<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
SUN COAST INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
SAFFRON ACQUISITION CORP.
KERR GROUP, INC.
(BIDDERS)
----------------
COMMON STOCK, PAR VALUE $.01 PER SHARE (AND ASSOCIATED PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
----------------
866670201
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
GILBERT H. LAMPHERE
PRESIDENT
SAFFRON ACQUISITION CORP.
C/O FREMONT PARTNERS, L.P.
50 FREMONT STREET
SUITE 3700
SAN FRANCISCO, CALIFORNIA 94105
(415) 284-8500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
COPY TO:
KENTON J. KING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR EMBARCADERO CENTER, SUITE 3800
SAN FRANCISCO, CALIFORNIA 94111
(415) 984-6400
----------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ---------------------------------------------------------------------------
<S> <C>
$48,905,974.75 $9,781.19
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
* For purposes of calculating fee only. This amount assumes the purchase of
4,117,629 outstanding shares of common stock of Sun Coast Industries, Inc.
and 431,764 shares of common stock of Sun Coast Industries, Inc. which may
be issued upon exercise of outstanding options and warrants, in each case,
at $10.75 in cash per share. The amount of the filing fee calculated in
accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934,
as amended, equals 1/50 of one percentum of the value of shares to be
purchased.
[_]Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
- --------------------------------------------------------------------------------
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
Saffron Acquisition Corp.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds AF
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
1
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
- --------------------------------------------------------------------------------
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
Kerr Group, Inc.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds BK, AF
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
- --------------------------------------------------------------------------------
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
Fremont Partners, L.P.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
PN
- --------------------------------------------------------------------------------
3
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
- --------------------------------------------------------------------------------
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
FP Advisors, L.L.C.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
OO (limited liability company)
- --------------------------------------------------------------------------------
4
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
Fremont Group, L.L.C.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares [_]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
OO (limited liability company)
- --------------------------------------------------------------------------------
5
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 866670201
- --------------------------------------------------------------------------------
1. Names of Reporting Person S.S. or I.R.S.
Identification Nos. of Above Persons
Fremont Investors, Inc.
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds OO
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f) [_]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Nevada
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
938,000
(see the Offer to Purchase)
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
20.3%
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
- --------------------------------------------------------------------------------
6
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Saffron Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Kerr Group, Inc., a Delaware
corporation ("Parent"), to purchase all of the outstanding shares (the
"Shares") of common stock, par value $.01 per share, including the associated
rights to purchase shares of common stock issued pursuant to the Rights
Agreement between Sun Coast Industries, Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company, dated as of June 6,
1995, as amended (the "Rights" and, together with the common stock, the
"Common Stock"), at $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"), a copy of which is attached hereto
as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which
is attached hereto as Exhibit (a)(2) (which together constitute the "Offer").
This Statement also constitutes a Statement on Schedule 13D of each of the
Purchaser, Parent, Fremont Partners, L.P. ("Fremont Partners"), FP Advisors,
L.L.C. ("FP Advisors"), The Fremont Group, L.L.C. ("The Fremont Group") and
Fremont Investors, Inc. ("Fremont Investors") with respect to (i) the option
granted by the Company to purchase up to 500,000 newly issued shares of Common
Stock at $10.75 per share, and (ii) a proxy granted by a major stockholder
with respect to the voting of approximately 438,000 shares of Common Stock in
favor of the Merger upon the terms and subject to the conditions set forth in
a stockholder agreement. The Option can only be exercised in certain
circumstances described in Section 11 of the Offer to Purchase. Each of
Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors
disclaims beneficial ownership of such shares.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Sun Coast Industries, Inc., and the
address of its principal executive offices is 2700 South Westmoreland Avenue,
Dallas, Texas 75233.
(b) The class of securities to which this Statement relates is the Common
Stock. As of January 28, 1998 there were (a) 4,117,629 shares of Common Stock
issued and outstanding and (b) outstanding options and warrants to purchase an
aggregate of 431,764 shares of Common Stock. Purchaser is seeking to purchase
all of the outstanding Shares at a purchase price of $10.75 per Share, net to
the seller in cash.
(c) The information set forth in "Section 6--Price Range of the Shares;
Dividends on the Shares" of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Purchaser, Parent, Fremont
Partners, FP Advisors, The Fremont Group and Fremont Investors. Each of
Fremont Partners, FP Advisors, The Fremont Group and Fremont Investors
disclaims that it is a "bidder" within the meaning of Schedule 14D-1. The
information set forth in the "INTRODUCTION" and "Section 9--Certain
Information Concerning Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each
director and executive officer of Fremont Partners, Parent and the Purchaser
and the name, principal business and address of any corporation or other
organization in which such occupations, positions, offices and employments are
or were carried on are set forth in Schedule I of the Offer to Purchase and
incorporated herein by reference.
