of the status and terms of any
Acquisition Proposal Interest. An "Acquisition Proposal" means any tender or
exchange offer involving the Company, any proposal for a merger, consolidation
or other business combination involving the Company, any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the business or assets of, the Company (other than immaterial or
insubstantial assets or inventory in the ordinary course of business or assets
held for sale), any proposal or offer with respect to the Company or any
proposal or offer with respect to any other transaction similar to any of the
foregoing with respect to the Company other than pursuant to the transactions
effected pursuant to the Merger Agreement.
In the Merger Agreement, the Company has agreed that the Company will not
(and that it will use its reasonable best efforts to ensure that its officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not), directly or indirectly (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, (ii)
enter into any agreement with respect to any Acquisition Proposal, or (iii) in
the event of an unsolicited written Acquisition Proposal for the Company
engage in negotiations or discussion with, or provide information or data to,
any Person (other than Parent, any of its affiliates or representatives and
except for information which has been previously publicly disseminated by the
Company) relating to any Acquisition Proposal, except that the Merger
Agreement does not prohibit the Company and the Company's Board of Directors
from (i) taking and disclosing to the Company's stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure
to the Company's stockholders as, in the good faith judgment of the Board,
only after receiving advice from outside counsel, that the failure to make
such disclosures is reasonably likely to cause the Company's Board of
Directors to violate its fiduciary duties to the Company's stockholders under
applicable law.
Notwithstanding the foregoing, prior to the acceptance of Shares pursuant to
the Offer, the Company may furnish information concerning its business to any
Person pursuant to confidentiality agreements with "standstill" provisions no
less favorable to the Company than those contained in the Confidentiality
Agreement, dated November 14, 1997 entered into between Fremont Partners and
the Company and negotiate an Acquisition Proposal if (a) such Person submitted
on an unsolicited basis a bona fide written proposal to the Company relating
to any such transaction which the Board determines in good faith, after
receiving advice from a nationally recognized investment banking firm,
represents a superior transaction to the Offer and the Merger and which is not
conditioned upon obtaining financing and (b) in the opinion of the Company's
Board of Directors, only after receipt of advice from outside legal counsel to
the Company, the failure to provide such information
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or access or to engage in such discussions or negotiations is reasonably
likely to cause the Board of Directors to violate its fiduciary duties to the
Company's stockholders under applicable law (an Acquisition Proposal which
satisfies clauses (a) and (b), a "Superior Proposal"). Within two business
days following receipt by the Company of a Superior Proposal, the Company must
notify Parent of the receipt thereof. The Company must then provide Parent any
material nonpublic information regarding the Company provided to the other
party which was not provided to Parent. At any time after two business days
following notification to Parent of the Company's intent to do so, the
Company's Board of Directors may terminate the Merger Agreement pursuant to
its terms and enter into an agreement with respect to a Superior Proposal,
provided that the Company, concurrently with entering into such agreement,
must pay or cause to be paid, the Termination Fee (as defined below), plus any
amount payable at the time for reimbursement of expenses. Except as permitted
under the terms of the Merger Agreement, neither the Company's Board of
Directors nor any committee thereof shall (i) approve or recommend, or propose
to approve or recommend, any Acquisition Proposal, (ii) enter into any
agreement with respect to any Acquisition Proposal or (iii) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or the
Purchaser, the approval or recommendation of the Company's Board of Directors,
or any such committee thereof, of the Offer, the Merger Agreement or the
Merger.
Indemnification and Insurance. Pursuant to the Merger Agreement, for a
period of six years after the Effective Time, the Certificate of Incorporation
and By-Laws of the Surviving Corporation shall not be amended, repealed or
otherwise modified in any manner that would adversely affect the rights
thereunder of individuals who as of the date of the Merger Agreement were
directors, officers, employees, fiduciaries, agents or otherwise entitled to
indemnification under the Certificate of Incorporation, By-Laws or
indemnification agreements (the "Indemnified Parties"). The Merger Agreement
provides that the Company shall, to the fullest extent permitted under
Delaware law and regardless of whether the Merger becomes effective,
indemnify, defend and hold harmless, and after the Effective Time, Parent, the
Purchaser and the Surviving Corporation shall jointly and severally, to the
fullest extent permitted under Delaware law, indemnify and hold harmless, each
Indemnified Party against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit
proceeding or investigation, including without limitation, liabilities arising
out of the Merger. The Merger Agreement also provides that the Surviving
Corporation will maintain the Company's existing officers' and directors'
liability insurance ("D&O Insurance") for a period of not less than six years
after the Effective Time, provided, that if the aggregate annual premiums for
such D&O Insurance at any time shall exceed 200% of the per annum rate of
premium currently paid by the Company for such insurance as in effect on the
date of the Merger Agreement, then Parent will cause the Company or the
Surviving Corporation (if after the Effective Time) to provide the maximum
coverage then available at an annual premium equal to 200% of such rate.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parities thereto, including
representations by the Company as to, among other things, corporate existence
and good standing, organization, capitalization, corporate authorization,
financial statements, public filings, conduct of business, employee benefit
plans, intellectual property, employment matters, compliance with laws, tax
matters, litigation, environmental matters, material contracts, potential
conflicts of interest, brokers' fees, real property, insurance, accounts
receivable and inventory, vote required to approve the Merger Agreement,
undisclosed liabilities, information in the Proxy Statement and the absence of
any material adverse effect on the Company since June 30, 1997. In addition,
the Company has represented that, subject to certain exceptions, no material
licensor, vendor, supplier, licensee or customer of the Company has cancelled
or otherwise adversely modified its relationship with the Company. In
addition, Parent and the Purchaser represented as to, among other things,
corporate existence and good standing, corporate authorization, consents and
approvals and the availability of funds to Purchaser sufficient to enable it
to purchase the Shares.
Termination. The Merger Agreement may be terminated and the transactions
contemplated therein may be abandoned at any time before the Effective Time,
whether before or after stockholder approval: (i) by mutual written consent of
Parent and the Company; (ii) by Parent if the Offer shall have expired or been
terminated without any Shares being purchased thereunder by Purchaser as a
result of the occurrence of any of the events set forth in Annex I to the
Merger Agreement; (iii) by either Parent or the Company if a court of
competent
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jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties thereto shall use their best
efforts to lift), in each case permanently restraining, enjoining, or
otherwise prohibiting the transactions contemplated by the Merger Agreement;
(iv) by Parent if, without any material breach by Parent or the Purchaser of
its obligations under the Merger Agreement, the purchase of Shares pursuant to
the Offer shall not have occurred on or before 120 days from the date of the
Merger Agreement; (v) by the Company if, without any material breach by the
Company of its obligations under the Merger Agreement, the purchase of Shares
pursuant to the Offer shall not have occurred on or before 120 days from the
date of the Merger Agreement; (vi) by the Company (A) if there shall be a
material breach of any of Parent's of the Purchaser's representations,
warranties or covenants thereunder, which breach cannot be or has not been
cured within ten days of the receipt of written notice thereof or (B) to allow
the Company to enter into an agreement in accordance with Section 5.3(b) of
the Merger Agreement (regarding a Superior Proposal); provided that the
Company has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the Termination
Fee, plus any amounts then due as a reimbursement of expenses; (vii) by
Parent, if prior to the purchase of Shares pursuant to the Offer, the Company
shall have breached any representation, warranty or covenant or other
agreement contained in the Merger Agreement, which breach (A) would give rise
to the failure of a condition set forth in paragraph (f) or (g) of Annex I to
the Merger Agreement and (B) cannot be or has not been cured within ten days
of the receipt of written notice thereof; (viii) by Parent, at any time prior
to the purchase of the Shares pursuant to the Offer, if (A) the Board of
Directors of the Company shall withdraw, modify, or change its recommendation
or approval in respect of the Merger Agreement of the Offer in a manner
adverse to the Purchaser, (B) the Board of Directors of the Company shall have
recommended any proposal other than by Parent or the Purchaser in respect of
an Acquisition Proposal, (C) the Company shall have exercised a right with
respect to an Acquisition Proposal referenced in Section 5.3(b) of the Merger
Agreement (regarding providing information to or negotiating with a Person
regarding an Acquisition Proposal) and shall, directly or through its
representatives, continue discussions with any third party concerning an
Acquisition Proposal for more than forty business days after the date or
receipt of such Acquisition Proposal, (D) an Acquisition Proposal that is
publicly disclosed shall have been commenced, publicly proposed or
communicated to the Company which contains a proposal as to price (without
regard to whether such proposal specifies a specific price or a range or
potential prices) and the Company shall not have rejected such proposal within
forty business days of its receipt of, if sooner, the date its existence first
becomes publicly disclosed, or (E) any Person or group (as defined in Section
13(d)(3) of the of the Exchange Act) other than Parent or the Purchaser or any
of their respective subsidiaries or affiliates shall have become the
beneficial owner of more than 15% of the outstanding Shares (either on a
primary or a fully diluted basis); provided, however, that this provision
shall not apply to any Person that owns more than 15% of the outstanding
Shares on the date of the Merger Agreement; provided, further, that such
Person does not further increase its beneficial ownership beyond the number of
Shares such Person beneficially owns on the date of the Merger Agreement.
Termination Fee and Expenses. If (i) Parent shall have terminated the Merger
Agreement pursuant to Section 8.1 (h) of the Merger Agreement (described in
clause (viii) in the preceding paragraph), (ii) Parent shall have terminated
the Merger Agreement pursuant to Section 8.1 (g) of the Merger Agreement
(described in clause (vii) in the preceding paragraph) and within twelve
months following the date of any such termination an Acquisition Proposal
shall have been consummated or (iii) the Company shall have terminated the
Merger Agreement pursuant to Section 8.1 (f) (ii) of the Merger Agreement
(described in clause (vi) of the preceding paragraph), then in either such
case the Company shall pay simultaneously with such termination, if pursuant
to Section 8.1 (f) (ii) of the Merger Agreement, and promptly, but in no event
later than two business days after the date of such termination or event if
pursuant to Section 8.1 (h) or 8.1 (g), to Parent, a termination fee (the
"Termination Fee") of $2.0 million plus an amount, not in excess of $1.5
million equal to the Purchaser's actual and reasonably documented reasonable
out-of-pocket expenses incurred by Parent and the Purchaser in connection with
the Offer, the Merger, the Merger Agreement and the consummation of the
transactions contemplated thereby.
Fees and Expenses. Except as set forth in Section 8.2(b) of the Merger
Agreement with respect to the payment of fees and the reimbursement of
expenses as described in the preceding paragraph, the Merger
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Agreement provides that all fees, costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by the Merger
Agreement shall be paid by the party incurring such fees, costs and expenses.
Amendments and Modifications. Subject to applicable law, the Merger
Agreement may be amended, modified or supplemented by a written agreement of
Parent, the Purchaser and the Company, provided, that after the approval of
the Merger Agreement by the stockholders of the Company, no such amendment,
modification or supplement shall reduce or change the consideration to be
received by the Company's stockholders in the Merger.
(iii) OPTION AGREEMENT.
The following is a summary of certain provisions of the Option Agreement.
The summary is qualified in its entirety by reference to the Option Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as Exhibit 2 to this Statement.
As a condition and inducement to Parent and the Purchaser to enter into the
Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Parent and the Company entered into a Company Option Agreement (the
"Option Agreement"), dated as of January 28, 1998, pursuant to which, among
other things, the Company has granted Parent an irrevocable option to purchase
up to 500,000 newly issued shares of Common Stock (approximately 10.8% of the
Common Stock on a fully diluted basis) at $10.75 per share (the "Option
Shares"). The Option can be exercised by the Parent (or its designee) under
the following circumstances: (a) any corporation, partnership, individual,
trust, unincorporated association, or other entity or "person" (as defined in
section 13(d)(3) of the Exchange Act) other than Parent or any of its
affiliates (i) commences a bona fide tender offer or exchange offer for any
shares of Common Stock, the consummation of which would result in beneficial
ownership by such third party (together with its affiliates and associates) of
15% or more of the then outstanding Common Stock (either on a primary or fully
diluted basis); (ii) acquires beneficial ownership of 15% of the Common Stock
(either on a primary or fully diluted basis); (iii) solicits proxies in a
"solicitation" subject to proxy rules under the Exchange Act, executes any
written consent or become a "participant" in any "solicitation" (as defined in
Regulation 14A under the Exchange Act), in each case with respect to the
Common Stock, or (b) any of the termination events described in Section 8.1(g)
or (h) of the Merger Agreement that would allow Parent to terminate the Merger
Agreement has occurred (but without the necessity of Parent having terminated
the Merger Agreement).
In addition, the Option Agreement provides that in the event of any change
in Common Stock or in the number of outstanding shares of Common Stock by
reason of a stock dividend, split up, recapitalization, combination, exchange
of shares or similar transaction or any other change in the corporate or
capital structure of the Company (including, but not limited to, the
declaration or payment of an extraordinary dividend of cash, securities or
other property), the type and number of Option Shares to be issued by the
Company upon exercise of the Option shall be adjusted appropriately, and
proper provision made in the agreements governing such transaction so that
Parent will receive upon exercise of the Option the number and class of shares
or other securities or property that Parent would have received in respect to
the Common Stock if the Option had been exercised immediately prior to such
event, or the record date therefor, as applicable. If the Company enters into
an agreement (i) to consolidate with or merge into any person, other than
Parent or one of its subsidiaries, and is not the continuing or surviving
corporation, (ii) to permit any person, other than Parent or one of its
subsidiaries, to merge into the Company, and the Company is the continuing or
surviving corporation, but in connection with such merger, the then
outstanding shares of Common Stock are changed into or exchanged for stock or
other securities of the Company or any other person or cash or any other
property, or the then outstanding shares of Common Stock after such merger
represent less than 50% of the surviving corporation or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Parent, or one of its subsidiaries, then, in each case, proper provision
must be made in such governing agreements so that Parent will receive upon
exercise of the Option the number and class of shares or other securities or
property that Parent would have received in respect of any Common Stock if the
Option had been exercised immediately prior to such transaction.
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The Option Agreement terminates, and the Option expires, on the earlier of
(i) the Effective Time and (ii) to the extent that a notice to exercise the
Option has not theretofore been given by Parent, six months after termination
of the Merger Agreement.
(iv)STOCKHOLDER AGREEMENT.
The following is a summary of certain provisions of the Stockholder
Agreement. The summary is qualified in its entirety by reference to the
Stockholder Agreement which is incorporated herein by reference and a copy of
which has been filed with the Commission as Exhibit 3 to this Statement.
As a condition and inducement to Parent and the Purchaser to enter into the
Merger Agreement and to incur the liabilities therein, James M. Hoak, Jr.
("Hoak" or the "Stockholder"), who has voting power and dispositive power with
respect to approximately 10.6% of the issued and outstanding Shares,
concurrently with the execution and delivery of the Merger Agreement entered
into a Stockholder Agreement (the "Stockholder Agreement"), dated as of
January 28, 1998, with Parent and the Purchaser. In the Stockholder Agreement,
the Stockholder represented that he owns approximately 438,000 Shares.
In the Stockholder Agreement, the Stockholder agrees that he will tender
promptly in the Offer and that he will not withdraw any Shares so tendered.
The Purchaser agrees to purchase all of the Shares so tendered at $10.75 per
Share or such higher price per Share as may be offered by the Purchaser in the
Offer, provided that the Purchaser's obligation to accept and pay for the
Shares in the Offer is subject to all the terms and conditions of the Offer
set forth in the Merger Agreement and Annex I thereto.
Pursuant to the Stockholder Agreement, the Stockholder has granted to the
Parent during the term of the Merger Agreement an irrevocable proxy to vote
his shares, or grant a consent or approval in respect of such Shares, in
connection with any meeting of the stockholders of the Company (i) in favor of
the Merger and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction such as a merger, reorganization or liquidation
involving the Company and a third party or any other proposal by a third party
to acquire the Company.
During the term of the Stockholder Agreement, the Stockholder has agreed
that he will not (subject to certain exceptions) (i) transfer, or enter into
any contract, option, agreement or other understanding with respect to the
transfer of, his Shares or any interest therein, (ii) except as provided in
the Stockholder Agreement, grant any proxy, power of attorney or other
authorization or consent in or with respect to his Shares, or (iii) deposit
his Shares in any voting trust or enter into any voting agreement or
arrangement with respect to his Shares that would in any way restrict, limit
or interfere with the performance of his obligations under the Stockholder
Agreement. In addition, the Stockholder has agreed that he will notify the
Purchaser of any inquiry the Stockholder receives which might lead to an
acquisition of the Company by a third party.
The Stockholder Agreement will terminate upon the earlier of (a) the
termination of the Merger Agreement in accordance with its terms or (b) the
Effective Time, provided that certain provisions specified in the Stockholder
Agreement will survive such termination.
(v)GUARANTEE.
The following is a summary of certain provisions of the Guarantee. The
summary is qualified in its entirety by reference to the Guarantee which is
incorporated herein by reference and a copy of which has been filed with the
Commission as Exhibit 4 to this Statement.
As a condition and inducement to the Company to enter into the Merger
Agreement, concurrently with execution and delivery of the Merger Agreement,
Fremont Partners L.P., an affiliate of Parent and the Purchaser ("Fremont" or
"Fremont Partners"), and the Company executed the Guarantee pursuant to which,
among other things, Fremont has agreed to unconditionally and irrevocably
guarantee, for the benefit of the Company the
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performance of all obligations of Parent and the Purchaser pursuant to the
Merger Agreement. Fremont has represented in the Guarantee that it has funds
available to it sufficient to purchase, or cause the purchase of the Shares in
accordance with the terms of the Merger Agreement, and to pay, or cause to be
paid, all amounts due (or which will, as a result of the transactions
contemplated by the Merger Agreement become due) in respect of any
indebtedness of the Company for borrowed money outstanding as of the date of
the consummation of the Offer. The Guarantee terminates upon the consummation
of the purchase by the Purchaser or Parent or any of its affiliates of any
Shares pursuant to the Offer.
(vi)CONFIDENTIALITY AGREEMENTS.
The following is a summary of certain provisions of the Confidentiality
Agreement, dated November 14, 1997 by and between Fremont and the Company (the
"Company Confidentiality Agreement") and the Confidentiality Agreement, dated
January 8, 1998 by and among Fremont, Parent and the Company (the "Parent
Confidentiality Agreement", and together with the Company Confidentiality
Agreement, the "Confidentiality Agreements"). The following summary of the
Confidentiality Agreements does not purport to be complete and is qualified by
reference to the Confidentiality Agreements which are incorporated herein by
reference and copies of which have been filed as Exhibits 11 and 12 to this
Statement.
The Confidentiality Agreements contain customary provisions pursuant to
which, among other matters, the parties have agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to each party
relating to the Company or Parent, as the case may be, subject to certain
exceptions (the "Confidential Information"), and to use the Confidential
Information solely in connection with the evaluation of a possible negotiated
transaction between the parties.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) From late 1994 through the summer of 1995, increases in raw material
costs, as well as increasing competition from imports and other competitive
pricing pressures in the context of a weaker retail economy caused results
from both the Company's Tableware Division and its Speciality Resins and
Compounds Division (the "Chemical Division") to deteriorate. In these
circumstances and with a view to protecting the Company's liquidity, the
Company's Board reviewed its financing alternatives.
In August 1995, the Company retained a major regional investment banking
firm (the "Investment Bank") to examine strategic alternatives for the
Company, including sale of the Company, sale, merger, spin off or sale of one
or more of the Company's divisions or acquisition or merger with another
company. In addition, public or private sales of debt or equity to raise $5
million to $10 million and other recapitalization or strategic alternatives
were explored.
During the fall of 1995, the Investment Bank, in addition to its examination
of other alternatives, made preliminary contacts with financial and strategic
investors to determine their interest in acquiring all or a portion of the
Company. At the same time, the Investment Bank and the Company's management
identified lenders that were interested in refinancing the Company's existing
senior lender and providing additional capital for expansion purposes.
Following the reports by management and the Investment Bank in December
1995, the Board determined that few, if any, of the prospective purchasers had
an interest in both the Company's Closures Division as well as its Chemical
and Tableware Divisions, although a number of prospective purchasers had an
interest in one or the other of these divisions. As a consequence, the Board
determined that a sale of the Company as an entirety at an acceptable price
was unlikely and that a sale of one of its divisions separately would not be
desirable due to tax considerations and structural issues. At the same time,
the Company identified a new senior lender that provided a new credit
facility. Although the engagement of the Investment Banker ended in December
1995, the Board and management continued to explore strategic options
thereafter.
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Shortly after entering the credit facility in December 1995, with the new
senior lender, operating performance, particularly in the Company's Chemical
and Tableware Divisions, deteriorated resulting in violations of certain loan
covenants at March 30, 1996 and during the remainder of 1996. As a
consequence, the Company's long-term debt was classified as a current
liability on the consolidated balance sheet.
In April 1996, Eddie Lesok was elected as the Company's new President and
Chief Executive Officer and a director of the Company and James D. Ireland
III, a Company director since 1989, was elected Chairman of the Board.
Although the executive transition went smoothly from an operational
standpoint, the Company's senior lender remained concerned about the Company's
overall leverage. Management again sought new senior lending arrangements.
At the same time, management developed a strategic assessment of the
Company's businesses that suggested (1) further capital investment in the
Closures Division was desirable and (2) the Chemical and Tableware Divisions
would benefit from consolidation with other firms in the industry in order to
compete more effectively in their markets. Accordingly, during the summer of
1996, the Company also had meetings with various potential strategic
transaction partners relative to the Company's Chemical and Tableware
Divisions.
From September 30, 1995 to June 30, 1996, the Company's common stock traded
in a range of $4 to $9 per share, closing at $4.25 on June 30, 1996.
In late 1996, management developed a transaction to provide for an exchange
of assets by which the Company would obtain the chemical business of another
industry participant in exchange for conveying the Tableware Division's assets
to the other company, with various working capital adjustments. Although it
would not have provided additional capital, this transaction would have
consolidated and expanded the Company's Chemical Division and allowed it to
exit the tableware business. Negotiation of this transaction began in the late
summer and continued through the fall of 1996 as mutual due diligence
progressed. By the end of 1996 the other industry participant had indicated
that it did not wish to proceed with the exchange. Accordingly, the Company
began to consider a discontinuation of the Tableware Division's operations in
the event it could not be sold to any potential alternative buyers identified
by the Company.
From August through December 1996, management solicited new asset based
lender proposals, which the Board evaluated at its December meeting, selecting
one to be closed as promptly as possible. During the fall of 1996, the Company
received several new proposals from the party with which it had negotiated the
proposed exchange transaction, including a proposal to acquire the entire
Company. Believing that the Company's position would be stabilized and
enhanced by completion of a new senior lending facility and considering the
difficulties encountered in negotiating the proposed exchange transaction, the
Board decided to inform the party that the Company was not at that time
interested in further discussions and instead would pursue the closing of the
new asset based senior lending facility. During the last calendar quarter of
1996, the Common Stock traded in a range of $2 3/4 to $4 per share, closing
the calendar year at $2 3/4.
In late January 1997, the Company completed the senior debt refinancing with
a new $30 million asset based facility, allowing the Company to reclassify
from current to long-term approximately $13.5 million of bank debt.
On February 17, 1997, the Company announced publicly that it had adopted a
plan to restore profitability and concentrate strategically on two businesses:
the Closures Division and the Chemical Division. The Company also announced
that it would treat the Tableware Division including its plastics business in
Mexico as a discontinued operation, noting that it was negotiating to sell the
institutional portion of its Tableware Division, a sale that was completed
subsequently in February 1997 with proceeds of approximately $2.1 million
applied to repay debt. The press release noted that the two remaining
divisions of the Company, the Chemical Division and Closures Division,
historically had been profitable and that, with the sale and discontinuation
of the Tableware Division, the remainder of the Company as a whole would be
strengthened. Finally, the Company also announced the implementation of a
growth plan for the Closures Division, which included adding substantial
capacity,
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including the acquisition of a 74,000 square foot building adjacent to its
existing facility for a price of approximately $1.9 million.
During the first calendar quarter of 1997, the Common Stock traded in a
range of $2 1/4 to $2 5/8, closing the quarter at $2 1/4 per share.
During the first half of calendar 1997, the Company had conversations with a
number of parties that expressed interest in various forms of strategic
transactions involving the Company. These parties included a privately held
closures and packaging manufacturer (the "Alternative Purchaser") that had
expressed interest in acquiring the Company through a merger in which the
Alternative Purchaser's stockholders would obtain majority control of the
Company, with the Company surviving as a public entity. The Company did not
discourage any of these parties, but did not progress significantly with any
either. In April 1997, Fremont Partners inquired whether the Company was
interested in selling the Closures Division, to which the Company responded
that it was not. A sale of the Closures Division alone would result in
substantial corporate taxes.
During the second calendar quarter of 1997, the Common Stock traded in a
range of $1 7/8 to $4 5/8, rising significantly after the May announcement of
positive net income from continuing operations for the quarter ended March 31,
1997 and closing the second calendar quarter at $4.00.
The Company continued efforts to sell the remaining components of the
discontinued Tableware Division. A sale of the Small Fry business was
completed in August 1997 for approximately $600,000; remaining retail product
inventory from the Tableware Division was substantially liquidated; and the
Company held discussions with a number of potential buyers for its retail
tableware assets and its Mexican manufacturing operations, although none of
these discussions has come to fruition.
On August 25, 1997, the Company announced that its net income from
operations for the fiscal year ended June 30, 1997 was $2.3 million and that
net income from continuing operations for the quarter ended June 30, 1997 was
$997,000. Such results in both cases represented a substantial improvement
compared to the prior year. The press release also noted that since January
31, 1997 when the Company refinanced its bank debt, the debt had decreased by
about $6 million to $17 million outstanding as of June 30, 1997. During the
third calendar quarter of 1997, the Company's stock traded in the range of $3
1/4 to $6, exhibiting a significant increase following the August 25 earnings
release.
During late August 1997, the Company's Chairman and a representative of
Fremont spoke several times by telephone relative to whether Fremont would
have an interest in acquiring the Company (including the Chemical Division and
remaining tableware assets) as a follow-on acquisition to its purchase of
Parent. Shortly thereafter, Fremont responded that it would have a serious
interest in acquiring the Company and a meeting was held in the offices of
Fremont on September 23, 1997 to discuss its interest in a transaction. The
meeting was attended by senior representatives of Fremont and the Company's
Chairman, President, and President of its Closure Division. At the meeting,
the Company reviewed operating and financial trends in its Closures Division
and various potential transactions were discussed.
Beginning in July 1997, the Company held additional meetings with the
Alternative Purchaser. These discussions included a meeting in Dallas on
September 16, 1997 with officials of the Alternative Purchaser, as well as its
investment banking representatives, along with the Company's Chairman,
President, Chief Financial Officer and President of the Closures Division. At
this meeting, representatives of the Alternative Purchaser delivered an
investment banking presentation summarizing the benefits and possible
economics of an all equity merger of the two businesses. Follow up discussions
with this party continued in late September and early October.
In the meantime, another party that during the summer had expressed an
interest in an acquisition of the Chemical Division indicated that it would be
interested in pursuing a cash purchase of the Chemical Division for
approximately book value (the "Chemical Acquiror"). Encouraged by this
communication, the Company began
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more detailed conversations with the Chemical Acquiror and exchanged
appropriate confidentiality agreements and diligence information in September
and October.
On October 9, 1997, the Company's Board met for a regularly scheduled
meeting. At the meeting, the Board reviewed recent financial results for both
the Chemical and Closures Divisions. Management indicated that both businesses
had experienced below budget results in the third calendar quarter and that
additional expense control actions were underway. During this meeting, the
Board reviewed the proposal from the Chemical Acquiror.
The Board also discussed various transactional opportunities with other
parties, including Fremont and the Alternative Purchaser. Virtually all of the
proposed transactions involving the entire Company targeted the Closures
Division and contemplated a subsequent divestiture of the Chemical Division.
These proposals in general discounted the value of the Chemical Division.
Accordingly, the Board concluded that it would be desirable to pursue further
diligence and negotiation with the Chemical Acquiror, with the perspective
that, if such a transaction could be completed, potential transaction
alternatives concerning the Company's Closure Division could then be pursued.
At the October 9 meeting, the Board authorized management to pursue the
Chemical Division sale and in order to focus management's energies on the sale
of the Chemical Division, to suspend conversations with the parties with which
it previously had discussed a transaction involving the entire Company. This
decision was communicated to Alternative Purchaser, which was informed that
the proposed terms of the combination set forth in its September 16, 1997
valuation analysis were not viewed by the Company's Board of Directors as a
satisfactory basis for a business combination.
On November 7, 1997, a senior Fremont representative telephoned the
Company's Chairman and told him that Fremont was submitting a letter dated
November 5, 1997 indicating Fremont's serious interest in acquiring the
Company and outlining a proposed time schedule, but only if this met with the
approval of the Company's Board of Directors. The letter set forth an
acquisition price of $8.50 per share. Since this price represented a
significant premium to trading levels in the past 30 days of $4.75 to $5.63,
the Company's Board met telephonically on November 11, 1997 to discuss the
proposal. During the discussion it was noted that Fremont's proposal
represented the first specific expression of an interest in a fully financed
all cash transaction to acquire the entire Company at a significant premium to
market. Management also indicated that diligence had been continuing
satisfactorily with the Chemical Acquiror and that preliminary purchase
agreement drafts were being circulated with the objective of completing
negotiations of such a sale by late November. After a review of the terms of
the Fremont proposal and a discussion of other transaction proposals and
valuation analysis previously considered by the Board, management was
authorized to respond to Fremont indicating that if Fremont were prepared to
consider an offer in "double digits," the Company would entertain execution of
a confidentiality agreement and the commencement of due diligence. It also
authorized the engagement of an investment banking advisor by management and
the Chairman.
On November 14, 1997, the Company's Chairman, President and Chief Financial
Officer spoke telephonically with senior representatives of Fremont. The
officers reviewed the status of the Company's Chemical Division transaction
and the high likelihood that it would move forward to a definitive agreement.
They indicated that the Company would consider an all cash offer for its
Common Stock if an offer for an expedited and fully financed transaction were
to be forthcoming at the highest end of a range of value that they believed
could be achieved for the stockholders of the Company in a sale of the
Company, which the Board believed to be in "double digits." Fremont indicated
its belief that, subject to detailed diligence, it could provide a definitive
proposal which met these terms. Following this telephonic conversation, a
confidentiality agreement was signed with Fremont and preliminary non-public
information was provided to Fremont.
In the meantime, management discussed with Stephens Inc., an investment bank
("Stephens"), their possible representation of the Company in any
transactional negotiations and requested that representatives of Stephens
participate in the Company's November 21, 1997 Board meeting.
At the November 21, 1997 Board meeting, management reviewed the status of
the transaction with the Chemical Acquiror and noted that the Chemical
Acquiror was sending a team to Dallas for final diligence in late November.
Management also indicated that it appeared highly likely that a definitive
agreement, a draft of which had already been submitted by the Chemical
Acquiror, could be executed prior to December 31, 1997. The Board
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authorized management to negotiate a definitive agreement relative to the sale
of the Chemical Division assets to the Chemical Acquiror.
The Board also met with the representatives from Stephens who reviewed their
qualifications and experience as financial advisors as well as their
historical familiarity with the Company's operations. Management reviewed with
the Board the proposed terms of Stephens' engagement and recommended their
retention, which was unanimously approved. Following the Board meeting. The
Fremont representatives confirmed to management a high level of interest in
continuing diligence and committed to reconfirm the detailed pricing and terms
of their proposal for the Shares by early December.
During the following two weeks, management provided detailed historical and
other diligence materials concerning the Company, its assets and operations to
Stephens and engaged in numerous meetings and conference calls with the
financial advisor in order to permit Stephens to evaluate the Fremont
proposal, other proposals which had been made by other parties previously and
any additional proposals which might materialize.
On December 8, 1997, the Company's Chairman and President spoke
telephonically with senior representatives of Fremont along with
representatives of Stephens. In that call, the Fremont representatives
indicated that Fremont was prepared to offer a cash price of $9.50 per share
provided that: (1) a definitive agreement had been executed regarding the
Chemical Division; (2) a definitive agreement had been executed respecting the
sale of the Mexican operation; and (3) and certain liabilities would prove,
upon further diligence, to be consistent with earlier representations by the
Company's management. In the conversation, Fremont also reiterated that the
proposal contemplated a fully financed transaction with the Board having the
ability to respond to unsolicited superior offers, subject to termination
fees. Fremont also proposed that the Company be obligated to pay termination
fees in certain events.
Following the conference call, Stephens visited with the Company's Chairman,
President and Chief Financial Officer telephonically and reviewed their
preliminary views concerning valuation which they intended to present to the
Board at a special meeting to be held on December 12, 1997. Based upon such
review and related discussions, the officers instructed Stephens to contact
Fremont to indicate that the $9.50 was not satisfactory and that in order to
proceed with further due diligence, including a visit to the Closures
Division's Florida facility, they would need to reaffirm their earlier oral
proposal that contemplated a "double digit" purchase price. The Fremont
representatives did not respond immediately but indicated they would consider
the Company's position.
On December 10, 1997, the Alternative Purchaser contacted the Company to
reiterate its interest in proceeding with a transaction on either an equity
merger or an all cash basis. Management updated them on the status of the
Company's efforts to complete the negotiation of a definitive agreement
regarding the sale of the Chemical Division and informed them that the Company
at this time would consider an all cash proposal if such proposal were fully
financed, subject to limited and defined diligence procedures and could be
accomplished at an acceptable price with the Board having the ability to
respond to unsolicited superior offers, subject to termination fees.
Management also indicated that if the Alternative Purchaser were to submit a
proposal, it should be done expeditiously. The Alternative Purchaser indicated
that such a proposal would be forthcoming during the week of December 15,
1997.
On December 11, 1997, representatives of Fremont contacted Stephens and
indicated orally that they were prepared to offer $10.00 per share subject to
completion of the sales of the Chemical Division and Mexican operations and
subject to further due diligence that Fremont stated that it could complete in
three weeks. Representatives of Fremont indicated that they were only willing
to offer such a price and proceed with such additional due diligence on the
understanding that the Company would not actively "solicit" additional
transactional interest from third parties. Fremont also proposed a termination
fee of $5 million.
On December 12, 1997, the Board held a special meeting in which Stephens
also participated. The officers informed the Board that negotiations with the
Chemical Acquiror appeared likely to result shortly in a definitive
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agreement and that there appeared to be a purchaser for the Mexican operations
interested in an expedited transaction. The Board then reviewed the status of
the Fremont proposal and conversations with the Alternative Purchaser.
Representatives of Stephens presented an analysis to the Board of their
valuation of the Company, comparable transactions, data regarding premiums in
recent acquisitions, as well as a comparison of the Fremont proposal with the
September valuation by the Alternative Purchaser on the basis of an all equity
merger. Stephens' analysis also indicated that the $10.00 Fremont proposal
represented a significantly higher price than the likely trading range for the
Common Stock following a sale of the Chemical Division. Following further
discussion, Stephens was authorized to convey to Fremont that the conditions
it proposed should be acceptable (provided, that the $5 million termination
fee request was not agreed to and, instead, the subject of termination fees
and arrangements would be tabled for further discussion) but that Fremont
should be aware that the Company had been contacted by parties with which it
had earlier had discussions, including the Alternative Purchaser, and that
while it would accede to Fremont's demand that it not actively "shop" the
Fremont proposal, it would continue to respond to unsolicited interest from
third parties, including parties with whom the Company had previously been
engaged in discussions. Between December 10 and 16, 1997, management held a
number of conversations with the Alternative Purchaser to provide additional
information and reiterate that in view of the likely execution of a definitive
agreement to sell the Chemical Division, the Company would only be interested
in a cash offer for the Common Stock rather than any proposal to acquire the
assets of the Closures Division separately.
On December 16, 1997, representatives of Fremont visited the Closures
Division's Florida facility for detailed on-site diligence. On December 18,
1997, the Alternative Purchaser provided a written proposal, countersigned by
a major institutional financing source that was its majority stockholder,
indicating that such parties were prepared to acquire the Closures business in
an all cash transaction with a total enterprise value of $35 million, less the
amount of the Company's funded debt assumed by the Alternative Purchaser,
without financing contingencies and based upon additional diligence and
definitive agreements. Stephens determined that the value of their proposal
was clearly inferior to the Fremont proposal and that their unwillingness to
acquire stock of the Company as distinct from that of the Closures Division's
assets made their proposal structurally impractical. On December 19 after
discussions with officers of the Company, Stephens notified the Alternative
Purchaser that its offer was not competitive with other potential acquirors
with whom the Company was actively engaged in discussions on either a price
basis or a structural basis.
On December 30, 1997, representatives of the Alternative Purchaser contacted
the Company's President and Chief Financial Officer who reiterated Stephens'
communication that the Alternative Purchaser's December 18 proposal was not
competitive and elaborated that such response was both a matter of price and
structure.
On December 31, 1997, the Company received a written proposal from the
Alternative Purchaser indicating that it would pay $9.00 per share in cash for
the outstanding shares of the Common Stock without a financing contingency
based upon definitive documentation and limited further diligence and with
deference to the fiduciary obligations of the Board.
During the fourth calendar quarter of 1997, the Common Stock traded in a
range of $4 5/8 to $6 3/8 per share, closing the year at $5.8125.
On January 2, 1998, after consultation with management and the Chairman,
Stephens informed the Alternative Purchaser that its proposal was still not
competitive with other potential acquirors with whom the Company was actively
engaged in discussions. Between January 2 and 5, 1998, the Alternative
Purchaser held additional discussions with management concerning diligence
matters, financial forecasts and related issues. On January 6, the President
of the Alternative Purchaser contacted the Company's Chairman and indicated
that it was prepared to make an improved cash offer which would be fully
financed with limited diligence conditions by January 9 subject to an onsite
diligence visit to the Company's Closure operation.
Following discussions between the Company's management and Stephens,
Stephens on January 7 returned the call of the President of the Alternative
Purchaser and indicated, consistent with the Company's practice with Fremont,
that no onsite diligence visit could be undertaken until and unless a
competitive -- "double-digit"-- all cash price on acceptable conditions had
been provided. The Alternative Purchaser indicated it understood this
procedure and confirmed that it would respond with its best proposal on either
January 9 or January 12, 1998.
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In the meantime, representatives of Fremont undertook a second onsite
diligence visit to the Closures' facility on January 8 and requested that the
President of the Closures Division visit senior management of Kerr at their
facilities. Fremont further requested, in connection with such visit, that the
Company sign a confidentiality agreement relative to such visit. The agreement
was signed on January 9, 1998.
On January 9, 1998, Fremont also requested that, in view of the ongoing
conversations with the Alternative Purchaser (which Stephens had generally
made Fremont aware of pursuant to the understanding between the parties), the
Company enter into an exclusive negotiating agreement with it, with the
objective of concluding a definitive agreement by January 23, 1998 relative to
an all cash transaction at $10.00 per share. In connection with this request,
Fremont submitted a draft exclusivity agreement and requested a conference
call the following day, Saturday, January 10, with management. The requested
term of the exclusive negotiating agreement was thirty days.
On January 10, 1998, the Company's Chairman and President, along with
representatives of Stephens, spoke telephonically with senior representatives
of Fremont and indicated that any request for an exclusive negotiating
agreement would have to be reviewed and approved by the Company's Board of
Directors. In responding in this fashion to Fremont, the Company took into
consideration the fact that the Alternative Purchaser had suggested it would
be providing shortly an improved proposal on an all cash basis without
financing contingencies and with limited diligence, which suggested the
possibility that such proposal might be superior to the Fremont proposal. On
the same day, Stephens contacted the Alternative Purchaser's investment banker
and reiterated that if a proposal were intended, it needed to be submitted by
Monday, January 12, 1998.
On January 12, 1998 the Alternative Purchaser submitted an all cash proposal
for the Company's Common Stock at $10.50 per share based upon certain
assumptions regarding assumed liabilities and with the contingencies that the
Company would have closed the sale of both its Chemical Division and its
Mexican operation. The proposal also set forth certain understandings
concerning further diligence as well as an executed commitment letter from the
Company's institutional majority owner to provide debt and equity capital
necessary to complete the purchase of the Company's Shares.
After reviewing the revised proposal from the Alternative Purchaser,
Stephens advised the Company orally that while the proposal appeared to be
potentially superior to the Fremont proposal on price, the contingencies to
the closing of the sale of the Chemical business and delays in efforts to sell
the Mexican operation, together with uncertainties concerning the value of
liability assumptions by the Alternative Purchaser, made it unclear that the
Alternative Purchaser was as likely as Fremont to complete a transaction at a
higher value.
On January 12 and 13, 1998, representatives of Stephens attempted to clarify
certain aspects of the revised proposal from the Alternative Purchaser to see
if, in fact, they were comparable to those of Fremont on matters other than
price.
On January 13, 1998, Stephens contacted Fremont and indicated that based
upon further analysis of the new proposal from the Alternative Purchaser,
Fremont's latest offer no longer appeared superior on price. It also advised
the Alternative Purchaser that while its price proposal appeared to be
reasonably attractive, certain conditions to the proposal and liability
assumptions made it uncertain whether the proposal was superior to other
options available to the Company. Stephens encouraged the Alternative
Purchaser through its investment banker to clarify these issues and contact
Stephens as promptly as possible.
Later on January 13, 1998, Fremont submitted a revised proposal to acquire
the common stock of the Company at $10.75 per share on a fully financed basis
with a $3 million termination fee, expense reimbursement and an option for
newly issued shares of Common Stock equal to 19.9% of the Company exercisable
in certain circumstances at a price of $10.75 per share. In connection with
this proposal, Fremont indicated that it was only willing to proceed with the
final negotiations at that premium valuation level under an executed
exclusivity agreement and pre-determined termination arrangement, although
Fremont was willing to reduce the exclusivity period from thirty days to two
weeks. Fremont also agreed to eliminate its previous requirement that the
Mexican operations be sold.
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The same day, representatives of Stephens contacted the investment banker
for the Alternative Purchaser to inquire whether it could clarify its
conditions and liability assumptions on a basis which could make the proposal
comparable to that of Fremont. The Alternative Purchaser's investment banker
responded indicating that although it might be possible to improve the
conditions and assumptions of the offer, it was already a full price at
$10.50. Based upon this conversation, Stephens communicated verbally to the
Company's management that it believed the new Fremont proposal at $10.75
clearly provided superior consideration to the Company's shareholders.
On January 15, 1998, the Board met in Dallas at the offices of its counsel
to review the latest Fremont proposal as well as the course of discussions
between Fremont and the Company, the Alternative Purchaser and Stephens. At
the meeting, Stephens and the Company's management reviewed in detail the
various negotiations, diligence visits and discussions which had occurred over
the prior several weeks. In addition, they reviewed in detail the proposals
that had been submitted and provided their financial analysis of the proposals
based upon their review of the Company's historical and projected financial
statements, market values for comparable companies and the value and premiums
of comparable transactions. Based upon such analysis and discussions, Stephens
indicated its opinion that the Fremont proposal represented an attractive and
fair price, from a financial perspective, for the Company's common stock.
Stephens also noted that in its analysis of the range of value of the
Company's stock in a "change of control" transaction, the price offered by
Fremont was near the top of the range.
In addition, the specific provisions of the exclusivity arrangements
demanded by Fremont were discussed in detail by the Board and Stephens and the
Company's counsel. Stephens indicated that the proposed termination fee and
expense reimbursement as well as Fremont's request for an option to acquire
shares had been significantly negotiated by it over the past two days compared
to the earlier Fremont proposal. Specifically, they indicated that the request
for a $3 million break up fee had been negotiated to $2 million, the expense
reimbursement provision had eliminated certain expenses, and the request for
an option to acquire 19.9% of the Company had been negotiated to 500,000
shares or 10.8% of the outstanding shares on a fully diluted basis. In
connection with these requests, Stephens indicated that these arrangements, in
view of the significant consideration offered by the Fremont proposal and
Fremont's statement that it would not pursue further discussions unless those
conditions were satisfied, were not unreasonable.
Following extensive discussions, the Company's Board of Directors authorized
management to enter into the exclusivity agreement for two weeks on
substantially the terms presented to the Board and authorized further the
negotiation of a form of definitive agreement which Fremont had provided to
the Company the prior day.
On Monday, January 19, 1998, the Company provided to counsel for Fremont a
first round of comments on the draft agreement. Between January 19 and 27 the
parties negotiated to resolve open issues.
On January 20, 1998 the Company received a letter from the Alternative
Purchaser indicating that since the Company had not responded formally to its
proposal of January 12, that such proposal would be withdrawn by January 21 if
no response were forthcoming. The Company reviewed the letter and based upon
the Board's determination that Fremont's proposal was superior to that of the
Alternative Purchaser, concluded that it would not respond to the Alternative
Purchaser.
AT A MEETING HELD ON JANUARY 27, 1998, THE COMPANY'S BOARD OF DIRECTORS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF THE COMMON STOCK, AND UNANIMOUSLY
RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
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(b) In reaching its conclusions and the recommendation described above, the
Company's Board of Directors considered a number of factors, including without
limitation the following:
(i) The Company's business, financial condition, results of operations,
assets, liabilities, business strategy and prospects.
(ii) The opinion of Stephens, the Company's financial advisor, that based
on the assumptions, limited procedures and matters set forth in their
fairness opinion, the consideration to be received in the Offer and the
Merger by the holders of the Common Stock is fair to the holders of the
Common Stock from a financial point of view.
The opinion was not intended and does not constitute a recommendation to
any holder of Common Stock as to whether such holder should tender shares
pursuant to the Offer or vote to approve the Merger and related
transactions. The opinion of Stephens, dated January 27, 1998, is attached
as Schedule I hereto and is incorporated herein by reference. Holders of
Shares are encouraged to read the opinion of Stephens in its entirety.
(iii) The terms and conditions of the Merger Agreement, including (A)
that under certain circumstances the Merger Agreement may be terminated if
the Company receives a Superior Proposal, (B) that if the Merger Agreement
is terminated for certain reasons, Kerr is entitled to receive a fee in the
amount of $2,000,000, plus certain expenses, (C) that Kerr was granted an
option to acquire 500,000 shares of Common Stock under certain
circumstances, (D) that Hoak agreed to tender to the Purchaser in the Offer
and not withdraw therefrom all of the shares of Common Stock owned by Hoak
(being approximately 438,000 shares), (E) the structure of the transaction,
which involves a first-step cash tender offer and a second-step cash
merger, (F) that nothing precludes the Company from not permitting the
Rights to expire or taking any other action with respect to the Rights
Agreement if the Merger Agreement is terminated in accordance with its
terms, and (G) the conditions to the Offer and the Merger.
(iv) The fact that the Offer would not be subject to a financing
condition, that Kerr, the Purchaser and Fremont have represented that the
funds necessary to consummate the Offer and the Merger will be provided,
and that Fremont has agreed to guarantee the obligations of Kerr and the
Purchaser under the Merger Agreement.
(v) A consideration of alternatives to the sale of the Company including
(A) the Alternative Purchaser's Proposal or development of proposals with
other parties, (B) continuing to maintain the Company as a public
corporation and not engaging in any extraordinary transaction, or (C) the
sale of a significant portion of the Company's business to a strategic
buyer in a merger in which the Company's stockholders would remain holders
of a minority of the shares of the surviving corporation.
(vi) The market price of the Shares and the substantial premium over that
market price represented by the Offer Price.