(e)-(f) During the last five years neither Parent or the Purchaser nor, to
the best knowledge of Parent and the Purchaser, any of the persons listed in
Schedule I of the Offer to Purchase have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
7
<PAGE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser, nor, to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
has entered into any transaction with the Company, or any of the Company's
affiliates which are corporations, since the commencement of the Company's
third full fiscal year preceding the date of this Statement, the aggregate
amount of which was equal to or greater than one percent of the consolidated
revenues of the Company for (i) the fiscal year in which such transaction
occurred or (ii) the portion of the current fiscal year which has occurred if
the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser nor, to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
has entered into any transaction since the commencement of the Company's third
full fiscal year preceding the date of this Statement, with the executive
officers, directors or affiliates of the Company which are not corporations,
in which the aggregate amount involved in such transaction or in a series of
similar transactions, including all periodic installments in the case of any
lease or other agreement providing for periodic payments or installments,
exceeded $40,000.
(b) The information set forth in the "INTRODUCTION", "Section 9--Certain
Information Concerning Parent and the Purchaser", "Section 11--Background of
the Offer; Purpose of the Offer and the Merger; The Merger Agreement and
Certain Other Agreements" and "Section 12--Plans for the Company; Other
Matters" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 10--Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION", "Section 11--
Background of the Offer; Purpose of the Offer and the Merger; The Merger
Agreement and Certain Other Agreements" and "Section 12--Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in "Section 7--Effect of the Offer on the
Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in "Section 9--Certain Information
Concerning Parent and the Purchaser" and "Section 11--Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION", "Section 10--Source and
Amount of Funds", "Section 11--Background of the Offer; Purpose of the Offer
and the Merger; The Merger Agreement and Certain Other Agreements", "Section
12--Plans for the Company; Other Matters" and "Section 16--Fees and Expenses"
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Section 16--Fees and Expenses" of the Offer to
Purchase is incorporated herein by reference.
8
<PAGE>
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Section 9--Certain Information Concerning
Parent and the Purchaser" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Parent or the Purchaser, or to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
and the Company, or any of its executive officers, directors, controlling
persons or subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION", "Section 14--
Conditions of the Offer" and "Section 15--Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(d) The information set forth in "Section 7--Effect of the Offer on the
Market for Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" and "Section 15--Certain Legal Matters" of the Offer to Purchase
is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letters of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated February 3, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release jointly issued by Parent and the Company, dated January
28, 1998.
(a)(8) Form of Summary Advertisement, dated February 3, 1998.
(a)(9) Fairness Opinion of Stephens Inc., dated January 27, 1998.
(c)(1) Agreement and Plan of Merger, dated as of January 28, 1998, by and
among Parent, the Purchaser and the Company.
(c)(2) Company Option Agreement, dated January 28, 1998, by and among
Parent, the Purchaser and the Company.
(c)(3) Stockholder Agreement, dated January 28, 1998, by and among Parent,
the Purchaser and James M. Hoak, Jr.
(c)(4) Guarantee, dated January 28, 1998, by and between the Company and
Fremont Partners, L.P.
(c)(5) Confidentiality Agreement, dated November 14, 1997, by and between
Fremont Partners, L.P. and the Company.
(c)(6) Confidentiality Agreement, dated January 8, 1998, by and among
Fremont Partners, L.P., Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
9
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
Saffron Acquisition Corp.
By: /s/ Gilbert H. Lamphere
-----------------------------------
Gilbert H. Lamphere
President
10
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
Kerr Group, Inc.
By: /s/ Gilbert H. Lamphere
-----------------------------------
Gilbert H. Lamphere
Chairman of the Board of
Directors
11
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
Fremont Partners, L.P.
By: FP Advisors, L.L.C., its general
partner
By: Fremont Group, L.L.C., its
managing member
By: Fremont Investors, Inc.,
its manager
By:/s/ R. S. Kopf
-------------------------
Name: R. S. Kopf
Title: Managing
Director, General
Counsel and
Secretary
12
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
FP Advisors, L.L.C.
By: Fremont Group, L.L.C., its
managing member
By: Fremont Investors, Inc., its
manager
By: /s/ R. S. Kopf
---------------------------------
Name: R. S. Kopf
Title: Managing Director,General
Counseland Secretary
13
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
Fremont Group, L.L.C.
By: Fremont Investors, Inc., its
manager
By: /s/ R. S. Kopf
----------------------------------
Name: R. S. Kopf
Title: Managing Director,General
Counsel and Secretary
14
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: February 3, 1998
Fremont Investors, Inc.
By: /s/ R. S. Kopf
---------------------------------
Name: R. S. Kopf
Title: Managing Director,General
Counseland Secretary
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
(a)(1) Offer to Purchase, dated February 3, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release jointly issued by Parent and the Company, dated January
28, 1998.
(a)(8) Form of Summary Advertisement, dated February 3, 1998.
(a)(9) Fairness Opinion of Stephens Inc., dated January 27, 1998.
(c)(1) Agreement and Plan of Merger, dated as of January 28, 1998, by and
among Parent, the Purchaser and the Company.
(c)(2) Company Option Agreement, dated January 28, 1998, by and among Parent,
the Purchaser and the Company.
(c)(3) Stockholder Agreement, dated January 28, 1998, by and among Parent,
the Purchaser and James M. Hoak, Jr.
(c)(4) Guarantee, dated January 28, 1998, by and between the Company and
Fremont Partners, L.P.
(c)(5) Confidentiality Agreement, dated November 14, 1997, by and between
Fremont Partners, L.P. and the Company.
(c)(6) Confidentiality Agreement, dated January 8, 1998, by and among Fremont
Partners, L.P., Parent and the Company.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
<PAGE>
Exhibit (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
SUN COAST INDUSTRIES, INC.
by
SAFFRON ACQUISITION CORP.
a wholly owned subsidiary of Kerr Group, Inc.
at
$10.75 NET PER SHARE
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, MARCH 3, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED AS
OF JANUARY 28, 1998 AMONG KERR GROUP, INC., SAFFRON ACQUISITION CORP. AND SUN
COAST INDUSTRIES, INC. THE BOARD OF DIRECTORS OF SUN COAST INDUSTRIES, INC.
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING 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 RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, 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 OF COMMON STOCK
OUTSTANDING ON A FULLY DILUTED BASIS AND THE OTHER CONDITIONS SET FORTH IN
THIS OFFER TO PURCHASE. SEE SECTION 14.
---------------
IMPORTANT
Any stockholder who desires to tender all or any portion of such
stockholder's Shares (as defined herein) should either (i) complete and sign
the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to the Depositary and either deliver the certificates for
such Shares to the Depositary or tender such Shares pursuant to the procedures
for book-entry transfer set forth in Section 3 or (ii) request such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such stockholder. Any stockholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such person to tender such stockholder's Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent at the locations and telephone numbers set forth on the back cover of
this Offer to Purchase. Requests for additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Depositary, or to brokers,
dealers, commercial banks or trust companies. A stockholder also may contact
brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
---------------
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO OF MACKENZIE PARTNERS, INC APPEARS HERE]
---------------
February 3, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION
THE OFFER
1. Terms of the Offer............................................... 3
2. Acceptance for Payment and Payment............................... 4
3. Procedure for Tendering Shares................................... 5
4. Withdrawal Rights................................................ 8
5. Certain Federal Income Tax Consequences.......................... 8
6. Price Range of the Shares; Dividends on the Shares............... 9
7. Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration; Margin Regulations .................. 9
8. Certain Information Concerning the Company....................... 11
9. Certain Information Concerning Parent and the Purchaser.......... 12
10. Source and Amount of Funds....................................... 15
11. Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements................... 16
12. Plans for the Company; Other Matters............................. 28
13. Dividends and Distributions...................................... 31
14. Conditions of the Offer.......................................... 31
15. Certain Legal Matters............................................ 33
16. Fees and Expenses................................................ 35
17. Miscellaneous.................................................... 35
</TABLE>
SCHEDULE I--General Partners, Managing Members, Directors and Executive
Officers of Saffron Acquisition Corp. and Kerr Group, Inc., Fremont Acquisition
Company, LLC, Fremont Partners, L.P., FP Advisors, L.L.C., Fremont Group,
L.L.C. and Fremont Investors, Inc.
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF SUN COAST INDUSTRIES, INC.:
INTRODUCTION
SAFFRON ACQUISITION CORP., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Kerr Group, Inc., a Delaware corporation
("Parent"), hereby offers to purchase all issued and outstanding shares (the
"Shares") of common stock, par value $.01 per share, including the associated
rights to purchase shares of common stock pursuant to the Rights Agreement
between Sun Coast Industries, Inc., a Delaware corporation (the "Company") and
American Stock Transfer & Trust Company, dated June 6, 1995, as amended (the
"Rights" and together with the common stock, the "Common Stock"), of the
Company, 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 this Offer to Purchase and in
the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the sale of Shares pursuant to the Offer. The Purchaser will pay all
fees and expenses incurred in connection with the Offer of MacKenzie Partners,
Inc., which is acting as the Information Agent (the "Information Agent") and
American Stock Transfer & Trust Company which is acting as the Depositary (the
"Depositary").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES OF COMMON STOCK WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION
14. As used in this Offer to Purchase, "fully diluted basis" takes into
account the conversion or exercise of all outstanding options and other rights
and securities exercisable or convertible into shares of Common Stock. The
Company has informed the Purchaser that, as of January 28, 1998, there were
(i) 4,117,629 shares of Common Stock issued and outstanding, and (ii)
outstanding options and other rights to purchase an aggregate of 431,764
shares of Common Stock. The Merger Agreement (as defined below) provides,
among other things, that the Company will not, without the prior written
consent of Parent, issue any additional Shares (except on the exercise of
outstanding options and other rights and securities). Based on the foregoing
and giving effect to the exercise of all outstanding options and warrants,
other than the Option (as defined below), the Purchaser believes that the
Minimum Condition will be satisfied if 2,279,246 shares of Common Stock are
validly tendered and not withdrawn prior to the expiration of the Offer.
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 have entered into a Company 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 at $10.75 per share (the
"Option"). The Option can only be exercised in certain circumstances. See
Section 11.
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. (the
"Major Stockholder"), who has voting power and dispositive power with respect
to approximately 438,000 Shares, concurrently with the execution and delivery
of the Merger Agreement, is entering into a Stockholder Agreement (the
"Stockholder Agreement"), dated as of January 28, 1998, with Parent and the
Purchaser. Pursuant to the Stockholder Agreement, 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.