The foregoing discussion of the information and factors considered and given
weight by the Company's Board of Directors is not intended to be exhaustive.
The Company's Board of Directors did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Stephens to render financial advisory services to the
Company with respect to the Offer and any other sale of stock, merger,
consolidation, reorganization, business combination, lease, exchange, joint
venture or other transaction involving transfer to an unaffiliated party of
ownership or control of the business of the Company (a "Business
Combination"). Pursuant to an engagement letter, dated December 1, 1997, the
Company agreed to (a) pay Stephens an initial fee of $50,000, (b) pay Stephens
$150,000 upon execution by the Company of a definitive agreement to effect a
Business Combination, (c) upon consummation of a Business Combination, pay
Stephens 1.25% of the value of the transaction (which includes without
limitation the consideration payable to the Company or its stockholders and
debt of the Company assumed by the Purchaser); provided that any amounts paid
to Stephens under clauses (a) or (b) above would be credited
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against the amount due to Stephens under this clause (c). The aggregate amount
to be paid to Stephens if the Merger is closed would be approximately
$600,000. The Company also has agreed to reimburse Stephens' reasonable out-
of-pocket expenses including the fees and expenses of Stephens' counsel, and
indemnify and defend Stephens and certain related persons against certain
liabilities in connection with the engagement.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by an executive
officer, director, subsidiary or affiliate of the Company, except that on
January 30, 1998, James R. Parish, a former director of the Company, exercised
options to acquire 100 shares of Common Stock at an exercise price of $4.25
per share and 200 shares at $9.50 per share. Such options had been previously
granted to Mr. Parish under the Company's 1994 Director Stock Option Plan.
(b) To the best of the Company's knowledge, each executive officer, director
and affiliate of the Company currently intends to tender all Shares to the
Purchaser over which he or she has sole dispositive power as of the expiration
date of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein or in Item 3(b) or 4(b), no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in: (1) an extraordinary transaction such as a
merger or reorganization involving the Company; (2) a purchase, sale or
transfer of a material amount of assets by the Company; (3) a tender offer for
or other acquisition of securities by or of the Company; or (4) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as described herein or in Item 3(b) or 4(b), 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.
(a) The Information Statement attached as Schedule II hereto and
incorporated herein by reference is being furnished in connection with the
possible designation by Kerr, pursuant to the Merger Agreement, of certain
persons to be appointed to the Board of Directors other than at a meeting of
the Company's stockholders, as described in Item 3.
(b) Rights Agreement and Rights Amendment. The Company has entered into a
Rights Agreement (the "Rights Agreement"), dated as of June 6, 1995, between
the Company and American Stock Transfer & Trust Company, as Rights Agent.
Pursuant to the terms of the Rights Agreement, the Rights are attached to all
certificates representing shares of Common Stock. When the Rights become
exercisable, each Right will entitle the holder to purchase from the Company
one share of Common Stock at a price of $50.00 per share (the "Purchase
Price"), subject to adjustment.
The Rights separate from the Common Stock and a "Distribution Date" occurs
at the close of business on the earlier to occur of (i) the tenth day after
the date a person (an "Acquiring Person") (other than the Company, any
subsidiary of the Company, or any employee benefit plan of the Company or any
subsidiary of the Company) alone or together with affiliates and associates,
has become the beneficial owner of 15% (or such lower threshold as may be
established by the Board of Directors) or more of the outstanding shares of
Common Stock or (ii) the tenth business day after the date (or such later date
as may be determined by action of the Board of Directors
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prior to such time as any person becomes an Acquiring Person) of the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in any person (other
than the Company, any subsidiary of the Company, or any employee benefit plan
of the Company or any subsidiary of the Company) becoming an Acquiring Person.
James M. Hoak will not be deemed an Acquiring Person unless he and his
affiliates and associated together beneficially own 20% or more of the
outstanding shares of Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on July 6, 2005 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by the
Company.
In the event that on or after the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such (the
"Stock Acquisition Date") the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold (in one transaction or a series of transactions other
than in the ordinary course of business), proper provision will be made so
that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current Purchase Price of the Right, that
number of common shares of the acquiring company which at the time of such
transaction will have a market value of two times the Purchase Price. In the
event that any person, together with its affiliates and associates, becomes an
Acquiring Person, proper provision shall be made so that each holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of Common Stock of the Company having a market
value of two times the Purchase Price. Under no circumstances may a Right be
exercised following the occurrence of an event set forth in the preceding
sentence prior to the expiration of the Company's right of redemption.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person, together with its affiliates and associates, of
beneficial ownership of 50% or more of the outstanding shares of Common Stock,
the Board of Directors of the Company may exchange the Rights (other than
Rights owned by such person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, per Right (subject to
adjustment).
At any time prior to the tenth day following the first public announcement
of the existence of an Acquiring Person, the Board of Directors of the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right,
payable in cash or shares of Common Stock (the "Redemption Price"); provided,
however, that for the 120-day period after any date of a change (resulting
from a proxy or consent solicitation) in a majority of the Board of Directors
of the Company in office at the commencement of such solicitation, the Rights
may only be redeemed if (i) there are directors then in office who were in
office at the commencement of such solicitation and (ii) the Board of
Directors of the Company, with the concurrence of a majority of such directors
then in office, determines that such redemption is, in their judgment, in the
best interests of the Company and its stockholders. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption
Price. All rights relating to the Rights, including the right to exercise the
Rights, will terminate.
The terms of the Rights may be amended by the Board in any manner prior to
the Distribution Date. After the Distribution Date, the provisions of the
Rights Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
the holders of the Rights, or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time
period governing redemption shall be made at such time as the Rights are not
redeemable. Notwithstanding the foregoing, for the 120-day period after any
date of a change (resulting from a proxy or consent solicitation) in a
majority of the Board of Directors of the Company in office at the
commencement of such solicitation, the Rights Agreement may be supplemented or
amended only if (i) there are directors then in office who were in office at
the commencement of such solicitation and (ii) the Board of Directors of the
23
<PAGE>
Company, with the concurrence of a majority of such directors then in office,
determines that such amendment or supplement is, in their judgment, in the
best interests of the Company and its stockholders.
In accordance with the Merger Agreement, the Company and the Rights Agent
entered into Amendment No. 2 to the Rights Agreement, dated as of January 28,
1998 (the "Rights Amendment"). The Rights Amendment provides that (i) neither
Kerr nor the Purchaser shall be deemed to be an "Acquiring Person" solely by
virtue of (a) the announcement or making of the Offer, (b) the acquisition of
the Shares pursuant to the Offer or the Merger, (c) the execution of the
Merger Agreement, or (d) the consummation of the other transactions
contemplated by the Merger Agreement, (ii) a "Distribution Date" will not be
deemed to have occurred solely as a result of (a) the announcement or making
of the Offer, (b) the acquisition of the Shares pursuant to the Offer or the
Merger, (c) the execution of the Merger Agreement or (d) the consummation of
the other transactions contemplated by the Merger Agreement, (iii) a
"Triggering Event" shall not be deemed to have occurred as a result of (a) the
announcement or making of the Offer, (b) the acquisition of the Shares
pursuant to the Offer or the Merger, (c) the execution of the Merger Agreement
or (d) the consummation of the other transactions contemplated by the Merger
Agreement, (iv) the Rights shall not be adjusted or become exercisable, nor
shall a "Flip-In Event" (as defined in the Rights Agreement), nor a "Flip-Over
Event" (as defined in the Rights Agreement) occur as a result of (a) the
announcement or making of the Offer, (b) the acquisition of the Shares
pursuant to the Offer or the Merger, (c) the execution of the Merger Agreement
or (d) the consummation of the other transactions contemplated by the Merger
Agreement, and (v) the Rights shall automatically expire upon the acceptance
of Shares for payment pursuant to the Offer in accordance with the Merger
Agreement and that the Rights shall cease to be exercisable upon the earlier
of (a) the close of business on July 6, 2005, (b) the time at which the Rights
are redeemed as provided in the Rights Agreement, or (c) the acceptance of
Shares for payment pursuant to the Offer in accordance with the Merger
Agreement, if such acceptance occurs.
The foregoing descriptions of the Rights Agreement and the Rights Amendment
are qualified in their entirety by reference to the Rights Agreement and the
Rights Amendment, respectively, copies of which have been filed with the
Commission as Exhibit 5 and Exhibit 6, respectively, to this Statement.
(c) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"Business Combinations" (defined generally to include (i) mergers or
consolidations between a Delaware corporation and an Interested Stockholder
(as defined below), (ii) transactions with an Interested Stockholder involving
the assets or stock of the corporation or its majority-owned subsidiaries, and
(iii) transactions which increase an Interested Stockholder's percentage
ownership of stock) between a Delaware corporation whose stock is publicly
traded or has more than 2,000 stockholders of record, and an "Interested
Stockholder" (defined generally as a person that is the beneficial owner of
15% or more of a corporation's outstanding voting stock) are prohibited for a
three-year period following the date that such a stockholder became an
Interested Stockholder, unless (i) the corporation has elected in its original
certificate of incorporation not to be governed by Section 203 (the Company
did not make such an election), (ii) the transaction in which the stockholder
became an Interested Stockholder or the Business Combination was approved by
the board of directors of the corporation before the other party to the
Business Combination became an Interested Stockholder, (iii) upon consummation
of the transaction that made it an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock
owned by directors who are also officers or held in employee benefit plans in
which the employees do not have a confidential right to tender or vote stock
held by the plan) or (iv) the Business Combination was approved by the board
of directors of the corporation and ratified by 66-2/3% of the voting stock
which the Interested Stockholder did not own.
In accordance with the Merger Agreement and Section 203, the Company's Board
of Directors approved the Offer, the Merger, the Option Agreement, the
Stockholder Agreement and the other transactions contemplated by the Merger
Agreement and, therefore, the restrictions of Section 203 are inapplicable to
the
24
<PAGE>
Offer, the Merger, the exercise by Kerr of the Option, the agreement of Hoak
to tender his shares in accordance with the Stockholder Agreement, and the
related transactions.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Agreement and Plan of Merger, dated as of January 28, 1998, among
Sun Coast Industries, Inc., Kerr Group, Inc. and Saffron Acquisition
Corp.
Exhibit 2 Company Option Agreement, dated as of January 28, 1998, among Sun
Coast Industries, Inc. and Kerr Group, Inc.
Exhibit 3 Guarantee, dated as of January 28, 1998, between Sun Coast
Industries, Inc. and Fremont Partners, L.P.
Exhibit 4 Stockholder Agreement dated as of January 28, 1998, between Kerr
Group, Inc. and James M. Hoak, Jr.
Exhibit 5 Rights Agreement, dated as of June 6, 1995, between Sun Coast
Industries, Inc. and American Stock Transfer & Trust Company.
Exhibit 6 Amendment No. 2 to the Rights Agreement, dated as of January 28,
1998, between Sun Coast Industries, Inc. and American Stock Transfer
& Trust Company.
Exhibit 7 Letter to Stockholders of the Company, dated February 3, 1998.*
Exhibit 8 Joint Press Release of the Company and Fremont Partners, L.P., dated
January 28, 1998.
Exhibit 9 Opinion of Stephens Inc.*
Exhibit 10 Purchase and Sale Agreement dated as of December 22, 1997 between
Sun Coast Industries, Inc., Sun Coast Holdings, Inc. and Plastics
Manufacturing Company, and Borden Chemical, Inc.
Exhibit 11 Confidentiality Agreement dated November 14, 1997, between the
Company and Fremont Partners, L.P.
Exhibit 12 Confidentiality Agreement dated January 8, 1998, among the Company,
Fremont Partners, L.P. and Kerr Group, Inc.
- --------
* Included in copies mailed to stockholders.
25
<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.
SUN COAST INDUSTRIES, INC.
By: /s/ Eddie Lesok
-------------------------------------
Eddie Lesok
President and Chief Executive
Officer
Dated: February 3 , 1998
26
<PAGE>
INVESTMENT BANKERS
SCHEDULE I
Stephens Inc.
January 27, 1998
Board of Directors of Sun Coast Industries, Inc.
2700 5. Westmoreland Ave.
Dallas, TX 75233
Gentlemen:
We have acted as your financial advisor in connection with the proposed
merger of Sun Coast Industries, Inc. (the "Company") with Saffron Acquisition
Corp., a wholly owned subsidiary of Kerr Group, Inc. (the "Transaction"). This
Transaction is expected to take the form of an all cash tender offer, followed
by a merger of Saffron Acquisition Corp. with and into the Company. The terms
and conditions of the Transaction are more fully set forth in the definitive
merger agreement.
You have requested our opinion as to the fairness to the shareholders of the
Company from a financial point of view of the consideration to be received by
such shareholders in the Transaction. In connection with rendering our opinion
we have:
(i) analyzed certain publicly available financial statements and reports
regarding the Company;
(ii) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning the Company
prepared by management of the Company;
(iii) reviewed the reported prices and trading activity for the Common
stock;
(iv) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(vi) reviewed the definitive merger agreement and related documents;
(vii) discussed with management of the Company the operations of and future
business prospects for the Company;
111 CENTER STREET POST OFFICE BOX 3507LITTLE ROCK, ARKANSAS 72203-3507 501-374-
4361 FAX 501-377-2674
<PAGE>
January 27, 1998
Page 2
(viii) assisted in your deliberations regarding the material terms of the
Transaction, and
(ix) performed such other analyses and provided such other services as we
have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company, and our opinion is based upon
such information. We have inquired into the reliability of such information
and financial data only to the limited extent necessary to provide a
reasonable basis for our opinion, recognizing that we are rendering only an
informed opinion and not an appraisal or certification of value. With respect
to the financial projections prepared by management of the Company, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial
performance of the Company.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Stephens
Inc. and its affiliates at any time may hold long or short positions, and may
trade or otherwise effect transactions as principal or for the accounts of
customers, in debt or equity securities or options on securities of the
Company. Stephens is receiving a fee, and reimbursement of its expenses, in
connection with the issuance of this fairness opinion and for its role as
financial advisor to the Company.
Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion on the date
hereof that the consideration to be received by the shareholders of the
Company in the Transaction is fair to them from a financial point of view.
This opinion and a summary discussion of our underlying analyses and role as
your financial advisor may be included in communications to the Company's
shareholders provided that we approve of such disclosures prior to
publication.
Very truly yours,
/s/ Stephens Inc.
-------------------------------------
Stephens Inc.
<PAGE>
SCHEDULE II
SUN COAST INDUSTRIES, INC.
2700 SOUTH WESTMORELAND
DALLAS, TEXAS 75233
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
(THE "EXCHANGE ACT") AND RULE 14F-1 THEREUNDER
The following information is being furnished to holders of the common stock,
par value $.01 per share ("Common Stock" or the "Shares"), of Sun Coast
Industries, Inc., a Delaware corporation (the "Company"), in connection with
the possible designation by Kerr Group, Inc., a Delaware corporation ("Kerr"),
of at least a majority of the board of directors of the Company pursuant to
the terms of an Agreement and Plan of Merger, dated as of January 28, 1998
(the "Merger Agreement"), by and among the Company, Kerr and Saffron
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Kerr
(the "Purchaser"). THIS INFORMATION IS BEING PROVIDED SOLELY FOR INFORMATIONAL
PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
The Merger Agreement provides that promptly following the purchase by
Purchaser of any Shares pursuant to the Offer, the Minimum Condition having
been satisfied, Kerr may request that the Company take all actions necessary
to cause persons designated by Kerr to become directors of the Company (the
"Kerr Designees") so that the total number of directorships held by such
persons is proportionate to the percentage calculated by dividing (i) the
number of Shares accepted for payment pursuant to the Offer plus Shares
beneficially owned by Purchaser by (ii) the total number of Shares outstanding
at the time of acceptance of the Shares for payment pursuant to the Offer;
provided that prior to the consummation of the Merger, the board of directors
of the Company (the "Board") shall always have at least one member who is
either Steve Bartlett, James D. Ireland III, James H. Miller or Wayne Kern or
otherwise is not an officer of the Company nor a designee, stockholder,
affiliate or associate of Kerr. The Company has also agreed to increase the
size of the Board or exercise its best efforts to secure the resignation of
existing directors, or both, in order to ensure that it has complied with this
provision of the Merger Agreement.
The information contained in this Schedule II concerning the Purchaser has
been furnished to the Company by the Purchaser, and the Company assumes no
responsibility for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of January 30, 1998, there were issued and outstanding 4,117,929 shares
of Common Stock, each of which entitles the holder to one vote.
<PAGE>
BOARD OF DIRECTORS, ACQUISITION DESIGNEES
AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board. The following
sets forth as to each director (as of January 30, 1998), his age, and
principal occupation and business experience, the period during which each has
served as a director, any family relationship with any other director or
executive officer of the Company and the directorships currently held by him
in corporations whose shares are publicly registered.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT/
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------------
<S> <C>
STEVE BARTLETT, age 50, Mr. Bartlett is a principal stockholder and Chairman of
director since December the Board of Meridian Products Corp. and Saranda
1996 Corporation, which are privately held, custom
manufacturers of injection molded plastics in Dallas,
Texas and Phoenix, Arizona, respectively. He founded
Meridian in 1976 and acquired Saranda, along with other
stockholders, in 1996. Mr. Bartlett served as Mayor of
Dallas, Texas, from December 1991 to June 1995. From
1983 to 1991, he served as a member of the U.S.
Congress, representing Texas' Third Congressional
District. In March 1996, Mr. Bartlett was appointed to
Fannie Mae's National Advisory Council. He also serves
as a director of the Mercantile Growth Fund, Inc., a
private investment company which invests primarily in
selected emerging growth companies. Since completing his
service as Mayor of Dallas in June 1995, Mr. Bartlett
has principally been occupied with the business of
Meridian and Saranda.
JAMES D. IRELAND III, Mr. Ireland was elected Chairman of the Board of the
age 48, Company in April 1996. He has been a managing director
director since 1989 of Capital One Partners, a privately-held merchant
banking and advisory firm, since January 1993. Mr.
Ireland is also Chairman of First Colorado Corporation,
an owner of natural resource projects and real estate
properties, and Terresolve Technologies Ltd., a
manufacturer of environmentally friendly lubricant
products. He is also a director of Cleveland-Cliffs,
Inc., the largest North American producer of iron ore,
and numerous privately held companies.
WAYNE KERN, age 65, Mr. Kern is Executive Vice President of James M. Hoak
director since June Co. a privately-held investment, merchant banking and
1997 advisory firm. From July 1991 to March 1995, Mr. Kern
was Executive Vice President of Crown Media, Inc.
("Crown"), a company formed with James M. Hoak and
Hallmark Cards to purchase and operate cable television
systems. Crown was sold in 1995.
EDDIE LESOK, age 49, Mr. Lesok was elected President, Chief Executive Officer
director since April and a director of the Company in April 1996. From
1996 September 1995 until April 1996, Mr. Lesok was self-
employed. Mr. Lesok was Chairman of the Board and Chief
Executive Officer of Color Tile, Inc. from 1988 until
September 1995. Prior to 1988, he held other executive
positions at Color Tile, Inc. In January 1996 Color
Tile, Inc., filed a petition for protection under
Chapter XI of the Federal Bankruptcy Act.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT/
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------------
<S> <C>
JAMES H. MILLER, age 71, Mr. Miller, who retired in June 1992 as President of the
director since 1988 Company, served as interim President from February to
April 1996. He was elected a director and Chief
Operating Officer in 1988 and President in 1989. Mr.
Miller had been employed since 1950 by the subsidiary
that today consists of the Company's Specialty Resins
and Compounds Division and had served as its President
and Chief Executive Officer since 1983.
ARNO F. PIRKAU, age 55, Mr. Pirkau is President and General Manager of the
director since 1982 Company's Closures Division. He is a co-founder of the
Company and has been an Executive Vice President since
1988. From the Closure Division's inception until 1988,
he was its Vice President of Manufacturing. In 1988 he
was promoted to Executive Vice President. In 1991 he
additionally became the Closure Division's General
Manager and in 1993 he was elected its President.
</TABLE>
There is no family relationship between any of the directors or between any
of the directors and any executive officer of the Company.
RIGHT TO DESIGNATE DIRECTORS; KERR DESIGNEES
The Merger Agreement provides that promptly upon the purchase by the
Purchaser of any Shares pursuant to the Offer, the Minimum Condition having
been satisfied, Kerr shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board as will give Kerr
representation on the Board equal to at least that number of directors which
equals the product of the total number of directors on the Board (giving
effect to the directors designated by Kerr) multiplied by the percentage that
the number of Shares beneficially owned by the Purchaser or any of its
affiliates (including Shares as are accepted for payment pursuant to the
Offer) bears to the number of Shares outstanding. The Company will, upon
request of the Purchaser, promptly increase the size of the Board or use its
best efforts to secure the resignations of such number of its incumbent
directors as is necessary to enable the Kerr Designees to be elected to the
Board; provided that prior to the consummation of the Merger, the Board shall
always have at least one director who is either Steve Bartlett, James D.
Ireland III, James H. Miller or Wayne Kern, or otherwise an independent
director as discussed in the Schedule 14D-9 of the Company and incorporated
herein by reference.
Kerr has informed the Company that it will choose the initial Kerr Designees
from among certain persons set forth below. With respect to the Kerr
Designees, the following table, prepared from information furnished to the
Company by Kerr, sets forth the name, occupation and age of each such Kerr
Designee. Kerr has informed the Company that each of such individuals has
consented to act as a director, if so designated. If necessary, Kerr may
choose additional or other Kerr Designees, subject to the requirements of Rule
14f-1 under the Exchange Act.
None of the Kerr Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any
directors or executive officers of the Company or (iii) to the best knowledge
of Kerr, beneficially owns any securities (or rights to acquire such
securities) of the Company. The Company has been advised by Kerr that, to the
best of Kerr's knowledge, none of the Kerr Designees has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
It is expected that the Kerr Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding
Shares pursuant to the Offer, which purchase cannot be earlier than
3
<PAGE>
March 4, 1998, and that, upon assuming office, the Kerr Designees will
thereafter constitute at least a majority of the Board. Kerr has informed the
Company that it will choose the Kerr Designees from the individuals shown in
the table below to serve on the Board.
The following table, prepared from information furnished to the Company by
Kerr, sets forth the name, occupation and age of each of the Kerr Designees.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT/
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- --------------------------------------------------
<C> <S>
ROBERT JAUNICH II, Age 57 Managing Director and Director of The Fremont Group, L.L.C.,
("Fremont Group"), Fremont Investors and Sequoia Ventures,
Inc. ("Sequoia"); Director of CNF Transportation, Inc.;
Chairman of the Board of Coldwell Banker Corporation from 1992
to 1996; Chairman of the Board of Crown Pacific, Ltd. since
1992; member of the Board of Control of Petro Stopping
Centers, L.P. from 1992 to 1997; Chairman of the Board of
Kinetic Concepts, Inc. since 1997.
GILBERT H. LAMPHERE, Age 45 Director, Chairman and President of Kerr and a director and
President of the Purchaser; Managing Director and Director of
The Fremont Group, Fremont Investors and Sequoia since 1994;
Director and Chairman of Illinois Central Corporation; Co-
Chairman and Chief Executive Officer of the Noel Group prior
to 1994; Chairman and Chief Executive Officer of the Prospect
Group (1990-1994); Director of Recognition International, Inc.
(1990-1995), Cleveland-Cliffs, Inc. (1991-1994), R.P. Scherer
Corporation (1991-1995); Global Natural Resources Corporation
(resigned 1994); Belding Heminway Company (1993-1997); Sylvan,
Inc. (resigned 1994); Lincoln Snacks Company (resigned 1994);
Simmons Outdoor Corporation (resigned 1994); and Children's
Discovery Centers of America, Inc. (resigned 1994).
JAMES T. FARRELL, Age 33 Managing Director of The Fremont Group since January 1, 1997;
Principal of The Fremont Group from 1992 through 1996;
Director Coldwell Banker Corporation from 1992 to 1996;
Director of the nonprofit Pacific Research Institute; Director
of Kinetic Concepts, Inc. since 1997.
MARK N. WILLIAMSON, Age 35 Managing Director of The Fremont Group since January 1, 1997;
Principal of The Fremont Group in 1996; prior to 1996,
Managing Director at the Harvard Private Capital Group, Inc;
Director of Risk Capital Holdings, Inc.; Director of Tarquin
PLC from 1994 to 1996; Director of Atlantic Auto Finance
Corporation from 1994 to 1996.
GREGORY P. SPIVY, Age 28 Director, Vice President and Secretary of the Purchaser and a
Director of Kerr; Managing Director of The Fremont Group since
January 1, 1998; Principal of The Fremont Group from 1995
through 1997; Director and Associate of The Bridgeford Group
from 1992 through 1995.
RICHARD D. HOFMANN, Age 57 Director and Chief Executive Officer of Kerr since 1997;
Chairman New Canaan Investments, Inc. since 1987.
LAWRENCE C. CALDWELL, Age 51 Director, Vice President and Treasurer of Purchaser; Director
and Chief Financial Officer of Kerr since 1997; Vice President
of New Canaan Investments, Inc.
</TABLE>
4
<PAGE>
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS
During fiscal year 1997, the Board held 11 meetings. Each director attended
at least 75% of the meetings of the Board and the committees of which such
director was a member. The Board's committees include audit, compensation and
stock option committees. The current members of those committees, number of
meetings held by each committee in fiscal 1997 and a brief description of the
functions performed by each committee are set forth below:
Audit Committee (2 meetings). Steve Bartlett and James R. Parish (Mr.
Parish did not stand for re-election to the Board at the 1997 Annual
Meeting of Stockholders of the Company). The primary responsibilities of
the audit committee are to review with the Company's auditors, the scope of
the audit procedures to be applied in the conduct of the annual audit and
the results of the annual audit.
Compensation Committee (2 meetings). Steve Bartlett, James D. Ireland
III, James H. Miller and James R. Parish. The primary responsibilities of
the compensation committee are to review and recommend to the Board the
setting of the compensation levels of the executive officers of the
Company, including those officers who are also directors, and to oversee
compensation of the officers of the Company's subsidiaries.
Stock Option Committee (2 meetings). Steve Bartlett and James R. Parish.
The stock option committee administers the Company's employee benefits
plans, including the Company's 1994 Long-Term Incentive Plan and, in
accordance with Rule 16b-3 promulgated under Securities Exchange Act of
1934, as amended (the "Exchange Act"), makes the final determination
regarding grants of stock options, restricted shares and other stock based
awards to eligible employees under the 1994 Long-Term Incentive Plan.
Compensation Committee Interlocks and Insider Participation. James D.
Ireland III, James H. Miller and Stephen P. Smiley served as members of the
compensation committee of the Board of Directors during fiscal 1997. Mr.
Smiley resigned from the Board in June 1997. Mr. Ireland was elected Chairman
of the Board of the Company in April 1996. Mr. Smiley served as Chairman of
the Board of the Company from September 1992 until April 1996 and Mr. Miller
served as interim President of the Company from February to April 1996.
The Merger Agreement. The Merger Agreement provides that at the request of
Kerr, the Company will also cause persons designated by Kerr to constitute at
least the same percentage (rounded up to the next whole number) as is on the
Board of (i) each committee of the Board, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board of
directors. After the consummation of the Merger, it is expected that the Board
will act to appoint new members to the Audit and Compensation Committees. To
the Company's knowledge, no decision has been made by the Kerr Designees
regarding the membership of any such committees of the Board.
COMPENSATION OF DIRECTORS
Fees and Expenses; Other Arrangements. In fiscal 1997, all directors of the
Company, except those who were full time employees, were entitled to
reimbursement of out-of-pocket expenses in connection with attendance at Board
meetings, plus fees of generally $500 per meeting ($200 for some meetings) and
$1,000 per month. Beginning in May 1996, Mr. Ireland, as the Chairman of the
Board, began receiving compensation of $50,000 per year in addition to
director's meeting fees. In fiscal 1997 he received $4,167 per month for
serving as Chairman of the Board, in addition to director's fees of $5,000. In
recognition of the significant time and effort devoted by Mr. Ireland in
connection with the sale of the Company, the Board voted at its meeting on
January 27, 1998 to pay Mr. Ireland a bonus of $50,000.
Director Stock Options. At the 1994 Annual Meeting, stockholders approved
the 1994 Director Stock Option Plan, pursuant to which each newly elected
nonemployee director shall be granted an option to purchase 1,000 shares of
Common Stock and each nonemployee director and the Chairman of the Board will
receive an option to purchase 500 shares of Common Stock on June 30, each
year. The options under the plan are granted at fair market value on the grant
date and become exercisable, subject to certain conditions, in five equal
annual installments on the first five anniversaries of the grant date and
terminate ten years from the grant date, unless
5
<PAGE>
terminated sooner. Pursuant to the plan, Messrs. Bartlett and Kern each
received an option to purchase 1,000 shares of Common Stock at $3.375 and
$3.50 per share, respectively, upon their election as directors, and on June
30, 1997 Messrs. Bartlett, Ireland, Miller, Kern and Parish each received
options to purchase 500 shares of Common Stock at $4.00 per share.
EXECUTIVE OFFICERS; BUSINESS EXPERIENCE
Executive officers serve at the discretion of the Board. The following table
sets forth certain information concerning the executive officers of the
Company (as of January 30, 1998) who are expected to serve in such capacity
until the consummation of the Merger (none of whom has a family relationship
with another executive officer):
<TABLE>
<CAPTION>
NAME OFFICE HELD SINCE
---- ----------- -----
<S> <C> <C>
James D. Ireland III...... Chairman of the Board 1996(1)
Eddie Lesok............... President and Chief Executive Officer 1996(1)
Arno F. Pirkau............ Executive Vice President 1988(1)
Cynthia R. Morris......... Executive Vice President, Chief Financial 1993
Officer, Treasurer and Secretary
</TABLE>
- --------
(1) Member of the Board. See "--Board Biographical Information" above for more
information.
Ms. Morris, age 43, has held her office since September 1993. From July 1991
until September 1993 she was an Audit Partner in the public accounting firm of
Price Waterhouse LLP, where she began her career in 1980. Ms. Morris was the
partner-in-charge of the Mergers and Acquisitions Group of Price Waterhouse in
Dallas. At Price Waterhouse she served retail, franchising and manufacturing
clients.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of January 30, 1998, the following are the only persons known to the
Company to be the beneficial owners of more than five percent of the Common
Stock:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED CLASS
------------------- ------------ -------
<S> <C> <C>
James M. Hoak, Jr. .................................... 438,200(1) 10.6%
13355 Noel Road, Suite 1350
Dallas, Texas 75240
Pioneering Management Corporation...................... 240,000(2) 5.8%
60 State Street
Boston, Massachusetts 02114
Wellington Management Company.......................... 240,000(3) 5.8%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- --------
(1) Based on Amendment No. 3 to Schedule 13D dated January 23, 1997 and filed
with the Securities and Exchange Commission (the "Commission"), Mr. Hoak
has sole voting and dispositive power with respect to such shares.
(2) Based on Amendment No. 4 to Schedule 13G dated January 30, 1998 and filed
with the Commission, Pioneering Management Corporation, a registered
investment advisor, has sole voting and dispositive power with respect to
such shares.
6
<PAGE>
(3) Based on Amendment No. 1 to Schedule 13G dated January 24, 1997 and filed
with the Commission, Wellington Management Company, a registered
investment advisor, has shared dispositive power with respect to such
shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of January 30, 1998 the beneficial
ownership of Common Stock (the only equity securities of the Company presently
outstanding) by each director of the Company, each named executive listed in
the Summary Compensation Table and all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NUMBER PERCENT OF
OF SHARES CLASS
NAME --------- ----------
<S> <C> <C>
Directors
Steve Bartlett....................................... 4,000 *
James D. Ireland III................................. 62,438(1) 1.5%(1)
Wayne Kern........................................... -- --
Eddie Lesok.......................................... 36,471(2) *
James H. Miller...................................... 63,130(3) 1.5%(3)
Arno F. Pirkau....................................... 62,428(4) 1.5%(4)
Named Executive officer (excluding
any director named above)
Cynthia R. Morris.................................... 68,000(5) 1.6%(5)
All directors and executive
officers as a group (6 persons)...................... 294,201(6) 7.0%(6)
</TABLE>
- --------
* Less than 1%
(1) Includes (i) 1,989 shares, of which Mr. Ireland disclaims beneficial
ownership, owned by his wife, (ii) 1,990 held in custodial accounts for
the benefit of his minor children and (iii) 1,400 shares with respect to
which Mr. Ireland has the right to acquire beneficial ownership upon
exercise of currently exercisable options (the percentage is calculated on
the basis that such shares are declared outstanding).
(2) Includes 20,000 shares with respect to which Mr. Lesok has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares are
deemed outstanding.
(3) Includes 1,400 shares with respect to which Mr. Miller has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares are
deemed outstanding.
(4) Includes 12,000 shares with respect to which Mr. Pirkau has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares are
deemed outstanding.
(5) Includes 67,000 shares with respect to which Ms. Morris has the right to
acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares are
deemed outstanding.
(6) Includes 101,800 shares with respect to which such persons have the right
to acquire beneficial ownership upon exercise of currently exercisable
options and the percentage is calculated on the basis that such shares are
deemed outstanding.
7
<PAGE>
EXECUTIVE COMPENSATION
The Compensation Committee Report appearing below and the information
presented herein under the caption "Executive Compensation -- Performance
Graph" shall not be deemed to be "filed" with the Commission or subject to the
liabilities of Section 18 of the Exchange Act, and such information shall not
be deemed to be incorporated by reference into any filing made by the Company
under the Exchange Act or under the Securities Act of 1933.
REPORT OF THE COMPENSATION COMMITTEE AND
THE STOCK OPTION COMMITTEE
To the Stockholders of
Sun Coast Industries, Inc.:
For the fiscal year ended June 30, 1997, the compensation committee of the
Board consisted of Steve Bartlett, James D. Ireland III, James H. Miller and
James R. Parish. The committee makes recommendations to the Board concerning
the compensation of the Company's executive officers and oversees compensation
of the officers of the Company's subsidiaries. In administering the Company's
compensation program, the compensation committee recommends grants of stock
options and awards of restricted shares and other stock based awards to the
Company's stock option committee, which for the fiscal year ended June 30,
1997 consisted of Steve Bartlett and James R. Parish. The Board has selected
the stock option committee to administer the 1994 Long-Term Incentive Plan and
make the final determination regarding grants of stock options, restricted
shares and other stock based awards to eligible employees under such plan.
Compensation Philosophy
The compensation philosophy that is applicable to the Company's executive
officers conforms to the compensation philosophy applicable to the Company's
employees generally. The Company's compensation program is designed to:
. provide compensation comparable to that offered by companies with
similar businesses, allowing the Company to attract, retain and motivate
competent employees who have the ability and experience to contribute
materially to its long-term success;
. provide compensation relative to, and differentiated by, the individual
employee's performance;
. provide incentive compensation that varies directly with both Company
performance and the individual employee's contribution to that
performance; and
. provide an appropriate linkage between compensation and the creation of
shareholder value through awards tied to the Company's performance and
through facilitating employee stock ownership.
Executive Officers' Compensation Program
The Company's executive officers' compensation program is comprised of base
salary, annual performance bonus, long-term incentive compensation
(traditionally in the form of stock options, although the 1994 Long-Term
Incentive Plan permits other stock-based awards) and various benefits,
including medical benefits and a profit sharing and savings plan, which are
generally available to all employees of the Company. During fiscal 1995 the
Committee retained a compensation consultant to evaluate the Company's
compensation programs and make recommendations for their refinement.
Base Salary
The compensation committee reviewed the salaries of the Company's executive
officers in fiscal 1995. The committee made salary decisions about the
executive officers based upon the elements of its compensation
8
<PAGE>
philosophy set forth above. First, salaries were competitively set relative to
other companies in the same industry and other companies of comparable size.
Second, the compensation committee considered the performance of the
individual executive officers with respect to the areas of his or her
responsibility, including an assessment of the value of each to the Company.
Third, internal equity among employees was factored into the decision.
Finally, the compensation committee considered the Company's financial
performance and its ability to absorb any increases in salaries.
Annual Performance Bonus
Each executive officer, including the Chief Executive Officer, is eligible
to receive an annual performance bonus award. These bonuses are paid pursuant
to a bonus pool formula established in advance of each fiscal year. The
formula recognizes Company earnings results, budget projections and trends in
both Company financial results and United States industrial compensation
practices. Maximum dollar ceilings are defined for each executive officer,
tied to performance goals.
Stock Option Awards
From time to time, the stock option committee has granted options under
plans to its executive officers to align the officers' interests with those of
the stockholders. Under the 1994 Long-Term Incentive Plan, the stock option
committee may grant to the Company's executive officers stock options,
restricted stock and other stock based awards. In general, stock based awards
are granted on an annual basis if warranted by the Company's growth and
profitability. The compensation committee and stock option committee believe
that stock options and stock based awards encourage the recipients to enhance
the value of the Common Stock throughout the option or award period by
continually improving the Company's performance. The compensation committee,
in formulating its recommendations to the stock option committee in charge of
making the final determination regarding grants of awards under the 1994 Long-
Term Incentive Plan, and the stock option committee, in granting options or
other stock based awards to an executive officer, evaluate the Company's
overall financial performance for the year, the desirability of long-term
service from the officer and the size of grants to executives with similar
responsibilities at other companies. To encourage long-term performance,
options typically vest over a five-year period and remain outstanding for ten
years.
Chief Executive Officer Compensation
In April 1996, Eddie Lesok began his service to the Company as Chief
Executive Officer upon the resignation of R. Carter Pate. In setting the
compensation for the Chief Executive Officer, the compensation committee
reviewed an analysis of the compensation levels of executives at comparable
publicly traded plastics manufacturing companies. This analysis included
information regarding base salary, bonus, stock option grants and overall
market performance of these companies. The compensation committee also had
recommendations from management and information available from the executive
compensation study performed by the Company's compensation consultant which
presented market averages for various executive level positions.
THE COMPENSATION COMMITTEE
Steve Bartlett
James D. Ireland II
James H. Miller
James R. Parish
THE STOCK OPTION COMMITTEE
Steve Bartlett
James R. Parish
9
<PAGE>
The following table summarizes the compensation during the past three years
of the Company executive officers whose compensation exceeded $100,000 during
the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
SECURITIES
UNDERLYING
NAME AND OPTIONS
PRINCIPAL OTHER ANNUAL (NO. OF ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION SHARES) COMPENSATION
--------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eddie Lesok............. 1997 $240,000 $130,000(2) $7,200(3) 10,000 $ 0
President and Chief 1996 $ 46,462 $ 15,000 $1,340(3) 100,000 $ 0
Executive Officer of
the Company(1)
Arno F. Pirkau.......... 1997 $154,000 $ 75,395 $7,800(3) 7,500 $20,311(4)
Executive Vice 1996 $144,000 $ 60,000 $7,800(3) 0 $13,105(4)
President of the 1995 $144,000 $ 40,000 $8,294(3) 5,000 $ 5,023(4)
Company and President
of
Sun Coast Closures,
Inc.
Cynthia R. Morris ...... 1997 $160,000 $ 66,000 $7,200(3) 7,500 $ 844(6)
Executive Vice 1996 $160,000 $225,000(5) $7,200(3) 20,000 $ 1,000(6)
President, Chief 1995 $160,000 $ 20,000 $ 0 7,500 $ 2,400(6)
Financial Officer,
Treasurer and Secretary
of the Company
</TABLE>
- --------
(1) Mr. Lesok was elected President and Chief Executive Officer of the Company
in April 1996, at an annual salary of $240,000 with bonus provisions for
achieving target results.
(2) Of this amount, $53,600 was awarded to Mr. Lesok in the form of 13,400
shares of Common Stock issued from the Company's treasury.
(3) The Company pays car allowances of $600 per month to each of Mr. Lesok and
Ms. Morris and $650 per month to Mr. Pirkau and paid various other auto
expenses for Mr. Pirkau.
(4) These amounts consisted of term life insurance premiums, club dues, profit
sharing match and other non-monetary awards.
(5) This amount was paid pursuant to a Retention Bonus Agreement entered into
by the Company and Ms. Morris in March 1996, following a determination by
the Board of Directors that it was in the best interest of the Company to
assure that the Company would have her continued dedication following the
resignation of R. Carter Pate and during the transition to a new Chief
Executive Officer.
(6) These amounts represent profit sharing match.
10
<PAGE>
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the fiscal year ended June 30, 1997 to
each of the named executive officers.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE (1)
-------------------------------------------------- -------------
NUMBER OF SECURITIES
UNDERLYING OPTIONS % OF TOTAL OPTIONS EXERCISE
GRANTED GRANTED TO EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME (NO. OF SHARES) IN FISCAL YEAR ($/SH) DATE PRESENT VALUE
---- -------------------- -------------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Eddie Lesok............. 10,000 19.9% $4.00 6/30/2007 $26,900
Arno F. Pirkau.......... 7,500 14.9% $4.00 6/30/2007 $20,175
Cynthia R. Morris....... 7,500 14.9% $4.00 6/30/2007 $20,175
</TABLE>
- --------
(1) The "grant date present value" shown is a hypothetical value based upon
application of the "Black-Scholes" model which often is used to estimate
the market value of transferable options by calculating the probability,
based on the volatility of the stock subject to the options, that the
stock price will exceed the option exercise price at the end of the option
term. The Company's stock options are not transferable and, the Black-
Scholes estimate notwithstanding, an option granted under the Stock Option
Plan will have value to the optionee only if and to the extent the market
price of the Company's stock rises above the market price on the date the
option was granted.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the fiscal year ended June
30, 1997, and unexercised options held at June 30, 1997, by each of the named
executive officers. None of the executive officers has been granted SARs.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF
OPTIONS UNEXERCISED
AT 6/30/97 IN-THE-MONEY
EXERCISABLE/ OPTIONS AT
SHARES UNEXERCISABLE 6/30/97(1)
ACQUIRED VALUE (NO. OF EXERCISABLE/
NAME ON EXERCISE REALIZED SHARES) UNEXERCISABLE
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Eddie Lesok.................... 0 $0 20,000/90,000 $0/$0
Arno F. Pirkau................. 0 $0 12,000/15,500 $0/$0
Cynthia R. Morris.............. 0 $0 67,000/28,000 $0/$0
</TABLE>
- --------
(1) The high sales price per share on June 30, 1997 was $4.625 as reported by
the New York Stock Exchange.
CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into Severance Agreements with Mr. Lesok, Mr. Pirkau
and Ms. Morris. The purpose of the Agreements is to induce these key employees
to remain in the employment of the Company and to assure it of both present
and future continuity of services by the employees in the event of any actual
or threatened change of control of the Company. The Severance Agreements
provide severance pay and continuation of certain benefits should the Company
or any successor terminate the executive's employment for any reason other
than "cause," or should the executive terminate his or her employment for
"good reason" within one year following a Change of Control. Upon any such
termination, the executive would be entitled to receive his or her base annual
salary multiplied by a fraction (the "Employment Term Factor"), the numerator
of which is the sum of twelve plus the number of years the executive has
served with the Company, and the
11
<PAGE>
denominator of which is twelve. An executive's base annual salary is defined
as the greater of (i) the executive's annual salary on the date of the
earliest Change of Control to occur during the eighteen months prior to the
executive's termination or (ii) the executive's annual salary on the date of
the executive's termination, plus any bonuses or special incentive payments
received in the prior twelve months.
Generally, a "Change of Control" will be deemed to have occurred with
respect to the Severance Agreements in any of the following circumstances:
(i) the individuals serving as directors of the Company as of August 8,
1995, and those replacements or additions subsequently approved by a
majority vote of such directors, cease to make up at least 51% of the
Board;
(ii) a merger, consolidation or reorganization in which the stockholders
of the Company prior to such merger, consolidation or reorganization
ultimately own 50% or less of the merged, consolidated or reorganized
company; or
(iii) a liquidation or dissolution of the Company or disposition of all
or substantially all of the Company's assets.
The Company's 1994 Long-Term Incentive Plan contains certain "changes of
control" provisions which are applicable to awards issued under this plan. The
committee designated to administer the 1994 Long-Term Incentive Plan is
required to take action with respect to outstanding awards under the plan in
the event of any of the following: (i) the merger, consolidation or other
reorganization of the Company in which the outstanding Common Stock is
converted into or exchanged for a different class of securities of the
Company, a class of securities of any other issuer, cash or other property;
(ii) the sale, lease or exchange of all or substantially all of the assets of
the Company to another entity; (iii) the adoption by the shareholders of the
Company of a plan of liquidation and dissolution; (iv) the acquisition by any
person or entity of beneficial ownership of more than 20% of the Company's
outstanding capital stock; or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board. In
such events, the Committee may (i) accelerate the vesting of awards, (ii)
require surrender of awards in exchange for payment based on the terms of the
awards or (iii) make such other adjustments to such awards as the Committee
deems appropriate to reflect the corporate change.
The Company's Bylaws, as amended, provide for mandatory indemnification of
and advancement of expenses to officers and directors, including former
directors and officers, of the Company in circumstances involving a "change of
control." The Company has entered into separate agreements with each of its
officers and directors which embody these indemnification provisions.
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
during the past five years with the average cumulative total return during the
same period on the stocks which comprise the Dow Jones Equity Market Index and
the Industrial Sector, Containers and Packaging. The Dow Jones Equity Market
Index is comprised of 700 United States companies in the industrial,
transportation, utilities and financial industries, weighted by market
capitalization. The graph assumes that $100 was invested on June 30, 1992, in
the Common Stock and in the other indices, and that all dividends were
reinvested and are weighted on a market capitalization basis at the time of
each reported data point. The stock price performance shown below is not
necessarily indicative of future price performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SUN COAST INDUSTRIES, INC., DOW JONES EQUITY MARKET INDEX
AND INDUSTRIAL SECTOR, CONTAINERS AND PACKAGING
JUNE 30, 1992--JUNE 30, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dow Equity Market Index 100.00 114.95 116.02 145.99 183.99 246.03
- -------------------------------------------------------------------------------------------
Containers & Packaging 100.00 96.40 99.75 124.76 124.36 156.44
- -------------------------------------------------------------------------------------------
Sun Coast Industries, Inc. 100.00 191.49 229.79 161.70 72.34 68.09
- -------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
CERTAIN TRANSACTIONS
On January 15, 1996, the Company loaned Arno F. Pirkau $33,000 to exercise
options to purchase Common Stock. This loan was made on a recourse basis at an
interest rate equal to the Company's cost of funds.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and any persons who own more than 10% of a registered
class of the Company's equity securities to file with the Securities and
Exchange Commission and the New York Stock Exchange reports of ownership and
changes in ownership of the Common Stock. Officers, directors and greater than
10% stockholders are required to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on review of the copies of these
reports furnished to the Company or written representations that no other
reports were required, the Company believes that, during fiscal 1997, all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that a report on Form 5 was
inadvertently filed late for each of Steve Bartlett, James D. Ireland III,
Wayne Kern, Eddie Lesok, James H. Miller, James R. Parish, Arno F. Pirkau and
Cynthia R. Morris disclosing grants of stock options to such persons on June
30, 1997 and an award of 13,400 shares of Common Stock to Eddie Lesok as part
of his fiscal 1997 bonus.
14
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
by and among
KERR GROUP, INC.