As an inducement to the Company to enter into the Merger Agreement,
concurrently with the execution and delivery of the Merger Agreement, Fremont
Partners, L.P., a Delaware limited partnership ("Fremont Partners"), and the
Company have entered into a Guarantee, dated as of January 28, 1998 (the
"Guarantee"), pursuant to which, among other things, Fremont Partners has
agreed to unconditionally and irrevocably guarantee, for the benefit of the
Company, the performance of all obligations of Parent and the Purchaser
pursuant to the Merger Agreement. Fremont Partners has represented in the
Guarantee that it has funds available sufficient to purchase, or cause the
purchase, of the Shares in accordance with the terms of the Merger Agreement,
and to pay, or cause
1
<PAGE>
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 consummation of
the purchase by the Purchaser, Parent or any of their respective affiliates of
any Shares to the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 28, 1998 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company pursuant to which, as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions to the Merger (as defined below), the Purchaser will be merged with
and into the Company and the corporate existence of the Purchaser will
thereupon cease. The merger, as effected pursuant to the immediately preceding
sentence, is referred to herein as the "Merger," and the Company as the
surviving corporation of the Merger is sometimes herein referred to as the
"Surviving Corporation." At the effective time of the Merger (the "Effective
Time"), each share of Common Stock then outstanding (other than Shares held by
Parent or the Purchaser and Shares held by stockholders who properly perfect
their dissenters' rights under Delaware law) will be cancelled and
extinguished and converted into the right to receive the Offer Price or any
higher price per share of Common Stock paid in the Offer (the "Merger
Consideration"), in cash payable to the holder thereof without interest. The
Merger Agreement is more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREUNDER, INCLUDING 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 RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES.
Stephens Inc., the Company's financial advisor ("Stephens"), has delivered
to the Company's Board of Directors its written opinion (the "Fairness
Opinion") to the effect that the consideration to be received by the holders
of Common Stock pursuant to the Offer and under the terms of the Merger
Agreement, is fair to such holders, from a financial point of view. Such
opinion is set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
that is being mailed to stockholders of the Company.
The Merger Agreement provides that the initial scheduled expiration date of
the Offer shall be twenty (20) business days after the date the Offer is
commenced, but that if all conditions to the Offer shall not have been
satisfied or waived by such date, the Purchaser may, from time to time, in its
sole discretion, extend the expiration date. In addition, the Merger Agreement
provides that the Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
purchase, as soon as permitted under the terms of the Offer, all Shares
validly tendered and not withdrawn prior to the expiration of the Offer;
provided, however, that if, immediately prior to the initial expiration date
of the Offer, the Shares tendered and not withdrawn pursuant to the Offer
equal less than 90% of the outstanding shares of Common Stock, 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. The Offer will not remain open following the
time Shares are accepted for payment.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See Section 11. Under the Delaware General Corporation Law (the
"DGCL"), except as otherwise provided below, the affirmative vote of a
majority of the outstanding shares of Common Stock is required to approve the
Merger Agreement and the Merger.
Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of another corporation, the corporation
holding such stock may merge such other corporation into itself without any
action or vote on the part of the board of directors or the stockholders of
such other corporation (a "short-form merger"). In the event that Parent and
the Purchaser acquire in the aggregate at least 90% of the outstanding shares
of Common Stock pursuant to the Offer or otherwise, then, at the election of
Parent, a short-
2
<PAGE>
form merger could be effected without any approval of the Board of Directors
or the stockholders of the Company, subject to compliance with the provisions
of Section 253 of the DGCL. Even if Parent and the Purchaser do not own 90% of
the outstanding shares of Common Stock following consummation of the Offer,
Parent and the Purchaser could seek to purchase additional shares in the open
market or otherwise in order to reach the 90% thresholds and employ a short-
form merger. The per share consideration paid for any Shares so acquired may
be greater or less than that paid in the Offer. Parent presently intends to
effect a short-form merger if permitted to do so under the DGCL.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer, the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase. The term "Expiration
Date" shall mean 12:00 Midnight, New York City time, on Tuesday, March 3,
1998, unless and until the Purchaser, in accordance with the terms of the
Merger Agreement, shall have extended the period of time for which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (the "HSR Act"). See Section 14. If
such conditions are not satisfied prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Shares tendered and terminate the Offer, subject to the terms of the
Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent
permitted by applicable law and the provisions of the Merger Agreement, and,
subject to complying with applicable rules and regulations of the Securities
and Exchange Commission (the "Commission"), purchase all Shares validly
tendered or (iii) subject to the terms of the Merger Agreement, extend the
Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain the Shares which will have been tendered during the
period or periods for which the Offer is open or extended.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time,
(i) to extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares, by giving
oral or written notice of such extension to the Depositary and (ii) to amend
the Offer in any respect (including, without limitation, by decreasing or
increasing the consideration offered in the Offer (the "Offer Price") to
holders of Shares and/or by decreasing the number of Shares being sought in
the Offer), by giving oral or written notice of such amendment to the
Depositary. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer as described in
Section 14. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rule 14d-4(c) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without
limiting the obligation of the Purchaser under such Rule or the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
currently intends to make announcements by issuing a press release to the Dow
Jones News Service. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER
PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
3
<PAGE>
The Merger Agreement provides that the Purchaser will not amend or waive the
Minimum Condition and will not decrease the Offer Price or change the form of
consideration payable in the Offer or decrease the number of Shares sought, or
impose 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 is twenty (20) business days after the
date the Offer is commenced, all conditions to the Offer shall not have been
satisfied or waived, the Purchaser may, from time to time, in its sole
discretion, extend the Expiration Date. In addition, under the terms of the
Merger Agreement, if, immediately prior to the initial Expiration Date, the
Shares tendered and not withdrawn equal less than 90% of the outstanding
shares of Common Stock, the Purchaser may extend the Offer for a period not to
exceed five (5) business days, notwithstanding that all conditions to the
Offer may have been satisfied.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or in the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the Commission has stated that in its view an offer must
remain open for a minimum period of time following a material change in the
terms of the Offer and that waiver of a material condition, such as the
Minimum Condition, is a material change in the terms of the Offer. The release
states than an offer should remain open for a minimum of five (5) business
days from the date a material change is first published, sent or given to
security holders and that, if material changes are made with respect to
information not materially less significant than the offer price and the
number of shares being sought, a minimum of ten (10) business days may be
required to allow adequate dissemination and investor response. The
requirement to extend the Offer will not apply to the extent that the number
of business days remaining between the occurrence of the change and the then-
scheduled Expiration Date equals or exceeds the minimum extension period that
would be required because of such amendment. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed by the Purchaser to record holders of Shares and
will be furnished by the Purchaser to brokers, dealers, banks and similar
persons whose names, or the names of whose nominees, appear on the stockholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the Purchaser will
accept for payment and will pay, promptly after the Expiration Date, for all
Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with Section 4. All determinations concerning the
satisfaction of such terms and conditions will be within the Purchaser's
discretion, which determinations will be final and binding. See Sections 1 and
14. The Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of or payment for Shares in order to comply in
whole or in part with any applicable law, including, without limitation, the
HSR Act. Any such delays will be effected
4
<PAGE>
in compliance with Rule 14e-l(c) under the Exchange Act (relating to a
bidder's obligation to pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares (or a timely Book-Entry Confirmation (as defined below) with
respect thereto), (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined
below), and (iii) any other documents required by the Letter of Transmittal.
The per share consideration paid to any holder of Common Stock pursuant to the
Offer will be the highest per Share consideration paid to any other holder of
such shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE
PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (including such rights as are set forth in Sections 1 and 14)
(but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility (as defined below) pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained at the Book-
Entry Transfer Facility), as promptly as practicable after the expiration or
termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or in part,
to Parent or to any affiliate of Parent, the right to purchase Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer and will in no way prejudice
the rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. For Shares to be tendered validly pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation received by the Depositary), in each case, prior to
the Expiration Date or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depositary Trust Company or the Philadelphia Depositary Trust Company (either,
a "Book-Entry Transfer Facility") for purposes of the Offer within two
business days after the date of this Offer to Purchase. Any financial
institution that is a participant in
5
<PAGE>
the Book-Entry Transfer Facility's systems may make book-entry delivery of
Shares by causing the Book-Entry Transfer Facility to transfer such Shares
into the Depositary's account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer. However, although delivery of Shares
may be effected through book-entry transfer into the Depositary's account at
the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents must, in
any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-
ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder(s) has (have) not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution" and, collectively, "Eligible Institutions").
In all other cases, all signatures on Letters of Transmittal must be
guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter
of Transmittal. If the certificates for Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or certificates for Shares not tendered or not accepted for payment
are to be returned, to a person other than the registered holder of the
certificates surrendered, then the tendered certificates for such Shares must
be endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name or names of the registered holders or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(i)such tender is made by or through an Eligible Institution;
(ii)a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by the
Depositary, as provided below, prior to the Expiration Date; and
6
<PAGE>
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above, the
tendering stockholder will irrevocably appoint designees of the Purchaser, and
each of them, as such stockholder's attorneys-in-fact and proxies in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such stockholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such stockholder (and, if
given, will not be deemed effective). The designees of the Purchaser will
thereby be empowered to exercise all voting and other rights with respect to
such Shares and other securities or rights, including, without limitation, in
respect of any annual, special or adjourned meeting of the Company's
stockholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting, consent and other
rights with respect to such Shares and other related securities or rights,
including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of, or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, subject to the provisions of the
Merger Agreement, to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Shares of any particular stockholder,
whether or not similar defects or irregularities are waived in the case of
other stockholders. No tender of Shares will be deemed to have been validly
made until all defects or irregularities relating thereto have been cured or
waived. None of the Purchaser,
7
<PAGE>
Parent, the Depositary, the Information Agent, the Company or any other person
will be under any duty to give notification of any defects or irregularities
in tenders or incur any liability for failure to give any such notification.
Subject to the terms of the Merger Agreement, the Purchaser's interpretation
of the terms and conditions of the Offer (including the Letter of Transmittal
and the instructions thereto) will be final and binding.