SAFFRON ACQUISITION CORP.
and
SUN COAST INDUSTRIES, INC.
dated as of
January 28, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE OFFER AND MERGER
<S> <C> <C>
Section 1.1 The Offer.......................................................2
Section 1.2 Company Actions.................................................5
Section 1.3 Directors.......................................................7
Section 1.4 The Merger......................................................9
Section 1.5 Effective Time.................................................10
Section 1.6 Closing........................................................10
Section 1.7 Directors and Officers of the Surviving
Corporation..................................................10
Section 1.8 Effect of the Merger...........................................10
Section 1.9 Subsequent Actions.............................................11
Section 1.10 Stockholders' Meeting..........................................11
Section 1.11 Merger Without Meeting of Stockholders.........................12
<CAPTION>
ARTICLE II
CONVERSION OF SECURITIES
<S> <C> <C>
Section 2.1 Conversion of Capital Stock....................................12
Section 2.2 Dissenting Shares..............................................13
Section 2.3 Surrender of Shares; Stock Transfer
Books........................................................14
Section 2.4 Company Stock Plans............................................17
<CAPTION>
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
<S> <C> <C>
Section 3.1 Organization...................................................19
Section 3.2 Capitalization.................................................20
Section 3.3 Authorization; Validity of Agreement;
Company Action...............................................23
Section 3.4 Consents and Approvals; No Violations..........................24
Section 3.5 SEC Reports and Financial Statements...........................25
Section 3.6 Absence of Certain Changes.....................................25
Section 3.7 No Undisclosed Liabilities.....................................26
Section 3.8 Litigation.....................................................26
Section 3.9 Employee Benefit Plans; ERISA..................................27
Section 3.10 Taxes..........................................................32
Section 3.11 Contracts......................................................33
Section 3.12 Real Property..................................................34
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 3.13 Intellectual Property..........................................35
Section 3.14 Labor Matters..................................................39
Section 3.15 Compliance with Laws...........................................40
Section 3.16 Environmental Matters..........................................41
Section 3.17 Product Liability..............................................43
Section 3.18 Information in Proxy Statement.................................44
Section 3.19 Potential Conflict of Interest.................................44
Section 3.20 Opinion of Financial Advisor...................................44
Section 3.21 Insurance......................................................44
Section 3.22 Suppliers and Customers........................................45
Section 3.23 Accounts Receivable; Inventory.................................45
Section 3.24 Title and Condition of Properties..............................46
Section 3.25 Rights Agreement...............................................46
Section 3.26 Borden Disposition.............................................47
<CAPTION>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
<S> <C> <C>
Section 4.1 Organization...................................................47
Section 4.2 Authorization; Validity of Agreement;
Necessary Action.............................................48
Section 4.3 Consents and Approvals; No Violations..........................48
Section 4.4 Information in Proxy Statement.................................49
Section 4.5 Financing Arrangements.........................................50
Section 4.6 No Prior Activities............................................50
Section 4.7 Brokers........................................................50
<CAPTION>
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
<S> <C> <C>
Section 5.1 Acquisition Proposals..........................................50
Section 5.2 Interim Operations of the Company..............................51
Section 5.3 No Solicitation................................................55
<CAPTION>
ARTICLE VI
ADDITIONAL AGREEMENTS
<S> <C> <C>
Section 6.1 Proxy Statement................................................57
Section 6.2 Meeting of Stockholders of the Company.........................57
Section 6.3 Additional Agreements..........................................57
Section 6.4 Notification of Certain Matters................................58
Section 6.5 Access; Confidentiality........................................58
Section 6.6 Consents and Approvals.........................................60
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 6.7 Brokers or Finders.............................................61
Section 6.8 Publicity......................................................61
Section 6.9 Agreement to Defend and Indemnify..............................61
Section 6.10 Purchaser Compliance...........................................63
Section 6.11 Reasonable Best Efforts........................................63
Section 6.12 Stock Subscription Warrant.....................................64
<CAPTION>
ARTICLE VII
CONDITIONS
<S> <C> <C>
Section 7.1 Conditions to Each Party's Obligation
to Effect the Merger.........................................64
Section 7.2 Conditions to Obligations of Parent and
the Purchaser to Effect the Merger...........................65
<CAPTION>
ARTICLE VIII
TERMINATION
<S> <C> <C>
Section 8.1 Termination....................................................65
Section 8.2 Effect of Termination..........................................67
<CAPTION>
ARTICLE IX
MISCELLANEOUS
<S> <C> <C>
Section 9.1 Amendment and Modification.....................................68
Section 9.2 Non-survival of Representations and
Warranties...................................................68
Section 9.3 Expenses.......................................................69
Section 9.4 Notices........................................................69
Section 9.5 Interpretation.................................................70
Section 9.6 Counterparts...................................................70
Section 9.7 Entire Agreement; No Third Party
Beneficiaries................................................70
Section 9.8 Severability...................................................71
Section 9.9 Governing Law..................................................71
Section 9.10 Assignment.....................................................71
Section 9.11 Best Knowledge.................................................72
</TABLE>
iii
<PAGE>
Index of Defined Terms
----------------------
<TABLE>
<CAPTION>
Defined Term Section No.
- ------------ -----------
<S> <C>
Acquisition Proposal......................................................5.1
Acquisition Proposal Interest.............................................5.1
Appointment Date..........................................................5.2
Borden Agreement..................................................Article III
Borden Disposition.......................................................3.25
By-Laws...................................................................1.4
Certificate of Incorporation..............................................1.4
Certificates...........................................................2.3(b)
Closing...................................................................1.6
Closing Date..............................................................1.6
Code..............................................................3.9(b)(vii)
Common Stock.......................................................... 3.2(a)
Company..............................................................Recitals
Company Agreements........................................................3.4
Company Balance Sheet.................................................3.23(a)
Company Board of Directors...........................................Recitals
Company Disclosure Schedule.......................................Article III
Company Material Adverse Effect........................................3.1(a)
Company SEC Documents.....................................................3.5
Computer Software.....................................................3.13(b)
Confidentiality Agreement..............................................5.3(b)
DGCL.................................................................Recitals
Disclosure Documents...................................................6.5(c)
Dissenting Shares......................................................2.2(a)
Dissenting Stockholders................................................2.1(c)
Effective Time............................................................1.5
Encumbrances...........................................................3.2(b)
Environmental Claim...................................................3.16(c)
Environmental Laws....................................................3.16(a)
ERISA Affiliate........................................................3.9(a)
ERISA Plans............................................................3.9(a)
Exchange Act...........................................................1.1(a)
Financial Statements......................................................3.5
GAAP......................................................................3.5
Governmental Entity.......................................................3.4
HSR Act...................................................................3.4
Indebtedness...........................................................3.2(d)
Indemnified Party......................................................6.9(a)
Independent Directors..................................................1.3(c)
Intellectual Property.................................................3.13(c)
Major Stockholder....................................................Recitals
Materials of Environmental Concern....................................3.16(a)
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Merger....................................................................1.4
Merger Consideration...................................................2.1(c)
Minimum Condition......................................................1.1(a)
Offer................................................................Recitals
Offer Documents........................................................1.1(b)
Offer Price..........................................................Recitals
Offer to Purchase......................................................1.1(a)
Option Agreement.....................................................Recitals
Options................................................................2.4(a)
Parent...............................................................Recitals
Paying Agent...........................................................2.3(a)
PBGC...................................................................3.9(c)
Person....................................................................9.5
Plans..................................................................3.9(a)
Proxy Statement...................................................1.10(a)(ii)
Purchaser............................................................Recitals
Purchaser Common Stock....................................................2.1
Purchaser Representatives..............................................6.5(a)
Real Property.........................................................3.12(a)
Rights...............................................................Recitals
Rights Agreement.....................................................Recitals
SARs...................................................................2.4(a)
Schedule 14D-l.........................................................1.1(b)
Schedule 14D-9.........................................................1.2(b)
SEC....................................................................1.1(b)
Secretary of State........................................................1.5
Securities Act............................................................3.5
Sellers..................................................................3.26
Shares...............................................................Recitals
SPD................................................................3.9(b)(iv)
Special Meeting....................................................1.10(a)(i)
Stock Plans............................................................2.4(a)
Stockholder Agreement................................................Recitals
Subsidiary.............................................................3.1(a)
Superior Proposal......................................................5.3(b)
Surviving Corporation.....................................................1.4
Tax Authority.........................................................3.10(b)
Tax Return............................................................3.10(b)
Taxes.................................................................3.10(b)
Termination Fee........................................................8.2(b)
Transactions...........................................................1.2(a)
Transmittal Documents..................................................2.3(b)
Voting Debt............................................................3.2(a)
WARN Act..............................................................3.14(b)
Warrant................................................................3.2(a)
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated as of January 28, 1998, by and among Kerr Group, Inc., a
Delaware corporation ("Parent"), Saffron Acquisition Corp., a Delaware
------
corporation and a wholly owned subsidiary of Parent (the "Purchaser"), and Sun
---------
Coast Industries, Inc., a Delaware corporation (the "Company").
-------
WHEREAS, the Board of Directors of each of Parent, the Purchaser and
the Company has approved, and deems it advisable and in the best interests of
its respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser make a
cash tender offer (the "Offer") to acquire any and all shares (the "Shares") of
----- ------
the issued and outstanding common stock, $.01 par value, of the Company,
including the associated Common Stock Purchase Rights (the "Rights") issued
------
pursuant to the Shareholder Rights Agreement between the Company and American
Stock Transfer and Trust Company, dated December 5, 1995 (the "Rights
------
Agreement"), for $10.75 per share, net to the seller in cash (such price, or any
such higher price per Share as may be paid in the Offer, being referred to
herein as the "Offer Price");
-----------
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company have each approved the
Merger (as defined below) following the Offer in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and upon the terms and
----
subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company (the "Company Board of
----------------
Directors") has determined that the consideration to be paid for each Share in
- ---------
the Offer and the Merger is fair to the holders of such Shares and has resolved
to recommend that the holders of such Shares accept the Offer and approve this
Agreement and each of the transactions contemplated hereby upon the terms and
subject to the conditions set forth herein;
<PAGE>
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
James M. Hoak, Jr. (the "Major Stockholder") concurrently herewith is entering
-----------------
into a Stockholder Agreement (the "Stockholder Agreement"), dated as of the date
---------------------
hereof, with Parent and the Purchaser, in the form attached hereto as Exhibit A,
pursuant to which the Major Stockholder has agreed, among other things, to
tender the Shares held by him in the Offer and to grant Parent a proxy with
respect to the voting of such Shares in favor of the Merger upon the terms and
subject to the conditions set forth therein;
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Purchaser and
the Company are entering into a Company Option Agreement in the form of Exhibit
B hereto (the "Option Agreement"), pursuant to which, among other things, the
----------------
Company has granted the Purchaser an option to purchase certain newly-issued
shares of Common Stock (as hereinafter defined), subject to certain conditions;
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof, as promptly as practicable (but in no event
later than five business days after the public announcement of the execution of
this Agreement), Purchaser shall commence (within the meaning of Rule 14d-2
under the Securi-
2
<PAGE>
ties Exchange Act of 1934, as amended (the "Exchange Act")) the Offer at the
------------
Offer Price, and subject to there being validly tendered and not withdrawn prior
to the expiration of the Offer that number of Shares which represents at least a
majority of the Shares outstanding on a fully diluted basis (after giving effect
to the conversion or exercise of all outstanding options, warrants and other
rights and securities exercisable or convertible into Shares)(the "Minimum
-------
Condition") and to the other conditions set forth in Annex I hereto, shall use
- ---------
all reasonable efforts to consummate the Offer in accordance with its terms. The
obligations of the Purchaser to accept for payment and to pay for any Shares
validly tendered on or prior to the expiration of the Offer and not withdrawn
shall be subject only to the Minimum Condition and the other conditions set
forth in Annex I hereto. The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") subject to the Minimum Condition and the
-----------------
other conditions set forth in Annex I hereto and reflecting, where appropriate,
the other terms set forth in this Agreement. Purchaser shall not amend or waive
the Minimum Condition and shall not decrease the Offer Price, decrease the
number of Shares sought, change the form of consideration payable in the Offer,
propose additional conditions to the Offer or amend any other term of the Offer
in any manner adverse to the holders of the Shares without the written consent
of the Company; provided, however, that if on the initial scheduled expiration
-------- -------
date of the Offer, which shall be twenty (20) business days after the date the
Offer is commenced, all conditions to the Offer will not have been satisfied or
waived, Purchaser may, from time to time, in its sole discretion, extend the
expiration date. Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law; provided, however, that if, immediately prior to the expiration
-------- -------
date of the Offer (as it may be extended), the Shares tendered and not withdrawn
pursuant to the Offer constitute less than 90% of the outstanding Shares, the
Purchaser may extend the Offer for a period not to exceed five (5) business
days, notwithstanding that all conditions to the Offer are satisfied as of such
expiration date of the Offer.
3
<PAGE>
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
---
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-l"). 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 or sent 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 made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
furnished by the Company, in writing expressly for inclusion in the Offer
Documents. The information supplied by the Company expressly for inclusion in
the Offer Documents and by Parent or the Purchaser, expressly for inclusion in
the Schedule 14D-9 (as hereinafter defined) will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(c) Each of Parent and the Purchaser will take all steps necessary
to cause the Offer Documents 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. Each of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, will promptly (i) correct any information
provided by it for use in the Schedule 14D-1 or the Offer Documents if and to
the extent that it shall have become false or misleading in any material respect
and (ii) supplement the information provided by it specifically for use in the
Schedule 14D-1 or the Offer Documents to include any information that shall
become necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not mis-
4
<PAGE>
leading, and the Purchaser further will take all steps necessary to cause the
Schedule 14D-1 or the Offer Documents as so 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. The Company and its
counsel shall be given the reasonable opportunity to review any Offer Documents
before they are filed with the SEC. In addition, Parent and the Purchaser will
provide the Company and its counsel with any comments or other communications,
whether written or oral, Parent, the Purchaser 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.
Section 1.2 Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board of Directors, at a meeting duly called and
held, has (i) unanimously determined that each of the Agreement, the Offer and
the Merger and the Option Agreement (as hereinafter defined) are fair to and in
the best interests of the stockholders of the Company, (ii) duly approved this
Agreement, the Option Agreement, the Stockholder Agreement, and the transactions
contemplated hereby and thereby, including the Offer and the Merger,
(collectively, the "Transactions"), and such approval constitutes approval of
------------
the Offer, this Agreement, the Stockholder Agreement, the Option Agreement and
the transactions contemplated hereby and thereby, including the Merger, for
purposes of Section 203 of the DGCL, such that Section 203 of the DGCL will not
apply to the transactions contemplated hereby or thereby, and (iii) resolved to
recommend that the stockholders of the Company accept the Offer, tender their
Shares thereunder to the Purchaser and approve and adopt this Agreement and the
Merger.
(b) As soon as practicable after the Purchaser has filed the Offer
Documents with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments or supplements thereto and including the exhibits thereto, the
"Schedule 14D-9") which shall, subject to the provisions of Section 5.3(c)
- ---------------
contain the recommendation referred to in clause (iii) of Section 1.2(a)
5
<PAGE>
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 or sent 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 made therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to information furnished by Parent or the Purchaser in writing for
inclusion in the Schedule 14D-9. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of the Shares, in each case, as and to the extent
required by applicable Federal securities laws. The Company shall mail, or cause
to be mailed, such Schedule 14D-9 to the stockholders of the Company at the same
time the Offer Documents are first mailed to the stockholders of the Company
together with such Offer Documents. Each of the Company, on the one hand, and
Parent and the Purchaser, on the other hand, will promptly (i) 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 (ii)
supplement the information provided by it specifically for use in the Schedule
14D-9 to include any information that shall become necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to 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 Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Parent, the Purchaser
and their counsel with any comments or other communications, whether written or
oral, that the Company or its counsel may receive from time to time from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments or other communications.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels, security position
listings and
6
<PAGE>
any available listing or computer file containing the names and addresses of all
record holders of Shares, each as of a recent date, and shall promptly furnish
the Purchaser with such additional information (including, but not limited to,
updated mailing labels, security position listings and available listings or
computer files containing the names and addresses of all recordholders of
Shares) and assistance as the Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of the Shares.
Section 1.3 Directors.
---------
(a) Promptly upon the purchase of and payment for any Shares by the
Purchaser pursuant to the Offer, the Minimum Condition having been satisfied,
and from time to time thereafter as Shares are acquired by the Purchaser, Parent
shall be entitled to designate such number of directors, subject to compliance
with Section 14(f) of the Exchange Act, rounded up to the next whole number, on
the Company Board of Directors as is equal to the product of the total number of
directors on such Board (giving effect to the directors designated by Parent
pursuant to this sentence) multiplied by the percentage that the number of
Shares which Purchaser or any affiliate of the Purchaser owns beneficially bears
to the total number of Shares then outstanding. In furtherance thereof, the
Company shall, upon the request of Parent, promptly either increase the size of
its Board of Directors or use its best efforts to secure the resignations of
such number of its incumbent directors, or both as is necessary to enable
Parent's designees to be elected to the Company Board of Directors in accordance
with this Section 1.3 and shall cause Parent's designees to be so elected. At
such time, the Company shall, if requested by Parent, also cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company Board of Directors of (i) each
committee of the Company Board of Directors, (ii) each board of directors (or
similar body) of each Subsidiary (as hereinafter defined) of the Company and
(iii) each committee (or similar body) of each such board.
(b) Subject to applicable law, the Company shall promptly take all
actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-l
promul-
7
<PAGE>
gated thereunder in order to fulfill its obligations under Section 1.3(a)
hereof, and shall include in the Schedule 14D-9 mailed to stockholders promptly
after the commencement of the Offer (or an amendment thereof or an information
statement pursuant to Rule 14f-1 if the Purchaser has not theretofore designated
directors) such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under Section 1.3(a). Parent or the Purchaser shall supply the
Company information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.3 are in addition to and shall not limit any rights
which the Parent, Purchaser or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(c) In the event that Parent's designees are elected to the Company
Board of Directors subject to the other terms of this Agreement and until the
Effective Time, the Company Board of Directors shall have at least one director
who is a director on the date hereof and who may be Steve Bartlett, James D.
Ireland, Jim H. Miller and Wayne Kern or otherwise is neither an officer of the
Company nor a designee, stockholder, affiliate or associate (within the meaning
of the Federal securities laws) of Parent (one or more of such directors, the
"Independent Directors"), provided that, in such event, if the number of
- ---------------------- -------- ----
Independent Directors shall be reduced below two for any reason whatsoever, any
remaining Independent Director shall be entitled to, or, if no Independent
Director then remains, the other directors shall designate one person to fill
one of the vacancies who shall not be a stockholder, affiliate or associate of
Parent or the Purchaser and such person shall be deemed to be an Independent
Director for purposes of this Agreement. Notwithstanding anything in this
Agreement to the contrary, in the event that Parent's designees are elected to
the Company Board of Directors, after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective Time (as hereinafter defined),
the affirmative vote of a majority of the Independent Directors shall be
required to (a) amend or terminate this Agreement on behalf of the Company, (b)
exercise or waive any of the Company's rights, benefits or remedies hereunder,
8
<PAGE>
(c) extend the time for performance of the Purchaser's obligations hereunder or
(d) take any other action by the Company Board of Directors under or in
connection with this Agreement; provided, however, that if there shall be no
-------- -------
such directors, such actions may be effected by unanimous vote of the entire
Company Board of Directors.
Section 1.4 The Merger. Upon the terms and subject to the conditions
----------
of this Agreement at the Effective Time, the Company and the Purchaser shall
consummate a merger (the "Merger") pursuant to which (a) the Purchaser shall be
------
merged with and into the Company and the separate corporate existence of the
Purchaser shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
- ----------------------
State of Delaware, and (c) the corporate existence of the Company with all of
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth in this Section 1.4. Pursuant to
the Merger, (x) the certificate of incorporation of the Company (the
"Certificate of Incorporation"), shall be amended in its entirety to read as the
- -----------------------------
certificate of incorporation of the Purchaser in effect immediately prior to the
Effective Time, except that (i) Article FIRST thereof shall read as follows:
"FIRST: The name of the Corporation is SUN COAST INDUSTRIES, INC." and (ii) the
provisions thereof regarding indemnification of directors, officers and others
shall be amended by deleting such provisions in their entirety and substituting
therefor Article X of the Certificate of Incorporation of the Company, and, as
so amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation and (y) the By-Laws of the Purchaser (the "By-Laws"), as in effect
-------
immediately prior to the Effective time (as hereinafter defined), shall be the
By-Laws of the Surviving Corporation until thereafter amended as provided by
law, by such Certificate of Incorporation or by such By-Laws except that the
provisions thereof regarding indemnification of directors, officers and others
shall be amended by deleting such provisions in their entirety and substituting
therefor Article VI of the By-laws of the Company.
9
<PAGE>
Section 1.5 Effective Time. Parent, the Purchaser and the Company
--------------
shall cause a Certificate of Merger to be executed and filed on the Closing Date
(as hereinafter defined) (or on such other date as Parent and the Company may
agree) with the Secretary of State of Delaware (the "Secretary of State") in
------------------
such form as required by, and executed in accordance with the relevant
provisions of the DGCL. The Merger shall become effective on the date on which
the Certificate of Merger is duly filed with the Secretary of State or such time
as is agreed upon by the parties and specified in the Certificate of Merger, and
such time is hereinafter referred to as the "Effective Time."
--------------
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
------- -------
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VII hereof (the "Closing Date"), at the
------------
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center,
Suite 3800, San Francisco, California, unless another date or place is agreed to
in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
---------------------------------------------------
directors of the Purchaser and the officers of the Company at the Effective Time
shall, from and after the Effective Time, be the directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the By-laws. If, at the
Effective Time, a vacancy shall exist on the Company Board of Directors or in
any office of the Surviving Corporation, such vacancy may thereafter be filled
in the manner provided by law.
Section 1.8 Effect of the Merger. At the Effective Time, the effect
--------------------
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and the Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Com-
10
<PAGE>
pany and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.9 Subsequent Actions. If at any time after the Effective
------------------
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or the Purchaser acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or the Purchaser, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all rights, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.10 Stockholders' Meeting.
---------------------
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as promptly as
---------------
practicable following the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use its
best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy
11
<PAGE>
Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement, including any amendment or supplement thereto (the
"Proxy Statement") to be mailed to its stockholders, provided that no
---------------
amendment or supplement to the Proxy Statement will be made by the Company
without consultation with Parent and its counsel and (y) to obtain the
necessary approvals of the Merger and this Agreement by its stockholders;
and
(iii) 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 this Agreement.
(b) Parent will provide the Company with the information concerning
Parent and the Purchaser required to be included in the Proxy Statement. Parent
shall vote, or cause to be voted, all of the Shares then owned by it, the
Purchaser or any of its other subsidiaries and affiliates in favor of the
approval of the Merger and the approval and adoption of this Agreement.
Section 1.11 Merger Without Meeting of Stockholders. Notwithstanding
--------------------------------------
Section 1.10 hereof, in the event that Parent, the Purchaser and any other
Subsidiaries of Parent shall acquire in the aggregate 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 shall, at the request of Parent and
subject to Article VII hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 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
12
<PAGE>
or holders of common stock, par value $.01 per share, of the Purchaser (the
"Purchaser Common Stock"):
----------------------
(a) Each issued and outstanding share of Purchaser Common Stock
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.
(b) All Shares that are owned by the Company as treasury stock and
any Shares owned by Parent, the Purchaser 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) Each Share issued and outstanding immediately before the
Effective Time (other than any Shares to be cancelled pursuant to Section 2.1(b)
and any Shares which are held by stockholders exercising appraisal rights
pursuant to Section 262 of the DGCL ("Dissenting Stockholders")) shall be
-----------------------
cancelled and extinguished and be converted into the right to receive the Offer
Price in cash, payable to the holder thereof, without interest (the "Merger
------
Consideration"), upon surrender of the certificate formerly representing such
- -------------
Share in the manner provided in Section 2.3 hereof. From and after the Effective
Time, all such Shares shall no longer be outstanding and shall be deemed to 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 2.3 hereof, without
interest, or the right, if any, to receive payment from the Surviving
Corporation of the "fair value" of such Shares as determined in accordance with
Section 262 of the DGCL.
(d) Each share of Purchaser Common Stock, issued and outstanding
immediately before the Effective Time shall thereafter represent one validly
issued, fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
Section 2.2 Dissenting Shares.
-----------------
13
<PAGE>
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares held by a holder who has demanded and perfected his demand
for appraisal of his Shares in accordance with the DGCL (including but not
limited to Section 262 thereof) and as of the Effective Time has neither
effectively withdrawn nor lost his right to such appraisal ("Dissenting Shares")
-----------------
shall not be converted into or represent a right to receive cash pursuant to
Section 2.1, but the holder thereof shall be entitled to only such rights as are
granted by the DGCL.
(b) Notwithstanding the provisions of Section 2.2(a), if any holder
of Shares who demands appraisal of his Shares under the DGCL effectively
withdraws or loses (through failure to perfect or otherwise) his right to
appraisal, then as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Shares shall automatically be converted
into and represent only the right to receive the Merger Consideration as
provided in Section 2.1(a), without interest, upon surrender of the certificate
or certificates representing such Shares pursuant to Section 2.3 hereof.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to the DGCL received by
the Company and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not
voluntarily make any payment with respect to any demands for appraisal and shall
not, except with the prior written consent of Parent, settle or offer to settle
any such demands.
Section 2.3 Surrender of Shares; Stock Transfer Books.
-----------------------------------------
(a) Before the Effective Time, the Purchaser shall designate a bank
or trust Company reasonably acceptable to the Company to act as agent for the
holders of Shares in connection with the Merger (the "Paying Agent") to receive
------------
the funds necessary to make the payments contemplated by Section 2.1(a). At the
Effective Time, the Purchaser shall deposit, or cause to be deposited, in trust
with the Paying Agent for the benefit of holders of Shares the aggregate
consideration to which
14
<PAGE>
such holders shall be entitled at the Effective Time pursuant to Section 2.1(a).
Such funds shall be invested as directed by Parent or the Surviving Corporation
pending payment thereof by the Paying Agent to holders of the Shares. Earnings
from such investments shall be the sole and exclusive property of the Purchaser
and the Surviving Corporation and no part thereof shall accrue to the benefit of
the holders of the Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Paying Agent shall mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted pursuant to
------------
Section 2.1 into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected and that the
risk of loss of 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 not inconsistent with this Agreement as Parent may specify) and
(ii) instructions for use in effecting the surrender of Certificates in exchange
for payment of the Merger Consideration (together, the "Transmittal Documents").
---------------------
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 for each Share 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 otherwise be 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 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consi-
15
<PAGE>
deration in cash as contemplated by this Section 2.3. Upon the surrender of
Certificates in accordance with the terms and instructions contained in the
Transmittal Documents, the Purchaser shall cause the Paying Agent to pay the
holder of such certificates in exchange therefor cash in an amount equal to the
Merger Consideration multiplied by the number of Shares represented by such
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing Shares held by the Purchaser or in the treasury of the
Company).
(c) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfers of
any shares of capital stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates evidencing ownership of
the Shares outstanding immediately prior to 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, they shall be cancelled and exchanged
for cash as provided in this Article II. No interest shall accrue or be paid on
any cash payable upon the surrender of a Certificate or Certificates which
immediately before the Effective Time represented outstanding Shares.
(d) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Surviving Corporation shall pay
or cause to be paid in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration for Shares represented thereby. When authorizing such
payment of the Merger Consideration in exchange therefor, the board of directors
of the Surviving Corporation may, in its discretion and as a condition precedent
to the payment thereof, require the owner of such lost, stolen or destroyed
Certificate to give the Surviving Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(e) Promptly following the date which is six months after the
Effective Time, the Surviving Corpora-
16
<PAGE>
tion shall be entitled to require the Paying Agent to deliver to it any cash
(including any interest received with respect thereto), Certificates and other
documents in its possession relating to the transactions contemplated hereby,
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 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.
(f) The Merger Consideration paid in the Merger shall be net to the
holder of Shares in cash, subject to reduction only for any applicable Federal
withholding taxes or, as set forth in Section 2.3(b), stock transfer taxes
payable by such holder.
Section 2.4 Company Stock Plans.
-------------------
(a) Prior to the consummation of the Offer the Company shall take
all actions necessary to provide that, at or immediately prior to the Effective
Time, (i) each then outstanding option to purchase Shares (the "Options") and
-------
each outstanding Stock Appreciation Right (the "SARs") granted under the
----
Company's 1994 Director Stock Option Plan, 1994 Long-Term Incentive Plan, 1993
Incentive and Non-Statutory Stock Option Plan, 1987 Incentive Stock Option Plan,
1984 Incentive Stock Option Plan and any other stock-based incentive plan or
arrangement of the Company (collectively, the "Stock Plans"), whether or not
-----------
then vested or exercisable, shall be cancelled and (ii) in consideration of such
cancellation, such holders of Options and SARs shall receive for each Share
subject to such Option or SAR an amount (subject to any applicable withholding
tax) in cash equal to the product of (A) the excess, if any, of the Offer Price
over the per Share exercise price of such Option or the per Share base price of
such SAR and (B) the number of Shares subject to such Option or SAR, whether or
not vested. The Company shall use all reasonable efforts to
17
<PAGE>
effectuate the foregoing, including without limitation amending the Stock Plans
and obtaining any necessary consents from holders of Options and SARs; provided,
--------
however, that prior to the purchase of Shares pursuant to the Offer, the Board
- -------
of Directors of the Company shall adopt such resolutions or take such other
actions as are required to adjust, effective immediately prior to the Effective
Time, the terms of each outstanding Option and SAR under the Stock Plans as to
which any such consent is not obtained prior to the Effective Time to provide
that such Option or SAR shall be converted into the right, upon exercise of such
Option or SAR and payment of the exercise price thereof, at any time after the
Effective Time, to receive an amount in cash equal to the Offer Price for each
Share subject to such Option or SAR, or, alternatively, upon the surrender and
cancellation of such Option or SAR at any time after the Effective Time to
receive an amount in cash determined by multiplying (i) the excess, if any, of
the Offer Price over the applicable exercise price of such Option or base price
of such SAR by (ii) the number of Shares subject to such Option or SAR, in
either case without interest or any other adjustment thereto.
(b) Except as may be otherwise agreed to by Parent or the Purchaser
and the Company, the Stock Plans shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted as of the Effective Time.
(c) The Company shall take all necessary actions to provide that as
of the Effective Time no holder of Options under the Stock Plans will have any
right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Option.
(d) The Company shall take all actions necessary to provide that at
or immediately prior to the Effective Time, (i) each then outstanding option or
right to acquire Shares under the Company's Employee Stock Purchase Plan (the
"Stock Purchase Plan") shall automatically be exercised or deemed exercised and
- --------------------
(ii) in lieu of the issuance of Certificates, each option or right holder shall
receive an amount in cash (subject to any applicable withholding tax) equal to
the product of (x)
18
<PAGE>
the number of Shares otherwise issuable upon such exercise and (y) the Merger
Consideration. The Company shall use all reasonable efforts to effectuate the
foregoing, including without limitation amending the Stock Purchase Plan and
obtaining any necessary consents from holders of such options or rights. The
Company (i) shall not permit the commencement of any new offering period under
the Stock Purchase Plan following the date hereof, (ii) shall not permit any
optionee or right holder to increase his or her rate of contributions under the
Stock Purchase Plan following the date hereof, (iii) shall terminate the Stock
Purchase Plan as of the Effective Time, and (iv) shall take any other actions
necessary to provide that as of the Effective Time no holder of options or
rights under the Stock Purchase Plan will have any right to receive shares of
common stock of the Surviving Corporation upon exercise of any such option or
right.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the schedule delivered to Parent prior to the
execution of this Agreement setting forth specific exceptions to the Company's
representations and warranties set forth herein and except as set forth in the
Schedules to that certain Purchase and Sale Agreement (the "Borden Agreement")
----------------
between the Company, Sun Coast Holdings, Inc. and Plastics Manufacturing
Company, as Sellers and Borden Chemical, Inc. as Buyer, dated December 22, 1997
(the "Company Disclosure Schedule"), the Company represents and warrants to
---------------------------
Parent and the Purchaser as set forth below. Each exception set forth in the
Company Disclosure Schedule is identified by reference to, or has been grouped
under a heading referring to, a specific individual section of this Agreement
and, except as otherwise specifically stated with respect to such exception,
relates only to such section.
Section 3.1 Organization.
------------
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incor-
19
<PAGE>
poration or organization and has all requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as hereinafter defined). As
used in this Agreement, the term "Subsidiary" shall mean, with respect to any
----------
party, any corporation or other organization, whether incorporated or
unincorporated or domestic or foreign to the United States of which (i) such
party or any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests 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. As used in
this Agreement, "Company Material Adverse Effect" means any event, change in or
-------------------------------
effect on the business of the Company or its Subsidiaries, taken as a whole,
that is or could reasonably be expected to be materially adverse to (i) the
business, operations, properties (including intangible properties), condition
(financial or otherwise), results of operations, assets, liabilities, regulatory
status or prospects of the Company and its Subsidiaries, taken as a whole, or
(ii) the ability of the Company to consummate any of the Transactions or to
perform its obligations under this Agreement or the Option Agreement. The
Company Disclosure Schedule sets forth in Section 3.1(a) a complete list of the
Company's Subsidiaries.
(b) The Company and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not individually
or in the aggregate have a Company Material
20
<PAGE>
Adverse Effect. Except as set forth in Section 3.1(b) of the Company Disclosure
Schedule, the Company does not own (i) any equity interest in any corporation or
other entity or (ii) marketable securities where the Company's equity interest
in any entity exceeds five percent of the outstanding equity of such entity on
the date hereof.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
40,000,000 shares of common stock, par value $.01 per share (the "Common
------
Stock"). As of the date hereof, (i) 4,117,629 Shares are issued and outstanding,
- -----
(ii) no Shares are issued and held in the treasury of the Company, (iii) a total
of 593,900 Shares are reserved for issuance pursuant to the Stock Plans, of
which (A) 11,000 Shares are reserved for issuance pursuant to outstanding
Options and 14,000 Shares are reserved for issuance pursuant to future awards,
in each case under the Company's 1994 Director Stock Option Plan, (B) 232,750
Shares are reserved for issuance pursuant to outstanding Options, no Shares are
reserved in respect of outstanding SARs, no Shares have been issued as shares of
restricted stock that have not vested as of the date hereof, no Shares are
reserved in respect of outstanding Performance Shares, and 267,250 Shares are
reserved for issuance pursuant to future awards, in each case under the
Company's 1994 Long-Term Incentive Plan, (C) 63,500 Shares are reserved for
issuance pursuant to outstanding Options, no Shares are reserved for issuance
pursuant to outstanding SARs and no Shares are reserved for issuance pursuant to
future awards, in each case under the Company's 1993 Incentive and Non-Statutory
Stock Option Plan, (D) 5,400 Shares are reserved for issuance pursuant to
outstanding Options and no Shares are reserved for issuance pursuant to future
awards, in each case under the Company's 1987 Incentive Stock Option Plan, and
(E) no Shares are reserved for issuance pursuant to outstanding Options and no
Shares are reserved for issuance pursuant to future awards, in each case under
the Company's 1984 Incentive Stock Option Plan, and (iv) 119,114 Shares are
reserved for issuance upon the exercise of the warrant (the "Warrant") issued
-------
pursuant to the terms of the Stock Subscription Warrant dated January 9, 1988,
among the Company, PruSupply Capital Assets, Inc. (assigned to The Prudential
Insurance Company of America) and Sun Coast Holdings, Inc. Section 3.2(a) of the
21
<PAGE>
Company Disclosure Schedule sets forth the number of shares subject to each
outstanding Option, SAR and the Warrant, and the exercise price thereof. All the
outstanding shares of the Company's capital stock are, and all Shares which may
be issued pursuant to the exercise of outstanding Options and the Warrant will
be, when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures, notes or
other indebtedness having general voting rights (or convertible into securities
having such rights) ("Voting Debt") of the Company or any of its Subsidiaries
-----------
issued and outstanding. Except as disclosed in this Section 3.2 or as set forth
in Section 3.2(a) of the Company Disclosure Schedule, (i) there are no shares of
capital stock of the Company authorized, issued or outstanding, (ii) there are
no existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests,
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment, and (iii) except as set forth in Section 3.2(a) of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Shares, or the capital stock of the Company or any
Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, security interests, options, claims,
22
<PAGE>
mortgages, pledges, or other encumbrances and restrictions of any nature
whatsoever ("Encumbrances").
------------
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries.
(d) Other than as set forth on Section 3.2(d) of the Company
Disclosure Schedule, there is no outstanding material Indebtedness (as
hereinafter defined) of the Company or any of its Subsidiaries. Except as
identified in Section 3.2(d) of the Company Disclosure Schedule, no such
Indebtedness of the Company or its Subsidiaries contains any restriction upon
(i) the prepayment of such Indebtedness, (ii) the incurrence of Indebtedness by
the Company or its Subsidiaries, respectively, or (iii) the ability of the
Company or its Subsidiaries to grant any liens on its properties or assets. For
purposes of this Agreement, "Indebtedness" shall include (i) all indebtedness
------------
for borrowed money or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (ii) any other
indebtedness which is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations under financing leases, (iv) all obligations
in respect of acceptances issued or created, (v) all liabilities secured by any
lien on any property, and (vi) all guarantee obligations.
Section 3.3 Authorization; Validity of Agreement; Company Action.
----------------------------------------------------
(a) The Company has the necessary corporate power and authority to
execute and deliver this Agreement and the Option Agreement and, subject to
obtaining any necessary approval of this Agreement and the Merger by the
stockholders of the Company, to consummate the Transactions. The execution,
delivery and performance by the Company of this Agreement and the Option
Agreement, and the consummation by it of the Transactions, have been duly and
validly authorized by its Board of Directors and, except for obtaining the
approval of its stockholders as contemplated by Section 1.10 hereof, no other
corporate action on the part of the Company is necessary
23
<PAGE>
to authorize the execution and delivery by the Company of this Agreement and the
Option Agreement, and the consummation by it of the Transactions. Each of this
Agreement and the Option Agreement has been duly executed and delivered by the
Company and, assuming due and valid authorization, execution and delivery hereof
by Parent and the Purchaser, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought.
(b) The provisions of Section 203 of the DGCL, are not applicable to
this Agreement, the Option Agreement, the Stockholder Agreement or the other
Transactions, including the Merger and the purchase of Shares in the Offer or
pursuant to the exercise of the option granted under the Option Agreement. The
affirmative vote of the holders of a majority of the outstanding Shares is the
only vote of the holders of any class or series of the Company's capital stock
which may be necessary to approve this Agreement and the other Transactions,
including the Merger.
Section 3.4 Consents and Approvals; No Violations. Except as set
-------------------------------------
forth in Section 3.4 of the Company Disclosure Schedule and for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), none of the
-------
execution, delivery or performance of this Agreement by the Company, the
consummation by the Company of the Transactions or compliance by the Company
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation, the By-laws or similar
organizational documents of the Company or any of its Subsidiaries, state
securities laws or blue sky laws and the DGCL, (ii) require any filing with, or
permit, authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
author-
24
<PAGE>
ity or agency (a "Governmental Entity"), (iii) result in a violation or breach
-------------------
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
(the "Company Agreements") or (iv) violate any order, writ, injunction, decree,
------------------
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, except in the case of clause (ii), (iii)
or (iv) where failure to obtain such permits, authorizations, consents or
approvals or to make such filings, or where such violations, breaches or
defaults would not, individually or in the aggregate, have a Company Material
Adverse Effect. Section 3.4 of the Company Disclosure Schedule sets forth a
list of all material third party consents and approvals required to be obtained
in connection with this Agreement under the Company Agreements prior to the
consummation of the transactions contemplated by this Agreement.
Section 3.5 SEC Reports and Financial Statements. The Company has
------------------------------------
filed with the SEC, and has heretofore made available to Parent, true and
complete copies of all forms, reports, schedules, statements and other documents
required to be filed by it since July 1, 1995 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
--------------
have been amended since the time of their filing, collectively, the "Company SEC
-----------
Documents"). As of their respective dates, or if amended, as of the date of the
- ---------
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Company's Subsidiaries
is required to file any forms, reports or
25
<PAGE>
other documents with the SEC. The financial statements included in the Company
SEC Documents (the "Financial Statements") (i) have been prepared from, and are
--------------------
in accordance with, the books and records of the Company and its consolidated
Subsidiaries, (ii) comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, (iii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
----
during the periods involved (except as may be indicated in the notes thereto)
and (iv) fairly present the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and its consolidated Subsidiaries as of the times and for the
periods referred to therein, except that any such Financial Statements that are
unaudited, interim financial statements were or are subject to normal and
recurring year end adjustments.
Section 3.6 Absence of Certain Changes. Except as set forth in
--------------------------
Section 3.6 of the Company Disclosure Schedule or in the Company SEC Documents
filed prior to the date hereof, since June 30, 1997, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course. From June 30, 1997 through the date of this Agreement, there has
not occurred (i) any event, change or effect (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, individually or in the aggregate, a Company Material Adverse Effect, or
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of the Company or any of its Subsidiaries, or (iii) any material
changes in accounting principles or methods, except insofar as may be required
by a change in GAAP. Since June 30, 1997 neither the Company nor any of its
Subsidiaries has taken any of the actions prohibited by Section 5.2 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in
--------------------------
the Financial Statements and (b) for liabilities and obligations (i) incurred in
the ordinary course of business and consistent with past practice since June 30,
1997, (ii) pursuant to the terms of this Agreement or (iii) as disclosed in
Section 3.7 of
26
<PAGE>
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would be reasonably likely to
have a Company Material Adverse Effect or would be required to be reflected or
reserved against on a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto) prepared in accordance with GAAP as
applied in preparing the consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 1997. Section 3.7 of the Company Disclosure Schedule
sets forth the amount of principal and unpaid interest outstanding under each
instrument evidencing indebtedness of the Company and its Subsidiaries which
will accelerate or become due or result in a right of redemption or repurchase
on the part of the holder of such indebtedness (with or without due notice or
lapse of time) as a result of this Agreement, the Merger or the other
transactions contemplated hereby or thereby.
Section 3.8 Litigation. Except as set forth in Section 3.8 of the
----------
Company Disclosure Schedule or in the Company SEC Documents, as of the date
hereof, there is no suit, claim, action, proceeding, including, without
limitation, arbitration proceeding or alternative dispute resolution proceeding,
or investigation pending or, to the knowledge of the Company, threatened against
or affecting, the Company or any of its Subsidiaries before any Governmental
Entity that, either individually or in the aggregate, if adversely determined,
would be reasonably likely to have a Company Material Adverse Effect.
Section 3.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) Section 3.9 of the Disclosure Schedule contains a true and
complete list of each material employment, bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation right
or other stock-based incentive, severance, change-in-control, or termination
pay, hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement and each other employee benefit plan, program,
agreement or arrangement, sponsored, maintained or contributed to or required to
be contributed to by the Company or any of its Subsidiaries, or by any trade or
business, whether or
27
<PAGE>
not incorporated (an "ERISA Affiliate"), that together with the Company or any
---------------
of its Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of ERISA, for the benefit of any current or former employee
or director of the Company, or any of its Subsidiaries or any ERISA Affiliate
(the "Plans"). Section 3.9 of the Company Disclosure Schedule identifies each of
-----
the Plans that is an "employee welfare benefit plan," or "employee pension
benefit plan" as such terms are defined in Sections 3(1) and 3(2) of ERISA (such
plans being hereinafter referred to collectively as the "ERISA Plans"). None of
-----------
the Company, any of its Subsidiaries nor any ERISA Affiliate has any formal plan
or commitment, whether legally binding or not, to create any additional Plan or
modify or change any existing Plan that would affect any current or former
employee or director of the Company, any of its Subsidiaries or any ERISA
Affiliate.
(b) With respect to each of the Plans, except as set forth in Section
3.9(b) of the Company Disclosure Schedule, the Company has heretofore delivered
to the Purchaser true and complete copies of each of the following documents, as
applicable:
(i) a copy of the Plan documents (including all amendments
thereto) for each written Plan or a written description of any Plan that is
not otherwise in writing;
(ii) a copy of the annual report or Internal Revenue Service
Form 5500 Series, if required under ERISA, with respect to each ERISA Plan
for the last three Plan years ending prior to the date of this Agreement
for which such a report was filed;
(iii) a copy of the actuarial report, if required under ERISA,
with respect to each ERISA Plan for the last three Plan years ending prior
to the date of this Agreement;
(iv) a copy of the most recent Summary Plan Description ("SPD"),
---
together with all Summaries of Material Modification issued with respect to
such SPD, if required under ERISA, with respect to
28
<PAGE>
each ERISA Plan, and all other material employee communications relating to
each ERISA Plan;
(v) if the Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, if any;
(vi) all contracts relating to the Plans with respect to which
the Company, any of its Subsidiaries or any ERISA Affiliate may have any
material liability, including insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements; and
(vii) the most recent determination letter received from the IRS
with respect to each Plan that is intended to be qualified under section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
----
(c) Except as set forth in Section 3.9(c) of the Company Disclosure
Schedule, no material liability under Title IV of ERISA has been incurred by the
Company, any of its Subsidiaries or any ERISA Affiliate since the Effective Date
of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, or any of its Subsidiaries or any ERISA
Affiliate of incurring any material liability under such Title, other than
liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC"),
----
which payments have been or will be made when due. To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it
is made not only with respect to the ERISA Plans but also with respect to any
employee benefit plan, program, agreement or arrangement subject to Title IV of
ERISA to which the Company, any of its Subsidiaries or any ERISA Affiliate made,
or was required to make, contributions during the past six years.
(d) The PBGC has not instituted proceedings pursuant to Section 4042
of ERISA to terminate any of the ERISA Plans subject to Title IV of ERISA, and
to the Company's knowledge no condition exists that presents a
29
<PAGE>
material risk that such proceedings will be instituted by the PBGC.
(e) Except as set forth in Section 3.9(e) of the Company Disclosure
Schedule, with respect to each of the ERISA Plans that is subject to Title IV of
ERISA, the present value of accumulated benefit obligations under such Plan, as
determined by the Plan's actuary based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accumulated benefit obligations.
(f) None of the Company, any of its Subsidiaries, any ERISA Affiliate,
any of the ERISA Plans, any trust created thereunder, nor to the Company's
knowledge, any trustee or administrator thereof has engaged in a transaction or
has taken or failed to take any action in connection with which the Company, any
of its Subsidiaries or any ERISA Affiliate could be subject to any material
liability for either a civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a tax imposed pursuant to section 4975(a) or (b), 4976 or 4980B of
the Code.
(g) All contributions and premiums which the Company, any of its
Subsidiaries or any ERISA Affiliate is required to pay under the terms of each
of the ERISA Plans and section 412 of the Code, have, to the extent due, been
paid in full or properly recorded on the financial statements or records of the
Company or its Subsidiaries, and none of the ERISA Plans or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each of the ERISA
Plans ended prior to the date of this Agreement. No lien has been imposed under
section 412(n) of the Code or Section 302(f) of ERISA on the assets of the
Company, any of its Subsidiaries or any ERISA Affiliate, and to the Company's
knowledge no event or circumstance has occurred that is reasonably likely to
result in the imposition of any such lien on any such assets on account of any
ERISA Plan.
30
<PAGE>
(h) With respect to any ERISA Plan that is a "multiemployer plan," as
such term is defined in Section 3(37) of ERISA, (i) neither the Company, any of
its Subsidiaries nor any ERISA Affiliate has, since September 26, 1980, made or
suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA, (ii) no event has
occurred that presents a material risk of a complete or partial withdrawal,
(iii) neither the Company, each of its Subsidiaries nor any ERISA Affiliate has
any contingent liability under Section 4204 of ERISA, (iv) to the Company's
knowledge no circumstances exist that present a material risk that any such
multi-employer plan will go into reorganization, and (v) the aggregate
withdrawal liability of the Company, each of its Subsidiaries and the ERISA
Affiliates, computed as if a complete withdrawal by the Company, each of its
Subsidiaries and all of its ERISA Affiliates had occurred under each such
multiemployer plan on the date hereof, would be zero.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code.
(j) Each of the ERISA Plans that is intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified. The Company has
applied for and received a currently effective determination letter from the IRS
stating that it is so qualified, and no event has occurred which would affect
such qualified status.
(k) Any fund established under an ERISA Plan that is intended to
satisfy the requirements of section 501(c)(9) of the Code has so satisfied such
requirements.
(l) Except as set forth in section 3.9(l) of the Company Disclosure
Schedule, no amounts payable under any of the Plans or any other contract,
agreement or arrangement with respect to which the Company or any of its
Subsidiaries may have any liability could fail to be deductible for federal
income tax purposes by virtue of section 162(m) or section 280G of the Code.
(m) No Plan provides benefits, including without limitation death or
medical benefits (whether or
31
<PAGE>
not insured), with respect to current or former employees of the Company, its
Subsidiaries or any ERISA Affiliate after retirement or other termination of
service (other than (i) coverage mandated by applicable Laws, (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of the Company, any of its Subsidiaries or
an ERISA Affiliate, or (iv) benefits, the full direct cost of which is borne by
the current or former employee (or beneficiary thereof)).
(n) Except as set forth in Section 3.9(n) of the Company Disclosure
Schedule or as otherwise provided in this Agreement, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee, officer or director of the Company, any of its Subsidiaries or
any ERISA Affiliate to severance pay, unemployment compensation or any other
similar termination payment, or (ii) accelerate the time of payment or vesting,
or increase the amount of or otherwise enhance any benefit due any such
employee, officer or director.
(o) Except as set forth in Section 3.9(o) of the Company Disclosure
Schedule, there are no pending or, to the Company's knowledge, threatened or
anticipated material claims by or on behalf of any Plan by any employee or
beneficiary under any such Plan or otherwise involving any such Plan (other than
routine claims for benefits).
Section 3.10 Taxes.
-----
(a) Except as would not, either individually or in the aggregate, have
a Company Material Adverse Effect, or set forth in Section 3.10 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries have (x) duly filed (or
there have been filed on their behalf) with the appropriate Tax Authorities
(as hereinafter defined) all Tax Returns (as hereinafter defined) required
to be filed by them on or prior to the date hereof, and such Tax Returns
are true, correct and complete in all respects, and (y) duly paid in full
or made provision in accordance with
32
<PAGE>
GAAP (or there has been paid or provision has been made on their behalf)
for the payment of all Taxes (as hereinafter defined) for all periods
ending through the date hereof;
(ii) there are no liens for Taxes upon any property or assets of
the Company or any Subsidiary thereof, except for liens for Taxes not yet
due and for which adequate reserves have been established in accordance
with GAAP;
(iii) neither the Company nor any of its Subsidiaries has made
any change in accounting methods, received a ruling from any Tax Authority
or signed an agreement with regard to Taxes;
(iv) no Federal, state, local or foreign Audits are presently
pending with regard to any Taxes or Tax Returns of the Company or its
Subsidiaries and to the best knowledge of the Company no Audit is
threatened;
(v) except as set forth in Section 3.10(a)(v) of the Company
Disclosure Schedule, the Tax Returns of the Company and its Subsidiaries
have not been examined by any Tax Authority in the last five years.
Section 3.10(a)(v) of the Company Disclosure Schedule sets forth the Tax
Returns that have not been examined by the applicable Tax Authorities for
the period filed and remain open to examination under applicable statutes
of limitation;
(vi) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any
of its Subsidiaries with respect to any Taxes is currently in force;
(vii) neither the Company nor any of its Subsidiaries is a party
to any agreement providing for the allocation, indemnification, or sharing
of Taxes;
33
<PAGE>
(viii) neither the Company nor its Subsidiaries is a party to
any agreement, contract or arrangement that could result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of section 280G of the Code or in payments that will not be
deductible under section 162(m); and
(ix) neither the Company nor any of its Subsidiaries is a party
to an election with respect to Taxes;
(b) "Audit" means any audit, assessment, or other examination relating
-----
to Taxes by any Tax Authority or any judicial or administrative proceedings
relating to Taxes. "Tax" or "Taxes" means all Federal, state, local, and
--- -----
foreign taxes, and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto, imposed by any Tax Authority. "Tax Authority"
-------------
means the Internal Revenue Service and any other domestic or foreign
governmental authority responsible for the administration of any Taxes. "Tax
---
Returns mean all Federal, state, local and foreign tax returns, declarations,
- -------
statements, reports, schedules, forms, and information returns and any
amendments thereto.
Section 3.11 Contracts. Each Company Agreement is valid, binding
---------
and enforceable against the Company or its Subsidiaries, as the case may be, and
in full force and effect, except where failure to be valid, binding and so
enforceable and in full force and effect would not have a Company Material
Adverse Effect, and there are no defaults by the Company or its Subsidiaries
thereunder, except those defaults that would not have a Company Material Adverse
Effect. Section 3.11 of the Company Disclosure Schedule sets forth a true and
complete list of (i) all material Company Agreements entered into by the Company
or any of its Subsidiaries since June 30, 1997 and all amendments to any Company
Agreements included as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997 and (ii) all non-competition agreements
imposing restrictions on the ability of the Company or any of its Subsidiaries
to conduct business in any jurisdiction or territory.
Section 3.12 Real Property.
-------------
34
<PAGE>
(a) Section 3.12 of the Company Disclosure Schedule sets forth a
complete list of all real property owned by the Company or its Subsidiaries (the
"Real Property"). Except as set forth in Section 3.12(a) of the Company
-------------
Disclosure Schedule, the Company or its Subsidiaries has good and marketable
title to the Real Property, free and clear of all Encumbrances. Copies of (i)
all deeds, title insurance policies and surveys of the Real Property and (ii)
all documents evidencing all material Encumbrances upon the Real Property have
been furnished to Parent. Except for matters disclosed in the Company SEC
Documents, or matters that would not be reasonably expected to result in a
Company Material Adverse Effect, there are no proceedings, claims, disputes or
to the Company's knowledge conditions affecting any Real Property that might
curtail or interfere with the use of such property, nor is an action of eminent
domain pending or to the knowledge of the Company threatened for all or any
portion of the Real Property. Except as disclosed in Section 3.12(a) of the
Company Disclosure Schedule, the Company is not a party to any lease, assignment
or similar arrangement under which the Company is a lessor, assignor or
otherwise makes available for use by any third party any portion of the Real
Property.
(b) The Company has not during the preceding twelve (12) months
received any notice of or other writing referring to any requirements or
recommendations by any insurance Company that has issued a policy covering any
part of the Real Property or by any board of fire underwriters or other body
exercising similar functions, requiring or recommending any repairs or work to
be done on any part of the Real Property. The plumbing, electrical, heating,
air conditioning, ventilating and all other structural or material mechanical
systems in the buildings upon the Real Property are in good working order and
working condition, so as to be adequate for the operation of the business of the
Company as heretofore conducted, and the roof, basement and foundation walls of
all buildings on the Real Property are free of leaks and other material defects,
except for any matter otherwise covered by this sentence which does not have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) The Company has obtained all appropriate licenses, permits,
easements and rights of way, including proofs of dedication, required to use and
operate the
35
<PAGE>
Real Property in the manner in which the Real Property is currently being used
and operated, except for such licenses, permits or rights of way the failure of
which to have obtained does not have, individually or in the aggregate, a
Company Material Adverse Effect.
(d) The Company has not received notification that the Company is in
violation in any material respect of any applicable building, zoning, anti-
pollution, health or other law, ordinance or regulation in respect of the Real
Property or structures or their operations thereon and to the Company's
knowledge no such violation exists.
Section 3.13 Intellectual Property.
---------------------
(a) Section 3.13(a) of the Company Disclosure Schedule is a true and
complete list of all material (i) patents and patent applications, (ii)
trademark registrations and applications, (iii) service mark registrations and
applications, (iv) Computer Software, other than off-the-shelf applications, (v)
copyright registrations and applications, (vi) unregistered trademarks, service
marks, and copyrights, and (vii) Internet domain names used or held for use in
connection with the business of the Company or any of its Subsidiaries, together
with all licenses related to the foregoing (whether the Company or any of its
Subsidiaries is the licensee or licensor thereunder). Other than as listed in
Section 3.13(a) of the Company Disclosure Schedule, no agreement licensing the
Intellectual Property (as hereinafter defined) of the Company to any licensee
creates an option for such licensee to purchase any of the Intellectual Property
owned by the Company, its Subsidiaries or affiliates, or would in any other way
require the transfer of the Intellectual Property owned by the Company, its
Subsidiaries or any affiliate of the Company to such licensee. The Company or
one of its Subsidiaries currently is listed in the records of the appropriate
United States, state or foreign agency as the sole owner of record for each
application and registration listed in Section 3.13(a) of the Company Disclosure
Schedule.
(b) The term "Computer Software" shall mean other than off-the-shelf
-----------------
applications (i) any and all computer programs and applications consisting of
sets of statements and instructions to be used directly or indi-
36
<PAGE>
rectly in computer software or firmware whether in source code or object code
form, (ii) databases and compilations, including without limitation any and all
data and collections of data, whether machine readable or otherwise, (iii) all
versions of the foregoing including, without limitation, all screen displays and
designs thereof, and all component modules of source code or object code or
natural language code therefor, and whether recorded on papers, magnetic media
or other electronic or non-electronic device, (iv) all descriptions, flow-charts
and other work product used to design, plan, organize and develop any of the
foregoing, (v) all documentation, including without limitation all technical and
user manuals and training materials, relating to the foregoing, and all content
contained on all World Wide Web sites of the Company or any Subsidiary.
(c) Except as set forth on Section 3.13(c) of the Company Disclosure
Schedule, the Company and its Subsidiaries own or have the right to use all
patents, patent applications, patent rights, copyrights, trademarks, trademark
rights, trade names, trade name rights, and service marks, and all goodwill of
the business associated therewith, trade secrets, technology and know-how,
Computer Software other than off-the-shelf applications, Internet domain names,
registrations for and applications for registration of trademarks, service marks
and copyrights, and other confidential or proprietary rights and information and
all technical and user manuals and documentation made or used in connection with
any of the foregoing, used anywhere in the world in connection with the
businesses of the Company or any of its Subsidiaries as currently conducted
(collectively, the "Intellectual Property"), free and clear of all liens or
---------------------
other Encumbrances of any nature, except where the failure to so own or use such
Intellectual Property would not have a Company Material Adverse Effect.
(d) All patents, registrations and applications for Intellectual
Property that are used in and are material to the conduct of the businesses of
the Company and its Subsidiaries as currently conducted (i) are valid,
subsisting, in proper form and enforceable, and have been duly maintained,
including the submission of all necessary filings and fees in accordance with
the legal and administrative requirements of the appropriate jurisdictions and
(ii) have not lapsed, expired or been
37
<PAGE>
abandoned, and no patent, registration or application therefor is the subject of
any opposition, interference, cancellation proceeding or other legal or
governmental proceeding before any governmental, registration or other authority
in any jurisdiction.
(e) Other than as set forth in Section 3.13(e) of the Company
Disclosure Schedule, to the Company's knowledge, the conduct of the businesses
of the Company and its Subsidiaries as currently conducted does not conflict
with or infringe in any way on any proprietary right of any third party, which
conflict or infringement would have a Company Material Adverse Effect or any of
its Subsidiaries. Other than as set forth in Section 3.13(e) of the Company
Disclosure Schedule, there is no claim, suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries (i) alleging any such conflict or infringement with any third
party's proprietary rights, or (ii) challenging the ownership, use, validity or
enforceability of the Intellectual Property.
(f) The Computer Software, other than off-the-shelf applications,
currently used by the Company or any of its Subsidiaries in the conduct of their
businesses was either: (i) developed by employees of the Company or such
Subsidiary of the Company within the scope of their employment; (ii) developed
on behalf of the Company or any of its Subsidiaries by a third party, and all
ownership rights therein have been assigned or otherwise transferred to or
vested in the Company or such Subsidiary of the Company, as the case may be,
pursuant to written agreements; or (iii) licensed or acquired from a third party
pursuant to a written license, assignment, or other contract which is in full
force and effect and of which neither the Company nor any of its Subsidiaries is
in material breach except where the failure to have been Computer Software so
developed, licensed or acquired would not have a Company Material Adverse
Effect. Except as set forth on Section 3.13(f) of the Disclosure Schedule, (x)
no third party has had access to any of the source code for any of the Computer
Software described in clause (i) or (ii) hereof and (y) no act has been done or
omitted to be done by the Company or any of its Subsidiaries to impair or
dedicate to the public or entitle any Governmental Entity to hold abandoned any
of such Computer Software.
38
<PAGE>
(g) Except as set forth on Section 3.13(g) of the Company Disclosure
Schedule, all consents, filings, and authorizations by or with governmental
authorities or third parties necessary with respect to the consummation of the
transactions contemplated hereby as they may affect the Intellectual Property
have been obtained or made, except where the failure to obtain or make such
consents, filings and authorizations will not prohibit the consummation of the
Transactions or have a Company Material Adverse Effect.
(h) Neither the Company nor any of its Subsidiaries has entered into
any material consent, indemnification, forbearance to sue, settlement agreement
or cross-licensing arrangement with any person relating to any material
Intellectual Property or the intellectual property of any third party other than
as may be contained in the license agreements listed in Section 3.13 of the
Disclosure Schedule.
(i) Except as set forth on Section 3.13(i) of the Company Disclosure
Schedule, the Company and its Subsidiaries is not, nor will it be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to any material Intellectual Property.
(j) No former or present employees, officers or directors of the
Company or any of its Subsidiaries hold any material right, title or interest
directly or indirectly, in whole or in part, in or to any Intellectual Property.
(k) No material trade secret or confidential know-how or other
material confidential information relating to the Company has been disclosed or
authorized to be disclosed to any third party, other than pursuant to a non-
disclosure agreement that protects the Company's interests in and to such
confidential information.
Section 3.14 Labor Matters.
-------------
(a) Except as set forth on Section 3.14 of the Company Disclosure
Schedule, (i) there is no labor strike, dispute, slowdown, stoppage or lockout
actually
39
<PAGE>
pending, or to the knowledge of the Company, threatened against or affecting the
Company and during the past five years from the date of this Agreement there has
not been any such action, (ii) the Company is not a party to or bound by any
collective bargaining or similar agreement with any labor organization, or work
rules or practices agreed to with any labor organization or employee association
applicable to employees of the Company, (iii) none of the employees of the
Company is represented by any labor organization and the Company does not have
any knowledge of any union organizing activities among the employees of the
Company within the past five years, (iv) there are no written personnel
policies, rules or procedures applicable to employees of the Company, other than
those set forth on Section 3.14 of the Company Disclosure Schedule, true and
correct copies of which have heretofore been delivered to Parent, (v) the
Company is, and has at all times been, in compliance, in all material respects,
with all applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational safety and
health, and is not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable laws, except for such non-
compliance which has not had and would not reasonably be expected to have a
Company Material Adverse Effect, (vi) there is no unfair labor practice charge
or complaint against the Company pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any similar state or
foreign agency, (vii) there is no material pending grievance arising out of any
collective bargaining agreement or other grievance procedure, (viii) to the
knowledge of the Company, no charges with respect to or relating to the Company
are pending before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment practices, (ix) the
Company has not received notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company and no such
investigation is in progress, and (x) there are no complaints, lawsuits or other
proceedings pending or, to the knowledge of the Company, threatened in any forum
by or on behalf of any present or former employee of the Company, any applicant
for employment or classes of the foregoing alleging breach by the Company or its
Subsidiaries of any express
40
<PAGE>
or implied contract or employment, any laws governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship, which, if determined adversely to
the Company could reasonably be expected to have a Company Material Adverse
Effect.
(b) Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), (i) the Company has not effectuated a "plant
--------
closing," (as defined in the WARN Act) affecting any site of employment or one
or more facilities or operating units within any site of employment or facility
of the Company, (ii) there has not occurred a "mass layoff" (as defined in the
WARN Act) affecting any site of employment or facility of the Company; nor has
the Company been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state,
local or foreign law or regulation, and (iii) none of the Company's employees
has suffered an "employment loss" (as defined in the WARN Act) during the six
month period prior to the date of this Agreement.
Section 3.15 Compliance with Laws. To the Company's knowledge, the
--------------------
Company and its Subsidiaries have complied in a timely manner and in all
material respects with all laws, rules and regulations, ordinances, judgments,
decrees, orders, writs and injunctions of all United States federal, state,
local, foreign governments and agencies thereof which affect the current
business, properties or assets of the Company and its Subsidiaries, and no
notice, charge, claim, action or assertion has been received in writing by the
Company or any of its Subsidiaries or has been filed, commenced or, to the
Company's knowledge, threatened against the Company or any of its Subsidiaries
alleging any violation of any of the foregoing, except when such non-compliance
or violation could not reasonably be expected to have a Company Material Adverse
Effect. All licenses, permits and approvals required under such laws, rules and
regulations are in full force and effect, except where the failure to be in full
force and effect would not have a Company Material Adverse Effect.
Section 3.16 Environmental Matters.
---------------------
41
<PAGE>
(a) Except as set forth in Section 3.16(a) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries is in compliance in all
material respects with all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata, and natural resources (together
"Environmental Laws" and including, without limitation, laws and regulations
------------------
relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or wastes,
petroleum and petroleum products, polychlorinated biphenyls (PCBs), or asbestos
or asbestos-containing materials ("Materials of Environmental Concern")), or
----------------------------------
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern.
Such compliance includes, but is not limited to, the possession by the Company
and each of its Subsidiaries of all permits and other governmental
authorizations required under all applicable Environmental Laws, and compliance
with the terms and conditions thereof except where the failure to be in full
force and effect or such non-compliance would not have a Company Material
Adverse Effect. All permits and other governmental authorizations currently
held by the Company and each of its Subsidiaries pursuant to the Environmental
Laws are identified in Section 3.16(a) of the Company Disclosure Schedule.
(b) Except as set forth in Section 3.16(b) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has received any
communication (written or, to the best of the Company's knowledge, oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that the Company or any of its Subsidiaries is not in full
compliance with any Environmental Laws, and to the best of the Company's
knowledge, there are no circumstances that may prevent or interfere with such
full compliance in the future. The Company has used its best efforts to provide
to Parent or its representatives all information that is in the possession of or
reasonably available to the Company regarding environmental matters pertaining
to or the environmental condition of the business of the Company and its
Subsidiaries, or the compliance (or noncom-
42
<PAGE>
pliance) by the Company and its Subsidiaries with any Environmental Laws.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule, there is no claim, investigation or notice (written or, to the best of
the Company's knowledge, oral) (together, "Environmental Claim") by any person
-------------------
or entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, person injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned or operated by the Company or any of its Subsidiaries or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law, that in either case is pending or threatened against the
Company or any of its Subsidiaries, or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule, to the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, against
any person or entity whose liability for any Environmental Claim the Company or
any of its Subsidiaries has retained or assumed either contractually or by
operation of law.
(e) Without in any way limiting the generality of the foregoing, (i)
all on-site and off-site locations where the Company or any of its Subsidiaries
has (previously or currently) stored, disposed or arranged for the disposal of
Materials of Environmental Concern are identified in Section 3.16(e) of the
Company Disclosure Schedule, (ii) all underground storage tanks, and the
capacity and contents of such tanks, located on any property owned, leased,
operated or controlled by the Company or any of its Subsidiaries are identified
in
43
<PAGE>
Section 3.16(e) of the Company Disclosure Schedule, (iii) except as set forth
in Section 3.16(e) of the Company Disclosure Schedule, to the best of the
Company's knowledge there is no asbestos contained in or forming part of any
building, building component, structure or office space owned, leased, operated
or controlled by the Company or any of its Subsidiaries, and (iv) except as set
forth in Section 3.16(e) of the Company Disclosure Schedule, to the best of the
Company's knowledge, no PCBs or PCB-containing items are used or stored at any
property owned, operated or controlled by the Company and its Subsidiaries.
Section 3.17 Product Liability. Except as described in Section
-----------------
3.17 of the Company Disclosure Schedule, there are not presently pending, or to
the knowledge of the Company, threatened, any civil, criminal or administrative
actions, suits, demands, claims, hearings, notices of violation, investigations,
proceedings or demand letters relating to any alleged hazard or alleged defect
in design, manufacture, materials or workmanship, including any failure to warn
or alleged breach of express or implied warranty or representation, relating to
any product manufactured, distributed or sold by or on behalf of the Company and
its Subsidiaries. Neither the Company nor any of its Subsidiaries has extended
to its customers any written non-uniform product warranties, indemnifications or
guarantees.
Section 3.18 Information in Proxy Statement. The Proxy Statement,
------------------------------
if any (or any amendment thereof or supplement thereto), at the date mailed to
Company stockholders and at the time of the meeting of Company stockholders to
be held in connection with the Merger, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied in writing by Parent or the Purchaser expressly
for inclusion in the Proxy Statement. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
44
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Section 3.19 Potential Conflict of Interest. Except as set forth
------------------------------
in Section 3.19 of the Company Disclosure Schedule or in the Company SEC
Documents filed prior to the date hereof, since June 30, 1997 there have been no
transactions, agreements, arrangements or understandings between the Company or
its Subsidiaries, on the one hand, and their respective affiliates, on the other
hand, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
Section 3.20 Opinion of Financial Advisor. The Company has
----------------------------
received the written opinion of Stephens, Inc., dated the date hereof, to the
effect that, as of such date, the consideration to be received in the Offer and
the Merger by the Company's stockholders is fair to the Company's stockholders
from a financial point of view, a copy of which opinion has been delivered to
Parent and the Purchaser.
Section 3.21 Insurance. Section 3.21 of the Company Disclosure
---------
Schedule lists the Company's material insurance policies. There is no material
claim pending under any of the Company's or any of its Subsidiary's policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
Section 3.22 Suppliers and Customers. Since June 30, 1997, no
-----------------------
material licensor, vendor, supplier, licensee or customer of the Company or any
of its Subsidiaries has cancelled or otherwise modified (in a manner materially
adverse to the Company) its relationship with the Company or its Subsidiaries
and, to the Company's knowledge, (i) no such person has notified the Company of
its intention to do so, and (ii) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 3.23 Accounts Receivable; Inventory. Except as disclosed
------------------------------
in Section 3.23 of the Company Disclosure Schedule.
45
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(a) Subject to any reserves set forth in the consolidated balance
sheet of the Company included in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 as filed with the SEC prior to the date of
this Agreement (the "Company Balance Sheet"), the accounts receivable shown in
---------------------
the Company Balance Sheet arose in the ordinary course of business, were not, as
of the date of the Company Balance Sheet, subject to any material discount,
contingency, claim of offset or recoupment or counterclaim, and represented, as
of the date of the Company Balance Sheet, bona fide claims against debtors for
sales, leases, licenses and other charges. All accounts receivable of the
Company and its Subsidiaries arising after the date of the Company Balance Sheet
through the date of this Agreement arose in the ordinary course of business and,
as of the date of this Agreement, are not subject to any material discount,
contingency, claim of offset or recoupment or counterclaim, except for normal
reserves consistent with past practice. The amount carried for doubtful
accounts and allowances disclosed in the Company Balance Sheet is believed by
the Company as of the date of this Agreement to be sufficient to provide for any
losses which may be sustained or realization of the accounts receivable shown in
the Company Balance Sheet.
(b) As of the date of the Company Balance Sheet, the inventories
shown on the Company Balance Sheet consisted in all material respects of items
of a quantity and quality usable or saleable in the ordinary course of business.
All of such inventories were acquired in the ordinary course of business and, as
of the date of this Agreement, have been replenished in all material respects in
the ordinary course of business consistent with past practices. All such
inventories are valued on the Company Balance Sheet in accordance with GAAP,
applied on a basis consistent with the Company's past practices, and provision
has been made or reserves have been established on the Company Balance Sheet, in
each case in an amount believed by the Company as of the date of this Agreement
to be adequate, for all slow-moving, obsolete or unusable inventories.
Section 3.24 Title and Condition of Properties. The Company and its
---------------------------------
Subsidiaries own good and marketable title, free and clear of all Encumbrances,
to all of the personal property and assets shown on the
46
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Company Balance Sheet or acquired after September 30, 1997, except for (A)
assets which have been disposed of to nonaffiliated third parties since
September 30, 1997 in the ordinary course of business, (B) Encumbrances
reflected in the Balance Sheet, (C) Encumbrances or imperfections of title which
are not, individually or in the aggregate, material in character, amount or
extent and which do not materially detract from the value or materially
interfere with the present or presently contemplated use of the assets subject
thereto or affected thereby, and (D) Encumbrances for current Taxes not yet due
and payable. All of the machinery, equipment and other tangible personal
property and assets owned or used by the Company or its Subsidiaries are in good
condition and repair, except for ordinary wear and tear not caused by neglect,
and are usable in the ordinary course of business, except for any matter
otherwise covered by this sentence which does not have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.25 Rights Agreement. The Company has taken all action
----------------
that may be necessary under the Rights Agreement so that (i) the execution of
this Agreement and the Option Agreement and any amendments hereto and thereto by
the parties hereto and the consummation of the transactions contemplated hereby
shall not cause (A) Parent and/or the Purchaser to become an Acquiring Person
(as defined in the Rights Agreement), or (B) a Distribution Date, a Stock
Acquisition Date or a Triggering Event (as such terms are defined in the Rights
Agreement) to occur, irrespective of the number of Shares acquired pursuant to
the Offer or exercise of the option granted under the Option Agreement and (ii)
the Rights Agreement is otherwise inapplicable to this Agreement, the Option
Agreement and the transactions contemplated hereby, including the Offer and the
Merger. The Company has furnished to Parent true and complete copies of all
amendments to the Rights Agreement that fulfill the requirements of this Section
3.25 and such amendments are in full force and effect.
Section 3.26 Borden Disposition. The representations and
------------------
warranties of the Company, Sun Coast Holdings, Inc., a Nevada corporation, and
Plastics Manufacturing Company, a Nevada corporation (collectively, the
"Sellers") as set forth in the Borden Agreement are true and correct in all
-------
material respects. The disposi-
47
<PAGE>
tion by the Company of certain assets of the Sellers pursuant to the Borden
Agreement shall be referred to herein as the "Borden Disposition."
------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
Section 4.1 Organization.
------------
(a) Each of Parent and the Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate or other power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority, and governmental approvals would not, individually or in the
aggregate, have a material adverse effect on the ability of Parent and the
Purchaser to consummate the Transactions.
(b) Each of Parent and the Purchaser is duly qualified or licensed to
do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a material adverse effect on the ability of Parent and the
Purchaser to consummate the Transactions.
Section 4.2 Authorization; Validity of Agreement; Necessary Action.
------------------------------------------------------
Each of Parent and the Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution, delivery and performance by Parent and the Purchaser of this
Agreement and the consummation of the Merger and of the Transactions have been
duly
48
<PAGE>
authorized by the boards of directors of the Purchaser and Parent and by
Parent as the sole shareholder of the Purchaser, and no other corporate action
on the part of Parent or the Purchaser is necessary to authorize the execution
and delivery by Parent and the Purchaser of this Agreement and the consummation
of the Transactions. This Agreement has been duly executed and delivered by
Parent and the Purchaser and, assuming due and valid authorization, execution
and delivery hereof by the Company, is a valid and binding obligation of each of
Parent and the Purchaser enforceable against each of them in accordance with its
terms, except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act and the HSR Act,
none of the execution, delivery or performance of this Agreement by Parent or
the Purchaser, the consummation by Parent or the Purchaser of the Transactions
or compliance by Parent or the Purchaser with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of Parent or the Purchaser, (ii) require any filing
with, or permit, authorization, consent or approval of, any Governmental Entity,
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or give others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the property or assets of Parent or the Purchaser pursuant
to, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent, or any of its Subsidiaries or the Purchaser is a party or by
which any of them or any of their respective properties or assets may be bound,
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to
49
<PAGE>
Parent, any of its Subsidiaries or any of their properties or assets, except in
the case of clause (ii), (iii) or (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a material adverse
effect on the ability of Parent and Purchaser to consummate the Transactions.
Except for any filing pursuant to the HSR Act, no waiver, consent, approval or
authorization of any Governmental Authority is required to be obtained or made
by either Parent or the Purchaser in connection with its execution, delivery or
performance of this Agreement.
Section 4.4 Information in Proxy Statement. None of the information
------------------------------
supplied by or on behalf of Parent or the Purchaser in writing expressly for
inclusion or incorporation by reference in the Proxy Statement (or any amendment
thereof or supplement thereto) will, at the date mailed to stockholders and at
the time of the meeting of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.
Section 4.5 Financing Arrangements. The Purchaser has funds
----------------------
available to it sufficient to purchase the Shares in accordance with the terms
of this Agreement and to pay all amounts due (or which will, as a result of the
transactions contemplated hereby, become due) in respect of any indebtedness of
the Company for money borrowed outstanding as of the date of the consummation of
the Offer, a schedule of which is attached hereto as Section 4.5 of the
Disclosure Schedule.
Section 4.6 No Prior Activities. Except for obligations or
-------------------
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), the Purchaser has not incurred any obligations
or liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person
(as hereinafter defined) or entity.
50
<PAGE>
Section 4.7 Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or the Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals. The Company will notify the
---------------------
Purchaser immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with the Company or its officers, directors, employees, investment
bankers, attorneys, accountants or other agents, in each case in connection with
any Acquisition Proposal (as hereinafter defined) or the possibility or
consideration of making an Acquisition Proposal ("Acquisition Proposal
--------------------
Interest") indicating, in connection with such notice, the name of the Person
- --------
indicating such Acquisition Proposal Interest and the terms and conditions of
any proposals or offers. The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal
Interest. The Company agrees that it shall keep Parent informed, on a current
basis, of the status and terms of any Acquisition Proposal Interest. As used
in this Agreement, "Acquisition Proposal" shall mean any tender or exchange
--------------------
offer involving the Company, any proposal for a merger, consolidation or other
business combination involving the Company, any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial portion of the
business or assets of, the Company (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets held for sale
and other than the Borden Disposition), any proposal or offer with respect to
any recapitalization or restructuring with respect to the Company or any
proposal or offer with respect to any other transaction similar to any of the
foregoing with respect to the Company other than pursuant
51
<PAGE>
to the transactions to be effected pursuant to this Agreement.
Section 5.2 Interim Operations of the Company. The Company covenants
---------------------------------
and agrees that, except (i) as expressly contemplated by this Agreement or the
Option Agreement, (ii) as set forth in Section 5.2 of the Company Disclosure
Schedule, (iii) as agreed in writing by Parent, (iv) for the consummation of the
Borden Disposition pursuant to and in accordance with the terms of the Borden
Agreement, or (iv) pursuant to Section 2.4 hereof, after the date hereof, and
prior to the time the designees of Parent have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 hereof (the "Appointment Date"):
----------------
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its Subsidiaries shall use its best
reasonable efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors, business
partners;
(b) the Company will not, directly or indirectly, (i) except upon
exercise of the Warrant or Options or other rights to purchase shares of Common
Stock pursuant to the Stock Plans and the Stock Subscription Warrant outstanding
on the date hereof, issue, sell, transfer or pledge or agree to sell, transfer
or pledge any treasury stock of the Company or any capital stock of any of its
Subsidiaries beneficially owned by it, (ii) amend its Articles of Incorporation
or By-laws or similar organizational documents; or (iii) split, combine or
reclassify the outstanding Shares or any outstanding capital stock of any of the
Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock; (ii) issue, sell, pledge,
dispose of or encumber any additional shares of, or securities convertible into
or exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares
52
<PAGE>
reserved for issuance on the date hereof pursuant to the exercise of the Warrant
or Options outstanding on the date hereof; (iii) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any assets, other than in the ordinary
and usual course of business and consistent with past practice, or incur or
modify any indebtedness or other liability, other than in the ordinary and usual
course of business and consistent with past practice; or (iv) redeem, purchase
or otherwise acquire, directly or indirectly, any shares of any class or series
of its capital stock, or any instrument or security which consists of or
includes a right to acquire such shares;
(d) neither the Company nor any of its Subsidiaries shall make any
change in the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than general increases in
wages to employees who are not officers or directors or affiliates in the
ordinary course consistent with past practice), or to persons providing
management services, enter into or amend any employment, severance, consulting,
termination or other agreement or employee benefit plan or make any loans to any
of its officers, directors, employees, affiliates, agents or consultants or make
any change in its existing borrowing or lending arrangements for or on behalf of
any of such persons pursuant to an employee benefit plan or otherwise;
(e) neither the Company nor any of its Subsidiaries shall pay or make
any accrual or arrangement for payment of any pension, retirement allowance or
other employee benefit pursuant to any existing plan, agreement or arrangement
to any officer, director, employee or affiliate or pay or agree to pay or make
any accrual or arrangement for payment to any officers, directors, employees or
affiliates of the Company of any amount relating to unused vacation days, except
payments and accruals made in the ordinary course consistent with past practice;
adopt or pay, grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, offi-
53
<PAGE>
cer, employee, agent or consultant, whether past or present; or amend in any
material respect any such existing plan, agreement or arrangement in a manner
inconsistent with the foregoing;
(f) the Company shall not modify, amend or terminate any of the
Company Agreements or any provision of the Rights Agreement, and neither the
Company nor any of its Subsidiaries shall waive, release or assign any material
rights or claims under any of the Company Agreements, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries will permit any
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent except in the ordinary course
of business and consistent with past practice unless the Company shall have
obtained a comparable replacement policy;
(h) neither the Company nor any of its Subsidiaries will (i) incur or
assume any long-term debt, or except in the ordinary course of business, incur
or assume any short-term indebtedness in amounts not consistent with past
practice; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business and consistent with
past practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than travel and expense advances to
employees in the ordinary course of business and consistent with past practice);
or (iv) enter into any other material commitment or transaction involving an
amount in excess of $50,000 (including, but not limited to, any borrowing,
capital expenditure or purchase, sale or lease of assets or real estate);
(i) neither the Company nor any of its Subsidiaries will change any
of the accounting methods used by it unless required by GAAP, make any Tax
election or change any Tax election already made or settle any Tax Audit;
(j) neither the Company nor any of its Subsidiaries will pay,
discharge or satisfy any claims, liabil-
54
<PAGE>
ities or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, in the ordinary course of business and
consistent with past practice, of claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company;
(k) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
(l) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would or is reasonably likely to result
in any of the conditions to the Merger set forth in Article VII or any of the
conditions to the Offer set forth in Annex I not being satisfied, or would make
any representation or warranty of the Company contained herein inaccurate in any
respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company to consummate the Merger in
accordance with the terms hereof or materially delay such consummation; and
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.3 No Solicitation.
---------------
(a) The Company will not, and shall use its reasonable best efforts to
ensure that its officers, directors, employees, investment bankers, attorneys,
accountants and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making of, any offer
or proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal, (ii) enter into any agreement with respect to any Acquisition
Proposal, or (iii) in the event of an unsolicited Acquisition Proposal for the
Company engage in negotiations or discussions with, or provide any information
or data to, any Person (other
55
<PAGE>
than Parent, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company in its SEC
Reports) relating to any Acquisition Proposal; provided, however, that nothing
-------- -------
contained in this Section 5.3 or any other provision hereof shall prohibit the
Company or the Company Board of Directors from (i) taking and disclosing to the
Company's stockholders its position with respect to tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act or (ii) making such disclosure to the Company's stockholders as the Board of
Directors determines in good faith, only after receiving advice from outside
legal counsel to the Company, that the failure to make such disclosure is
reasonably likely to cause the Company Board of Directors to violate its
fiduciary duties to the Company's stockholders under applicable law.
(b) Notwithstanding the foregoing, prior to the acceptance of Shares
pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any Person pursuant to appropriate
confidentiality agreements with "standstill" provisions no less favorable to the
Company than those contained in the Confidentiality Agreement, dated November
14, 1997 entered into between Fremont Partners, an affiliate of Parent, and the
Purchaser and the Company (the "Confidentiality Agreement") and may negotiate
-------------------------
and participate in discussions and negotiations with such Person concerning an
Acquisition Proposal if (x) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Company relating to any such
transaction which the Company Board of Directors determines in good faith, after
receiving advice from a nationally recognized investment banking firm,
represents a superior transaction to the Offer and the Merger and which is not
conditioned upon obtaining additional financing and (y) the Company Board of
Directors determines in good faith, only after receiving advice from outside
legal counsel to the Company, that the failure to provide such information or
access or to engage in such discussions or negotiations is reasonably likely to
cause the Board of Directors to violate its fiduciary duties to the Company's
stockholders under applicable law (an Acquisition Proposal which satisfies
clauses (x) and (y) being referred to herein as a "Superior Proposal"). The
-----------------
Company shall promptly, and in any event within two business
56
<PAGE>
days following receipt of a Superior Proposal, notify Parent of the receipt of
the same and prior to providing any such party with any material non-public
information. The Company shall promptly provide to Parent any material non-
public information regarding the Company provided to any other party which was
not previously provided to Parent.
(c) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval
or recommendation by such Board of Directors or any such committee of the Offer,
this Agreement or the Merger, (ii) approve or recommend or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to
the time of acceptance for payment of Shares in the Offer, the Board of
Directors of the Company may (subject to the terms of this and the following
sentence) terminate this Agreement in accordance with Section 8.1(f) and enter
into an agreement with respect to a Superior Proposal; provided, however, that
-------- -------
the Company shall not enter into an agreement with respect to a Superior
Proposal unless the Company shall have furnished Parent with written notice not
later than 12:00 noon two business days in advance of any date that it intends
to enter into such agreement. In addition, if the Company proposes to enter
into an agreement with respect to any Acquisition Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid, to
Parent the Termination Fee (as defined in Section 8.2(b)), plus any amounts
payable at said time for reimbursement of expenses pursuant to the provisions of
Section 8.2(b).
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement. As promptly as practicable after the
---------------
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to stockholders, the
Proxy Statement. The
57
<PAGE>
Proxy Statement shall contain the recommendation of the Board of Directors in
favor of the Merger.
Section 6.2 Meeting of Stockholders of the Company. At the Special
--------------------------------------
Meeting, if any, the Company shall use its best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and shall take all
other action necessary or, in the reasonable opinion of the Purchaser, advisable
to secure any vote or consent of stockholders required by the DGCL to effect the
Merger. The Purchaser agrees that it shall vote, or cause to be voted, in favor
of the Merger all Shares directly or indirectly beneficially owned by it.
Section 6.3 Additional Agreements. Subject to the terms and
---------------------
conditions as herein provided, the Company, Parent and Purchaser will each
comply in all material respects with all applicable laws and with all applicable
rules and regulations of any governmental authority to achieve the satisfaction
of the Minimum Condition and all conditions set forth in Annex I attached hereto
and Article VII hereof, and to consummate and make effective the Merger and the
other Transactions. Each of the parties hereto agrees to use all reasonable
efforts to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to use all
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of the Company, Parent and the
Purchaser shall use all reasonable efforts to take, or cause to be taken, all
such necessary actions.
Section 6.4 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to the Purchaser and the Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event whose occurrence,
or non-occurrence would be likely to cause either (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (y) any
condition set forth in Annex I to be
58
<PAGE>
unsatisfied in any material respect at any time from the date hereof to the date
the Purchaser purchases Shares pursuant to the Offer and (ii) any material
failure of the Company, the Purchaser or Parent, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
-------- -------
this Section 6.4 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 6.5 Access; Confidentiality.
-----------------------
(a) From the date hereof to the Effective Time, upon reasonable
notice, the Company shall (and shall cause each of its Subsidiaries to) afford
to the officers, employees, accountants, counsel, financing sources and other
representatives of Parent, reasonable access, during normal business hours
during the period prior to the Appointment Date, to all its properties, books,
contracts, commitments and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to the Parent (a)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Access shall include
the right to conduct such environmental studies and tests as Parent, in its
reasonable discretion, shall deem appropriate. After the Appointment Date, the
Company shall provide Parent and such persons as Parent shall designate with all
such information, at such time as Parent shall request. Unless otherwise
required by law and until the Appointment Date, each of Parent and Purchaser
will hold and will cause all of its officers, directors, employees, financial
advisors, consultants, representatives and agents (the "Purchaser
---------
Representatives") to hold in strict confidence all data and information obtained
- ---------------
by them from the Company (unless such information is or becomes publicly
available without the fault of any of the Purchaser Representations or public
disclosure of such information is required by law in the opinion of counsel to
Parent and the Purchaser) and shall insure that the Purchaser Representatives do
not disclose such
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information to others without the prior written consent of the Company.
Notwithstanding anything herein to the contrary, the terms of the
Confidentiality Agreement shall remain in full force and effect. No
investigation pursuant to this Section 6.5(a) shall affect any representation or
warranty made by the Company hereunder.
(b) In the event of the termination of this Agreement, the Purchaser
shall, and shall cause its affiliates to, return promptly every document
furnished to them by the Company or any of its representatives in connection
with the Transactions and any copies thereof which have been made, and shall
cause the Purchaser Representatives to whom such documents were furnished
promptly to return such documents an any copies thereof any of them may have
made, other than documents filed with the SEC or otherwise publicly available.
(c) Prior to the Closing, the Company and its accountants, counsel,
agents and other representatives shall cooperate with the Purchaser by providing
information about the Company which is necessary for the Purchaser and its
accountants, agents, counsel and other representatives to prepare materials for
inclusion or incorporation by reference in any syndication and other materials
to be delivered to potential financing sources or otherwise used in connection
with the Transactions (the "Disclosure Documents") and such other documents and
--------------------
other reasonable requests with respect to such documents. Notwithstanding
anything to the contrary in Section 6.5(a), the Purchaser may disclose, or cause
its representatives to disclose, and at the request of the Purchaser, the
Company shall and shall cause its Subsidiaries to disclose information
concerning the Company and its Subsidiaries, and their respective businesses,
assets and properties, and the transactions contemplated by this Agreement in
the Disclosure Documents and to prospective financing sources in connection with
the transactions contemplated hereby; provided that the Purchaser shall insure
-------
that any party receiving the Disclosure Documents or any prospective financing
sources shall comply with the terms of Section 6.5(a) and (b).
Section 6.6 Consents and Approvals.
----------------------
(a) Each of Parent, the Purchaser and the Company will take all
reasonable actions necessary to
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comply promptly with all legal requirements which may be imposed on it with
respect to this Agreement and the Transactions (which actions shall include,
without limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other Governmental Entity) and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their Subsidiaries
in connection with this Agreement and the Transactions. Each of the Company,
Parent and the Purchaser will, and will cause its Subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party required to
be obtained or made by Parent, the Purchaser, the Company or any of their
Subsidiaries in connection with the Transactions or the taking of any action
contemplated thereby or by this Agreement.
(b) The Company and Parent shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 6.7 Brokers or Finders. The Company represents, as to
------------------
itself and its Subsidiaries and affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee or any other commission or similar fee from the Company
or any of its Subsidiaries in connection with any of the transactions
contemplated by this Agreement except for Stephens, Inc. whose fees are set
forth in a true, correct and complete copy of the engagement letter attached as
Section 6.7 of the Company Disclosure Schedule.
Section 6.8 Publicity. The initial press release with respect to
---------
the execution of this Agreement shall be a joint press release acceptable to
Parent and
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the Company. Thereafter, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other Transactions without the prior consultation
of the other party, except as such party believes, after receiving the advice of
outside counsel, may be required by law or by any listing agreement with a
national securities exchange or trading market. Information included in
Disclosure Documents shall not be deemed to constitute public disclosure for
purposes of this Agreement.
Section 6.9 Agreement to Defend and Indemnify.
---------------------------------
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who as of the date hereof were directors,
officers, employees, fiduciary, agents or otherwise entitled to indemnification
under the certificate of incorporation or by-laws of the Company or
indemnification agreements (the "Indemnified Parties"). It is understood and
-------------------
agreed that the Company shall, to the fullest extent permitted under Delaware
Law and regardless of whether the Merger becomes effective, indemnify, defend
and hold harmless, and after the Effective Time, the Parent, Purchaser and the
Surviving Corporation shall jointly and severally, to the fullest extent
permitted under Delaware Law, indemnify, defend and hold harmless, each
Indemnified Party against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, including without limitation liabilities arising out of the
Transactions, under the Exchange Act in connection with the Offer or the Merger,
and in the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Company or the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as statements
therefor are received, and (ii) the Company and the Surviving Corporation will
cooperate
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in the defense of any such matter; provided, however, that neither the Company
-------- -------
nor the Surviving Corporation shall be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld);
and further, provided, that neither the Company nor the Surviving Corporation
------- --------
shall be obliged pursuant to this Section 6.9 to pay the fees and disbursements
of more than one counsel for all Indemnified Parties in any single action except
to the extent that, in the opinion of counsel for the Indemnified Parties, two
or more of such Indemnified Parties have conflicting interests in the outcome of
such action. For six years after the Effective Time, the Surviving Corporation
shall be required to maintain or obtain officers' and directors' liability
insurance covering the Indemnified Parties who are currently covered by the
Company's officers and directors liability insurance policy with respect to
matters existing or occurring at or prior to the Effective Time on terms not
less favorable than those in effect on the date hereof in terms of coverage and
amounts; provided, however, that if the aggregate annual premiums for such
-------- -------
insurance at any time during such period shall exceed 200% of the per annum rate
of premium currently paid by the Company for such insurance on the date of this
Agreement, which amount is set forth in Section 6.9 of the Disclosure Schedule,
then Parent shall cause the Company (or the Surviving Corporation if after the
Effective Time) to, and the Company (or the Surviving Corporation if after the
Effective Time) shall, provide the maximum coverage that shall then be available
at an annual premium equal to 200% of such rate. This Section 6.9 shall survive
the consummation of the Merger. Purchaser shall cause Surviving Corporation to
reimburse all expenses, including reasonable attorney's fees and expenses,
incurred by any person to enforce the obligations of the Purchaser and the
Surviving Corporation under this Section 6.9. Notwithstanding Section 9.7
hereof, this Section 6.9 is intended to be for the benefit of and to grant third
party rights to Indemnified Parties whether or not parties to this Agreement,
and each of the Indemnified Parties shall be entitled to enforce the covenants
contained herein.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
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merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 6.9.
Section 6.10 Purchaser Compliance. Parent shall cause the Purchaser
--------------------
to comply with all of its obligations under or related to this Agreement.
Section 6.11 Reasonable Best Efforts.
-----------------------
(a) Upon the terms and subject to the conditions hereof, each of
the parties hereto agrees to 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 to consummate the transactions contemplated by this Agreement and
shall use its reasonable best efforts to obtain all necessary waivers, consents
and approvals, and to effect all necessary filings under the Exchange Act and
the HSR Act. The parties shall cooperate in responding to inquiries from, and
making presentations to, regulatory authorities.