Backup Federal Income Tax Withholding. Under the "backup withholding"
provisions of U.S. federal income tax law, unless a tendering registered
holder, or his assignee (in either case, the "Payee"), satisfies the
conditions described in Instruction 9 of the Letter of Transmittal or is
otherwise exempt, the cash payable as a result of the Offer may be subject to
backup withholding tax at a rate 31% of the gross proceeds. To prevent backup
withholding, each Payee should complete and sign the Substitute Form W-9
provided in the Letter of Transmittal. See Instruction 9 of the Letter of
Transmittal.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date and, unless theretofore accepted for payment and paid for
by the Purchaser pursuant to the Offer, may also be withdrawn at any time
after April 3, 1998.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer as set forth in Section 3, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 at any time prior to
the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any
such notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or the Merger will be a taxable transaction for U.S.
federal income tax purposes and may also be a taxable transaction under state,
local or foreign tax laws. In general, a stockholder who tenders Shares in the
Offer or receives cash in exchange for Shares in the Merger will recognize
gain or loss for U.S. federal income tax purposes equal to the difference, if
any, between the amount of cash received and the stockholder's tax basis in
the Shares sold. Gain or loss will be determined separately for each block of
Shares (i.e., Shares acquired at the same time and price) exchanged pursuant
to the Offer or the Merger. Such gain or loss will generally be capital gain
or loss if the Shares disposed of were held as capital assets by the
stockholder. Under the Taxpayer Relief Act of 1997, net capital gain (i.e.,
generally, capital gain in excess of capital loss) recognized by an individual
from the sale of a capital asset that has been held for more than 18 months
will be subject to tax at a rate not to exceed 20%, capital gain from the sale
of an asset held for more than 12 months but not more than 18 months will be
subject to tax at a rate not to exceed 28%, and capital gain recognized from
the sale of a capital asset that has been held for 12 months or less will be
subject to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate taxpayer will be subject to tax at the ordinary
income tax rates applicable to corporations.
8
<PAGE>
A holder of Shares who perfects such stockholder's appraisal rights, if any,
under the DGCL will probably recognize gain or loss at the Effective Time in
an amount equal to the difference between the "amount realized" and such
stockholder's adjusted tax basis of such Shares. For this purpose, although
there is no authority to this effect directly on point, the amount realized
should generally equal the trading value per share of the Shares at the
Effective Time. Ordinary interest income and/or capital gain (or capital loss,
assuming that the Shares were held as capital assets) should be recognized by
such stockholder at the time of actual receipt of payment, to the extent that
such payment exceeds (or is less than) the amount realized at the Effective
Time.
The following discussion is for general information purposes only and is
based on the U.S. federal income tax law now in effect, which is subject to
change, possibly retroactively. This summary does not discuss all aspects of
U.S. federal income taxation which may be important to particular stockholders
in light of their individual investment circumstances or to certain types of
stockholders subject to special tax rules (e.g., financial institutions,
broker-dealers, insurance companies, tax-exempt organizations and foreign
taxpayers), nor does it address specific state, local, or foreign tax
consequences. This summary assumes that stockholders have held their Shares as
"capital assets" (generally property held for investment) under the Internal
Revenue Code of 1986, as amended. Each holder of Shares is urged to consult
its tax advisor regarding the specific U.S. federal, state, local and foreign
income and other tax consequences of the Offer and Merger.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The shares of Common
Stock are traded on the NYSE under the symbol "SN". The following table sets
forth, for each of the calendar quarters indicated, the high and low reported
sales price per share of Common Stock on the NYSE and quarterly cash dividends
based on published financial sources.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------
HIGH LOW CASH DIVIDENDS
---- --- --------------
<S> <C> <C> <C>
1996
First Quarter............................. $ 7 5/8 $4 7/8 $ --
Second Quarter............................ 6 1/2 4 --
Third Quarter............................. 5 1/8 3 1/2 --
Fourth Quarter............................ 4 2 3/4 --
1997
First Quarter............................. $ 3 3/4 2 1/4 $ --
Second Quarter............................ 4 5/8 1 7/8 --
Third Quarter............................. 6 3 1/4 --
Fourth Quarter............................ 6 3/8 4 3/8 --
1998
First Quarter (through February 2, 1998).. $10 11/16 $5 5/8 $ --
</TABLE>
On January 27, 1998, the last full trading day prior to the public
announcement, of the execution of the Merger Agreement, the last reported
sales price of the Shares on the NYSE was $6 7/8 per share of Common Stock. On
February 2, 1998, the last full trading day prior to the commencement of the
Offer, the last reported sales price of the Shares on the NYSE was $10 1/2 per
share of Common Stock. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
The payment of Common Stock dividends is restricted under the terms of an
agreement with the Company's lenders. Under such restrictions, the payment of
Common Stock dividends is not currently permitted. In addition, under the
terms of the Merger Agreement, the Company is not permitted to declare or pay
dividends on the Common Stock.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of holder of Shares and the number of Shares
that might otherwise trade publicly and, depending upon the number of Shares
so purchased, could adversely affect the liquidity and market value of the
remaining Shares held by the public.
9
<PAGE>
Stock Listing. The Common Stock is listed on the NYSE. Depending upon the
aggregate market value and the per share price of any Shares not purchased
pursuant to the Offer, the Common Stock may no longer meet the requirements
for continued listing on the NYSE. According to the NYSE's published
guidelines, the NYSE would consider delisting the Common Stock if, among other
things, the number of record holders of at least 100 or more shares of Common
Stock should fall below 1,200, the number of publicly held shares of Common
Stock (exclusive of holdings of officers and directors of the Company and
their immediate families and other concentrated holdings of 10% or more)
should fall below 600,000, or the aggregate market value of the publicly held
Shares should fall below $5,000,000. According to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1997, there were approximately
2,245 holders of record of shares of Common Stock at September 22, 1997. The
Company has represented that, as of January 28, 1998, 4,117,629 Shares were
issued and outstanding.