(b) The Company agrees to use its reasonable best efforts to assist
the Purchaser in connection with obtaining any financing in connection with the
consummation of the Transactions. Without limiting the generality of the
foregoing, the Company shall promptly prepare all reasonably requested financial
statements required to be included in the Disclosure Documents.
Section 6.12 Stock Subscription Warrant. The Company shall
--------------------------
approach the holder of the Stock Subscription Warrant and request surrender and
cancellation of the Stock Subscription Warrant in an instrument in form and
substance reasonably satisfactory to Parent without payment of any fees or
incurrence of any liability on the part of the Company.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the Merger shall be
- ------
subject to the
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<PAGE>
satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by Parent,
the Purchaser, or the Company, as the case may be, to the extent permitted by
applicable law:
(a) Stockholder Approval. The Merger and this Agreement shall have
--------------------
been approved and adopted by the requisite vote of the holders of the Shares, if
required by the DGCL; and
(b) Statutes; Court Orders. No statute, rule or regulation shall
----------------------
have been enacted or promulgated by any governmental authority which prohibits
the consummation of the Merger; and there shall be no order or injunction of a
court of competent jurisdiction in effect precluding consummation of the Merger;
and
(c) Purchase of Shares in Offer. The Purchaser shall have made, or
---------------------------
caused to be made, the Offer and shall have purchased, or caused to be
purchased, the Shares pursuant to the Offer; provided, that this condition shall
--------
be deemed to have been satisfied with respect to the obligation of Parent and
the Purchaser to effect the Merger if the Purchaser fails to accept for payment
or pay for Shares pursuant to the Offer in violation of the terms of the Offer
or of this Agreement; and
(d) HSR Approval. The applicable waiting period under the HSR Act
------------
shall have expired or been terminated.
Section 7.2 Conditions to Obligations of Parent and the Purchaser
-----------------------------------------------------
to Effect the Merger. The obligations of Parent and Purchaser to consummate the
- --------------------
Merger are further subject to fulfillment of the condition that all actions
contemplated by Section 2.4 hereof shall have been taken, which may be waived in
whole or in part by Parent and the Purchaser.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein
65
<PAGE>
may be abandoned at any time before the Effective Time, whether before or after
stockholder approval thereof:
(a) By mutual written consent of Parent and the Company; or
(b) By Parent if the Offer shall have expired or been terminated
without any Shares being purchased thereunder by the Purchaser as a result of
the occurrence of any of the events set forth in Annex I; or
(c) By either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto shall use their best efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement; or
(d) By Parent if, without any material breach by the Purchaser of its
obligations under this Agreement, the purchase of Shares pursuant to the Offer
shall not have occurred on or before 120 days from date of this Agreement; or
(e) By the Company if, without any material breach by the Company of
its obligations under this Agreement, the purchase of Shares pursuant to the
Offer shall not have occurred on or before 120 days from date of this Agreement;
or
(f) By the Company (i) if there shall be a material breach of any of
Parent's or the Purchaser's representations, warranties or covenants hereunder,
which breach cannot be or has not been cured within ten (10) days of the receipt
of written notice thereof or (ii) to allow the Company to enter into an
agreement in accordance with Section 5.3(c) with respect to a Superior Proposal
which the Company Board of Directors has determined is more favorable to the
stockholders of the Company than the transactions contemplated hereby; provided,
--------
however, that it has complied with all provisions thereof, including the notice
- -------
provision therein, and that it makes simultaneous payment of the Termination
Fee, plus any amounts then due as a reimbursement of expenses; or
66
<PAGE>
(g) By Parent, if prior to the purchase of Shares pursuant to the
Offer, the Company shall have breached any representation, warranty or covenant
or other agreement contained in this Agreement, which breach (i) would give rise
to the failure of a condition set forth in paragraph (f) or (g) of Annex I
hereto and (ii) cannot be or has not been cured within ten (10) days of the
receipt of written notice thereof; or
(h) By Parent, at any time prior to the purchase of the Shares
pursuant to the Offer, if (i) the Company Board of Directors shall withdraw,
modify, or change its recommendation or approval in respect of this Agreement or
the Offer in a manner adverse to the Purchaser, (ii) the Company Board of
Directors shall have recommended any proposal other than by Parent or the
Purchaser in respect of an Acquisition Proposal, (iii) the Company shall have
exercised a right with respect to an Acquisition Proposal referenced in Section
5.3(b) and shall, directly or through its representatives, continue discussions
with any third party concerning an Acquisition Proposal for more than forty (40)
business days after the date of receipt of such Acquisition Proposal, (iv) an
Acquisition Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to the Company which contains a proposal as to
price (without regard to whether such proposal specifies a specific price or a
range of potential prices) and the Company shall not have rejected such proposal
within forty (40) business days of its receipt or, if sooner, the date its
existence first becomes publicly disclosed, or (v) any Person or group (as
defined in Section 13(d)(3) of the Exchange Act) other than Parent or the
Purchaser or any of their respective subsidiaries or affiliates shall have
become the beneficial owner of more than 15% of the outstanding Shares (either
on a primary or a fully diluted basis); provided, however, that this provision
-------- -------
shall not apply to any Person that owns more than 15% of the outstanding Shares
on the date hereof; provided, further, that such Person does not increase its
beneficial Ownership beyond the number of Shares such Person beneficially owns
on the date hereof.
Section 8.2 Effect of Termination.
---------------------
(a) In the event of the termination of this Agreement as provided in
Section 8.1 hereof, written
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<PAGE>
notice thereof shall forthwith be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void and there shall be no liability
on the part of Parent, the Purchaser or the Company, except (i) as set forth in
Sections 6.5(a) and 9.3 hereof and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement.
(b) If (i) Parent shall have terminated this Agreement pursuant to
Section 8.1(h), (ii) Parent shall have terminated this Agreement pursuant to
Section 8.1(g) and within twelve (12) months following the date of any such
termination an Acquisition Proposal shall have been consummated or (iii) the
Company shall have terminated this Agreement pursuant to Section 8.1(f)(ii),
then in either such case the Company shall pay simultaneously with such
termination if pursuant to Section 8.1(f)(ii) and promptly, but in no event
later than two business days after the date of such termination or event if
pursuant to Section 8.1(h) or 8.1(g), to Parent a termination fee (the
"Termination Fee") of $2,000,000 plus an amount, not in excess of $1,500,000,
---------------
equal to the Purchaser's actual and reasonably documented reasonable out-of-
pocket expenses to third parties unaffiliated with the Purchaser, other than
those expenses incurred by Parent and the Purchasers pursuant to an arrangement
between Fremont Advisors, LLC and Fremont Partners, L.P. for provision of
certain legal and tax services on an hourly basis at customary rates, incurred
by Parent and the Purchaser in connection with the Offer, the Merger, this
Agreement and the consummation of the transactions contemplated hereby, which
amount shall be payable by wire transfer to such account as Parent may designate
in writing to the Company. No fee or reimbursement shall be paid pursuant to
this Section 8.2 if either Parent or the Purchaser shall be in material breach
of its obligations hereunder, after affording Parent or the Purchaser a forty-
day period after notice in which to cure such breach.
ARTICLE IX
MISCELLANEOUS
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Section 9.1 Amendment and Modification. Subject to applicable law,
--------------------------
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors or equivalent governing bodies, at any
time prior to the Effective Time with respect to any of the terms contained
herein; provided, however, that after the approval of this Agreement by the
-------- -------
shareholders of the Company, no such amendment, modification or supplement shall
reduce the amount or change the form of the Merger Consideration.
Section 9.2 Non-survival of Representations and Warranties. The
----------------------------------------------
representations, warranties and agreements in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall
terminate at the Effective Time or the termination of this Agreement pursuant to
Section 8.1 hereof, as the case may be, except that the agreements set forth in
Article II hereof and Section 6.9 hereof shall survive the Effective Time
indefinitely and those set forth in Sections 6.5(a), 6.5(b), 8.2 and 9.3 hereof
shall survive termination indefinitely.
Section 9.3 Expenses. Except as expressly set forth in Section
--------
8.2(b), all fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fees, costs and expenses.
Section 9.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by a nationally recognized overnight
courier service, such as Federal Express, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or the Purchaser, to:
Kerr Group, Inc.
c/o Fremont Partners
50 Fremont Street, Suite 3700
San Francisco, California 94105
69
<PAGE>
Attention: General Counsel
Telephone No.: (415) 284-8500
Telecopy No.: (415) 284-8925
with a copy to:
Saffron Acquisition Corp.
c/o Fremont Partners
50 Fremont Street, Suite 3700
San Francisco, California 94105
Attention: General Counsel
Telephone No.: (415) 284-8500
Telecopy No.: (415) 284-8925
and
Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111-4114
Attention: Kenton J. King
Telephone No.: (415) 984-6483
Telecopy No.: (415) 984-2698
and
(b) if to the Company, to:
Sun Coast Industries, Inc.
2700 South Westmoreland Avenue
Dallas, Texas 75233
Attention: President
Telephone No.: (214) 373-7864
Telecopy No.: (214) 467-7104
with a copy to:
Thompson & Knight
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Attention: Joseph Dannenmaier
Telephone No.:(214) 969-1393
Telecopy No.: (214) 969-1751
Section 9.5 Interpretation. When a reference is made in this
--------------
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
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<PAGE>
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term
"affiliates" shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
As used in this Agreement, the term "Person" shall mean a natural person,
------
partnership, corporation, limited liability Company, business trust, joint stock
Company, trust, unincorporated association, joint venture, Governmental Entity
or other entity or organization.
Section 9.6 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein):
(a) constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and
(b) except as provided in Sections 2.4 and 6.9 is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 9.8 Severability. Any term or provision of this Agreement
------------
that is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court asking such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is
71
<PAGE>
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
Section 9.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 9.10 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent; provided that no such assignment shall relieve the assigning party of
its obligations hereunder. 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.
Section 9.11 Best Knowledge. "to the knowledge of the Company," "to
--------------
the best knowledge of the Company" or similar references to the Company's
knowledge in this Agreement means the actual knowledge of any of the following
persons: James D. Ireland, III, Eddie Lesok, Cynthia R. Morris, Arno F. Pirkau,
Merv Faras, Peter Lennox, Mike Eiffert and Kathy Kruse or knowledge of such
persons of facts or circumstances that would lead a prudent person to
investigate and, more likely than not, acquire actual knowledge.
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<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
KERR GROUP, INC.
By /s/ Gilbert H. Lamphere
------------------------
Name:
Title:
SAFFRON ACQUISITION CORP.
By /s/ Gilbert H. Lamphere
------------------------
Name:
Title:
SUN COAST INDUSTRIES, INC.
By /s/ Eddie M. Lesok
------------------------
Name:
Title:
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<PAGE>
ANNEX I
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 to extend and amend the Offer at any time in its sole discretion (subject
to the provisions of the Merger Agreement), the Purchaser shall not be required
to accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-l(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, subject to the restrictions referred to
above, may delay the acceptance for payment of or the payment for, any tendered
Shares, and may terminate or amend the Offer as to any Shares not then paid for,
if (i) any applicable waiting period under the HSR Act has not expired or
terminated prior to the expiration of the Offer, (ii) the Minimum Condition has
not been satisfied, or (iii) at any time on or after the date of this Agreement
and before the time of acceptance for payment for any such Shares, any of the
following events exists:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity against the Purchaser, Parent, the Company
or any Subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective Subsidiaries or affiliates) of all or a material portion
of their or the Company's businesses or assets, or to compel Parent or the
Purchaser or their respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (ii) seeking
to restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company, Parent or the Purchaser any
damages that are material in relation to the Company and its Subsidiaries taken
as a whole, (iii) seeking to impose material limitations on the ability of the
Purchaser, or render the Purchaser unable, to accept for payment, pay for or
purchase some or all of the Shares
A-1
<PAGE>
pursuant to the Offer and the Merger, (iv) seeking to impose material
limitations on the ability of Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
Company's shareholders, (v) seeking to impose circumstances under which the
purchase or payment for some or all of the Shares pursuant to the Offer and the
Merger could have a material adverse effect on Purchaser or Parent, or (vi)
which otherwise is reasonably likely to have a Company Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Governmental
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under HSR Act, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ Stock Market for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions),
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any limitation
(whether or not mandatory) by any United States governmental authority on the
extension of credit generally by banks or other financial institutions, or (v) a
change in general financial, bank or capital market conditions which materially
and adversely affects the ability of financial institutions in the United States
to extend credit or syndicate loans or (vi) in the case of any of the foregoing
existing at the time of the execution of the Agreement, a material acceleration
or worsening thereof;
A-2
<PAGE>
(d) since the date of this Agreement, there shall have occurred any
change that constitutes a Company Material Adverse Effect;
(e) (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent or the
Purchaser or its approval or recommendation of the Offer, the Merger or this
Agreement, or approved or recommended any Acquisition Proposal or (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.3(b) of this Agreement;
(f) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in all material respects, in
each case (i) as of the date referred to in any representation or warranty which
addresses matters as of a particular date, or (ii) as to all other
representations and warranties, as of the date of this Agreement and as of the
scheduled expiration of the Offer (without giving effect to any materiality
qualification or standard contained in any such representation or warranty);
(g) the Company shall have failed to perform in all material respects
any obligation or to comply with any agreement or covenant to be performed or
complied with by it under this Agreement (without giving affect to any
materiality qualification or standard contained in any such representation or
warranty);
(h) the Purchaser shall have failed to receive a certificate executed
by the President of a Vice President of the Company, dated as of the scheduled
expiration of the Offer, to the effect that the conditions set forth in
paragraphs (f) and (g) of this Annex I have not occurred;
(i) all consents, permits and approvals of Governmental Authorities
and other persons listed in Section 3.4 of the Company Disclosure Schedule and
identified with an asterisk shall not have been obtained with no material
adverse conditions attached and no material expense imposed on the Company or
any of its Subsidiaries;
A-3
<PAGE>
(j) the transactions contemplated under the Borden Agreement shall not
have been consummated pursuant to and substantially in accordance with the terms
set forth in the Borden Agreement without waiver of a material term by any party
thereto;
(k) any Person or Group (as defined in Section 13(d)(3) of the
Exchange Act) other than Parent or the Purchaser or any of their respective
subsidiaries or affiliates shall have become the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of more than 15% of the
outstanding Shares (either on a primary or a fully diluted basis); provided,
--------
however, that this provision shall not apply to any Person that beneficially
- -------
owns more than 15% of the outstanding Shares on the date hereof; provided,
further, that such Person does not further increase its beneficial ownership
beyond the number of Shares such Person beneficially owns on the date hereof;
and
(l) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or the Purchaser) and may be waived by Parent or the Purchaser in whole
or in part at any time and from time to time in the good faith of Parent or the
Purchaser, subject in each case to the terms of this Agreement. The failure by
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.
A-4
<PAGE>
EXHIBIT 2
COMPANY OPTION AGREEMENT
------------------------
STOCK OPTION AGREEMENT, dated as of January 28, 1998 (this
"Agreement"), between Kerr Group, Inc., a Delaware corporation ("Parent"), and
--------- ------
Sun Coast Industries, Inc., a Delaware corporation (the "Company").
-------
WHEREAS, Parent, Saffron Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company,
concurrently with the execution and delivery of this Agreement, will enter into
an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), providing for, among other things, the merger of Sub with and into
- ---------
the Company (the "Merger"); and
------
WHEREAS, as a condition to the willingness of Parent and Sub to enter
into the Merger Agreement, Parent and Sub have required that the Company agree,
and in order to induce Parent and Sub to enter into the Merger Agreement the
Company has agreed, to grant Parent the Option (as hereinafter defined) upon the
terms and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE OPTION
----------
SECTION 1.1 Grant of Option. The Company hereby grants to Parent an
---------------
irrevocable option (the "Option") to purchase up to 500,000 newly-issued shares
------
(the "Shares") of the common stock, par value $.01 per share of the Company (the
------
"Company Common Stock") at a purchase price per share of $10.75 (the "Exercise
-------------------- --------
Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement. The
- -----
number of Shares that may be received upon the exercise of the Option and the
Exercise Price are subject to adjustment as herein set forth. This Agreement
shall terminate, and the Option hereby granted shall expire, on the earliest of
(i) the
1
<PAGE>
Effective Time (as defined in the Merger Agreement) and (ii) six (6) months
after any termination of the Merger Agreement pursuant to Article VIII thereof;
provided, however, this Agreement shall not terminate, and the Option shall not
- -------- -------
expire if the Option Notice (as defined below) has been given by Parent prior to
such date.
SECTION 1.2 Exercise Of Option. At any time or from time to time
------------------
prior to the termination of the Option in accordance with the terms of this
Agreement, Parent (or its designee) may exercise the Option, in whole or in
part, if on or after the date hereof:
(a) any corporation, partnership, individual, trust,
unincorporated association, or other entity or "person" (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act")) other than Parent or any of its "affiliates" (as defined in the Exchange
- ---
Act) (a "Third Party"), shall have:
----- -----
(i) commenced a bona fide tender offer or exchange offer
---- ----
for any shares of Company Common Stock, the consummation of which would
result in "beneficial ownership" (as defined under the Exchange Act) by
such Third Party (together with all such Third Party's affiliates and
"associates" (as such term is defined in the Exchange Act)) of 15% or more
of the then outstanding voting equity of the Company (either on a primary
or a fully diluted basis);
(ii) acquired beneficial ownership of shares of Company
Common Stock which, when aggregated with any shares of Company Stock
already owned by such Third Party, its affiliates and associates, would
result in the aggregate beneficial ownership by such Third Party its
affiliates and associates of 15% or more of the then outstanding voting
equity of the Company (either on a primary or a fully diluted basis),
provided, however, that "Third Party" for purposes of this clause (ii)
-------- -------
shall not include any corporation, partnership, person or other entity or
group which beneficially owns more than 15% of the outstanding voting
equity of the Company
2
<PAGE>
(either on a primary or a fully diluted basis) as of the date hereof and
that does not, after the date hereof, increase such ownership percentage by
more than an additional 1% of the outstanding voting equity of the Company
(either on a primary or a fully diluted basis);
(iii) solicited "proxies" in a "solicitation" subject to the
proxy rules under the Exchange Act or executed any written consent with
respect to, or become a "participant" in, any "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act), in each case with
respect to the Company Stock; or
(b) any of the events described in Section 8.1(g) or (h) of the
Merger Agreement that would allow Parent to terminate the Merger Agreement has
occurred (but without the necessity of Parent having terminated the Merger
Agreement).
In the event that Parent wishes to exercise all or any part of the
Option, Parent shall give written notice (the "Option Notice," with the date of
-------------
the Option Notice being hereinafter called the "Notice Date") to the Company,
-----------
specifying the number of Shares it will purchase and a place and date (not
earlier than three (3) nor later than twenty (20) business days from the Notice
Date) for closing such purchase (a "Closing"). Parent's obligation to purchase
-------
Shares upon any exercise of the option is subject (at its election) to the
conditions that (i) no preliminary or permanent injunction or other order
against the purchase, issuance or delivery of the Shares issued by any federal,
state or foreign court of competent jurisdiction shall be in effect (and no
action or proceeding shall have been commenced or threatened for purposes of
obtaining such an injunction or order) and (ii) any applicable waiting period
under the HSR Act shall have expired and (iii) there shall have been no material
breach of the representations, warranties, covenants or agreements of the
Company contained in this Agreement or the Merger Agreement; provided, however,
-------- -------
that any failure by Parent to purchase Shares upon exercise of the Option at any
Closing as a result of the nonsatisfaction of any of such conditions shall not
affect or prejudice Parent's right to purchase such
3
<PAGE>
Shares upon the subsequent satisfaction of such conditions. Upon request by
Parent, the Company will promptly take all action required to effect all
necessary filings by the Company under the HSR Act.
SECTION 1.3 Purchase of Shares. At any Closing, (i) the Company will
------------------
deliver to Parent the certificate or certificates representing the number of
Shares being purchased in proper form for transfer upon exercise of the Option
in the denominations designated by Parent in the Option Notice, and, if the
Option has been exercised in part, a new Option evidencing the rights of Parent
to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay
the aggregate purchase price for the Shares to be purchased by delivery to the
Company of a certified or bank cashier's check payable in New York Clearing
House funds to the order of the Company in the amount of the Exercise Price
times the number of shares to be purchased.
SECTION 1.4 Adjustments Upon Share Issuances, Changes in
--------------------------------------------
Capitalization, etc. (a) In the event of any change in Company Common Stock or
- --------------------
in the number of outstanding shares of Company Common Stock by reason of a stock
dividend, split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of the
Company (including, without limitation, the declaration or payment of an
extraordinary dividend of cash, securities or other property), the type and
number of the Shares to be issued by the Company upon exercise of the Option
shall be adjusted appropriately, -and proper provision shall be made in the
agreements governing such transaction, so that Parent shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Parent would have received with respect to the Company Common
Stock if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable, and such Company Common Stock had elected
to the fullest extent it would have been permitted to elect, to receive such
securities, cash or other property.
(b) In the event that the Company shall enter into an agreement (i)
to consolidate with or
4
<PAGE>
merge into any person, other than Parent or one of its subsidiaries, and shall
not be the continuing or surviving corporation of such consolidation or merger,
(ii) to permit any person, other than Parent or one of its subsidiaries, to
merge into the Company and the Company shall be the continuing or surviving
corporation, but, in connection with such merger, the then outstanding shares of
Company Common Stock shall be changed into or exchanged for stock or other
securities of the Company or any other person or cash or any other property, or
the then outstanding shares of Company Common Stock shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
surviving corporation or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Parent or one of its
subsidiaries, then, and in each such case, proper provision shall be made in the
agreements governing such transaction so that Parent shall receive upon exercise
of the Option the number and class of shares or other securities or property
that Parent would have received with respect to Company Common Stock if the
Option had been exercised immediately prior to such transaction or the record
date therefor, as applicable, and such Company Common Stock had elected to the
fullest extent it would have been permitted to elect, to receive such
securities, cash or other property.
(c) The rights of Parent under this Section 1.4 shall be in addition
to, and shall in no way limit, its rights against the Company for any breach of
the Merger Agreement.
(d) The provisions of this Agreement shall apply with appropriate
adjustments to any securities for which the Option becomes exercisable pursuant
to this Section 1.4.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Parent as follows:
5
<PAGE>
SECTION 2.1 Authority Relative to this Agreement. The Company is a
------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware. The Company has all necessary power and authority (corporate and
otherwise) to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company, and no other corporate proceeding on the part
of the Company is necessary to authorize this Agreement or for the Company to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Company and, assuming this Agreement constitutes a valid
and binding obligation of Parent, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
SECTION 2.2 No Conflict; Required Filings and Consents. The
------------------------------------------
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the certificate of incorporation or by-laws of the Company, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or by which the Company is bound or affected, (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance of any kind on any of the Shares pursuant
to, any agreement, contract, indenture, notice or instrument to which the
Company is a party or by which the Company is bound or affected, or (iv) except
for applicable requirements, if any, of the HSR Act, the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), require any filing by
the Company with, or any permit, authorization, consent or approval of, any
governmental or regulatory authority, domestic or foreign.
SECTION 2.3 Option Shares. The Company has taken all necessary
-------------
corporate action to authorize and
6
<PAGE>
reserve for issuance upon exercise of the Option a total of 500,000 Shares, and
the Shares, when issued and delivered by the Company to Parent upon exercise of
the Option, will be duly authorized, validly issued, fully paid and
nonassessable shares of Company Common Stock, and will be free and clear of any
security interests, liens, claims, pledges, charges or encumbrances of any kind.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent hereby represents and warrants to the Company as follows:
SECTION 3.1 Authority Relative to this Agreement. Parent is a
------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware. Parent has all necessary power and authority (corporate and
otherwise) to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by Parent of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Parent, and no other corporate proceeding on the part of Parent is
necessary to authorize this Agreement or for Parent to consummate such
transactions. This Agreement has been duly executed and delivered by Parent
and, assuming its due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms.
SECTION 3.2 No Conflict, Required Filing and Consents. The execution
-----------------------------------------
and delivery of this Agreement by Parent do not, and the performance of this
Agreement by Parent will not, (i) conflict with or violate the certificate of
incorporation of Parent, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or by which Parent is
bound or affected, (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
7
<PAGE>
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, contract, indenture, note or instrument to which
Parent is a party or by which it is bound or affected or (iv) except for
applicable requirements, if any, of the HSR Act, the Exchange Act, and the
Securities Act, require any filing by Parent with, or any permit, authorization,
consent or approval of, any governmental or regulatory authority, domestic or
foreign, except in the case of each of the foregoing clauses (i) through (iv)
for any such conflicts, violations, breaches, defaults, failures to file or
obtain the consent or approval of, or other occurrences that would not cause or
create a material risk of non-performance or delayed performance by Parent of
its obligations under this Agreement.
SECTION 3.3 Investment Intent. The purchase of Shares pursuant to
-----------------
this Agreement is for the account of Parent for the purpose of investment and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act and the rules and regulations
promulgated thereunder.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
SECTION 4.1 Registration Rights; Listing of Shares. (a) Upon the
--------------------------------------
written request of Parent, the Company agrees to effect up to two registrations
under the Securities Act and any applicable state securities laws covering any
part or all of the Option (provided that only Shares will be distributed to the
public) and any part or all of the Shares purchased under this Agreement, which
registration shall be continued in effect for 90 days, unless, in the written
opinion of counsel to the Company, addressed to Parent and reasonably
satisfactory in form and substance to counsel for Parent, such registration is
not required for the sale and distribution of such Shares in the manner
contemplated by Parent. The registration effected under this paragraph shall be
effected at the Company's expense except for any underwriting commissions. If
Shares are offered in a firm commitment underwriting, the Company will provide
reasonable and customary indemnification to the
8
<PAGE>
underwriters. In the event of any demand for registration pursuant to this
paragraph, the Company may delay the filing of the registration statement for a
period of up to 90 days if, in the good faith judgment of the Board of Directors
of the Company, such delay is necessary in order to avoid interference with a
planned material transaction involving the Company. In the event the Company
effects a registration of Company Common Stock for its own account or for any
other stockholder of the Company (other than on Form S-4 or Form S-8, or any
successor or similar form), it shall allow Parent to participate in such
registration; provided, however, that if the managing underwriters in such
-------- -------
offering advise the Company in writing that in their opinion the number of
shares of Company Common Stock requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
the securities requested to be included therein pro rata among the holders
--- ----
requesting to be included.
(b) The Company shall, at its expense, use its best efforts to cause
the Shares to be approved for quotation on the New York Stock Exchange, Inc.
(the "NYSE") subject to notice of issuance, as promptly as practicable following
----
the date of this Agreement, and will provide prompt notice to the NYSE of the
issuance of each Share pursuant to any exercise of the Option.
SECTION 4.2 Transfer of Shares; Restrictive Legend. Parent agrees
--------------------------------------
not to transfer or otherwise dispose of the Shares, or any interest therein,
without first providing to the Company an opinion of counsel for Parent,
reasonably satisfactory in form and substance to counsel for the Company, to the
effect that such transfer or disposition will not violate the Securities Act or
any applicable state law governing the offer and sale of securities, and the
rules and regulations thereunder. Parent further agrees to the placement on the
certificate(s) representing the Shares of the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
9
<PAGE>
provided that upon provision to the Company of any opinion of counsel for
Parent, reasonably satisfactory in form and substance to counsel for the
Company, to the effect that such legend is no longer required under the
provisions of the Securities Act or applicable state securities laws, the
Company shall promptly cause new unlegended certificates representing such
Shares to be issued to Parent against surrender of such legended certificates.
SECTION 4.3 Best Efforts. Subject to the terms and conditions of
------------
this Agreement, Parent and the Company shall each use its 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 and make effective the transactions contemplated by this Agreement.
Each party shall promptly consult with the other and provide any necessary
information and material with respect to all filings made by such party with any
governmental or regulatory authority in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.4 Further Assurances. The Company shall perform such
------------------
further acts and execute such further documents and instruments as may
reasonably be required to vest in Parent the power to carry out the provisions
of this Agreement. If Parent shall exercise the Option, or any portion thereof,
in accordance with the terms of this Agreement, the Company shall, without
additional consideration, execute and deliver all such further documents and
instruments and take all such further action as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement.
SECTION 4.5 Survival. All of the representations, warranties and
--------
covenants contained herein shall survive a Closing and shall be deemed to have
been made as of the date hereof and as of the date
10
<PAGE>
of each Closing.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 Specific Performance. The parties hereto agree that if
--------------------
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, without any requirement for securing or posting any bond, in
addition to any other remedy at law or equity.
SECTION 5.2 Entire Agreement. This Agreement constitutes the entire
----------------
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
SECTION 5.3 Amendment; Assignment. This Agreement may not be amended
---------------------
except by an instrument in writing signed by the parties hereto and specifically
referencing this Agreement. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the rights and obligations of Parent
hereunder may, upon written notice to the Company prior to or promptly following
such action, be assigned by Parent to any of its corporate affiliates, but no
such transfer shall relieve Parent of its obligations hereunder if such
transferee does not perform such obligations.
SECTION 5.4 Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provisions hereof
or thereof shall not affect the validity and enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstances, is
11
<PAGE>
invalid or unenforceable, (i) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid and unenforceable provision
and (ii) the remainder of this Agreement and the application of such provision
to other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
SECTION 5.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
SECTION 5.6 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original, but each of
which together shall constitute one and the same document.
SECTION 5.7 Notices. All notices, requests, claims, demands and
-------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the addresses specified below (or at such
other address for a party as shall be specified by like notice): (i) if to
Parent, to its address set forth in Section 9.2(a) of the Merger Agreement; and
(ii) if to the Company, to the Company's address set forth in Section 9.4(b) of
the Merger Agreement.
SECTION 5.8 Binding Effect. This Agreement shall be binding upon,
--------------
inure to the benefit of, and be enforceable by the successors and assigns of the
parties hereto. Nothing expressed or referred to in this Agreement is intended
or shall be construed to give any person other than the parties to this
Agreement, or their respective successors or assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
12
<PAGE>
IN WITNESS WHEREOF, each of the Company and Parent have caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
SUN COAST INDUSTRIES, INC.
By: /s/ Eddie M. Lesok
---------------------------
Name:
Title:
KERR GROUP, INC.
By: /s/ Gilbert H. Lamphere
---------------------------
Name:
Title:
13
<PAGE>
EXHIBIT 3
GUARANTEE
---------
Guarantee, dated as of January 28, 1998 by and between Sun Coast
Industries, Inc., a Delaware corporation (the "Company") and Fremont Partners,
L.P., a Delaware limited partnership ("Guarantor").
WHEREAS, each of Kerr Group, Inc., a Delaware corporation ("Parent"),
and Saffron Acquisition Corp., a Delaware corporation (the "Purchaser"), is a
direct or indirect, subsidiary of Guarantor; and
WHEREAS, the Company, Parent, and the Purchaser have entered into an
Agreement and Plan of Merger (the "Merger Agreement") of even date herewith; and
WHEREAS, upon the terms and subject to the conditions set forth in the
Merger Agreement, the Purchaser will make a cash tender offer (the "1 Offer")
to acquire all shares of the issued and outstanding common stock, $.01 par
value, of the Company (the "1 Company Common Stock"), including the associated
Common Stock Purchase Rights issued pursuant to the Rights Agreement dated as of
December 5, 1995, between the Company and the American Stock Transfer and Trust
Company, for $10.75 per share of Company Common Stock or such higher price as
may be paid in the Offer, net to the seller in cash; and
WHEREAS, as an inducement to the Company to enter into the Merger
Agreement, the Guarantor has agreed to enter into this agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Guarantor hereby agree as follows:
1. Guarantor hereby unconditionally and irrevocably guarantees, as
primary obligor and not merely as surety, for the benefit of the Company the
performance of all obligations of Parent or the Purchaser pursuant to the Merger
Agreement.
2. Guarantor covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in this Guarantee.
This Guar-
<PAGE>
antee shall not be affected by, and shall remain in full force and effect
notwithstanding, any bankruptcy, insolvency, liquidation, or reorganization of
Parent or the Purchaser or Guarantor.
3. Guarantor agrees to pay, on demand, and to save the Company
harmless against liability for, any and all costs and expenses (including
reasonable fees and disbursements of counsel) incurred or expended by the
Company in connection with the enforcement of or preservation of any rights
under this Guarantee.
4. Guarantor hereby represents, warrants and covenants to the
Company as follows:
a. Guarantor is a limited partnership duly organized and validly
existing under the laws of the State of Delaware. Guarantor has the necessary
power and authority to own and operate its properties and assets and to carry on
its business as currently conducted.
b. Guarantor has all requisite legal power and authority to enter
into this Guarantee. The Guarantor has all requisite legal power and authority
to carry out and perform its obligations under the terms of this Guarantee. The
Guarantee constitutes the valid and binding obligation of Guarantor, enforceable
against it in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws or equitable
principles relating to or affecting creditors' rights generally.
c. All partnership action on the part of Guarantor and its general
partner and limited partners necessary to authorize the execution, delivery and
performance of this Guarantee has been taken.
d. The Guarantor has funds available to it sufficient to purchase,
or cause the purchase of, the Shares in accordance with the terms of the Merger
Agreement and to pay, or cause to be paid, all amounts due (or which will, as a
result of the transactions contemplated by the Merger Agreement, become due) in
respect of any indebtedness of the Company for money borrowed outstanding as of
the date of the consummation of the Offer (as defined in the Merger Agreement),
a schedule of which is
2
<PAGE>
attached as Section 4.5 of the Disclosure Schedule to the Merger Agreement.
5. This Guarantee shall be deemed to be a contract under the laws of
the State of Delaware and shall for all purposes be governed by and construed in
accordance with the laws of such State.
6. This Guarantee shall terminate and be of no further force or
effect upon the consummation of the purchase by the Purchaser, Parent or any of
their respective affiliates of any Shares pursuant to the Offer.
IN WITNESS WHEREOF, each of the Company and Guarantor have caused this
Guarantee to be executed on its behalf by its officers thereunto duly
authorized, all as on the date first above written.
SUN COAST INDUSTRIES, INC.
By:/s/ Eddie M. Lesok
-----------------------------------
Name:
Title:
FREMONT PARTNERS, L.P.
By: FREMONT ADVISORS, L.L.C., its
General Partner
By: THE FREMONT GROUP, L.L.C.,
its Managing Member
By: FREMONT INVESTORS, INC., its
Manager
By: /s/ Gilbert H. Lamphere
-----------------------------
Name: Gilbert H. Lamphere
Title: Managing Director
3
<PAGE>
EXHIBIT 4
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of January 28,
---------
1998, by and among Kerr Group, Inc., a Delaware corporation ("Parent"), Saffron
------
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Kerr Group, Inc. ("the Purchaser") and James M. Hoak, Jr. (the "Stockholder").
--------- -----------
WHEREAS, the Stockholder is, as of the date hereof, the record and
beneficial owner of approximately 438,000 shares of common stock, par value $.01
per share (the "Common Stock") of Sun Coast Industries, Inc., a Delaware
------------
corporation (the "Company");
-------
WHEREAS, Parent, the Purchaser and the Company concurrently herewith
are entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), which provides, among other things, for the
----------------
acquisition of the Company by Parent by means of a cash tender offer (the
"Offer") for any and all of the outstanding shares of Common Stock and for the
-----
subsequent merger (the "Merger") of the Purchaser with and into the Company upon
------
the terms and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser
to enter into the Merger Agreement, and in order to induce Parent and the
Purchaser to enter into the Merger Agreement, the Stockholder has agreed to
enter into this Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and the Purchaser of the Merger Agreement and the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein
and therein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Representations and Warranties of the Stockholder. The
-------------------------------------------------
Stockholder hereby represents and warrants to Parent and the Purchaser as
follows:
(a) Stockholder is the record and beneficial owner of
approximately 438,000 shares of Common
<PAGE>
Stock (as may be adjusted from time to time pursuant to Section 6 hereof,
the "Shares").
------
(b) The Stockholder has all requisite power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby, and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement.
(c) This Agreement has been duly authorized, executed and delivered
by the Stockholder and constitutes the legal, valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Stockholder is a party or bound or to which the Shares are
subject. Consummation by the Stockholder of the transactions contemplated
hereby will not violate, or require any consent, approval, or notice under, any
provision of any judgment, order, decree, statute, law, rule or regulation
applicable to the Stockholder or the Shares, except for any necessary filing
under Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
------------
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), or state takeover laws.
(e) The Shares and the certificates representing the Shares are now
and at all times during the term hereof will be held by the Stockholder, or by a
nominee or custodian for the benefit of the Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or
2
<PAGE>
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
SECTION 2. Representations and Warranties of Parent and the
------------------------------------------------
Purchaser. Each of Parent and the Purchaser hereby, jointly and severally,
- ----------
represents and warrants to the Stockholder as follows:
(a) Each of Parent and the Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby, and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by each of Parent and the Purchaser and constitutes the legal, valid
and binding obligation of each of Parent and the Purchaser, enforceable against
each of them in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) the
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by each of Parent and the Purchaser of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which each of Parent and the Purchaser
is a party or bound. The consummation by each of Parent and the Purchaser of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to either Parent or the Purchaser,
except for any necessary filing under the HSR Act or state takeover laws.
3
<PAGE>
SECTION 3. Purchase and Sale of the Shares. The Stockholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the third business day following the commencement of the Offer,
and that the Stockholder shall not withdraw any Shares so tendered. The
Purchaser hereby agrees to purchase all the Shares so tendered at a price per
Share equal to $10.75 per Share or any higher price that may be paid in the
Offer; provided, however, that the Purchaser's obligation to accept for payment
-------- -------
and pay for the Shares in the Offer is subject to all the terms and conditions
of the Offer set forth in the Merger Agreement and Annex I thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Stockholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or (v) take any other action that would in any way
restrict, limit or interfere with the performance of the Stockholder's
obligations hereunder or the transactions contemplated hereby.
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Stockholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of the Stockholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the stockholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
4
<PAGE>
the Company and a third party or any other proposal of a third party to acquire
the Company.
(b) The Stockholder represents that any proxies heretofore given
in respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled with an
interest and, except as set forth in Section 8 hereof, is intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law (the "DGCL").
----
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Stockholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Stockholder.
SECTION 7. Certain Other Agreements. The Stockholder will notify the
------------------------
Purchaser immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with the Stockholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each
case in connection with any Acquisition Proposal or Acquisition Proposal
Interest (as such terms are defined in the Merger Agreement) indicating, in
connection with such notice, the name of the person indicating such Acquisition
Proposal Interest and the terms and conditions of any proposals or offers.
The Stockholder agrees that it will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any
5
<PAGE>
parties conducted heretofore with respect to any Acquisition Proposal Interest.
The Stockholder agrees that it shall keep Parent informed, on a current basis,
of the status and terms of any Acquisition Proposal Interest. The Stockholder
agrees that it will not, and will use its best efforts to ensure that its
officers, directors, employees, investment bankers, attorneys, accountants and
other agents, if any, do not, directly or indirectly: (i) initiate, solicit or
encourage, or take any action to facilitate the making of, any offer or proposal
which constitutes or is reasonably likely to lead to any Acquisition Proposal,
(ii) enter into any agreement with respect to any Acquisition Proposal, or (iii)
in the event of an unsolicited written Acquisition Proposal engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal.
SECTION 8. Further Assurances. The Stockholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent or the Purchaser
to be necessary or desirable to carry out the provisions hereof and to vest the
power to vote the Shares as contemplated by Section 5 hereof in Parent.
SECTION 9. Termination. This Agreement, and all rights and
-----------
obligations of the parties hereunder, shall terminate immediately upon the
earlier of (a) the termination of the Merger Agreement in accordance with its
terms or (b) the Effective Time (as defined in the Merger Agreement); provided,
--------
however, that Section 10 shall survive any termination of this Agreement.
- -------
SECTION 10. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses.
SECTION 11. Public Announcements. Each of Parent, the Purchaser and
--------------------
the Stockholder agrees that it will not issue any press release or otherwise
make any public statement with respect to this Agreement or the
6
<PAGE>
transactions contemplated hereby without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed; provided, however,
-------- -------
that such disclosure can be made without obtaining such prior consent if (i) the
disclosure is required by law and (ii) the party making such disclosure has
first used its best efforts to consult with the other party about the form and
substance of such disclosure.
SECTION 12. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Stockholder, to:
James M. Hoak, Jr.
c/o Eric Van den Branden
13355 Noel Road, Suite 1050
Dallas, Texas 75240
Telephone: (214) 960-4896
and
(B) if to Parent or the Purchaser, to:
Kerr Group, Inc.
c/o Fremont Partners, L.P.
50 Fremont Street, Suite 3700
San Francisco, California 94105
Facsimile: (415) 284-8191
Attention: General Counsel
7
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111-4114
Facsimile: (415) 984-2698
Attention: Kenton J. King
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire
agreement, and supersedes all prior agreements and understandings, whether
written and oral, among the parties hereto with respect to the subject matter
hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. 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, and the provisions of this Agreement are
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
(h) If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid,
void or unen-
8
<PAGE>
forceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in
the event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in any
action for specific performance, the defense of adequacy of a remedy at law and
(ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in Wilmington,
Delaware. The parties hereto consent to personal jurisdiction in any such action
brought in any state or federal court sitting in Wilmington, Delaware and to
service of process upon it in the manner set forth in Section 12(b) hereof.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
9
<PAGE>
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be duly executed and delivered as of the date first
written above.
KERR GROUP, INC.
By /s/ Gilbert H. Lamphere
-------------------------------
Name:
Title:
SAFFRON ACQUISITION CORP.
By /s/ Gilbert H. Lamphere
-------------------------------
Name:
Title:
By /s/ James M. Hoak, Jr.
--------------------------------
JAMES M. HOAK, JR.
10
<PAGE>
EXHIBIT 5
- --------------------------------------------------------------------------------
SUN COAST INDUSTRIES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
Rights Agreement
Dated as of June 6, 1995
(As Amended December 5, 1995)
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Certain Definitions.................................................... 1
Section 2. Appointment of Rights Agent............................................ 4
Section 3. Issue of Right Certificates............................................ 4
Section 4. Form of Right Certificates............................................. 6
Section 5. Execution, Countersignature and Registration........................... 6
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates................ 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......... 7
Section 8. Cancellation and Destruction of Right Certificates..................... 8
Section 9. Reservation and Availability of Shares of Common Stock................. 8
Section 10. Common Stock Record Date............................................... 10
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights..... 10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............. 16
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power... 17
Section 14. Fractional Rights and Fractional Shares................................ 18
Section 15. Rights of Action....................................................... 19
Section 16. Agreement of Right Holders............................................. 19
Section 17. Right Certificate Holder Not Deemed a Stockholder...................... 20
Section 18. Concerning the Rights Agent............................................ 20
Section 19. Merger or Consolidation or Change of Name of Rights Agent.............. 21
Section 20. Duties of Rights Agent................................................. 21
Section 21. Change of Rights Agent................................................. 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 22. Issuance of New Right Certificates..................................... 24
Section 23. Redemption............................................................. 24
Section 24. Exchange............................................................... 25
Section 25. Notice of Certain Events............................................... 26
Section 26. Notices................................................................ 27
Section 27. Supplements and Amendments............................................. 28
Section 28. Successors............................................................. 29
Section 29. Benefits of this Agreement............................................. 29
Section 30. Severability........................................................... 29
Section 31. GOVERNING LAW.......................................................... 29
Section 32. Counterparts........................................................... 29
Section 33. Descriptive Headings................................................... 29
</TABLE>
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Rights to Purchase Common Stock
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of June 6, 1995 and amended December 5, 1995,
between Sun Coast Industries, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one common stock purchase right (a "Right") for each share of
Common Stock (as such term is hereinafter defined) of the Company outstanding on
the close of business on July 6, 1995 (the "Record Date"), each Right
representing the right to purchase one share of Common Stock of the Company upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each share of
Common Stock of the Company that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are hereinafter defined); provided,
--------
however, that Rights may be issued with respect to shares of Common Stock that
- -------
shall become outstanding after the Distribution Date and prior to the earlier of
the Redemption Date and the Final Expiration Date in accordance with Section 22
of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15% or more of the shares of Common Stock
of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of shares of Common Stock by
the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the shares of Common Stock of the Company then outstanding; provided,
--------
however, that if a Person shall become the Beneficial Owner of 15% or more of
- -------
the shares of Common Stock of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional shares of Common Stock of the
Company, then such Person shall be deemed to be an "Acquiring Person".
Notwithstanding anything contained in this Agreement to the contrary, James
M. Hoak ("Hoak") shall not become an Acquiring Person unless and until Hoak,
together with any of his Affiliates or Associates, becomes the Beneficial Owner
of 20% or more of the shares of Common Stock of the Company then outstanding;
provided, however, that Hoak, together with his
- -------- -------
<PAGE>
Affiliates and Associates, shall not become an Acquiring Person as the result of
an acquisition of shares of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by Hoak, together with his Affiliates and Associates, to 20%
or more of the shares of Common Stock of the Company then outstanding, unless
and until such time as Hoak or any Affiliate or Associate of Hoak shall purchase
or otherwise become the Beneficial Owner of any additional shares of Common
Stock of the Company or any other Person who is the Beneficial Owner of any
shares of Common Stock of the Company shall become an Affiliate or Associate of
Hoak."
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement; provided, however, that any Subsidiary of the
-------- -------
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan shall not be deemed an
Affiliate or an Associate.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly, including, without limitation,
securities with respect to which such Person or any of such Person's
Affiliates or Associates has "beneficial ownership" pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however, that a
-------- -------
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
-------- -------
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement,
2
<PAGE>
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the Borough of Manhattan, the City of New
York are authorized or obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(f) "Common Stock" when used with reference to the Company shall mean the
shares of common stock, par value $.01 per share, of the Company. "Common
Stock" when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3(b)
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(i) "Flip-In Event" shall mean any event described in Section 11(a)(ii)(A)
hereof.
(j) "Flip-Over Event" shall mean any event described in clauses (i), (ii)
or (iii) of Section 13(a) hereof.
(k) "Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity;
provided, however, that when two or more persons act as a partnership, limited
- -------- -------
partnership, syndicate or other group for the purpose of acquiring, holding or
disposing of the shares of Common Stock of the Company, such partnership,
limited partner, syndicate or other group shall be deemed a "Person".
(l) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
(m) "Stock Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
3
<PAGE>
(n) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
(o) "Triggering Event" shall mean any Flip-In Event or any Flip-Over Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of shares of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
---------------------------
(a) One Right shall be associated with each share of Common Stock
outstanding on the Record Date, each additional share of Common Stock that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date, and each additional
share of Common Stock with which Rights are issued after the Distribution Date
and prior to the earlier of the Redemption Date and the Final Expiration Date as
provided in Section 22 hereof; provided, however, that, if the number of
-------- -------
outstanding Rights are combined into a smaller number of outstanding Rights
pursuant to Section 11 hereof, the appropriate fractional Right determined
pursuant to such Section shall thereafter be associated with each such share of
Common Stock.
(b) Until the earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date or (ii) the close of business on the tenth business
day (or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity or Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming an Acquiring Person (including any such date which is after
the date of this Agreement and prior to the issuance of the Rights; the earlier
of such dates being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by
the certificates for the Common Stock registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of the
underlying Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will,
4
<PAGE>
if requested, send) by first-class, insured, postage-prepaid mail, to each
record holder of shares of Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of Exhibit A hereto (a
"Right Certificate"), evidencing one Right for each share of Common Stock so
held. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(c) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Shares of Common Stock, in
substantially the form of Exhibit B hereto (the "Summary of Rights"), by first-
class, postage-prepaid mail, to each record holder of shares of Common Stock as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for the Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto. Until
the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the transfer of any certificate for shares of Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the shares of Common Stock represented thereby.
(d) Certificates for Common Stock which become outstanding (including,
without limitation, reacquired shares of Common Stock referred to in the last
sentence of this paragraph (d)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN SUN COAST INDUSTRIES,
INC. (THE "COMPANY") AND AMERICAN STOCK TRANSFER & TRUST COMPANY DATED AS
OF JUNE 6, 1995 (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES,
AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY
SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.
THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
transfer of any such certificate shall also constitute the transfer of the
Rights associated with the shares of Common Stock represented thereby. In the
event that the
5
<PAGE>
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such shares of
Common Stock shall be deemed cancelled and retired so that the Company shall not
be entitled to exercise any Rights associated with the shares of Common Stock
which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
--------------------------
forms of election to purchase shares of Common Stock and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit A
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of shares
of Common Stock as shall be set forth therein at the price set forth therein
(the "Purchase Price"), but the amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
Section 5. Execution, Countersignature and Registration.
--------------------------------------------
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its President, any of
its Vice Presidents, or its Treasurer, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof,
and shall be attested by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
6
<PAGE>
(a) Subject to the provisions of Section 14 hereof, at any time after the
close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii)(B)
hereof or that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
shares of Common Stock as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right Certificate or
Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent, together with
payment of the aggregate Purchase Price with respect to the total number of
shares of Common Stock as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on July 6, 2005 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each share of Common Stock purchasable pursuant
to the exercise of a Right shall initially be $50.00, and shall be subject to
adjustment from time to time as provided in Section 11 or 13 hereof and shall be
payable in lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased (and an amount equal to any
applicable transfer tax required to be paid by
7
<PAGE>
the holder of such Right Certificate in accordance with Section 9 hereof) by
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Common Stock (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the total number of shares
of Common Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from the
depositary agent depositary receipts representing such number of shares of
Common Stock as are to be purchased (in which case certificates for shares of
Common Stock represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of such
Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported transfer or
exercise unless such registered holder shall have (i) completed and signed the
certification of status following the form of assignment or election to purchase
set forth on the reverse side of the Rights Certificate surrendered for such
assignment or exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in either such case shall deliver a certificate of destruction thereof to the
Company.
Section 9. Reservation and Availability of Shares of Common Stock.
-------------------------------------------------------
8
<PAGE>
(a) The Company covenants and agrees that it will use its best efforts to
cause to be reserved and kept available out of its authorized and unissued
shares of Common Stock (and/or other shares of capital stock or securities) or
its authorized and issued shares of Common Stock (and/or other shares of capital
stock or securities) held in its treasury, the number of shares of Common Stock
(and/or other shares of capital stock or securities) that, as provided in this
Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the shares of Common Stock (and/or shares of capital stock
or other securities) issuable and deliverable upon the exercise of the Rights
may be listed on any national securities exchange, the Company shall use its
reasonable efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as is
required by law following the Distribution Date, a registration statement under
the Securities Act of 1933 (the "Securities Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities, and, (B) the date of the expiration of
the Rights. The Company will also take such action as may be appropriate under,
or to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained or the exercise thereof shall not be permitted under applicable
law.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock, (and/or other shares
of capital stock or securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants that, subject to Sections 6 and 7(c), it
will pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for a number of shares of Common
Stock (and/or other shares of capital stock or securities, as the case may be)
issuable upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to
9
<PAGE>
a Person other than, or the issuance or delivery of a number of shares of Common
Stock (and/or other shares of capital stock or securities, as the case may be)
in respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of shares of Common Stock (and/or other shares of
capital stock or securities, as the case may be) in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Common Stock Record Date. Each person in whose name any
------------------------
certificate for a number of shares of Common Stock (and/or other shares of
capital stock or securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
such shares of Common Stock represented thereby on, and such certificate shall
be dated, the date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
-------- -------
payment is a date upon which the Common Stock transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Common Stock transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a stockholder of Company with respect to
shares for which the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
-----------------------------------------------------------
Rights. The Purchase Price, the number of shares of Common Stock covered by
- ------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common Stock payable
in Common Stock, (B) subdivide the outstanding shares of Common Stock (C)
combine the outstanding Common Stock into a smaller number of shares or (D)
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 or surviving
corporation), except as otherwise provided in this Section 11(a), the
Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Common Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of
shares of Common Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however,
-------- -------
that in no
10
<PAGE>
event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii)(A), the adjustment provided for in this Section 11(a)(i) shall be
in addition to and shall be made prior to, any adjustment required pursuant
to Section 11(a)(ii)(A).
(ii) (A) Subject to Section 23 and Section 24 of this Agreement, in
the event any Person becomes an Acquiring Person, each holder of a Right
shall thereafter have a right to receive, upon exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of shares
of Common Stock for which a Right is then exercisable, in accordance with
the terms of this Agreement, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of shares of Common Stock which a
Right is then exercisable and dividing that product by (y) 50% of the then
current per share market price of the Company's shares of Common Stock
(determined pursuant to Section 11(d) hereof) on the date of the occurrence
of such event (such number of shares shall be referred to herein as the
"Adjustment Shares"). In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any action which would eliminate or diminish the benefits
intended to be afforded by the Rights.
(B) From and after the occurrence of an event described in paragraph
11(a)(ii)(A), any Rights that are or were acquired or beneficially owned by
(i) an Acquiring Person (or any Associate or Affiliate of such Acquiring
Person), (ii) a transferee of an Acquiring Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person becomes
such or (iii) a transferee of an Acquiring Person (or of any such Associate
or Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person
to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is a part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this paragraph, shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision
of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person
whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for
transfer to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence shall be cancelled.
11
<PAGE>
(iii) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall, to the extent permitted by applicable
law or regulation: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess to be referred to
hereinafter as the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) other equity securities of the Company (including, without
limitation, shares, or units of shares which the Board of Directors of the
Company has deemed to have the same value as shares of Common Stock (such
shares of stock, referred to herein as "common stock equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value, as
determined by the Board of Directors of the Company; provided, however, if
-------- -------
the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a Flip-In Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii)(B) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of the Common Stock
shall be the current market price (as determined pursuant to Section 11(d)
hereof) per share of the Common Stock on the Section 11(a)(ii) Trigger Date
and the value of any common stock equivalents shall be deemed to have the
same value as the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of shares of Common Stock entitling them (for
a period expiring within 45 calendar days after such record date) to subscribe
for or purchase shares of Common Stock,
12
<PAGE>
common stock equivalents or securities convertible into Common Stock or common
stock equivalents at a price per share of Common Stock or common stock
equivalents (or having a conversion price per share, if a security convertible
into Common Stock or common stock equivalents) less than the then current per
share market price of the Common Stock (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date, plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares of
Common Stock and/or common stock equivalents so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Common Stock outstanding on such record
date, plus the number of additional shares of Common Stock and/or common stock
equivalents to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
--------
however, that in no event shall the consideration to be paid upon the exercise
- -------
of one Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of one Right. In case such subscription
price may be paid by delivery of consideration part or all of which may be in a
form other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and the holders of the Rights. Shares of Common Stock owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend payable in shares of
Common Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Common Stock on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one share of Common Stock and the denominator of which shall be
such current per share market price of the Common Stock; provided, however, that
-------- -------
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. 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 Purchase Price shall again
13
<PAGE>
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) For the purpose of any computation hereunder, the "current per share
market price" of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
-------- -------
price of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock, or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Stock
is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly traded, the "current per share
market price" of the Common Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
-------- -------
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section
14
<PAGE>
11 shall be made no later than the earlier of (i) three years from the date of
the transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in Section 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Common Stock shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest ten-thousandth) obtained by (i) multiplying (x) the
number of shares of Common Stock covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after such adjustment of the number
of Rights shall be exercisable for the number of shares of Common Stock for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Right Certificates have been issued, shall be at
least 10 days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the
15
<PAGE>
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued, executed and countersigned in the manner provided for herein and shall
be registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase Price and the number of shares of Common Stock which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the shares of Common Stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase 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
issuing to the holder of any Right exercised after such record date of the
shares of Common Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the shares of Common Stock and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
- -----------------
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the shares of Common Stock,
issuance wholly for cash of any shares of Common Stock at less than the current
market price, issuance wholly for cash of shares of Common Stock or securities
which by their terms are convertible into or exchangeable for shares of Common
Stock, dividends on shares of Common Stock payable in shares of Common Stock or
issuance of rights, options or warrants referred to hereinabove in Section
11(b), hereafter made by the Company to holders of its Common Stock shall not be
taxable to such stockholders.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the shares of
Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 25 hereof.
16
<PAGE>
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
- -----
(a) In the event that, on or after the Stock Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, or merge with and into, any
Person or Persons, (ii) any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property,
or (iii) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions
(other than in the ordinary course of business), assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person other than the Company or
one or more of its wholly owned Subsidiaries (any such event described in
clauses (i), (ii) or (iii) being referred to herein as a "Flip-Over Event"),
then, and in each such case, proper provision shall be made so that (A) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of shares of Common Stock for
which a Right is then exercisable, in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid, non-
assessable and freely tradable shares of Common Stock of the Principal Party (as
such term is hereinafter defined) free and clear of liens, encumbrances or other
adverse claims as shall equal the result obtained by (1) multiplying the then
current Purchase Price by the number of shares of Common Stock for which a Right
is then exercisable immediately prior to the first occurrence of a Flip-Over
Event (or, if a Flip-In Event has occurred prior to the first occurrence of a
Flip-Over Event, multiplying the number of shares for which a Right was
exercisable immediately prior to the first occurrence of a Flip-In Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Flip-Over
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the then current per share market
price of the shares of Common Stock of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (C) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply only to such Principal Party following the first
occurrence of a Flip-Over Event; (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares
of its Common Stock in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (E) the provisions of Section 11(a)(ii)(A) hereof shall be of no effect
following the first occurrence of any Flip-Over Event. The Company shall not
consummate any such consolidation, merger, sale or transfer unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement so providing. The Company shall not enter into
any transaction of the kind referred to in this Section 13 if at the time of
such transaction there are any rights, warrants, instruments or securities
outstanding or
17
<PAGE>
any agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights. The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (i) or (ii) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
in such transaction, or if there is more than one such issuer, the issuer
of shares of Common Stock with the greatest aggregate market value, and if
no securities are so issued, the Person that is the other party to such
transaction, or if there is more than one such Person, the Person having
shares of Common Stock with the greatest aggregate market value; and
(ii) in the case of any transaction described in clause (iii) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the shares of Common Stock of
- -------- -------
such Person are not at such time and have not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another person the shares of
Common Stock of which are and have been so registered, "Principal Party" shall
refer to such other Person; and (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the shares of Common Stock of
two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high
18
<PAGE>
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of such fractional Rights,
the Company shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one share of Common Stock. For the
purposes of this Section 14(b), the current market value of one share of Common
Stock shall be the closing price of a share of Common Stock (as determined
pursuant to the second sentence of Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
shares of Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the shares of Common Stock), without the
consent of the Rights Agent or of the holder of any other Right Certificate (or,
prior to the Distribution Date, of the shares of Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such Right Certificate
in the manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this
Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the shares of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer;
19
<PAGE>
(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
certificate of Common Stock) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated certificate of Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligations; provided, however, the Company must use reasonable efforts to have
-------- -------
any such order, decree or ruling lifted or otherwise overturned as soon as
reasonably practicable.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
-------------------------------------------------
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate of Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
20
<PAGE>
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
--------
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
21
<PAGE>
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii)(B) hereof) or any adjustment
in the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Right Certificate or as to whether any shares of Common
Stock will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct
22
<PAGE>
of any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent harmless
against any loss, liability or expense (including reasonable fees and expenses
of counsel) that the Rights Agent may incur resulting from its actions as Rights
Agent pursuant to this Agreement; provided, however, that the Rights Agent shall
-------- -------
not be indemnified or held harmless with respect to any such loss, liability,
damage or expense incurred by the Rights Agent as a result of, or arising out
of, its own negligence, bad faith or willful misconduct. In no case shall the
Company be liable with respect to any action, proceeding, suit or claim against
the Rights Agent unless the Rights Agent shall have notified the Company, by
letter or by facsimile confirmed by letter, of the assertion of any action,
proceeding, suit or claim against the Rights Agent, promptly after the Rights
Agent shall have notice of any such assertion of an action, proceeding, suit or
claim or have been served with the summons or other first legal process giving
information as to the nature and basis of the action, proceeding, suit or claim.
The Company shall be entitled to participate at its own expense in the defense
of any such action, proceeding, suit or claim, and, if the Company so elects,
the Company shall assume the defense of any such action, proceeding, suit or
claim. In the event that the Company assumes such defense, the Company shall
not thereafter be liable for the fees and expenses of any additional counsel
retained by the Rights Agent, so long as the Company shall retain counsel
satisfactory to the Rights Agent, in the exercise of its reasonable judgment, to
defend such action, proceeding, suit or claim. The Rights Agent agrees not to
settle any litigation in connection with any action, proceeding, suit or claim
with respect to which it may seek indemnification from the Company without the
prior written consent of the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock by registered or certified mail, and to the holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of New York, in good standing, having an office in the
State of New York which is authorized under such laws to exercise
23
<PAGE>
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock,
and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the earlier of the Redemption Date and the Final Expiration
Date, the Company (i) shall, with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes
or debentures issued by the Company, and (ii) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that no such Right Certificate shall
-------- -------
be issued if, and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued, and no such Right Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the Close of Business on the tenth day following the
Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the Close of Business on the tenth day following the
Record Date) and (ii) the Final Expiration Date, order the redemption of all,
but not fewer than all, the then outstanding Rights at a redemption price of
$.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"), and the Company,
at its option, may pay the Redemption Price either in cash or shares of Common
Stock or other securities of the Company deemed by the board of Directors of the
Company, in the exercise of its sole discretion, to be at least equivalent in
value
24
<PAGE>
to the Redemption Price; provided, however, that, in addition to any other
-------- -------
limitations contained herein on the right to redeem outstanding Rights
(including the occurrence of any event or the expiration of any period after
which the rights may no longer be redeemed), for the 120-day period after any
date of a change (resulting from a proxy or consent solicitation) in a majority
of the Board of directors of the Company in office at the commencement of such
solicitation, the Rights may only be redeemed if (A) there are directors then in
office who were in office at the commencement of such solicitation and (B) the
Board of Directors of the Company, with the concurrence of a majority of such
directors then in office, determines that such redemption is, in their judgment,
in the best interests of the Company and its stockholders.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however, that the failure to
-------- -------
give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the shares of Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of shares of Common Stock prior to
the Distribution Date.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii)(B) hereof) for
shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the shares of Common Stock then
outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right
25
<PAGE>
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any
-------- -------
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(ii)(B) hereof) held by each holder
of Rights .
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares. In
lieu of such fractional shares, the Company shall pay to the registered holders
of the Right Certificates with regard to which such fractional shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock. For the purposes of this
paragraph (d), the current market value of a share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 11(d) hereof) for the Trading Day immediately prior to the
date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock (other than a regular quarterly cash
dividend), (ii) to offer to the holders of Common Stock rights or warrants to
subscribe for or to purchase any additional shares of Common Stock or shares of
stock of any class or any other securities, rights or options, (iii) to effect
any reclassification of Common Stock (other than a reclassification involving
only the subdivision of outstanding shares of Common Stock), (iv) to effect any
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock, if any such date is to be fixed, and
such
26
<PAGE>
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of
Common Stock for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Common
Stock, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii)(A) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii)(A)
hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Sun Coast Industries, Inc.
2700 S. Westmoreland Ave.
Dallas, Texas 75233
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Executive Vice President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. At any time prior to the
--------------------------
Distribution Date and subject to the last sentence of this Section 27, the
Company may, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Rights Agreement (including, without limitation, the
date on which the Distribution Date shall occur or the time during which the
Rights may be redeemed pursuant to Section 23) without the approval of any
holder of the Rights. From and after the Distribution Date and subject to
applicable law, the Company may, and the Rights Agent shall if the Company so
directs, amend this Rights Agreement without the approval of any holders of
Right Certificates (i) to cure any ambiguity or to correct or supplement
27
<PAGE>
any provision contained herein which may be defective or inconsistent with any
other provision of this Rights Agreement, (ii) to shorten or lengthen any time
period herein or (iii) to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, this Agreement may not be supplemented or
-------- -------
amended to lengthen pursuant to clause (ii) of this sentence, (A) a time period
governing redemption of the Rights if the Rights are not then redeemable, or (B)
any other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than an Acquiring Person or any Affiliate or Associate of an
Acquiring Person). Any supplement or amendment adopted during any period after
any Person has become an Acquiring Person but prior to the Distribution Date
shall be null and void unless such supplement or amendment could have been
adopted under the prior sentence from and after the Distribution Date. Without
limiting the foregoing, the Company may at any time prior to the Distribution
Date amend this Agreement to lower the threshold set forth in the definition of
Acquiring Person in Section 1 hereof and in Section 3(a) hereof to not less than
the greater of (i) the sum of .001% and the largest percentage of the
outstanding shares of Common Stock then known by the Company to be beneficially
owned by any Person (other than the Company, a Subsidiary of the Company, an
employee benefit plan of the Company or any Subsidiary of the Company, or any
entity or Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan) and (ii) 10%. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment; provided,
--------
however, that the Rights Agent may, but shall not be obligated to, enter into
- -------
any such supplement or amendment which affects its own rights, duties or
immunities under this Agreement. Notwithstanding anything contained in this
Rights Agreement to the contrary, during the 120-day period after any date of a
change (resulting from a proxy or consent solicitation) in a majority of the
Board of directors of the Company in office at the commencement of such
solicitation, this Rights Agreement may be supplemented or amended only if (A)
there are directors then in office who were in office at the commencement of
such solicitation and (B) the Board of directors of the company, with the
concurrence of a majority of such directors then in office, determines that such
supplement or amendment is, in their judgment, in the best interests of the
Company and its stockholders and, after the Distribution Date, the holders of
the Right Certificates. In addition, notwithstanding anything to the contrary
contained in this Rights Agreement, no supplement or amendment to this Rights
Agreement shall be made which (a) reduces the Redemption Price (except as
required hereunder by appropriate adjustment to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement) or
(b) provides for an earlier Final Expiration Date.
Section 28. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the shares of Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
28
<PAGE>
holders of the Right Certificates (and, prior to the Distribution Date, the
shares of Common Stock).
Section 30. Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. GOVERNING LAW. THIS AGREEMENT AND EACH RIGHT CERTIFICATE
-------------
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS TO BE MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 32. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.
SUN COAST INDUSTRIES, INC.
Attest:
By: /s/ Cynthia R. Morris By: /s/ R. Carter Pate
---------------------------------- ----------------------------------
Name: Cynthia R. Morris Name: R. Carter Pate
---------------------------- ----------------------------
Title: Secretary, Chief Financial Title: President, Chief Executive
Officer Officer
--------------------------- ---------------------------
AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest:
By: /s/ Susan Silber By: /s/ Herbert J. Lemmer
---------------------------------- ----------------------------------
Name: Susan Silber Name: Herbert J. Lemmer
---------------------------- ----------------------------
Title: Assistant Secretary Title: Vice President
--------------------------- ---------------------------
29
<PAGE>
Exhibit A
---------
[Form of Right Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER JULY 6, 2005 OR EARLIER IF TERMINATION OR REDEMPTION
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED
BY A PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND SUBSEQUENT HOLDERS OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
SUN COAST INDUSTRIES, INC.
This certifies that _______________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of June 6, 1995 (the "Rights Agreement"), between
Sun Coast Industries, Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M., New York City time, on July 6, 2005,
at the principal office of the Rights Agent, or at the office of its successor
as Rights Agent, one fully paid non-assessable share of Common Stock, par value
$.01 per share (the "Common Stock"), of the Company, at a purchase price of
$50.00 per share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase and Certification of
Status duly executed. The number of Rights evidenced by this Right Certificate
(and the number of shares of Common Stock which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of _______________, ___, based on the Common Stock as
constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number of
shares of Common Stock which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
<PAGE>
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent and are also
available upon written request to the Company.
If a Person becomes an Acquiring Person (as such terms are defined in the
Rights Agreement), any Rights evidenced by this Right Certificate that are
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
such Acquiring Person (as such terms are defined in the Rights Agreement), (ii)
a transferee of any such Acquiring Person or Associate or Affiliate who becomes
a transferee after the Acquiring Person becomes such or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of such Acquiring
Person or Associate or Affiliate who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such, shall be null and void
from and after the occurrence of such event.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of Common Stock as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may, prior to the time that any Person becomes an Acquiring
Person, but are not required to, be redeemed by the Company at a redemption
price of $.01 per Right by the Company at no cost or (ii) may, at any time after
any Person becomes an Acquiring Person, but are not required to, be exchanged in
whole or in part for shares of Common Stock.
No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
(except as provided in the Rights Agreement) or receive dividends or be deemed
for any purpose the holder of the shares of Common Stock or of any other
securities of the Company which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
A-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ______________, 19___.
[CORPORATE SEAL]
ATTEST: SUN COAST INDUSTRIES, INC.
_______________________________ ______________________________________
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
- ---------------------------------------
By: ___________________________
Authorized Signature
A-3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto _____________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _________________________________
Attorney, to transfer the within Right Certificate on the books of the within-
named Company, with full power of substitution.
Dated: ________________, 19___
________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities Transfer
Association recognized signature guarantee program.
A-4
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right Certificate
[_] is
[_] is not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Associate or an Affiliate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did
[_] did not
acquire the Rights evidenced by this Right Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate
thereof.
________________________________________
Signature
Date: ______________, 19___
NOTICE
------
The signature(s) in the foregoing Form of Assignment and Certification of
Status must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment is
not completed, the Company will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Right Certificates issued
in exchange for this Right Certificate.
A-5
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To SUN COAST INDUSTRIES, INC.:
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Right Certificate to purchase the shares of Common
Stock issuable upon the exercise of such Rights and requests that certificates
for such shares of Common Stock be issued in the name of:
Please insert social security
or other identifying number:____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:____________________________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ______________, 19___
________________________________
Signature
A-6
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities
Transfer Association recognized signature guarantee program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate
[_] is
[_] is not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Associate or an Affiliate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did
[_] did not
acquire the Rights evidenced by this Right Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate
thereof.
________________________________________
Signature
Date: _______________, 19___
A-7
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
NOTICE
------
The signature(s) in the foregoing Form of Election to Purchase and
Certification of Status must correspond to the name as written upon the face of
this Right Certificate in every particular, without alteration or enlargement or
any change whatsoever.
In the event the certification set forth above in the Form or Election to
Purchase is not completed, the Company will deem the beneficial owner of the
Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the
case of an Assignment, will affix a legend to that effect on any Right
Certificates issued in exchange for this Right Certificate.
A-8
<PAGE>
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On June 6, 1995, the Board of Directors of Sun Coast Industries, Inc.
(the "Company") declared a dividend of one common stock purchase right (a
"Right") for each outstanding share of common stock, par value $.01 per share
(the "Common Stock"), of the Company. The dividend is payable on July 6, 1995
(the "Record Date") to the stockholders of record of the Common Stock on that
date. When the Rights become exercisable, each Right will entitle the registered
holder to purchase from the Company one share of Common Stock at a price of
$50.00 per share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and American Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agent").
Until the earlier to occur of the Close of Business on (i) the tenth
day after the date a person (an "Acquiring Person") (other than the Company, any
subsidiary of the Company, or any employee benefit plan of the Company or any
subsidiary of the Company) alone or together with affiliates and associates, has
become the beneficial owner of 15% (or such lower threshold as may be
established by the Board of Directors) or more of the outstanding shares of
Common Stock or (ii) the tenth business day after the date (or such later date
as may be determined by action of the Board of Directors prior to such time as
any person becomes an Acquiring Person) of the commencement of, or announcement
of an intention to make, a tender offer or exchange offer the consummation of
which would result in any person (other than the Company, any subsidiary of the
Company, or any employee benefit plan of the Company or any subsidiary of the
Company) becoming an Acquiring Person (the earlier of (i) or (ii) being called
the "Distribution Date"), the Rights will be evidenced, with respect to any of
the Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate with a copy of this Summary of Rights attached thereto. James
M. Hoak will not be deemed an Acquiring Person unless and until he, together
with his Affiliates and Associates, becomes the Beneficial Owner of 20% or more
of the outstanding shares of Common Stock.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier termination or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of shares of Common Stock, will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
termination or expiration of the Rights), the transfer of any certificates for
shares of Common Stock, outstanding as of the Record Date, even without such
notation or a copy of this Summary of Rights being attached thereto, will also
constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificate") will be mailed to holders of record of the shares of Common Stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
<PAGE>
The Rights are not exercisable until the Distribution Date. The
Rights will expire on July 6, 2005 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed by
the Company, in each case, as described below.
The Purchase Price payable, and the number of shares of Common Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the shares of Common Stock of
certain rights or warrants to subscribe for or purchase shares of Common Stock
at a price, or securities convertible into shares of Common Stock with a
conversion price, less than the then current market price of the shares of
Common Stock or (iii) upon the distribution to holders of the shares of Common
Stock of evidences of indebtedness or assets (excluding a regular quarterly cash
dividend or a dividend payable in shares of Common Stock) or of subscription
rights or warrants (other than those referred to above).
In the event that on or after the first date of public announcement by
the Company or an Acquiring Person that an Acquiring Person has become such (the
"Stock Acquisition Date") the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold (in one transaction or a series of transactions other than in the
ordinary course of business), proper provision will be made so that each holder
of a Right will thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price of the Right, that number of common shares of
the acquiring company which at the time of such transaction will have a market
value of two times the Purchase Price. In the event that any person, together
with its affiliates and associates, becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of
Common Stock of the Company having a market value of two times the Purchase
Price. Under no circumstances may a Right be exercised following the occurrence
of an event set forth in the preceding sentence prior to the expiration of the
Company's right of redemption.
At any time after any person becomes an Acquiring Person and prior to
the acquisition by such person, together with its affiliates and associates, of
beneficial ownership of 50% or more of the outstanding shares of Common Stock,
the Board of Directors of the Company may exchange the Rights (other than Rights
owned by such person which have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Common Stock will be issued and in
lieu thereof, an adjustment in cash will be made based on the market price of
the shares of Common Stock on the last trading day prior to the date of
exercise.
B-2
<PAGE>
At any time prior to the tenth day following the first public
announcement of the existence of an Acquiring Person, the Board of Directors of
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right, payable in cash or shares of Common Stock (the "Redemption Price");
provided, however, that for the 120-day period after any date of a change
(resulting from a proxy or consent solicitation) in a majority of the Board of
Directors of the Company in office at the commencement of such solicitation, the
Rights may only be redeemed if (i) there are directors then in office who were
in office at the commencement of such solicitation and (ii) the Board of
Directors of the Company, with the concurrence of a majority of such directors
then in office, determines that such redemption is, in their judgment, in the
best interests of the Company and its stockholders. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
All rights relating to the Rights, including the right to exercise the Rights,
will terminate.
The terms of the Rights may be amended by the Board in any manner
prior to the Distribution Date. After the Distribution Date, the provisions of
the Rights Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
the holders of the Rights, or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable. Notwithstanding the foregoing, for the 120-day period after any
date of a change (resulting from a proxy or consent solicitation) in a majority
of the Board of directors of the Company in office at the commencement of such
solicitation, the Rights Agreement may be supplemented or amended only if (i)
there are directors then in office who were in office at the commencement of
such solicitation and (ii) the Board of Directors of the Company, with the
concurrence of a majority of such directors then in office, determines that such
amendment or supplement is, in their judgment, in the best interests of the
Company and its stockholders.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote (other than with respect to the amendment of Rights in certain
circumstances) or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
June 22, 1995. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
B-3
<PAGE>
EXHIBIT 6
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
AMENDMENT NO. 2 TO RIGHTS AGREEMENT, dated as of January 28, 1998 (the
"Amendment"), by and between Sun Coast Industries, Inc., a Delaware corporation
(the "Company"), and American Stock Transfer & Trust Company (the "Rights
Agent").
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement dated as of June 6, 1995, amended pursuant to an Amendment No. 1 dated
December 5, 1995 (the "Rights Agreement");
WHEREAS, Kerr Group, Inc., a Delaware limited liability company (the
"Parent"), Saffron Acquisition Corporation, a Delaware corporation and a wholly-
owned subsidiary of Parent (the "Purchaser"), and the Company have entered into
an Agreement and Plan of Merger, dated as of January 28, 1998 (the "Agreement
and Plan of Merger"), pursuant to which Purchaser will commence a tender offer
(the "Offer") for all outstanding shares of the Company's common stock and,
following consummation of the Offer, Purchaser will merge with and into the
Company (the "Merger");
WHEREAS, the Board of Directors of the Company (including a majority
of the Continuing Directors (as defined in the Rights Agreement)) has approved
the Agreement and Plan of Merger, the Offer and the Merger; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Board of
Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable to reflect the
foregoing and the Company and the Rights Agent desire to evidence such amendment
in writing.
Accordingly, the parties agree as follows:
1. AMENDMENT OF SECTION 1(A). Section 1(a) of the Rights Agreement
is hereby amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Parent nor Purchaser shall be deemed to be an "Acquiring Person"
solely by virtue of (i) the announcement or making of the Offer (as defined
in the Agreement and Plan of Merger), (ii) the acquisition of the Shares
(as defined in the Agreement and Plan of Merger) pursuant to the Offer or
the Merger (as defined in the Agreement and Plan of Merger), (iii) the
execution of the
-1-
<PAGE>
Agreement and Plan of Merger, or (iv) the consummation of the other
transactions contemplated by the Agreement and Plan of Merger."
2. AMENDMENT OF SECTION 1(G). Section 1(g) of the Rights Agreement
is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a result
of: (i) the announcement or making of the Offer, (ii) the acquisition of
the Shares pursuant to the Offer or the Merger, (iii) the execution of the
Agreement and Plan of Merger, or (iv) the consummation of the other
transactions contemplated in the Agreement and Plan of Merger."
3. SECTIONS 1(O). Section 1(o) of the Rights Agreement is hereby
amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Triggering Event shall not be deemed to have occurred as a result of: (i)
the announcement or making of the Offer, (ii) the acquisition of the Shares
pursuant to the Offer or the Merger, (iii) the execution of the Agreement
and Plan of Merger, or (iv) the consummation of the other transactions
contemplated in the Agreement and Plan of Merger."
4. SECTIONS 1(P), (Q) AND (R). The following subsections are hereby
added after Section 1(rr) of the Rights Agreement:
"(p) "Agreement and Plan of Merger" shall mean the Agreement and Plan
of Merger dated as of January 28, 1998 by and among Parent, Purchaser and
the Company, as it may be amended from time to time.
(q) "Parent" shall mean Kerr Group, Inc., a Delaware limited
liability company.
(r) "Purchaser" shall mean Saffron Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent."
5. AMENDMENT OF SECTION 1(I). Section 1(i) of the Rights Agreement
is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Offer, (ii) the acquisition of the
Shares by Parent or Purchaser pursuant to the Offer or the Merger, (iii)
the execution of the
-2-
<PAGE>
Agreement and Plan of Merger, or (iv) the consummation of the other
transactions contemplated in the Agreement and Plan of Merger, shall not be
deemed to be a Flip-In Event and shall not cause the Rights to be adjusted
or exercisable under this Agreement."
6. AMENDMENT OF SECTION 1(J). Section 1(j) of the Rights Agreement
is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Offer, (ii) the acquisition of the
Shares by Parent or Purchaser pursuant to the Offer or the Merger, (iii)
the execution of the Agreement and Plan of Merger, or (iv) the consummation
of the other transactions contemplated in the Agreement and Plan of Merger,
shall not be deemed to be a Flip-Over Event and shall not cause the Rights
to be adjusted or exercisable under this Agreement."
7. AMENDMENT OF SECTION 7(a). Section 7(a) of the Rights Agreement
is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
the Rights shall automatically expire upon the acceptance of Shares for
payment pursuant to the Offer in accordance with the Agreement and Plan of
Merger and that the Rights shall cease to be exercisable upon the earlier
of (i) the close of business on July 6, 2005 (the "Final Expiration Date"),
(ii) the Redemption Date, or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof or (iv) the acceptance of Shares
for payment pursuant to the Offer in accordance with the Agreement and Plan
of Merger, if such acceptance occurs (the earlier of (i), (ii), (iii) and
(iv) being herein referred to as the "Expiration Date")."
8. EFFECTIVENESS. This Amendment shall be deemed effective as of
the date hereof. Except as amended hereby, the Rights Agreement shall remain in
full force and effect and shall be otherwise unaffected by this Amendment.
9. MISCELLANEOUS. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state applicable
to contracts to be made and performed entirely within such state. This
Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If any
provision, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid,
-3-
<PAGE>
illegal or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be effected, impaired or invalidated.
-4-
<PAGE>
EXECUTED as of the date set forth above.
SUN COAST INDUSTRIES, INC.
/s/ EDDIE M. LESOK
--------------------------------------------------
Name: Eddie M. Lesok
Title: President and Chief Executive Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY
/s/ HERBERT J. LEMMER
--------------------------------------------------
Name: Herbert J. Lemmer
Title: Vice President
-5-
<PAGE>
EXHIBIT 7
SUN COAST INDUSTRIES, INC.
2700 SOUTH WESTMORELAND
DALLAS, TEXAS 75233
FEBRUARY 3, 1998
To Our Stockholders:
We are pleased to inform you that on January 28, 1998, Sun Coast Industries,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Kerr Group, Inc. ("Kerr") and Saffron Acquisition Corp., a
wholly owned subsidiary of Kerr (the "Purchaser"), pursuant to which the
Purchaser has commenced a tender offer (the "Offer") to purchase all of the
outstanding shares of the Company's common stock, par value $0.01 per share
(the "Shares"), for a cash price of $10.75 per Share. The Offer is conditioned
upon, among other things, the tender of at least a majority of the Shares
outstanding on a fully diluted basis. The Merger Agreement provides that
following consummation of the Offer, the Purchaser will be merged (the
"Merger") with and into the Company and those Shares that are not acquired in
the Offer will be converted into the right to receive $10.75 per Share in
cash.
The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Offer and the Merger and determined that the terms of the Offer
and the Merger are fair to, and in the best interest of, the Company and the
holders of the Shares, and unanimously recommends that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer.
In arriving at its recommendation, the Board of Directors considered the
factors described in the accompanying Schedule 14D-9, including the opinion of
the Company's financial advisor, Stephens Inc., to the effect that the
consideration to be received by the holders of the Shares is fair from a
financial point of view. A copy of Stephens' written opinion, which sets forth
the assumptions made, procedures followed and matters considered in, and the
limitations on, the review by Stephens in rendering its opinion is attached to
the Schedule 14D-9 as Schedule I.
The accompanying Offer to Purchase sets forth all of the terms of the Offer.
Additionally, the enclosed Schedule 14D-9 sets forth additional information
regarding the Offer and the Merger relevant to making an informed decision. We
urge you to read these materials carefully and in their entirety.
James D. Ireland III Eddie Lesok
Chairman President and Chief
Executive Officer
<PAGE>
EXHIBIT 8
PRESS RELEASE
SUN COAST INDUSTRIES, INC.
(NYSE: SN)
FOR IMMEDIATE RELEASE
SUN COAST INDUSTRIES, INC.
SIGNS DEFINITIVE MERGER AGREEMENT WITH
KERR GROUP, INC.
DALLAS, TEXAS, January 28, 1998 . . . Sun Coast Industries, Inc., and Kerr
Group, Inc., a company majority owned by Fremont Partners, jointly announced
that they have signed a definitive merger agreement for Kerr to acquire all of
the outstanding shares of common stock of Sun Coast. Pursuant to the merger
agreement, Kerr will pay $10.75 in cash for each outstanding share of Sun
Coast common stock. Sun Coast currently has 4,117,629 shares of common stock
outstanding.
The transaction will be a cash tender offer followed by a cash merger to
acquire any shares not previously tendered. The transaction has been
recommended by the Board of Directors of Sun Coast and approved by the Board
of Directors of Kerr. Kerr will obtain additional equity financing from
Fremont Partners to finance the acquisition.
In connection with the execution of the merger agreement, Kerr entered into
a stockholder agreement with the largest stockholder of Sun Coast, who holds
approximately 11% of the outstanding shares of Sun Coast common stock. The
agreement provides for the largest stockholder's commitment to tender his
shares into Kerr's tender offer. Additionally, Kerr and Sun Coast entered into
an option agreement whereby Sun Coast granted to Kerr an irrevocable option to
purchase up to 500,000 newly-issued shares of Sun Coast common stock at $10.75
per share.
Kerr expects to commence its cash tender offer on or before February 3,
1998. The cash offer is subject to Kerr receiving at least a majority of the
fully diluted shares of common stock of Sun Coast. The closing of the
transaction is subject to the expiration of the waiting period under the Hart-
Scott-Rodino Act.
Following the pending sale of its melamine and urea resins and compounds
business to Borden Chemical, Inc., Sun Coast's primary business will be the
manufacture of linerless, foil or foam-lined and tamper-evident plastic
closures and lids for use in the bottling and packaging of food, beverage,
chemical and pharmaceutical products.
"The sale of Sun Coast stock to Kerr concludes the strategic realignment of
the company. Sun Coast has historically had three operating divisions. In
December, 1996, we discontinued the Tableware Division and in December, 1997,
we entered into an agreement to sell the Chemical Division. This transaction
consolidates our Closures unit, selling primarily to the food and beverage
industry, with the Kerr Group, who together will represent a leading packaging
organization. We are pleased that the purchasers of the Sun Coast businesses
present our employees an opportunity to grow with larger companies within our
respective industries," said Eddie Lesok, President and CEO of Sun Coast.
Kerr, headquartered in Lancaster, Pennsylvania, is a major producer of
tamper-evident and child-resistant plastic closures, and plastic vials and
bottles for the pharmaceutical, drug, food and distilled spirits industries.
Kerr was acquired by Fremont Partners in August of 1997.
Fremont Partners is a $600 million private equity fund, headquartered in San
Francisco. Fremont Partners is affiliated with The Fremont Group, a private
investment company with more than $7 billion in assets under management. In
addition to Kerr, Fremont Partners has a significant investment in Kinetic
Concepts, Inc., a worldwide leader in the development and delivery of
innovative therapeutic systems. Fremont's investment in Kinetic Concepts was
made in November 1997 in a recapitalization transaction totaling approximately
$900 million.
<PAGE>
EXHIBIT 9
Stephens Inc.
January 27, 1998
Board of Directors of Sun Coast Industries, Inc.
2700 5. Westmoreland Ave.
Dallas, TX 75233
Gentlemen:
We have acted as your financial advisor in connection with the proposed
merger of Sun Coast Industries, Inc. (the "Company") with Saffron Acquisition
Corp., a wholly owned subsidiary of Kerr Group, Inc. (the "Transaction"). This
Transaction is expected to take the form of an all cash tender offer, followed
by a merger of Saffron Acquisition Corp. with and into the Company. The terms
and conditions of the Transaction are more fully set forth in the definitive
merger agreement.
You have requested our opinion as to the fairness to the shareholders of the
Company from a financial point of view of the consideration to be received by
such shareholders in the Transaction. In connection with rendering our opinion
we have:
(i) analyzed certain publicly available financial statements and reports
regarding the Company;
(ii) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning the Company
prepared by management of the Company;
(iii) reviewed the reported prices and trading activity for the Common
stock;
(iv) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(vi) reviewed the definitive merger agreement and related documents;
(vii) discussed with management of the Company the operations of and future
business prospects for the Company;
111 CENTER STREET POST OFFICE BOX 3507LITTLE ROCK, ARKANSAS 72203-3507 501-374-
4361 FAX 501-377-2674
<PAGE>
January 27, 1998
Page 2
(viii) assisted in your deliberations regarding the material terms of the
Transaction, and
(ix) performed such other analyses and provided such other services as we
have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company, and our opinion is based upon
such information. We have inquired into the reliability of such information
and financial data only to the limited extent necessary to provide a
reasonable basis for our opinion, recognizing that we are rendering only an
informed opinion and not an appraisal or certification of value. With respect
to the financial projections prepared by management of the Company, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial
performance of the Company.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Stephens
Inc. and its affiliates at any time may hold long or short positions, and may
trade or otherwise effect transactions as principal or for the accounts of
customers, in debt or equity securities or options on securities of the
Company. Stephens is receiving a fee, and reimbursement of its expenses, in
connection with the issuance of this fairness opinion and for its role as
financial advisor to the Company.
Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion on the date
hereof that the consideration to be received by the shareholders of the
Company in the Transaction is fair to them from a financial point of view.
This opinion and a summary discussion of our underlying analyses and role as
your financial advisor may be included in communications to the Company's
shareholders provided that we approve of such disclosures prior to
publication.
Very truly yours,
/s/ Stephens Inc.
-------------------------------------
Stephens Inc.
<PAGE>
EXHIBIT 10
PURCHASE AND SALE AGREEMENT
BETWEEN
SUN COAST INDUSTRIES, INC.,
SUN COAST HOLDINGS, INC.
AND
PLASTICS MANUFACTURING COMPANY
(SELLERS)
AND
BORDEN CHEMICAL, INC.
(BUYER)
DATED: December 22, 1997
<PAGE>
TABLE OF CONTENTS
1. Sale of Assets........................................ 1
2. Excluded Assets....................................... 3
3. Purchase Price........................................ 4
4. Payment............................................... 4
5. Accounts Receivable................................... 4
6. Inventories........................................... 5
7. Closing Balance Sheet/Adjustments..................... 6
8. Closing............................................... 8
9. Representations and Warranties of the Sellers......... 11
(a) Organization; Corporate Power; Qualification.. 11
(b) Authorization................................. 11
(c) Financial Statements.......................... 12
(d) Absence of Certain Changes.................... 13
(e) Title to Properties........................... 14
(f) Real Property; Machinery; Equipment........... 14
(g) Environmental and Regulatory Affairs.......... 15
(h) Contracts; Leases............................. 17
(i) Employees..................................... 19
(j) Labor Relations............................... 22
(k) Accounts Receivable........................... 23
(l) Inventories................................... 23
(m) Customers..................................... 23
(n) Licenses; Permits............................. 24
(o) Intellectual Property Rights.................. 24
(p) Litigation.................................... 25
(q) Insurance..................................... 26
(r) No Brokers.................................... 26
(s) Taxes......................................... 26
(t) Complete Assets............................... 27
(u) Affiliated Transactions....................... 27
10. Representations and Warranties of the Buyer........... 27
(a) Organization; Corporate Power................. 27
(b) Authorization................................. 28
(c) No Brokers.................................... 28
(d) Financing..................................... 28
(e) Independent Investigation..................... 28
<PAGE>
TABLE OF CONTENTS (Continued)
11. Access to Information/HSR Filing...................... 29
12. Title Insurance; Surveys.............................. 31
13. Conduct of the Business Pending the Closing........... 32
14. Conditions Precedent to Obligation of the Buyer....... 32
15. Conditions Precedent to Obligation of the Sellers..... 33
16. The Buyer's Assumption of Liabilities................. 34
17. Liabilities Not Assumed by the Buyer.................. 35
18. The Sellers' Indemnity................................ 37
19. The Buyer's Indemnity................................. 38
20. Remedies.............................................. 39
21. Survival of Representations and Warranties............ 41
22. Employees............................................. 41
23. Prorations............................................ 46
24. Expenses.............................................. 46
25. Termination........................................... 46
26. Use of The Sellers' Name.............................. 47
27. Transitional Services................................. 47
28. Removal of Excluded Equipment......................... 49
29. Notices............................................... 49
30. Headings.............................................. 49
31. Schedules............................................. 50
32. Entire Agreement...................................... 50
33. Governing Law......................................... 50
34. Binding Effect........................................ 50
35. Public Announcement................................... 50
<PAGE>
SCHEDULES
REAL PROPERTY............................................... A
REAL PROPERTY LEASES........................................ B
MACHINERY AND EQUIPMENT..................................... C
CONTRACTS................................................... D
CLAIMS AND RIGHTS........................................... E
INVENTORIES................................................. F
PATENTS/LICENSES............................................ G
TRADEMARKS.................................................. H
PREPAID EXPENSES............................................ I
BALANCE SHEET............................................... J
DEED FORM................................................... K
BILL OF SALE FORM........................................... L
ASSIGNMENT FORM............................................. M
NON-COMPETE AGREEMENT....................................... N
ABSENCE OF CHANGE........................................... O
LIENS....................................................... P
VIOLATIONS OF LAW/ENVIRONMENTAL MATTERS..................... Q
EMPLOYEES................................................... R
LICENSES AND PERMITS........................................ S
LITIGATION.................................................. T
INSURANCE................................................... U
CLAIMS NOT ASSUMED.......................................... V
TRADEMARK LICENSE AGREEMENT................................. W
EXCLUDED EQUIPMENT.......................................... X
<PAGE>
PURCHASE AND SALE AGREEMENT
AGREEMENT made December 22, 1997, between SUN COAST INDUSTRIES, INC., a
Delaware corporation ("Sun Coast"), PLASTICS MANUFACTURING COMPANY, a Nevada
corporation ("PMC") and SUN COAST HOLDINGS, INC., a Nevada corporation ("Sun
Coast Holdings") (Sun Coast, PMC and Sun Coast Holdings are hereinafter
collectively referred to as "Sellers") and BORDEN CHEMICAL, INC., a Delaware
corporation (the "Buyer").