If the NYSE were to delist the Common Stock, the market therefor could be
adversely affected. It is possible that such Shares would continue to trade on
other securities exchanges, or in the over-the-counter market, and that price
quotations would be reported by such exchanges or through the National
Association of Securities Dealers Automated Quotation System or other sources.
The extent of the public market for the Common Stock and the availability of
such quotations would, however, depend upon the number of stockholders and/or
the aggregate market value of such Shares remaining at such time, the interest
in maintaining a market in such Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act and
other factors. If, as a result of the purchase of the Shares pursuant to the
Offer or otherwise, the Shares no longer meet the requirements of the NYSE for
continued inclusion in the NYSE and the Shares are no longer included in the
NYSE, the market for, and value of, the Shares could be adversely affected.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act, assuming there are no other securities of the Company subject to
registration, would substantially reduce the information required to be
furnished by the Company to its stockholders and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement pursuant to Section 14(a) in connection with stockholders' meetings
and the related requirement of furnishing an annual report to stockholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
or Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated. If registration of the
Common Stock under the Exchange Act were terminated, such Shares would no
longer be "margin securities" or be eligible for continued listing on any
stock exchange. The Purchaser may seek to cause the Company to apply for
termination of registration of the Shares under the Exchange Act as soon after
the completion of the Offer as the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from the NYSE and the registration of the Shares
under the Exchange Act will be terminated following the consummation of the
Merger.
Margin Regulations. The Shares presently are "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of securities. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers.
10
<PAGE>
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or
based upon publicly available documents and records on file with the
Commission and other public sources. Neither Parent nor the Purchaser assumes
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent or the Purchaser.
The Company manufactures and sells plastic closures, lids, melamine and urea
resins and compounds which it supplies to other manufacturers and has used in
producing its own consumer products and foodservice products. The Company is a
Delaware corporation with its principal executive offices at 2700 Westmoreland
Avenue, Dallas, Texas 75233. The telephone number of the Company at such
offices is (214) 373-7864.
On December 22, 1997, the Company and two of its subsidiaries, Sun Coast
Holdings, Inc. ("Holdings") and Plastics Manufacturing Company ("PMC" and
together with the Company and Holdings, the "Sellers"), and Borden Chemical,
Inc. ("Borden") executed a Purchase and Sale Agreement pursuant to which the
Sellers sold to Borden all of the assets and properties used or held in
connection with PMC's ownership and operation of a chemical division engaged
in the manufacture and marketing of melamine and urea resins and compounds
(the "Borden Disposition"). The purchase price for the acquired assets was
equal to the approximate net book value of the assets, subject to certain
adjustments. The Company anticipates that the Borden Disposition will be
consummated on or about February 5, 1998.
Approximately 10.64% of the Shares are held by the Major Stockholder, who
has agreed, among other things, to tender, or cause to be tendered, all Shares
owned by him pursuant to the Offer. The Major Stockholder also has granted to
Parent a proxy to vote the Shares owned by him in favor of the Merger. See
Section 11.
Selected Financial Information. The table set forth below includes summary
historical financial information of the Company. The summary financial
information has been derived from the audited consolidated financial
statements as reported in the Company's Annual Report on Form 10-K for the
year ended June 30, 1997 and the unaudited consolidated financial statements
of the Company as reported in the Company's Quarterly Report on Form 10-Q for
the first fiscal quarter ended September 30, 1997. In the opinion of the
Company's Management, the unaudited financial statements for the quarters
ended September 30, 1997 and 1996 reflect all adjustments necessary for a fair
statement of the results of operations for the interim periods. However, the
results of operations for any interim period are not necessarily indicative of
results for the full year. The summary historical financial information should
be read in conjunction with, and is qualified in its entirety by reference to,
the consolidated financial statements and related notes included in the
reports referred to above.
Such reports and other documents may be inspected and copies may be obtained
from the Commission in the manner set forth in "Available Information".
11
<PAGE>
SUN COAST INDUSTRIES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
--------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996 1995
------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA FOR
CONTINUING OPERATIONS*:
Net Sales............. $16,637 $15,996 $66,716 $58,879 $61,455
Operating Income
(loss)............... 792 1,289 5,843 1,963 1,774
Net Earnings.......... 248 535 2,340 196 261
Net Earnings per
share................ 0.06 0.14 0.58 0.05 0.06
BALANCE SHEET DATA (AT
END OF PERIOD):
Total Assets.......... 42,581 Not available 45,329 53,494 54,670
Total Liabilities..... 30,454 Not available 33,503 38,650 37,897
Stockholders' Equity.. 12,127 Not available 11,826 14,844 16,773
</TABLE>
- --------
* Includes both the Closures and Chemical Divisions of the Company.