WHEREAS, PMC owns and operates a Chemical Division which is engaged in the
manufacture and marketing of melamine and urea resins and compounds (the
"Business"); and
WHEREAS, PMC is a wholly-owned subsidiary of Sun Coast Holdings and Sun
Coast Holdings is a wholly-owned subsidiary of Sun Coast; and
WHEREAS, the Sellers desire to sell, and Buyer desires to purchase, all the
assets and properties used or held by the Sellers in connection with the
Business, upon the terms and conditions hereinafter set forth:
NOW, THEREFORE, it is agreed as follows:
1. Sale of Assets.
--------------
Sellers shall sell, transfer, assign, convey, and deliver to Buyer,
and Buyer shall purchase, acquire, and accept from the Sellers, on the Closing
Date (as defined in Paragraph 8), all of the assets and properties used or held
in connection with the Business, of every kind, nature, and description, and
wherever located, tangible and intangible, including the following:
(a) the land, plants, facilities, and buildings described in Schedule
A, attached hereto, including all appurtenances, licenses, and permits;
<PAGE>
(b) the claims, rights and benefits under the real property leases
described in Schedule B, attached hereto;
(c) the machinery, equipment, tools, parts, furniture, fixtures and
vehicles described in Schedule C, attached hereto;
(d) the claims, rights, and benefits under the sales and purchase
contracts, distributor and sales agency agreements, purchase orders,
construction contracts, collective bargaining agreements, consulting agreements,
employment and secrecy agreements, personal property leases and other contracts
and agreements described in Schedules D and R, attached hereto, or which were
entered into in the ordinary course of the Business and are not required to be
listed in Schedule D due to the materiality criteria in Paragraph 9(h)(iv) or
(vii);
(e) the accounts and notes receivable of the Business and other claims
and rights described in Schedule E, attached hereto;
(f) the supplies, raw materials, work-in-process, finished goods, and
other inventories of the Business, the major categories of which are described
in Schedule F, attached hereto;
(g) the claims, rights, and benefits under the patents, patent
applications, patent licenses, copyrights, copyright licenses and know how and
technology licenses described in Schedule G, attached hereto, and all existing
inventions, technology, trade secrets, processes, know-how and formulae, whether
patentable or unpatentable, and similar rights that relate to or are used in the
Business;
(h) the trade name, trademarks, trademark applications, trademark
licenses, and logos described in Schedule H, attached hereto;
(i) the prepaid expenses, employee advances, and construction-in-
process described in Schedule I, attached hereto;
2
<PAGE>
(j) the books of account, records, files, invoices, customer lists,
supplier lists, health, safety and environmental records and other similar data
used in connection with the Business;
(k) all other assets and properties of the Sellers reflected on the
balance sheet of the Business as of September 30, 1997 (the "Balance Sheet"), a
copy of which is attached hereto as Schedule J, and all of the properties
thereafter acquired by the Sellers in respect of the Business prior to the
Closing Date; except inventories sold, used, consumed, or otherwise disposed of
prior to the Closing Date in the ordinary course of business; and
(l) all other assets and properties used or held by Sellers in
connection with the Business.
Such sales, transfers, assignments, and deliveries shall be made free
and clear of all liabilities, obligations, liens, mortgages, deeds of trust,
security interests, charges, and other encumbrances, except those certain
liabilities and obligations which are to be assumed by the Buyer in accordance
with the provisions of Paragraph 15.
The assets and properties being sold, transferred, assigned, and
delivered under this Agreement are hereinafter called the "Acquired Assets."
2. Excluded Assets.
---------------
Buyer shall not acquire cash on hand or on deposit, or any other
assets shown as eliminations on Schedule J, nor any assets or liabilities of Sun
Coast Closures, Inc., or the excluded equipment described in Section 28. Except
as provided in the Trademark License Agreement between Sellers and Buyer
attached as Schedule W hereto, Buyer shall acquire no right to the name "Sun
Coast", or any derivation thereof.
3
<PAGE>
3. Purchase Price.
--------------
The Purchase Price (herein so called) for the Acquired Assets shall be
Thirteen Million Eight Hundred Twenty-Four Thousand Dollars ($13,824,000), plus
or minus the adjustments to be made as provided in Paragraph 7; and the Buyer
shall assume and agree to pay or discharge those certain liabilities and
obligations of the Sellers as provided in Paragraph 16.
4. Payment.
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(a) At the Closing the Buyer shall pay the Sellers, by wire transfer
of immediately available funds to the Sellers' account number 08805 144 258 at
Texas Commerce Bank (ABA # 113 000 609) (the "Sellers' Account"), the sum of
Thirteen Million Eight Hundred Twenty-Four Thousand Dollars ($13,824,000).
(b) The purchase price shall be allocated according to the book values
of the Acquired Assets as reflected on the Closing Balance Sheet:
5. Accounts Receivable.
-------------------
At the Closing the Sellers shall furnish to the Buyer a true and
complete list of the accounts and notes receivable of the Business and other
claims referred to in Schedule E as of the Closing, including the amount of each
such receivable and claim, and the amount of any reserve against such
receivables and claims as reflected in the Closing Balance Sheet (as hereinafter
defined).
If any receivables or claims have not been collected in full by the
Buyer within ninety (90) days after the Closing Date, the Sellers shall
immediately pay the uncollected amount to the Buyer, less any reserves or
credits reflected in the Closing Balance Sheet, provided the Buyer has not acted
in any way to impair collectibility. Upon such payment by the Sellers to the
Buyer, the Buyer shall reassign the unpaid receivables or claim to the Seller.
4
<PAGE>
If, at any time after the Closing Date, the Sellers receive any
payment on account of any account or claim assigned to the Buyer, the Sellers
shall hold such payment in trust for the benefit of the Buyer, and shall pay
over the amount of such payment to the Buyer within three (3) days after the
Sellers' receipt of such payment.
Any payment received by the Buyer on account of any account or claim
reassigned to the Sellers shall be held in trust by the Buyer for the benefit of
the Sellers, and the Buyer shall pay over the amount of such payment to the
Seller within three (3) days after the Buyer's receipt thereof
All payments received by the Buyer or the Sellers shall be applied to
the customer's oldest account first, in the absence of a designation by the
customer.
6. Inventories.
-----------
On or within five (5) days prior to the Closing Date the Sellers
shall, in the presence of the Buyer's representatives, conduct a physical count
of the inventories of the Business, and the Sellers shall deliver true and
complete copies of the work papers used to tabulate such count to the Buyer.
Such count shall thereupon be adjusted to account for shipments and
other transactions made between the physical count and the Closing Date and then
multiplied by the prices which generally reflect the values of the items
involved at the lower of actual cost or net realizable value (after allowance of
historic margins) in accordance with generally accepted accounting principles,
and the aggregate sum so calculated, less the inventory reserve, shall be the
net book value of the inventories as of the Closing Date for purposes of the
Closing Balance Sheet. The inventory reserve shall remain constant at $531,000,
except that missing, off-specification, defective, substandard, obsolete or slow
moving inventory will be charged against the reserve, but only to the extent
that the reserve is not thereby reduced below $100,000.
5
<PAGE>
Notwithstanding the foregoing, the cost of all off- specification,
defective substandard, obsolete, or slow moving items shall be written down to
net realizeable value in the ordinary course of business allowing for ordinary
margins. For purposes of this Agreement, the term "slow moving" shall refer to
items of finished product which were not sold within 180 days after their date
of manufacture, or if raw materials or work-in-process, items which have not
been converted into finished products within 180 days after they were placed in
inventory.
7. Closing Balance Sheet / Adjustments.
-----------------------------------
(a) (i) Within 30 days after the Closing Date, Buyer shall prepare and
deliver to Sellers a balance sheet for the Business as of the Closing Date (the
"Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles, consistent with the
preparation of the Balance Sheet (except it may be prepared on the basis of
month-end numbers and rolled forward to the Closing Date), and shall present
fairly the financial condition of the Business as of the Closing Date. Buyer
shall also deliver to Sellers copies of all work papers used in connection with
the preparation of the Closing Balance Sheet as well as a description of all of
the procedures used or followed.
(ii) If the Sellers shall notify Buyer, within 21 days after the
receipt of the Closing Balance Sheet, that it disputes any matter with respect
to the Closing Balance Sheet, Sellers and Buyer will negotiate in good faith in
an effort to resolve such dispute. If the Buyer and the Sellers are unable to
resolve such dispute within 30 days after Buyer's notice, then the dispute shall
be submitted to the Dallas, Texas office of the national accounting firm of
Arthur Andersen, LLP for a resolution of the dispute. The determination of such
accounting firm shall be a final and binding determination as to the matters in
dispute. The parties shall share equally in the cost of the accounting firm.
6
<PAGE>
(b) If the Net Working Capital of the Business (as hereinafter
defined), as reflected on the Closing Balance Sheet, exceeds the Net Working
Capital as reflected on the Balance Sheet, then the Buyer, as an adjustment to
the Purchase Price, shall pay the Sellers the amount of such excess within seven
(7) business days after the Net Working Capital of the Business has been so
determined.
If the Net Working Capital of the Business, as reflected on the
Closing Balance Sheet, is less than the Net Working Capital as reflected on the
Balance Sheet, then the Sellers, as an adjustment to the Purchase Price, shall
pay the Buyer the amount of such difference within seven (7) business days after
the Net Working Capital of the Business has been so determined.
For purposes of this Paragraph 7, the Net Working Capital of the
Business is defined as (A) the sum of the (i) net book value of the inventories
and accounts receivable of the business, (ii) plus the prepaid expenses of the
----
Business, (B) minus the trade payables of the Business and other current
-----
liabilities to be assumed by Buyer according to the provisions of Paragraph 16.
(c) If the Closing Balance Sheet reflects net additions or deletions
(including depreciation) occurring in the ordinary course of business to the
plant, property and equipment ("Fixed Assets") of the Business as listed on the
Balance Sheet, or changes in any long term liabilities, including, but not
limited to capital leases, which Buyer is assuming according to the provisions
of Paragraph 16, then, as an additional adjustment to the Purchase Price, Buyer
shall pay Sellers for any net additions in Fixed Assets or reductions in such
liabilities, or Sellers shall pay Buyer for any net deletions in Fixed Assets or
increases in such liabilities within seven (7) business days after the final
Closing Balance Sheet has been established; provided, however, that in no event
shall Buyer be required to pay more than Three Hundred Thousand Dollars
($300,000) for net additions to the Fixed Assets of the Business.
7
<PAGE>
(d) Any amount payable by the Sellers or the Buyer after the Closing
Date in accordance with the provisions of this Paragraph 7 shall bear interest
from the Closing Date to the date of payment at an annual rate of interest equal
to the prime rate quoted by the Chase Manhattan Bank on the Closing Date.
8. Closing.
-------
(a) The Closing (herein so called) of this Agreement shall be held at
the offices of Thompson & Knight, P.C. at 10 A.M. (local time) on January
15, 1998, or at such other place and time as the Sellers and the Buyer may agree
upon in writing (the "Closing Date"). The Closing will be effective as of 12:01
a.m. on the Closing Date.
(b) At the Closing, the Sellers shall deliver to the Buyer:
(i) special warranty deeds, bills of sale, and assignments, in
the forms attached hereto as Schedules K, L, and M; and such other documents of
transfer or assignment as may be necessary or appropriate to vest in Buyer good
and indefeasible title to the Acquired Assets; and
(ii) certified copies of the proceedings of the Sellers' Boards
of Directors with respect to the approval and authorization of the transactions
contemplated by this Agreement; and
(iii) consents to the assignment and transfer of all of the rights
of the Sellers in and to those leases, permits, licenses, contracts, agreements,
and commitments included in the Acquired Assets and listed on Schedules A, B, D,
G, H, and R, the absence of which consent would reasonably be expected to have a
Material Adverse Effect (as hereinafter defined); and
(iv) an officer's certificate signed by an officer of each of
Sellers, whereby such officer(s) certifies that all representatives and
warranties of Sellers in this Agreement remain true and correct on the Closing
Date; and
8
<PAGE>
(v) an opinion of Thompson & Knight, P.C., legal counsel for
Sellers, in form and substance reasonably satisfactory to Buyer, to the effect
that (A) this Agreement has been duly authorized by PMC and Sun Coast Holdings
by all necessary corporate proceedings (including any appropriate action by the
stockholders and directors of such Sellers) and is valid and enforceable against
such Sellers in accordance with its terms (except for effect of bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting
creditors' rights generally), (B) PMC and Sun Coast Holdings have full corporate
power and authority to consummate the transactions contemplated by this
Agreement, (C) this Agreement has been duly authorized by Sun Coast by all
necessary action by the directors of Sun Coast and, assuming stockholder
authorization is not necessary, is valid and enforceable against Sun Coast in
accordance with its terms (except for effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditor's rights
generally) and (D) assuming stockholder authorization is not necessary, Sun
Coast has full corporate authority to consummate the transactions contemplated
by this Agreement; and
(vi) an opinion of Richards, Layton & Finger, Delaware legal
counsel for Sellers, to the effect that approval of the stockholders of Sun
Coast would not be necessary; and
(vii) releases of any liens, deeds of trust, mortgages or security
interests arising pursuant to the financing agreement with the CIT
Group/Business Credit, Inc.
(c) The Buyer shall deliver to the Sellers:
(i) a wire transfer in accordance with the provisions of
Paragraph 4; and
9
<PAGE>
(ii) certified copies of the proceedings of the Buyers Board of
Directors with respect to the approval and authorization of the transactions
contemplated by this Agreement; and
(iii) an officer's certificate signed by an officer of Buyer,
whereby such officer certifies that all representations and warranties of Buyer
in this Agreement remain true and correct on the Closing Date; and
(iv) an opinion of legal counsel for Buyer, in form and substance
reasonably satisfactory to Sellers, to the effect that (A) this Agreement has
been duly authorized by Buyer by all necessary corporate proceedings (including
any appropriate action by the stockholders and directors of Buyer) and is valid
and enforceable against Buyer in accordance with its terms (except for effect of
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally) and (B) Buyer has full corporate power
and authority to consummate the transactions contemplated by this Agreement.
(d) The Sellers shall deliver to the Buyer a Non-Compete Agreement
in the form attached hereto as Schedule N.
(e) From time to time, at the Buyer's request, whether at or after
the Closing, and without further consideration, the Sellers shall execute and
deliver such further instruments of conveyance, assignment, or transfer, and
take such other action, as the Buyer may reasonably require, to convey,
transfer, or assign any of the Acquired Assets to the Buyer, including but not
limited to, any further conveyances, assignments and transfers as may be
necessary to transfer to Buyer all of Sellers' right, title and interest in and
to the technology used or held by them in connection with the operation of the
Business and such actions as may be necessary to put Buyer in possession of all
documents in Sellers' possession which embody such technology.
10
<PAGE>
(f) The Sellers and the Buyer shall each pay one half all sales,
use, stamp, transfer, and documentary taxes, if any, payable in connection with
the transactions contemplated by this Agreement.
9. Representations and Warranties of the Sellers.
---------------------------------------------
The Sellers represent and warrant to the Buyer as follows:
(a) Organization; Corporate Power; Qualification. PMC and Sun Coast
--------------------------------------------
Holdings are corporations duly organized, validly existing, and in good standing
under the laws of Nevada, and Sun Coast is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Each of Sellers has
all requisite corporate power and authority to own, lease, and operate its
assets and properties, and to conduct any aspect of the Business as it is now
being conducted by it, and each of the Sellers has all requisite corporate power
and authority to enter into this Agreement, and to consummate the transactions'
contemplated by it.
The Sellers are duly qualified and in good standing to do business as
foreign corporations in every jurisdiction in which the ownership of the
Acquired Assets or the conduct of the Business require such qualification, and
none of the Sellers are subject to any non-compete agreement, or other contract
or commitment, which restricts or prohibits, or may restrict or prohibit, the
conduct of the Business in any jurisdiction or location.
(b) Authorization. This Agreement, and the transactions contemplated
-------------
by it, have been duly approved and authorized by the Sellers' shareholders,
where necessary and Boards of Directors. According to Sun Coast's Articles of
Incorporation and By-Laws, and Delaware law, the execution of this Agreement and
the consummation of the transactions contemplated hereunder by Sun Coast do not
require the vote, approval or ratification of the shareholders of Sun Coast.
11
<PAGE>
This Agreement has been duly and validly executed and delivered by the
Sellers, and constitutes the valid, binding, and enforceable obligation of the
Sellers.
The execution and delivery of this Agreement by the Sellers, and the
consummation of the transactions contemplated by it, do not, and will not:
(i) subject to compliance with the HSR Act, as hereinafter
defined, violate, or conflict with, any law, rule, regulation, judgment, order,
injunction, or decree applicable to the Sellers other than violations or
conflicts that do not and would not reasonably be expected to have a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
a material adverse effect on the value or operation of the Acquired Assets or
the Business;
(ii) violate, or conflict with, any of the provisions of any
of the Sellers' Articles of Incorporation or By-Laws;
(iii) violate, conflict with, result in a breach of, or
constitute a default under, or give to any other party any right of termination
or cancellation of, or accelerate the performance required by, or maturity of,
any promissory note, bond, indenture, mortgage, contract, agreement, lease,
lien, or other instrument to which any of the Sellers is a party, or by which
they are bound other than those violations, conflicts, breaches, defaults,
creations or impositions that do not and would not reasonably be expected to
have a Material Adverse Effect;
(iv) result in the creation or imposition of any material
claim, lien, charge, or other encumbrance on or against, or loss of any material
rights with respect to, any of the Acquired Assets; or
(v) accelerate the maturity of any material liability which
Buyer is assuming hereunder.
(c) Financial Statements. The Sellers have delivered to the Buyer true
--------------------
and complete copies of the financial statements for the Business and for Sellers
for
12
<PAGE>
each of their two (2) most recent fiscal years and the three (3) months ended
September 30,1997, including the September 30, 1997 Balance Sheet attached
hereto as Schedule J.
Such financial statements, including the Balance Sheet, are in
accordance with the books and records of the Sellers; were prepared in
accordance with generally accepted accounting principles, consistently applied,
except as stated on Schedule J; and present fairly in all material respects the
financial condition of Sellers and the Business at the dates stated, and the
results of operations for the periods then ended. In the preparation of the
financial statements for the Business and the Balance Sheet adequate provision
was made for common costs shared by more than one operating company. These costs
were allocated to the financial statements in such a manner as to estimate the
actual usage of resources by the Business. Assumptions used in allocating common
costs were consistently applied across all periods for which financial
statements of the Business were carried out of the financial statements of Sun
Coast.
(d) Absence of Certain Changes. Since the date of the Balance Sheet,
--------------------------
except as disclosed in Schedule O, there has not been:
(i) any change in the financial condition, assets, properties,
liabilities, operations, or affairs of the Business, other than changes in the
ordinary course of business, none of which individually, or in the aggregate,
has been materially adverse to the Business;
(ii) any damage, destruction, or loss, whether or not covered by
insurance, which might materially and adversely affect the Acquired Assets or
the Business;
(iii) any increase in the compensation payable, or to become
payable, to any of the officers, employees, or agents of the Business, or any
bonus
13
<PAGE>
payment or arrangement made to, or with, any of them, except salary adjustments
and bonus payments made in accordance with normal and customary past practices
which in the aggregate are not material to the Business; or
(iv) any other event or condition of any character which might
materially and adversely affect the Acquired Assets or the Business.
(e) Title to Properties. Except as disclosed in Schedule P, the
-------------------
Sellers own outright and are vested with good and indefeasible title to all of
the Acquired Assets shown as being owned by Sellers, free and clear of any
liens, mortgages, security interests, claims, charges, restrictions, easements,
or other encumbrances, or any other restrictions on sale or transfer, including
any conditional sale or other title retention agreement, except for:
(i) easements, servitudes, and rights-of-way of record, none of
which have a Material Adverse Effect;
(ii) rights of the public in any portion of the real properties
which may fall within any public street, way, or alley;
(iii) covenants, conditions, and restrictions of record, none of
which materially and adversely affect the present use or value of the Acquired
Assets, individually or in the aggregate, or the operation of the Business;
(iv) liens for current taxes not yet payable; and
(v) any minor imperfections of title which do not have a Material
Adverse Effect.
(f) Real Property; Machinery; Equipment. Schedule A contains an
-----------------------------------
accurate and complete legal description of all of the land owned and used in
connection with the Business, together with a brief description of all of the
plants, facilities, and buildings located on each such property.
14
<PAGE>
Schedule B contains an accurate and complete list of all of the land
leased and used in connection with the Business, together with a brief
description of all of the plants, facilities, and buildings located on each such
property, and a summary of the principal terms of the lease applicable to each
such property. True and complete copies of each such lease have been delivered
to Buyer.
Schedule C contains an accurate and complete list of all of the
machinery, equipment, tools, parts, furniture, and vehicles owned and used in
connection with the Business.
Except as set forth in A, B, or C, all of the plants, facilities,
buildings, machinery, and equipment listed in Schedules A, B, and C, and all
equipment leased pursuant to the leases listed in Schedule D, are in good
operating condition and repair, ordinary wear and tear excepted.
There are no parties in possession of any portion of any of the land,
plants, facilities, or buildings listed in Schedules A and B as leases, tenants
at sufferance, or trespassers, except as disclosed in Schedule P.
Except as disclosed in Schedule Q, to the Sellers' knowledge the land,
plants, facilities, buildings, machinery, and equipment listed in Schedules A,
B, C and D, and the Sellers' use and operation of such land, plants, facilities,
buildings, machinery, and equipment, do not violate any deed restriction,
restrictive covenant, building or fire code, zoning ordinance (whether or not
permitted due to prior non-conforming use), or any other law, regulation,
ordinance, or code applicable to such land, plants, facilities, machinery, or
equipment.
(g) Environmental and Regulatory Affairs. To the Sellers' knowledge,
------------------------------------
the Sellers' use and operation of the Acquired Assets, and the Sellers' conduct
of the Business are in substantial compliance with all environmental, pollution,
health, or
15
<PAGE>
safety laws, rules, or regulations, the enforcement of which would have a
Material Adverse Affect.
Except as disclosed in Schedule Q, no inspection or investigation by
the Environmental Protection Agency (EPA), the Occupational Safety and Health
Administration (OSHA), or any other federal, state, or local governmental body
or agency during the past five (5) years has resulted in a citation, complaint,
notice of violation, or letter demanding cleanup of hazardous substances or
waste, pursuant to any law, rule, regulation, ordinance, judgment, decree,
order, injunction, or decision of any court or governmental authority in regard
to the Acquired Assets or the Business and no such citation, complaint, notice,
or demand letter is pending, or, to the Sellers' knowledge, threatened; nor have
the Sellers failed to remedy any such previously existing citation, complaint,
notice, or demand letter.
Except as disclosed in Schedule Q, the Sellers are not aware of any
solid, liquid, or gaseous materials present at the surface or subsurface levels
of the land, plants, facilities, and buildings listed in Schedules A and B, or
present in the air above, or the water on or under, or the air and water
immediately surrounding such land, plants, facilities, and buildings, which is
in excess of any concentration levels or standards prescribed or permitted by
any applicable law, rule, regulation, ordinance, judgment, decree, order,
injunction, or decision of any court or governmental authority; nor are the
Sellers, except as disclosed in Schedule Q, aware of any condition or state of
affairs existing on or about such land, plants, facilities, and buildings that
would now or in the future require corrective action or closure under the
provisions of the Resource Conservation and Recovery Act, or remedial or other
action under the provisions of the Comprehensive Environmental Response,
Compensation, and Liability Act, or the regulations promulgated under such Acts,
or that would require
16
<PAGE>
remedial action, corrective action or closure under the laws of the states in
which such land, plants, facilities, and buildings are located.
Except as disclosed in Schedule Q, to the Sellers' knowledge there are
no PCBs or asbestos containing materials located on, in, or about such land,
plants, facilities, and buildings. To the Sellers' knowledge all underground
storage tanks located on, in, or about such land, plants, facilities, and
buildings are listed on Schedule Q. All such tanks that are required to be
registered have been properly registered with or reported to the appropriate
governmental agencies, and all such tanks and associated piping are in sound
condition and no leaks have occurred from them.
Except as described in Schedule Q, the products manufactured by the
Sellers and all chemical substances which are contained in such finished
products which are required to be on the Inventory List promulgated under the
United States Toxic Substances Control Act, were and are on such Inventory List,
or are the subject of a Premanufacturing Notice filed with the EPA under such
Act, and, to the Sellers' knowledge, the Sellers have not filed, and have not
been under a duty to file, any reports required by Section 8(e) of such Act with
respect to substantial risks involving such products. Except as described in
Schedule Q, to the Sellers' knowledge none of the products of the Business are
subject to an order under Section 5(e), a testing rule under Section 4 or
regulation under Section 6(a) of such Act.
(h) Contracts: Leases. Schedule D consists of a listing of certain oral
-----------------
and written contracts and agreements relating to the Business. Except only as to
contracts and agreements listed in Schedule D, or listed in Schedule B with
respect to real property leases, or Schedule G or H with respect to licenses, or
Schedule R with respect to employment or labor relations matters, the Sellers
are not parties to and the Business is not bound by any:
17
<PAGE>
(i) contracts, not made in the ordinary course of business;
(ii) employment, employment termination or severance, consulting,
noncompetition, or secrecy agreements;
(iii) collective bargaining agreements;
(iv) leases with respect to any real or personal property, whether as
lessor or lessee, except personal property leases terminable without penalty
upon one month's notice or less or involving total commitments of less than
$10,000;
(v) dealer's, manufacturer's representative, distributor or agent's
agreements;
(vi) contracts or commitments for capital expenditures or
construction;
(vii) contracts or series of contracts for purchase or sale of
products, materials, supplies or services involving revenues or expenditures
greater than $25,000;
(viii) partnership or joint venture agreements; or
(ix) agreements, contracts or commitments containing covenants
limiting in any fashion the freedom and ability of Sellers or the Business to
compete or of the Sellers or the Business to manufacture or market the products
of the Business or to use or employ the technology of the Business.
Neither the Sellers, nor, to the Sellers' knowledge, any other party,
is in material default, nor, to the Sellers' knowledge, has any event occurred,
which, through the passage of time or the giving of notice, or both, would
constitute a material default, under any sale or purchase contract, distributor
or sales agency agreement, purchase order, lease, construction contract,
collective bargaining agreement, consulting agreement, employment or secrecy
agreement, license or other contract or agreement listed in Schedules B, D, G, H
or R.
18
<PAGE>
Except as disclosed in Schedules B, D, G, H or R, all such scheduled
sale or purchase contracts, distributor or sales agency agreements, purchase
orders, leases, construction contracts, collective bargaining agreements,
consulting agreement, employment or secrecy agreements, loan agreements,
licenses, and other contract and agreements may be assigned to, or assumed by,
the Buyer, without first obtaining the consent of the other party or parties to
it.
The Sellers shall use their best efforts to procure consents to the
assignment of the sale or purchase contracts, distributor or sales agency
agreements, purchase orders, leases, construction contracts, collective
bargaining agreements, consulting agreement, employment and secrecy agreements,
licenses and other contracts and agreements described in Schedules B, D, G, H or
R, as requiring such consent.
If any such consent is not obtained, the Sellers shall cooperate with
the Buyer in any reasonable arrangement designed to provide for the Buyer the
benefit of any rights the Sellers may have against the other party or parties to
any such sale or purchase contract, distributor or sales agency agreement,
purchase order, lease, construction contract, consulting agreement, collective
bargaining agreement, employment or secrecy agreement, license, or other
contracts or agreements, including, but not limited to, any right of
enforcement, or any right arising out of a breach or cancellation by such other
party or parties.
(i) Employees. As of the date of this Agreement Schedule R, part 1
---------
contains an accurate and complete list of (i) all of the employees of the
Business ("Employees"), including each such Employees' area of employment,
salary or hourly rate and annual bonuses, (ii) any employment contract or
special arrangement with any Employee and (iii) all personnel policies, manuals,
employee handbooks, summary plan descriptions and similar materials pertaining
to the Business. Except as set forth
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on Schedule R, part 1, there are no other material forms of compensation paid to
any Employee.
Except as specifically described in Schedule R, part 2, all Employees
are actively at work and no Employee is currently on a leave of absence, layoff,
suspension, sick leave, workers compensation, short or long term disability,
family leave, military leave, or otherwise not actively performing his or her
work during all normally scheduled business hours.
With respect to the Business, the Sellers has no Employee Benefit
Plan, and no employee of the Sellers is covered by any Employee Benefit Plan,
other than those listed on Schedule R, part 3. For purposes of this Agreement,
the term "Employee Benefit Plan" shall mean any written or oral plan, contract,
or other arrangement of benefit or advantage to any officers or employees of the
Sellers, including, but not limited to, stock option, profit sharing, and
pension plans; deferred compensation; retirement, medical, disability, life, and
other insurance; income protection arrangements; and severance and termination
plans. The Sellers have furnished to the Buyer copies of summary plan
descriptions, Employee eligibility and enrollment lists, Employee handbooks and
any other documents describing terms or conditions of employment or work related
to the Business. All such documents are also listed in Schedule R, part 3.
No changes in any Employee Benefit Plan applicable to any such
Employee of the Seller, and no new Employee Benefit Plan or Plans with respect
to such Employees are contemplated or have been communicated to any Employee as
being contemplated.
There are no actions or claims existing or pending (other than routine
claims for benefits) or threatened with respect to any Employee Benefit Plan
that would have a material effect on this transaction, and neither Sellers nor
any other ERISA
20
<PAGE>
Affiliate has been notified of any audit or investigation of an Employee Benefit
Plan by any governmental entity that would have a material effect on this
transaction. "ERISA Affiliate" means any entity trade or business that would be
treated as under common control with Sellers or as a member of a controlled
group including any of the Sellers within the meaning of Section 414 of the U.S.
Internal Revenue Code (the "Code") or Section 4001 of the Employees Retirement
Income Security Act as from time to time amended ("ERISA").
There are no multi-employer plans (as defined in ERISA Section
4001(a)(3)) to which Sellers are or have been required to make a contribution or
other payment.
Sellers have paid and discharged promptly when due all liabilities and
obligations arising under ERISA or the Code of a character which if unpaid or
unperformed might result in the imposition of a lien against any of the assets
of the Business.
Except as set forth in Schedule R, part 4, or as otherwise provided in
this Agreement, no Seller has promised or has any liability for providing health
care or other welfare benefits to any Employee or any former employee of the
Business following the termination of such individual's employment in the
Business.
Sellers are in substantial compliance with the Immigration Reform and
Control Act of 1986, as amended, and have ready for transfer as part of the
assets of the Business any and all Employment Eligibility Verification Forms (I-
9) for Employees hired by Sellers since November 6, 1986, employed in the
Business on or after June 1, 1987, and hired by Buyer at or after Closing
pursuant to the terms of this Agreement.
Except as described on Schedule R, part 5, or as otherwise provided in
this Agreement, assuming that all Employees remain in the employment of the
Business immediately after the Closing (regardless of whether such employment is
21
<PAGE>
thereafter continued), the sale of assets contemplated by this Agreement in
itself will not: (i) entitle any Employee to severance pay, unemployment
compensation or similar payment from Buyer; (ii) increase the amount of
compensation payable by Buyer to any Employee or (iii) entitle any Employee to
an "excess parachute payment" within the meaning of Section 280G of the Code.
There has not been in respect of the Business any plant closing or mass
layoff of employees as those terms are defined in the Worker Adjustment
Retraining and Notification ("WARN") Act of 1988, as amended, or any similar
state or local law or regulation within the one hundred twenty (120) days prior
to the execution of this Agreement, and Sellers, within the ninety (90) day
period prior to the Closing, has not laid off or terminated more than ten (10)
employees at any location subject to this Agreement.
(j) Labor Relations. Except as set forth in Schedule R, part 6, no
---------------
Employees are or have been subject to any collective bargaining agreement or
other labor contract in respect of the Business. Except as set forth in Schedule
R, part 6 during the past five years, the Business has not been subject to and
there is no existing, or to the knowledge of the Sellers threatened; (i) strike,
slowdown, picketing or work stoppage; (ii) proceeding relating to alleged
violation of any legal requirement pertaining to labor relations, employment or
employee benefit matters, including any charge or complaint filed by an employee
or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, Department of Labor, the Occupational Health and Safety
Administration, the Pension Benefit Guaranty Corporation, or any similar local,
state or federal governmental authority; (iii) union organizational or
representation activity, or (iv) application for certification as a collective
bargaining agent in respect of the Business.
22
<PAGE>
(k) Accounts Receivable. The accounts receivable of the Business
-------------------
reflected on the Balance Sheet, or thereafter acquired in connection with the
operation of the Business, have been collected, or are current and collectible
within ninety (90) days after the Closing Date, without any legal action,
defenses, set-offs, or other deductions, except returns and allowances in the
ordinary course of business, at the aggregate amounts recorded for such
receivables on the Sellers' books.
Sellers have not received any notice or threat that any products
previously shipped in connection with the Business are to be returned to the
Sellers for any reason, other than returns in the ordinary course of Business,
and the Sellers have no knowledge or reason to believe that unusual returns will
occur.
(l) Inventories. The inventories of the Business reflected on the
-----------
Balance Sheet, or thereafter acquired in connection with the operation of the
Business, consist of items of a quantity and quality usable or salable in the
ordinary course of business, and have been valued at the lower of actual cost or
net realizable value on the Sellers' books, consistent with prior practices, and
can be sold, used, or consumed in the ordinary course of business.
Since the date of the Balance Sheet, the inventories of the Business
have been maintained at levels consistent with past practices, and the Sellers
have not caused the inventories of the Business to be increased or decreased,
except in the ordinary course of business.
(m) Customers. To Sellers' knowledge, no customer, or group of
---------
customers under common control, accounting for more than five (5%) percent in
aggregate volume of gross sales of the Business during any one of the past two
(2) years, has ceased, or indicated an intention to cease, purchasing products
from the Business, nor has any such customer requested or threatened any
material modification or change in its business relationship with the Business.
23
<PAGE>
(n) Licenses; Permits. Schedule S contains an accurate and complete
-----------------
list of all of the licenses, franchises, approvals, certificates, consents,
permits, or authorizations of governmental and regulatory bodies required to
conduct the Business as it is now being conducted and the termination or absence
of which would have a Material Adverse Effect, all of which are in full force
and effect and readily transferable or assignable to the Buyer, except as
disclosed in Schedule S. No action or claim is pending or, to the knowledge of
the Sellers, threatened, to revoke, terminate, or limit any such license,
franchise, approval, certificate, consent, permit, or authorization except as
disclosed in Schedule S.
The Sellers have delivered to the Buyer copies of all of the licenses
and permits described in the attached Schedule S, and will deliver, on or before
the Closing Date, copies of all of the background data, drawings, and other
information in the Sellers' possession which formed the basis for the
applications filed for, or the granting of, such permits.
(o) Intellectual Property Rights. Schedules G and H contain accurate
----------------------------
and complete lists and summary descriptions of all of the unexpired patents,
patent applications, patent licenses, registered copyrights, copyright licenses,
trademarks, trademark applications, trademark licenses, and trade names, used,
owned, held, or controlled by the Sellers in connection with the operation of
the Business, or governing its products or processes; and, except for such
intellectual property the absence of which does not and will not have a Material
Adverse Effect, no other patents, patent licenses, copyrights, copyright
licenses, trademarks, trademark licenses, or trade names, are used, or required,
to conduct the Business as it is now being conducted.
All of the patents, patent applications, copyrights, trademarks,
trademark applications, and trade names listed on Schedules G and H are valid,
in good standing, and in full force and effect; and, to the Sellers' knowledge,
none of such patents, patent
24
<PAGE>
applications, copyrights, trademarks, trademark applications, and trade names is
being infringed by any other person.
Except as disclosed in Schedules G, H or T, there are no actions,
suits or proceedings pending and no claim has been made, nor, to the Sellers'
knowledge, is one threatened, to the effect that, nor do the Sellers have
knowledge that, the operation of the Business, or the manufacture or sale of any
of its products, or the use of any technology that it employs, infringes upon
any patent, copyright, trademark, trademark application, trade name, trade
dress, trade secret or other proprietary right, owned or claimed by any other
party or that Sellers are in breach of any obligation owed with respect to such
intellectual property to any third party.
Except as disclosed in Schedules G or H, the Sellers are not required
to pay any royalty, license fee, or similar type of compensation in connection
with the current or prior conduct of the Business.
For purposes of this Agreement, "technology" means all technical
information and know-how, confidential and non-confidential, which is owned or
used by or on behalf of the Sellers in connection with the Business, including,
without limitation, all patterns, plans, designs, research data, inventions,
trade secrets, know-how, formulae, recipes, manufacturing processes, operating
manuals, drawings, equipment and parts lists (with related description and
instructions), manuals, records, procedures, product packaging instructions,
product specifications, analytical methods, sources and specifications for raw
materials, toxicity and general health and safety information, research and
development records and reports, and other documents relating to the foregoing.
(p) Litigation. Schedule T contains an accurate and complete list and
----------
summary description of all of the claims, actions, suits, proceedings, and
investigations pending, and all of the orders, injunctions, decrees, judgments,
and decisions
25
<PAGE>
outstanding, in courts, or before governmental authorities, or before
arbitrators or mediators, by or against the Sellers, with respect to the
Acquired Assets or the Business.
Except as disclosed in Schedules T or Q, there are no claims, actions,
suits, or proceedings pending in any court, or before any governmental
authority, or before any arbitrator or mediator, by or against the Sellers, or,
to the Sellers' knowledge, threatened, which, if adversely determined, would
have a Material Adverse Effect, or which would prevent or restrict the
consummation of the transactions contemplated by this Agreement, or declare such
transactions unlawful, or cause their rescission.
(q) Insurance. Schedule U contains a complete and accurate list of
---------
all insurance policies in force with respect to the Acquired Assets or the
Business as of the date of this Agreement.
The Sellers have previously provided to the Buyer a loss history for
the three (3) years prior to the date of this Agreement with respect to all of
the insurance policies applicable to the Acquired Assets or the Business during
such period of time including, but not limited to, fire and casualty, workers
compensation, product liability, and general liability insurance.
(r) No Brokers. No finder's fee, brokerage, commission, or other
----------
payment is payable by the Sellers to any other party in connection with the
origination or negotiation of this Agreement, or the consummation of the
transactions contemplated by it.
(s) Taxes. All taxes, including without limitation, income, property,
-----
sales, use, franchise, added value, payroll, employees' income withholding and
social security taxes, imposed by the United States or any foreign country or
any state, municipality, subdivision or instrumentality thereof or any other
taxing authority, which
26
<PAGE>
are due and payable by Sellers related to the Business, and all interest and
penalties thereon, whether disputed or not, for periods up to the Closing Date
have been or will be paid in full by Sellers and all tax returns required to be
filled in connection therewith have been or will be accurately prepared and duly
and timely filed by Sellers. Sellers are not delinquent in the payment of any
tax related to the Business and has no tax deficiency or claim outstanding
proposed or assessed against it related to the Acquired Assets or the Business.
This representation and warranty shall not be considered breached by Sellers if
through inadvertence Sellers have failed to pay when due taxes in a cumulative
amount which is not substantial; provided, however, Buyer shall be entitled to
withhold from the Purchase Price an amount equal to any past due taxes which
could, if not paid, become a lien against the Acquired Assets or the Business,
until Sellers deliver proof of payment to Buyer. For purposes of this paragraph
an amount of taxes which is not substantial shall be a cumulative amount of less
than $10,000.
(t) Complete Assets. The Acquired Assets comprise all of the assets
---------------
used in, or held by Sellers for use in, the Business, or required for the
conduct of the Business as it is presently being operated.
(u) Affiliated Transactions - Except as set forth in Schedule D, the
-----------------------
Business is not bound by, nor does it receive any rights or benefits under any
contracts or agreements with any party that is directly or indirectly through
one or more intermediaries, controlled by or under common control with Sun
Coast.
10. Representations and Warranties of the Buyer.
-------------------------------------------
The Buyer represents and warrants to the Sellers as follows:
(a) Organization: Corporate Power. The Buyer is a corporation duly
-----------------------------
organized, validly existing, and in good standing under the laws of Delaware,
and has
27
<PAGE>
all requisite corporate power and authority to enter into this Agreement, and to
consummate the transactions contemplated by it.
(b) Authorization. This Agreement has been duly and validly executed
-------------
and delivered by the Buyer and constitutes the valid, binding, and enforceable
obligation of the Buyer.
The execution and delivery of this Agreement by the Buyer, and the
consummation of the transactions contemplated by it, do not, and will not:
(i) subject to compliance with the HSR Act, violate, or conflict
with, any law, rule, regulation, judgment, order, injunction, or decree
applicable to the Buyer;
(ii) violate, or conflict with, any of the provisions of the
Buyer's Articles of Incorporation or By-Laws; or
(iii) violate, conflict with, result in a breach of, or
constitute a default under, or give to any other party any right of termination
or cancellation of, or accelerate the performance required by, or maturity of,
any promissory note, bond, indenture, mortgage, contract, agreement, lease,
lien, or other instrument to which the Buyer is a party, or by which it is
bound.
(c) No Brokers. No finder's fee, brokerage, commission, or other
----------
payment is payable by the Buyer to any other party in connection with the
origination or negotiation of this Agreement, or the consummation of the
transactions contemplated by it.
(d) Financing. Buyer has, and at the Closing will have, sufficient
---------
cash, available lines of credit, or other sources of immediately available funds
to enable it to pay the Purchase Price to Seller at the Closing.
(e) Independent Investigation. Buyer hereby acknowledges and affirms
-------------------------
that it has completed its own independent investigation, analysis, and
evaluation of Sellers, the Acquired Assets, and the Business, that it has made
all such
28
<PAGE>
reviews and inspections of the Acquired Assets and the Business as it has deemed
necessary or appropriate, and that in making its decision to enter into this
Agreement and to consummate the transactions contemplated hereby it has relied
solely on (i) its own independent investigation, analysis, and evaluation of
Sellers, the Acquired Assets, and the Business and (ii) the covenants,
agreements, representations and warranties contained in this Agreement.
11. Access to Information/HSR Filing.
--------------------------------
(a) During the period between the date of this Agreement and the
Closing Date, the Buyer and its counsel, accountants, and other representatives
may make, or cause to be made, such investigation of the financial condition,
assets, properties, liabilities, operations, or affairs of the Business as the
Buyer deems necessary or advisable for its own purposes; and the Sellers shall
give to the Buyer, or any of its representatives, full access during normal
business hours to all the properties, books, records, files, and other
information of the Business, and shall furnish to the Buyer, or any of its
representatives, all such documents and copies of documents and information
concerning the Business, as the Buyer may reasonably request for such purposes.
In addition, at the request of Buyer, Seller shall arrange and participate in
interviews, at mutually convenient times and locations, with customers of the
business selected by Buyer. The Buyer acknowledges and agrees that the
Confidentiality Agreement dated August 27, 1997 between Sun Coast and the Buyer
shall remain in effect as provided therein.
(b) Between the date of this Agreement and the Closing Date, the
Buyer shall be entitled to conduct such tests, either directly or by an
independent contractor, as may be necessary to determine the existence of: (i)
any soil or groundwater contamination at, on, about, or under, the land, plants,
facilities, and buildings listed in Schedules A and B, including, but not
limited to, integrity tests of all
29
<PAGE>
underground storage tanks and associated piping, soil borings and ground water
sampling and (ii) any asbestos and PCBs at, in, about, or under such property;
provided such tests shall be conducted in consultation with Sellers and in a
manner to minimize physical damage to the Assets. Buyer shall defend, indemnify
and hold harmless Sellers from and against any such physical damage.
Upon Sellers' request, the results of such tests shall be shared
promptly with the Sellers by the Buyer, but shall be treated by the Buyer and
the Sellers as confidential, and shall not be disclosed to any third party
without the other party's prior written consent, which consent shall not be
withheld in any case where such information is required by law, rule,
regulation, or ordinance, to be disclosed.
Promptly following the execution of this Agreement, Sellers shall make
their files supporting PMC's application to TNRCC for its air permit renewal,
including the results of any modeling done on its behalf available for review by
Buyer or its representatives. Sellers will also provide Buyer with samples of
wastewater taken as directed by representatives of Buyer.
No inspections, tests, or studies conducted by Buyer, or failure to
conduct inspections, tests or studies, will be deemed to constitute a waiver or
relinquishment on the part of Buyer of its rights to rely upon the covenants,
representations, or warranties made by the Sellers in this Agreement.
(c) Sellers and Buyer shall prior to the Closing Date, file with the
Federal Trade commission and the Department of Justice the notification and
report form required for the transactions contemplated hereby under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"). Sellers and Buyer
shall cooperate with each other in submitting any supplemental information that
may reasonably be required in connection with their HSR Act filing and in
obtaining the expiration or
30
<PAGE>
termination of the waiting period required under HSR Act. Buyer shall pay the
filing fees payable in connection with the filings by the parties required by
the HSR Act.
12. Title Insurance; Surveys.
------------------------
The Sellers, at their own expense, shall deliver, or cause to be
delivered to the Buyer, not less than ten (10) days prior to the Closing Date,
Commitments for Title Insurance (the "Title Binders") issued by First American
Title Insurance Company (the "Title Company"), showing good and indefeasible
title in Sellers to each of the real properties described in Schedule A, and
committing to issue owner's title insurance policies to the Buyer, subject only
to the standard printed exceptions and matters included within the exceptions
stated in Paragraph 9(e), including any matters specifically disclosed on
Schedule A.
The Sellers, at their own expense, shall also deliver, or cause to be
delivered, to the Buyer, not less than ten (10) days prior to the Closing Date,
current surveys (the "Surveys") of each of the real properties described in
Schedule A showing that there are no survey conditions which constitute
exceptions to or deficiencies in title, except as provided in paragraphs 9(e)
and 9(f). The Surveys shall be performed and certified by licensed surveyors
acceptable to the Title Company and shall contain all detail necessary for the
Title Company to amend or eliminate the survey exceptions in the Title Binders.
Promptly after the Closing Date, the Sellers shall pay for and shall
cause the Title Company to deliver to the Buyer owner's title insurance policies
issued by the Title Company in the amount of the purchase price applicable to
each such property and insuring that the Buyer owns indefeasible fee simple
title to each such property, subject to no exceptions other than those permitted
under this Paragraph 12.
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<PAGE>
13. Conduct of the Business Pending the Closing.
-------------------------------------------
During the period between the date of this Agreement and the Closing
Date, except as otherwise permitted by the prior written consent of the Buyer:
(a) the Seller shall conduct the Business only in the ordinary
course, as established by past practices, and in such manner as to avoid any
breach of any of the representations and warranties made by the Sellers in this
Agreement; provided, however, that the Sellers shall not sell, lease, grant
rights to, or otherwise dispose of, any of the Acquired Assets, except for the
sale, use, consumption, or other disposal of inventories in the ordinary course
of business; and
(b) the Sellers shall use their best efforts to preserve the
organization of the Business intact; to keep available the services of the
present officers and employees of the Business, and to maintain and preserve the
goodwill of its suppliers and customers.
14. Conditions Precedent to Obligation of the Buyer.
-----------------------------------------------
The obligation of the Buyer to close, as provided in Paragraph 8, is
subject, at the option of the Buyer, to the fulfillment, on, or prior to, the
Closing Date, of each of the following conditions:
(a) all representations and warranties of the Sellers contained in
Paragraph 9 shall be true and correct in all material respects on the Closing
Date, with the same effect as though such representations and warranties had
been made on such date;
(b) in its review of PMC's application for its air permit renewal and
the modeling conducted for PMC, Buyer shall not have learned of any facts or
circumstances which reasonably lead Buyer to conclude that the permit will not
be
32
<PAGE>
issued or will be issued under circumstances which will require significant
capital investments to bring the Dallas plant into compliance; and
(c) since the date of this Agreement, no material adverse change in
the Business shall have occurred and Buyer shall have received a certificate
signed by the chief executive officer of PMC to such effect; and
(d) the Sellers shall have duly performed and complied with all
obligations, covenants, terms, and conditions to be performed or complied with
by it under this Agreement prior to, or on, the Closing Date, including, but not
limited to, its obligations under the provisions of Paragraphs 8, 11, 12 and 13;
and
(e) the waiting period under the HSR Act shall have expired or been
terminated and there shall not be any actual or threatened action, proceeding,
or investigation by any governmental agency or authority which is directed
toward challenging, restraining, prohibiting, or invalidating the transactions
contemplated by this Agreement, or which, in the reasonable judgment of the
Buyer's counsel, might materially and adversely affect the right of the Buyer,
after the Closing, (i) to own, operate, or control any of the Acquired Assets,
or (ii) to continue the Business in the same manner in which it is now being
conducted.
15. Conditions Precedent to Obligation of the Sellers.
-------------------------------------------------
The obligation of the Sellers to close, as provided in Paragraph 7, is
subject, at the option of the Sellers, to the fulfillment, on, or prior to, the
Closing Date, of each of the following conditions:
(a) all representations and warranties of the Buyer contained in
Paragraph 10 shall be true and correct on the Closing Date, with the same effect
as though such representations and warranties had been made on such date;
(b) the Buyer shall have duly performed and complied with all
obligations, covenants, terms, and conditions to be performed or complied with
by it
33
<PAGE>
under this Agreement prior to, or on, the Closing Date, including, but not
limited to, its obligations under the provisions of Paragraph 7; and
(c) the waiting period under the HSR Act shall have expired or been
terminated and there shall not be any active or threatened action, proceeding,
or investigation by any governmental agency or authority which is directed
toward challenging, restraining, prohibiting, or invalidating the transactions
contemplated by this Agreement.
16. The Buyer's Assumption of Liabilities.
-------------------------------------
The Buyer agrees to assume and pay or discharge the following
liabilities and obligations of the Seller:
(a) all the trade payables and current liabilities of the Business
reflected on the Closing Balance Sheet;
(b) all liabilities and obligations of the Sellers which are to be
performed or paid or accrue, on or after the Closing Date under the licenses,
franchises, approvals, certificates, consents, permits or authorizations listed
on Schedule S and under the sales and purchase contracts, distributor and sales
agency agreements, purchase orders, construction contracts, leases, consulting
agreement, secrecy agreements, licenses and other contracts and agreements
described in Schedules B, D, G, and H, and under all other sales and purchase
contracts and purchase orders entered into in the ordinary course of business
between the date of this Agreement and the Closing Date, except for: (i) any
liability or obligation arising from a breach of or violation of any such sale
or purchase contract, distributor or sales agency agreement, purchase order,
lease, construction contract, consulting agreement, secrecy agreement, license
or other contract or agreement, or of any such licenses, franchises, approvals,
certificates, consents, permits or authorization, on the Sellers'
34
<PAGE>
part prior to the Closing Date, and (ii) any liability or obligation arising
from a breach of the representations and warranties contained in Paragraph 9(h),
9(n) and 9(o); and
(c) all liabilities and obligations of the Sellers on account of
product liability or warranty claims for personal injury or property damage
arising from products shipped or delivered by the Buyer after the Closing Date;
and
(d) all liabilities and obligations of the Sellers which the Buyer is
assuming under Paragraph 22; and
(e) all liabilities and obligations of the Sellers which arise on
account of the Buyer's use of the Sellers' name after the Closing Date pursuant
to Paragraph 26; and
(f) all other liabilities resulting from Buyers operation of the
Business and the Acquired Assets on and after the Closing Date; and
(g) PMC's guarantee to Milton Moskovitz of payment under the real
estate lease for property located at 820 Esther Lane, Murfreesboro, TN, but only
to the extent of the rent remaining to be paid during the remaining term ending
February 8, 1999.
17. Liabilities Not Assumed by the Buyer.
------------------------------------
Notwithstanding anything to the contrary in this Agreement or in the
attached Schedules, it is expressly agreed that the Buyer shall not assume, pay,
perform, or discharge, nor shall it for any purpose be deemed to have assumed,
any debts, obligations, or liabilities of the Sellers, except as expressly
assumed in Paragraph 16. Without limiting the generality of the foregoing, the
Buyer shall not assume, pay, perform, or discharge any of the following debts,
obligations, or liabilities of the Sellers:
(a) any liability or obligation for federal, state, or local income,
property, franchise, sales, use, value added, payroll, social security, or other
taxes or
35
<PAGE>
fees payable in respect of any transaction which occurred prior to the Closing
Date, or which is contemplated by this Agreement, or any taxes which the Sellers
are expressly obligated to pay under this Agreement;
(b) any liability or obligation arising out of any sale or purchase
contract, distributor or sales agency agreement, purchase order, lease,
collective bargaining agreement, consulting agreement, employment or secrecy
agreement, loan agreement, promissory note, indenture, license, or any other
commitment not assigned and transferred to the Buyer under this Agreement, and
not expressly assumed by the Buyer pursuant to the provisions of Paragraph 16;
(c) any liability or obligation on account of any product liability
or warranty claim, action, or suit for personal injury or property damage
arising from any product shipped or delivered by the Sellers, or by any prior
owner or operator of the Business, prior to the Closing Date, or any liability
for death or injury to persons or damage to property arising from the operation
of the Business prior to the Closing Data
(d) any liability or obligation on account of any of the claims,
actions, suits, proceedings, investigations, citations, complaints, notices,
demand letters, or conditions described in Schedule V, attached hereto; or any
other liability or obligation on account of any claim, action, suit, proceeding,
citation, complaint, notice, or demand letter arising from a violation of any
environmental law, rule, regulation, code, or ordinance at, on, or about the
land, plants, facilities, and buildings listed in Schedules A and B prior to the
Closing Date, or at, on, or about any other land, plants, or facilities
previously owned or operated by the Sellers or any other owner or operator of
all or any part of the Business;
(e) any liability or obligation on account of any claim, action,
suit, proceeding, citation, complaint, notice, or demand letter arising from the
transport,
36
<PAGE>
treatment, recycling, storage, or disposal, or arrangements therefor, at, on, or
about any land, plant or facility owned or operated by any other party, of any
material or waste generated by the Sellers or any other owner or operator of all
or any part of the Business, and transported off-site from any land, plant, or
facility listed in Schedules A or B prior to the Closing Date or from any other
land, plant, or facility previously owned or operated by the Sellers or any
prior owner or operator of all or any part of the Business; and
(f) any liability or obligation:
(i) to provide life insurance coverage; or health and welfare
benefits, for employees of the Sellers during any period before the Closing
Date, including coverage for claims incurred but not reported as of the closing,
or to provide such coverage or benefits after the Closing Date to former
employees of the Sellers who retired from employment with the Sellers prior to
the Closing Date;
(ii) to pay severance pay due to the termination of employees of
the Sellers prior to the Closing Date, or due to the transactions contemplated
by this Agreement, except as otherwise provided in Schedule R, part 7;
(iii) to provide relocation expenses, reimbursements, or
assistance to any employee of the Sellers for relocations which occurred prior
to the Closing Date;
(iv) to pay or provide benefits of any kind for any periods of
time for employees of the Sellers who are disabled on the Closing Date; and
(v) to pay fees due under any consulting agreements between the
Sellers and former employees of the Sellers.
18. The Sellers' Indemnity.
----------------------
The Sellers shall defend, indemnify, and hold the Buyer harmless from
and against:
37
<PAGE>
(a) any and all liabilities, obligations, losses, and damages
resulting from, or attributable to: (i) any breach of any representation or
warranty made by the Sellers in this Agreement, or (ii) any breach or default in
the performance by the Sellers of any of the covenants or agreements made by the
Sellers in this Agreement; and
(b) any and all liabilities, obligations, losses, and damages
incurred by the Buyer as a result of the Sellers' non-compliance with any bulk
sales law; and
(c) any and all liabilities and obligations of the Sellers not
expressly assumed by the Buyer pursuant to the provisions of Paragraphs 16 and
17; and
(d) any and all costs and expenses. including reasonable attorneys
fees, relating to the foregoing, (collectively "Buyer Claims").
19. The Buyer's Indemnity.
---------------------
The Buyer shall defend, indemnify, and hold the Sellers harmless from
and against:
(a) any and all liabilities, obligations, losses, and damages
resulting from, or attributable to: (i) any breach of any representation or
warranty made by the Buyer in this Agreement, or (ii) any breach or default in
the performance by the Buyer of any of the covenants or agreements made by the
Buyer in this Agreement; and
(b) any and all liabilities or obligations expressly assumed by Buyer
in Paragraphs 16 and 17 of this Agreement; and
(c) any and all liabilities, obligations, losses, and damages,
resulting from, or attributable to the ownership, management or use by the Buyer
of the Acquired Assets from and after the Closing Date, except to the extent the
Buyer is indemnified by the Sellers pursuant to Paragraph 18; and
(d) any and all costs and expenses, including reasonable attorneys
fees, relating to the foregoing,
38
<PAGE>
(collectively "Seller Claims").
20. Remedies.
--------
(a) No indemnification shall be required to be made by Sellers
pursuant to Paragraph 18 (a)(i) except to the extent the aggregate amount of
Buyer Claims established under paragraph 18(a)(i) exceeds $100,000.
(b) No indemnification shall be required to be made by Buyer pursuant
to Paragraph 19 (a)(i) except to the extent the aggregate amount of Seller
Claims established under Paragraph 19(a)(i) exceeds $100,000.
(c) The amount required to be paid by any party to indemnify any
other party pursuant to Paragraph 18 or 19 as a result of any Seller Claim or
any Buyer Claim shall be reduced to the extent of any amounts actually received
by such other party after the Closing Date pursuant to the terms of the
insurance policies (if any) covering such claim.
(d) Any indemnity payments owed by any party to any other party
pursuant to this Paragraph 18 or 19 shall be reduced by any tax benefits to the
party claiming indemnity under thereunder and increased by any tax detriments to
the party claiming indemnity thereunder.
(e) No indemnification shall be required to be made by Sellers
pursuant to Paragraph 18 with respect to any Buyer Claims to the extent that the
aggregate amount of Buyer Claims incurred by Buyer with respect to all Buyer
Claims exceed the Purchase Price.
(f) No indemnification shall be required to be made by Buyer pursuant
to Paragraph 19 with respect to any Seller Claims to the extent that the
aggregate amount of Seller Claims incurred by Seller with respect to all Seller
Claims exceeds an amount equal to the Purchase Price.
39
<PAGE>
(g) The parties hereto agree that, in relation to any breach,
default, or nonperformance of any representation, warranty, covenant, or
agreement made or entered into by a party hereto, the only relief and remedy
available to the other party hereto in respect of said breach, default, or
nonperformance shall be:
(i) termination, but only if said termination is expressly
permitted under the provisions of Paragraph 25; or
(ii) damages, but only the extent properly claimable under
Paragraphs 18 or 19 and as limited pursuant to this Paragraph 20 or otherwise
hereunder; or
(iii) specific performance if a court of competent jurisdiction
in its discretion grants the same; or
(iv) injunctive or declamatory relief if a court of competent
jurisdiction in its discretion grants the same.
The parties hereto also agree that no action for rescission, or
claiming repudiation, of this Agreement may be brought or maintained by either
party against the other following the Closing no matter how severe, grave, or
fundamental any such breach, default, or nonperformance may be by one party.
Accordingly, the parties hereby expressly waive and forego any and all rights
they may possess to bring any such action.
(h) In order to invoke the indemnifying party's duty to defend,
indemnify and hold harmless under either this Paragraph 18 or Paragraph 19 (each
an "indemnification obligation" and collectively the "indemnification
obligations"), the indemnified party shall promptly but not later than 30 days
after becoming aware of a liability, obligation, loss or damages for which an
indemnification obligation may exist, give written notice to the indemnifying
party. Upon receipt of such notice, the indemnifying party shall, at its option,
promptly take over the defense and resolution of
40
<PAGE>
such liability, obligation, loss or damages or such portion thereof that may be
subject to an indemnification obligation.
21. Survival of Representations and Warranties.
------------------------------------------
All of the representations and warranties made by the Buyer and the
Sellers in this Agreement shall be continuing and shall survive the closing for
a period of two (2) years, regardless of any investigation made at any time by
either party; and no claim, action, suit, or other proceeding may be brought on
any such warranty or representation after the expiration of such two (2) year
period. All the indemnification obligations provided for in Paragraphs 18 (a)(i)
and 19(a)(i) shall terminate on the second anniversary of the Closing Date. All
other indemnification obligations shall terminate on the fifth anniversary of
the Closing Date.
22. Employees.
---------
(a) The Buyer shall offer employment, as of the Closing Date, to all
active Employees listed on Schedule R, part 1, at the same salary or hourly rate
and in the same or comparable position that the Employee held on the day before
the Closing Date as listed in Schedule R, part 1.
(b) The Buyer will offer employment at the same salary or hourly rate
in the same or comparable position previously held by them in the Business if
available, to any Employee listed in Schedule R, part 2, who on the Closing Date
is disabled and receiving short term or long term disability benefits including
worker's compensation and who is released to return to work within six (6)
months of the Closing Date and who applies for employment within two (2) weeks
of such release.
(c) The employee benefit plans offered by Buyer to Employees hired by
the Buyer shall be the same as Borden Chemical, Inc. provides its similarly
situated employees and shall recognize (or be amended to recognize) the service
of Employees for periods of employment by the Sellers for purposes of
eligibility, participation, vesting
41
<PAGE>
and for purposes of vacation determining the amount of a benefit, provided,
however that any plan for retiree medical and death benefits will be based upon
service with the Buyer on or after the Closing Date, and that any benefit
accrual under any savings or pension plan will be for service on or after the
Closing Date. Employees hired by Buyer shall be immediately eligible to
participate in Buyers savings plans and, except as otherwise provided herein,
employee welfare benefit plans and programs. Effective as of the Closing,
Sellers shall take all necessary and appropriate action to amend the savings
plans in which Employees participate to provide (i) the Employees hired by Buyer
receive full and immediate vesting in any employee derived benefits accrued
under such plans; (ii) that any such Employees with an outstanding loan will not
be in default on such loans unless and until such Employee receives a
distribution from such plan or fails to make a timely payment on such loan;
(iii) that such Employees will be deemed employed on the last day of the plan
year in which the Closing occurs solely for purposes of sharing in any
applicable discretionary matching contributions promised to Employees prior to
the Closing Date pursuant to Section 3.2 of the Sun Coast Industries, Inc.
Savings and Profit Sharing Plan, and (iv) such Employees may receive a
distribution of their accrued benefits under the applicable Seller savings plan
as soon as administratively feasible after the Closing, provided that such
distribution would be in accordance with the requirements of Section 401 (k)(10)
of the Code. To the extent eligible under Section 402 of the Code, the Buyer's
savings plans shall permit the Employees hired by Buyer to directly roll over
any distributions from any Sellers savings plans including any then outstanding
unpaid loans.
In addition, with respect to employee benefit plan coverage provided
to any Employee in accordance with this paragraph (c), each such Employee shall
be given credit for any deductible or co-payment amounts paid under employee
benefit plans maintained by the Sellers in respect of the plan year in which the
Closing occurs
42
<PAGE>
and Buyer shall cause its employee benefit plans to waive any and all
preexisting condition limitations with respect to such Employees. Such employee
benefit plan coverage shall be provided in a manner that will avoid any gap in
coverage for the Employees following the Closing.
(d) Sellers currently maintain defined benefit pension plans
("Sellers Pension Plans") which provide certain retirement benefits for certain
eligible Employees. Sellers will remain solely responsible for making all
contributions to and the payment of all benefits under the Sellers Pension Plans
and Buyer will have no obligation or liability in respect of Sellers Pension
Plans. Effective as of the Closing, Sellers will take all necessary and
appropriate action to cause the Sellers Pension Plans to expressly provide that
benefits accrued as of the Closing Date will be fully vested.
(e) Buyer shall have the right to dismiss any of the Employees it
hires at any time, with or without cause, and to change the terms and conditions
of employment of such Employees.
(f) The Buyer will assume the liability for any earned and unused
vacation time for any Employees of the Sellers hired by the Buyer to the extent
that such liability is reflected on Schedule R and is included as an accrued
liability on the Balance Sheet or arises in the ordinary course of business from
employment between the date of this Agreement and the Closing Date and is
included as an accrued liability on the Closing Balance Sheet.
(g) Welfare benefit plans established by the Sellers applicable to
Employees hired by Buyer shall be responsible for all claims incurred under
those plans prior to the Closing Date, including all claims incurred but
unreported as of that time. Employees receiving disability benefits as of the
Closing Date shall continue to receive benefits from the Sellers' sponsored
plans while the disability continues or until
43
<PAGE>
their eligibility otherwise expires as provided in those plans. The Buyer shall
have no obligation to pay any medical, life, or disability benefits to any
Employee who does not actively work for the Buyer after the Closing.
(h) The rights and benefits under all non-compete, confidentiality
and non-disclosure agreements with the Employees of the Sellers hired by Buyer
shall be assigned to the Buyer.
(i) Effective as of the Closing, Buyer shall assume until their
scheduled expiration date(s) the collective bargaining agreements listed on
Schedule R, part 6, and shall be solely responsible for discharging all
liabilities arising thereunder on and after the Closing, subject to Buyer's
right to negotiate in good faith with recognized collective bargaining agents of
the Employees regarding the substitution, as of the Closing Date, of Buyer's
employee benefit plans for the Employee Benefit Plans specified in the
applicable collective bargaining agreements.
(j) Buyer shall have sole responsibility for "continuation coverage"
benefits provided on and after the Closing under Buyer's group health plans to
all Employees hired by Buyer and "qualified beneficiaries" of such Employees,
for whom a "qualifying event" has occurred on or after the Closing Date. Sellers
shall have sole responsibility for "continuation coverage" benefits provided
under Sellers' group health plans to all current Employees of Sellers hired by
Buyer and "qualified beneficiaries" of such Employees of Sellers, for whom a
"qualifying event" has occurred prior to the Closing Date. The terms
"continuation coverage", "qualified beneficiaries" and "qualifying event" shall
have the meaning ascribed to thereunder Section 4980B of the Code and Sections
601 through 608 of ERISA and the regulations thereunder.
(k) Sellers and Buyer agree that pursuant to the "Alternative
Procedures" provided in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753,
in respect of filing and furnishing Internal Revenue Service forms W-2, W-3 and
941,
44
<PAGE>
respectively: (i) Sellers and Buyer shall report on a "predecessor-successor"
basis as set forth therein, (ii) Sellers shall be relieved from furnishing forms
W-2 to Employees who accept employment with Buyer to whom Seller would have been
obligated to furnish such forms and (iii) Buyer shall assume Seller's obligation
to furnish such forms to all such employees for the full calendar year of the
Closing. Upon Buyer's request, Seller will promptly provide Buyer with the
information relating to periods ending at the Closing necessary for Buyer to
prepare and distribute forms W-2 to Employees hired by Buyer, which forms W-2
will include all remuneration earned from both Seller and Buyer during the
calendar year of the Closing.
(l) The Seller and Buyer agree that Buyer's offer of employment to
all active Employees as stated in Paragraph 22 (a) above will result in no loss
of employment for any Employee who accepts Buyer's offer and that in reliance on
Buyer's agreement to employ Seller's Employees, Seller shall not be required to
give notice to Employees under the Worker Adjustment and Retraining Notification
Act ("WARN"), 29 U.S.C. (S) 2101 et seq. Buyer hereby agrees to indemnify and
defend Seller against and hold Seller harmless from any and all losses,
liabilities, expenses (including costs and attorney's fees) and claims for
damages or loss of any nature whatsoever, both direct and indirect, and
specifically including any costs, fees, expenses, damages or other liabilities
relating to or arising out of any obligations of Seller under WARN in connection
with this transaction which Seller may incur, suffer or become liable for, or
which may be asserted against Seller under WARN.
(m) Within 30 days after the Closing Sellers will pay to the
Employees hired by Buyer the incentive compensation and bonuses that would have
been paid to such Employees under Sellers' incentive and bonus plans or programs
had such Employees been employed by Sellers at the end of its 1998 fiscal year,
pro rated as to goals and incentives based on the time elapsed from the
beginning of the incentive
45
<PAGE>
year to the Closing Date. The accrual for incentives and bonuses shall be
excluded from both the Balance Sheet and Closing Balance Sheet, and Buyer shall
assume no liability under Sellers' plans or programs for paying incentives and
bonuses to the Employees.
(n) This Section 22 is not intended to, and does not create any rights
or obligations to or for the benefit of anyone other than Buyer or Sellers.
23. Prorations.
----------
Water and other utility charges, fuels, real estate taxes, and other
like items shall be adjusted ratably as of the Closing Date. If the amount of
the current real estate taxes is not then ascertainable, the adjustment for such
taxes shall be based on the last amount then ascertainable. The Sellers shall
pay all special assessments which are a lien on the Closing Date.
24. Expenses.
--------
Except as otherwise provided in this Agreement, the Sellers and the
Buyer shall each bear and pay its own legal and other costs and expenses
incident to the execution of this Agreement and the consummation of the
transactions contemplated by it, whether or not such transactions are
consummated.
25. Termination.
-----------
This Agreement can be terminated:
(a) by the mutual agreement of the Buyer and the Sellers, provided
such termination is agreed to in a writing executed by both parties;
(b) by the Buyer, if any of the conditions stated in Paragraph 14 have
not been satisfied or fulfilled on or before February 15,1998, and shall not
have been waived by the Buyer; and
46
<PAGE>
(c) by the Sellers, if any of the conditions stated in Paragraph 15
shall not have been satisfied or fulfilled on or before February 15, 1998, and
shall not have been waived by the Sellers.
Any termination pursuant to this Paragraph 25 shall be effective
immediately upon the giving of notice in writing by the terminating party to the
other party. In the event of the termination of this Agreement pursuant to this
Paragraph by Sellers or Buyer, written notice thereof shall forthwith be given
by specifying the provision hereof pursuant to which such termination is made,
and this Agreement shall become void and have no effect, except that the
agreements contained in this Paragraph and Paragraphs 24 and 34 shall survive
the termination hereof. Nothing contained in this Paragraph shall relieve any
party from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties pursuant to the
confidentiality agreement referred to in Paragraph 11(a).
26. Use of The Sellers' Name.
------------------------
Pursuant to Trademark License Agreement between Sellers and Buyer
attached hereto as Schedule W, the Sellers shall grant to the Buyer a royalty-
free license to continue to use the "Sun Coast" tradename, style and logo on
existing supplies of packaging, literature, advertising, stationery, etc., until
such supplies have been exhausted or until one (1) year following the Closing,
if earlier. Immediately following the Closing, the Sellers will cause PMC to
change its corporate name to a name other than Plastics Manufacturing Company or
any name similar to or confusing with Plastics Manufacturing Company, and
Sellers will discontinue the use of Plastics Manufacturing Company as a trade
name.
27. Transitional Services.
---------------------
(a) For a period of six (6) months following the Closing Date Sellers
will be entitled to continue to use the offices currently occupied by Eddie
Lesok and
47
<PAGE>
Cynthia Morris at the Dallas, Texas plant, for administrative and accounting
functions connected with the wind-up of Sellers' participation in the Business.
Sellers will reimburse Buyer on a fair and equitable basis for variable costs
associated with the use of this space such as telephone, janitorial,
maintenance, utilities, etc. Also during a period of up to six (6) months
following the Closing, Sellers shall be entitled, to the extent such systems are
still functional and access is practical, to continued access to the
computerized accounting system of the Business for the purpose of preparing tax
returns and securities filings, etc.; provided, however, that appropriate
security measures must be in place to safeguard both Buyer's and Sellers'
information and Sellers shall pay Buyer an equitable and fair share of the cost
of maintaining the system. If Buyer discontinues the use of the computerized
accounting system before the expiration of six (6) months following the Closing,
Buyer shall cooperate with Sellers in making reasonable arrangements to preserve
and transfer Sellers' information.
(b) With respect to the files, records and other documents
constituting part of the Acquired Assets, for a period of five (5) years after
the Closing Date, Buyer will give Sellers access to such files, records and
other documents acquired from Sellers as part of the Acquired Assets and will
make its personnel reasonably available for the purpose of providing Sellers,
upon Sellers' reasonable request, with assistance in locating information from
such records, providing appropriate verifications of documents and information,
developing information, reports, submissions and the like relating to Sellers'
operation of the Business prior to the Closing, or otherwise providing
reasonable assistance which the parties mutually deem appropriate, provided,
however, that Buyer shall be under no obligation to retain any such files,
records and other documents beyond the periods of time applicable under Buyer's
records retention policies and procedures, and shall be under no obligation to
retain employees not
48
<PAGE>
otherwise needed for the operation of the Business. The reasonable hourly cost
to Buyer of personnel engaged in activities for Sellers shall be reimbursed by
Sellers to Buyer.
28. Removal of Excluded Equipment.
-----------------------------
The equipment described in Schedule X, belonging to Sellers'
dinnerware operations, is excluded from the Acquired Assets. It shall be removed
by Sellers at their cost from the Dallas plant within ninety (90) days after the
Closing and Sellers shall repair any damage done to the Dallas plant by the
removal of this equipment.
29. Notices.
-------
All notices and other communications made pursuant to this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand
(including delivery by private courier service), mailed by registered or
certified mail, or sent by fax, as follows:
If to the Buyer: Borden Chemical, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attn: Chief Operating Officer
Fax: 614-225-4238
If to the Seller: Sun Coast Industries, Inc.
2700 5. Westmoreland Ave.
Dallas, Texas 75376
Attn: Eddie M. Lesok, Pres. and CEO
Fax: 214-467-7104
30. Headings.
--------
The headings in this Agreement are intended solely for the convenience
of reference, and shall be given no effect in the construction or interpretation
of this Agreement.
49
<PAGE>
31. Schedules.
---------
All of the schedules to this Agreement constitute an integral part of
this Agreement as if fully written within it.
32. Entire Agreement.
----------------
This Agreement, and the documents to be delivered under it, constitute
the entire understanding and agreement between the Buyer and the Sellers
concerning the subject matter covered by it, and this Agreement may not be
modified or amended, except by a writing signed by the parties.
33. Governing Law.
-------------
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of Ohio, except for real estate matters which
shall be governed by the laws of the State where the particular real estate is
located.
34. Binding Effect.
--------------
This Agreement shall be binding upon, and inure to the benefit of, the
Buyer and the Seller, and their respective successors and assigns; provided,
however, that this Agreement may not be assigned by either party without the
prior written consent of the other, except that Buyer may assign its rights
under this Agreement to a wholly owned subsidiary of the Buyer. In the event
that at any time during the five (5) years immediately following the Closing,
Sun Coast (including any surviving corporation into which Sun Coast may be
merged) elects to voluntarily dissolve or liquidate, Sun Coast shall give Buyer
not less than thirty (30) days advance written notice before entering into any
agreement or plan of liquidation or dissolution or otherwise taking any steps to
effectuate such liquidation or dissolution.
35. Public Announcement. No party, without the consent of the others,
-------------------
shall make any public announcement or issue any press release prior to the
Closing,
50
<PAGE>
concerning this Agreement or the transactions contemplated hereby, except as may
be required in the opinion of counsel to comply with law or the rules of any
securities exchange.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers on the day and year first above written.
BORDEN CHEMICAL, INC.
By: /s/ James O. Sterning
------------------------------
Exec. VP & Chief Financial
Officer
SUN COAST INDUSTRIES, INC.
By: /s/ Eddie M. Lesok
------------------------------
Pres. & CEO
SUN COAST HOLDINGS, INC.
By: /s/ Eddie M. Lesok
------------------------------
Chairman
PLASTICS MANUFACTURING COMPANY
By: /s/ Eddie M. Lesok
------------------------------
Pres. & CEO
<PAGE>
EXHIBIT 11
[LETTERHEAD OF SUN COAST INDUSTRIES, INC. APPEARS HERE]
November 14, 1997
VIA FAX
- -------
Mr. Gilbert H. Lamphere
Managing Director
Fremont Partners
50 Fremont Street, Suite 3700
San Francisco, California 94105-1895
Dear Gil;
In connection with your consideration of a possible negotiated transaction
with Sun Coast Industries, Inc. and/or its subsidiaries (collectively, with such
subsidiaries, the "Company"), the Company is prepared to make available to you
certain information concerning the business, financial condition, operations,
assets and liabilities of the Company. As a condition to such information being
furnished to you and your directors, officers, employees, agents or advisors
(including, without limitation, attorneys, accountants, consultants, bankers and
financial advisors) (collectively, "Representatives"), you agree to treat any
information concerning the Company (whether prepared by the Company, its
advisors or other wise and irrespective of the form of communication) which is
furnished to you or to your Representatives of or in the future by or on behalf
of the Company (herein collectively referred to as the "Evaluation Material")
in accordance with the provisions of this letter agreement, and to take or
abstain from taking certain other actions hereinafter set forth.
The term "Evaluation Material" also shall be deemed to include all notes
analyses, complications studies, interpretations or other documents prepared by
you or your Representatives which contain, reflect or are based upon, in whole
or in part, the information furnished to you or your Representatives pursuant
hereto. The term "Evaluation Material" does not include information which (i) is
or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was within your possession prior
to its being furnished to you by or on behalf of the Company pursuant hereto,
provided that the source of such information was not known by you to be bound by
a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to
such information or (iii) becomes available to you on a non-confidential basis
from a source other than the Company or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information.
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible negotiated transaction
between the Company and you, that the Evaluation Materials will be kept
confidential and that you and your Representatives will not disclose
- --------------------------------------------------------------------------------
<PAGE>
Mr. Gilbert H. Lamphere
November 14, 1997
Page 2
any of the Evaluation Material in any manner whatsoever; provided, however, that
(i) you may make any disclosure of such information to which the Company gives
its prior written consent and (ii) any of such information may be disclosed to
your Representatives who need to know such information for the sole purpose of
evaluating a possible negotiated transaction with the Company, who agree to keep
such information confidential and who are provided with a copy of this letter
agreement and agree to be bound by the terms hereof to the same extent as if
they were parties hereto. In any event, you shall be responsible for any breach
of this letter agreement by any of your Representatives and you agree, at your
sole expense, to take all reasonable measures (including but not limited to
court proceedings) to restrain your Representatives from prohibited or
unauthorized disclosure or use of the Evaluation Material.
In addition, you agree that, without prior written consent of the Company,
you and your Representatives will not disclose to any other person the fact that
the Evaluation Material has been made available to you, that discussions or
negotiations are taking place concerning a possible transaction involving the
Company or any of the terms, conditions or other facts with respect thereto
(including the status thereof) provided, that you may make such disclosure if
you have received the written opinion of your outside counsel that such
disclosure must be made by you in order that you not commit a violation of law.
Without limiting the generality of the foregoing, you further agree that,
without the prior written consent of the Company, you will not, directly or
indirectly, enter into any agreement, arrangement or understanding, or any
discussions which might lead to such agreement, arrangement or understanding,
with any person regarding a possible transaction involving the Company. The term
"person" as used in this letter agreement shall be broadly interpreted to
include the media and any corporation, partnership, group, individual or other
entity.
In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, subpoena, civil investigative demand or other
similar process) to disclose any of the Evaluation Material, you shall provide
the Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this letter agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
Company, you or any of your Representatives are nonetheless, in the written
opinion of counsel, legally compelled to disclose Evaluation Material to any
tribunal or else stand liable for contempt or suffer other censure or penalty,
you or your Representative may, without liability hereunder, disclose to such
tribunal only that portion of the Evaluation Material which such counsel advises
you is legally required to be disclosed, provided that you exercise your best
efforts to preserve the confidentiality of the Evaluation Material, including,
without limitation, by cooperating with the Company to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Evaluation Material by such tribunal.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform the Company of that decision. In that case, or
at any time upon the request of the Company for any reason, you will promptly
deliver to the Company all Evaluation Material (and all copies thereof)
furnished to you or your Representatives by or on behalf of the Company pursuant
<PAGE>
Mr. Gilbert H. Lamphere
November 14, 1997
Page 3
hereto (except for one copy that you may retain, in secure storage, permanently
subject to the terms of this Agreement, for use only in disputes relating to
this Agreement). In the event of such a decision or request, all other
Evaluation Material prepared by you or your Representatives shall be destroyed
and no copy thereof shall be retained. Notwithstanding the return or destruction
of the Evaluation Material, you and your Representatives will continue to be
bound by your obligations of confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including without limitation its investment bank or any of the
Company's directors, officers, employees, or agents) make any representation or
warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material. You agree that neither the Company nor any of its
Representatives (including without limitation its investment bank or any of the
Company's directors, officers, employees, or agents) shall have any liability to
you or any of your Representatives relating to or resulting from the use of the
Evaluation Material or any errors therein or omissions therefrom. Only those
representations or warranties which are made in a final definitive agreement
regarding any transactions contemplated hereby, when, as and if executed, and
subject to such limitations and restrictions as may be specified therein, will
have any legal effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of two years from the date hereof, neither you
nor any of your affiliates will solicit to employ any of the current officers or
employees of the Company with whom you have had contact or who was specifically
identified to you during the period of your investigation of the Company, so
long as they are employed by the Company, without obtaining the prior written
consent of the Company.
You agree that, for a period of three years from the date of this
agreement, unless such shall have been specifically invited in writing by the
Company, neither you nor any of your affiliates (as such term is defined under
the Securities Exchange Act of 1934, as amended (the "1934 Act")) or
Representative will in any manner, directly or indirectly, (a) effect or seek,
offer or propose (whether publicly or otherwise) to effect, or cause to
participate in or in any way assist any other person to effect or seek, offer or
propose (whether publicly or otherwise) to effect or participate in, (i) any
acquisition of any securities (or beneficial ownership thereof) or assets of the
Company or any of its subsidiaries; (ii) any tender or exchange offer, merger or
other business combination involving the Company or any of its subsidiaries;
(iii) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Company or any of its
subsidiaries; or (iv) any "solicitation" of "proxies" (as such terms are used in
the proxy rules of the Securities and Exchange Commission) or consents to vote
any voting securities of the Company; (b) form, join or in any way participate
in a "group" (as defined under the 1934 Act); (c) otherwise act, alone or in
concert with others, to seek to control or influence the management, Board of
Directors or policies of the Company; (d) take any action which might force the
Company to make a public announcement regarding any of the types of matters set
forth in (a) above; or (e) enter into any discussions or arrangements with any
third party with respect to any of the foregoing. You also agree during such
period not to request the Company (or its directors, officers, employees or
agents), directly or indirectly, to amend or waive any provision of this
paragraph (including this sentence).
<PAGE>
Mr. Gilbert H. Lamphere
November 14, 1997
Page 4
You understand and agree that no contract or agreement providing for any
transaction involving the Company shall be deemed to exist between you and the
Company unless and until a final definitive agreement has been executed and
delivered, and you hereby waive, in advance, any claims (including, without
limitation, breach of contract) in connection with any transaction involving the
Company unless and until you and the Company shall have entered into a final
definitive agreement. You also agree that unless and until a final definitive
agreement regarding a transaction between the Company and you has been executed
and delivered, neither the Company nor you will be under any legal obligations
of any kind whatsoever with respect to such a transaction by virtue of this
letter agreement except for the matters specifically agreed to herein. You
further acknowledge and agree that the Company reserves the right, in its sole
discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a transaction between the Company and you, and to
terminate discussions and negotiations with you at any time. You further
understand that (i) the Company and its Representatives shall be free to conduct
any process for any transaction involving the Company, if and as they in their
sole discretion shall determine (including, without limitation, negotiating with
any other interested parties and entering into a definitive agreement without
prior notice to you or any other person), (ii) any procedures relating to such
process or transaction may be changed at any time without notice to you or any
other person, and (iii) you shall not have any claims whatsoever against the
Company, its Representatives or any of their respective directors, officers,
stockholders, owners, affiliates or agents arising out of or relating to any
transaction involving the Company (other than those as against the parties to a
definitive agreement with you in accordance with the terms thereof) nor, unless
a definitive agreement is entered into with you, against any third party with
whom a transaction is entered into. Neither this paragraph nor any other
provision in this agreement can waived or amended except by written consent of
the Company, which consent shall specifically refer to this paragraph (or such
provision) and explicitly make such waiver or amendment.
It it 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
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you or any of your
Representatives and that the Company shall be entitled to equitable relief,
including injunction and specific performance, as a remedy for any such breach.
Such remedies shall not be deemed to be the exclusive remedies for a breach by
you of this letter agreement but shall be in addition to all other remedies
available at law or equity to the Company. In the event of litigation relating
to this letter agreement, if a court of competent jurisdiction determines that
you or any of your Representatives have breached this letter agreement, then you
shall be liable and pay to the Company the reasonable legal fees incurred by the
Company in connection with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, their directors
and officers, and shall be governed by and construed in accordance with the laws
of the State of Delaware. You also hereby
<PAGE>
Mr. Gilbert H. Lamphere
November 14, 1997
Page 5
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 State of Texas 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 State of Texas,
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.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
SUN COAST INDUSTRIES, INC.
By: /s/ Cynthia R. Morris
------------------------------
Cynthia R. Morris
Chief Financial Officer
Accepted and agree as of
the date first written above:
FREMONT PARTNERS
By: [SIGNATURE APPEARS HERE]
----------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
EXHIBIT 12
Fremont Partners
Fifty Fremont Street, Suite 3700
San Francisco, California 94105-1895
January 8, 1998
Ms. Cynthia R. Morris
Chief Financial Officer
Sun Coast Industries, Inc.
2700 S. Westmoreland Avenue
Dallas, TX 75376-9045
Dear Cynthia:
In connection with your consideration of a possible negotiated transaction
with Kerr Group, Inc. (the "Company") and Fremont Partners ("Fremont"), Fremont
and the Company are prepared to make available to you certain information
concerning the business, financial condition, operations, assets and liabilities
of the Company. As a condition to such information being furnished to you and
your directors, officers, employees, agents or advisors (including, without
limitation, attorneys, accountants, consultants, bankers and financial advisors)
(collectively, "Representatives"), you agree to treat any information concerning
the Company (whether prepared by Fremont, the Company, their advisors or
otherwise and irrespective of the form of communication) which is furnished to
you or to your Representatives now or in the future by or on behalf of the
Company (herein collectively referred to as the "Evaluation Material") in
accordance with the provisions of this letter agreement, and to take or abstain
from taking certain other actions hereinafter set forth.
The term "Evaluation Material" also shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
you or your Representatives which contain, reflect or are based upon, in whole
or in part, the information furnished to you or your Representatives pursuant
hereto. The term "Evaluation Material" does not include information which (i)
is or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was within your possession prior
to its being furnished to you by or on behalf of the Company pursuant hereto,
provided that the source of such information was not known by you to be bound by
a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to Fremont, the Company or any other party with
respect to such information or (iii) becomes available to you on a
non-confidential basis from a source other than Fremont, the Company or any of
their Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to Fremont, the Company or any other party with
respect to such information.
You hereby agree that you and your Representatives shall use the
Evaluation Material solely for the purpose of evaluating a possible negotiated
transaction between Fremont, the
<PAGE>
Ms. Cynthia R. Morris
January 8, 1998
Page 2
Company and you, that the Evaluation Materials will be kept confidential and
that you and your Representatives will not disclose any of the Evaluation
Material in any manner whatsoever, except as set forth in the next succeeding
paragraph; provided, however, that (i) you may make any disclosure of such
information to which Fremont gives its prior written consent and (ii) any of
such information may be disclosed to your Representatives who need to know such
information for the sole purpose of evaluation a possible negotiated transaction
with Fremont and the Company, who agree to keep such information confidential
and who are provided with a copy of this letter agreement. In any event, you
shall be responsible for any breach of this letter agreement by any of your
Representatives and you agree, at your sole expense, to take all reasonable
measures (including but not limited to court proceedings) to restrain your
Representatives from prohibited or unauthorized disclosure or use of the
Evaluation Material.
In addition, you agree that, without prior written consent of Fremont,
you and your Representatives will not disclose to any other person the fact that
the Evaluation Material has been made available to you, that discussions or
negotiations are taking place concerning a possible transaction involving the
Company or any of the terms, conditions or other facts with respect thereto
(including the status thereof) provided, that you may make such disclosure if
you have been advised by your counsel that such disclosure is legally required.
Without limiting the generality of the foregoing, you further agree that,
without the prior written consent of Fremont, other than with or among your
Representatives, you will not, directly or indirectly, enter into any agreement,
arrangement or understanding, or any discussions which might lead to such
agreement, arrangement or understanding with any person regarding a possible
transaction involving the Company. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any corporation,
partnership, group, individual or other entity.
In the event that you or any of your Representatives are required (by
oral questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose any of the Evaluation Material, you shall provide Fremont the prompt
written notice of any such request or requirement so that Fremont may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this letter agreement. If, in the absence of a proactive order or
other remedy or the receipt of a waiver by Fremont, you or any of your
Representatives are nonetheless, in the opinion of counsel, legally compelled to
disclose Evaluation Material to any tribunal or else stand liable for contempt
or suffer other censure of penalty, you or your Representative may, without
liability hereunder, disclose to such tribunal only that portion of the
Evaluation Material which such counsel advises you is legally required to be
disclosed, provided that you exercise your best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with Fremont to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material by such tribunal.
If you decide that you do not wish to proceed with a transaction with
Fremont and the Company, you will promptly inform Fremont of that decision. In
that case, or at any time upon
<PAGE>
Ms. Cynthia R. Morris
January 8, 1998
Page 3
the request of Fremont for any reason, you will promptly deliver to Fremont all
Evaluation Material, except those Evaluation Materials prepared by you and your
Representatives (and all copies thereof) furnished to you or your
Representatives by or on behalf of the Company pursuant hereto (except for one
copy that you may retain, in secure storage, permanently subject to the terms of
this Agreement, for use only in disputes relating to this Agreement). In the
event of such a decision or request, all other Evaluation Material prepared by
you or your Representatives shall be destroyed and no copy thereof shall be
retained. Upon the return and/or destruction of Evaluation Materials, you agree
to certify, upon our request in writing, that all of the foregoing materials
have been destroyed or surrendered to Fremont. Notwithstanding the return or
destruction of the Evaluation Material, you and your Representatives will
continue to be bound by your obligations of confidentiality and other
obligations hereunder.
You understand and acknowledge that neither Fremont, the Company nor any of
their Representatives (including without limitation their investment bank or any
of Fremont's directors, officers, employees, partners or agents or the Company's
directors, officers, employees, or agents) make any representation or warranty,
express or implied, as to the accuracy or completeness of the Evaluation
Material. You agree that neither Fremont, the Company nor any of their
Representatives (including without limitation their investment bank or any of
Fremont's directors, officers, employees, partners or agents or the Company's
directors, officers, employees, or agents) shall have any liability to you or to
any of your Representatives relating to or resulting from the use of the
Evaluation Material or any errors therein or omissions therefrom. Only those
representations or warranties which are made in a final definitive agreement
regarding any transactions contemplated hereby, when, as and if executed, and
subject to such limitations and restrictions as may be specified therin, will
have any legal effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of two years from the date hereof, neither you
nor any of your affiliates will solicit to employ any of the current officers or
employees of the Company with whom you have had contact or who was specifically
identified to you during the period of your investigation of the Company, so
long as they are employed by the Company, without obtaining the prior written
consent of Fremont, except for a general solicitation not aimed at such officers
and employees. For purposes of this paragraph "affiliates" shall include only
your affiliates that have access to, or have been provided with, the Evaluation
Material.
You agree that, for a period of three years from the date of this
agreement, unless such shall have been specifically invited by Fremont, neither
you nor any of your affiliates (as such term is defined under the Securities
Exchange Act of 1934, as amended (the "1934 Act")) or Representatives will in
any manner, directly or indirectly, (a) effect or seek, offer or propose
(whether publicly or otherwise) to effect, or cause or participate in or in any
way assist any other person to effect or seek, offer or propose (whether
publicly or otherwise) to effect or participate in, (i) any acquisition of any
securities (or beneficial ownership thereof) or assets of the Company or any of
its subsidiaries; (ii) any tender or exchange offer, merger or other business
combination involving the Company or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the
<PAGE>
Ms. Cynthia R. Morris
January 8, 1998
Page 4
Company or any of its subsidiaries; or (iv) any "solicitation" of "proxies" (as
such terms are used in the proxy rules of the Securities and Exchange
Commission) or consents to vote any voting securities of the Company; (b) form,
join or in any way participate in a "group" (as defined under the 1934 Act); (c)
otherwise act, alone or in concert with others, to seek to control or influence
the management, Board of Directors or policies of the Company; (d) take any
action which might force the Company to make a public announcement regarding any
of the types of matters set forth in (a) above; or (e) enter into any
discussions or arrangements with any third party with respect to any of the
foregoing. You also agree during such period not to request Fremont (or any of
its directors, officers, employees, partners or agents), directly or indirectly,
to amend or waive any provision of this paragraph (including this sentence). The
foregoing prohibition set forth in the paragraph shall not apply in the event
that any person takes any of the actions set forth in clauses (a) through (e) of
this paragraph.
You understand and agree that no contract or agreement providing for any
transaction involving Fremont and the Company shall be deemed to exist between
you, Fremont and the Company unless and until a separate letter of intent or a
definitive agreement has been executed and delivered, and you hereby waive, in
advance, any claims (including, without limitation, breach of contract) in
connection with any transaction involving Fremont and the Company unless and
until you, Fremont and the Company shall have entered into a separate letter of
intent or a definitive agreement. You also agree that unless and until a
separate letter of intent or a definitive agreement regarding a transaction
between Fremont, the Company and you has been executed and delivered, neither
Fremont, the Company nor you will be under any legal obligations of any kind
whatsoever with respect to such a transaction by virtue of this letter agreement
except for the matters specifically agreed to herein. Subject to any letter of
intent that may be entered into between you, Fremont and the Company, you
further acknowledge and agree that Fremont reserves the right, in its sole
discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a transaction between Fremont, the Company and
you, and to terminate discussions and negotiations with you at any time. You
further understand that until a separate letter of intent or a definitive
agreement has been executed (i) Fremont, the Company and their Representatives
shall be free to conduct any process for any transaction involving the Company,
if and as they in their sole discretion shall determine (including, without
limitation, negotiating with any other interested parties and entering into a
definitive agreement without prior notice to you or any other person), (ii) any
procedures relating to such process or transaction may be changed at any time
without notice to you or any other person, and (iii) you shall not have any
claims whatsoever against Fremont, the Company, their Representatives or any of
their respective directors officers, partners, stockholders, owners, affiliates
or agents arising out of or relating to any transaction involving the Company
(other than those as against the parties to a definitive agreement with you in
accordance with the terms thereof) nor, unless a separate letter of intent or a
definitive agreement is entered into with you, against any third party with whom
a transaction is entered into. Neither this paragraph nor any other provision in
this agreement can be waived or amended except by written consent of Fremont,
which consent shall specifically refer to this paragraph (or such provision) and
explicitly make such waiver or amendment.
<PAGE>
Ms. Cynthia R. Morris
January 8, 1998
Page 5
It is understood and agreed that no failure or delay by Fremont 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
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you or any of your
Representatives and that Fremont shall be entitled to equitable relief,
including injunction and specific performance, as a remedy for any such breach.
Such remedies shall not be deemed to be the exclusive remedies for a breach by
you of this letter agreement but shall be in addition to all other remedies
available at law or equity to Fremont. In the event of litigation relating to
this letter agreement, if a court of competent jurisdiction determines that you
or any of your Representatives have breached this letter agreement, then you
shall be liable and pay to Fremont the reasonable legal fees incurred by Fremont
in connection with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of Fremont and the Company, their
directors and officers, and shall be governed by and construed in accordance
with the laws of the State of Delaware.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and Fremont.
Very Truly yours,
FREMONT PARTNERS
By: /s/ Gilbert H. Lamphere
----------------------------------
Gilbert H. Lamphere
Managing Director
Accepted and agreed as of
the date first written above:
SUN COAST INDUSTRIES, INC.
By: /s/ Cynthia R. Morris
-----------------------------
Name: Cynthia R. Morris
-----------------------
Title: [TITLE APPEARS HERE]
-----------------------