Substantially all of the assets of the Company's Chemical Division are
expected to be sold in the Borden Disposition.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information
as of particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
website at http://www.sec.gov that contains reports, proxy statements and
other information. Such material should also be available for inspection at
the offices of the NYSE, located at 20 Broad Street, New York, New York 10005.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
Fremont Partners. Fremont Partners, and its affiliated partnerships, is a
private investment fund headquartered in San Francisco, California formed with
committed capital of approximately $605 million. The sole general partner of
Fremont Partners is FP Advisors, L.L.C., a Delaware limited liability company
("FP Advisors"). The sole managing member of FP Advisors is Fremont Group,
L.L.C., a Delaware limited liability company (including predecessor entities,
"The Fremont Group"). The sole manager of The Fremont Group is Fremont
Investors, Inc., a Nevada corporation ("Fremont Investors"). Fremont Partners,
FP Advisors, The Fremont Group and Fremont Investors are collectively referred
to herein as the "Fremont Entities." Fremont Partners is a party to the
Guarantee; it is not a party to any of the Merger Agreement, the Option
Agreement or the Stockholder Agreement. None of the other Fremont Entities is
a party to any of the Merger Agreement, the Option Agreement, the Stockholder
Agreement or the Guarantee. The offices of each of the Fremont Entities are
located at 50 Fremont Street, Suite 3700, San Francisco, California 94105-
1895.
12
<PAGE>
Parent. On August 26, 1997, Fremont Acquisition Company, L.L.C., a Delaware
limited liability company and an affiliate of the Fremont Entities ("Fremont
Acquisition") and Kerr Acquisition Corporation, a Delaware corporation and an
affiliate of the Fremont Entities ("KAC") completed their previously announced
cash tender offer (the "Kerr Tender Offer") for all of the shares of common
stock, par value $.50 per share and $1.70 Class B cumulative convertible
preferred stock, Series D, par value $.50 per share of Parent pursuant to an
Agreement and Plan of Merger, dated as of July 1, 1997, among Parent, Fremont
Acquisition and KAC. Subject to the terms of the merger agreement on December
31, 1997, shares of common stock and preferred stock not tendered in the Kerr
Tender Offer were converted into the right to receive $5.40 net per share of
common stock and $12.50 net per share of preferred stock pursuant to a second
step merger between KAC and Parent. As a result of the consummation of the
merger of Parent and KAC, Parent continued as the surviving corporation and
became the subsidiary of Fremont Acquisition.
Parent is a major producer of plastic packaging products. Parent is a
Delaware corporation with its principal executive offices at 500 New Holland
Avenue, Lancaster, Pennsylvania 17602. The telephone number of Parent at such
offices is (717) 299-6511.
13
<PAGE>
The table set forth below includes summary historical financial information
of Parent. The summary information has been derived from the audited
consolidated financial statements as reported in Parent's Annual Report on
Form 10-K for the year ended December 31, 1996 and the unaudited consolidated
financial statements of Parent as reported in Parent's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997. In the opinion of Parent's
Management, the unaudited financial statements for the periods ended September
30, 1997, August 26, 1997 and September 30, 1996 reflect all adjustments
necessary for a fair statement of the results of operations for the interim
periods. However, the results of operations for any interim period are not
necessarily indicative of results for the full year. The summary historical
financial information should be read in conjunction with, and is qualified in
its entirety by reference to, the consolidated financial statements and
related notes included in the reports referred to above.
Such reports and other documents may be inspected and copies may be obtained
from the Commission in the manner set forth in Section 8.
KERR GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ONE MONTH EIGHT MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, AUGUST 26, SEPTEMBER 30 FISCAL YEAR ENDED DECEMBER 31,
1997(1) 1997(1) 1996 1996 1995 1994
------------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Sales............. $9,819 $76,488 $ 80,488 $ 107,369 $ 109,187 $ 106,792
Operating Income
(loss)............... 469 (5,295) (15,473) (17,425) (6,024) 3,534
Net Earnings (loss)... 286 (9,714) (11,853) (22,293) (5,307) 3,404
Net Earnings (loss)
per share 0.06(2) (2.58) (3.17) (5.88) (1.60) 0.70
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 30,
SEPTEMBER 30, ----------------
1997(1) 1996 1995
------------- ------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total Assets.................................. $148,257 $85,526 $119,497
Total Liabilities............................. 97,971 82,224 95,590
Stockholders' Equity.......................... 50,286 3,302 23,907
</TABLE>
- --------
(1) As of August 27, 1997, the purchase method of accounting was used to
record the acquisition of Parent. Such accounting generally results in
increased amortization and depreciation reported in future periods.
Accordingly, the financial statements of the predecessor and Parent are
not comparable in all material respects since the financial statements
report financial position and results of operations of Parent before and
after application of the purchase method of accounting. The one month
period ended September 30, 1997 represents the period from August 27,
1997 through September 30, 1997. The eight month period ended August 26,
1997 represents the period from January 1, 1997 through August 26, 1997
(2) The earnings per share presentation represents shares outstanding of KAC.
The Purchaser. The Purchaser is a Delaware entity, newly formed by Parent
for the purpose of effecting the Offer and the Merger. Parent owns all of the
outstanding capital stock of the Purchaser. It is not anticipated that, prior
to the consummation of the Offer, the Purchaser will have any significant
assets or liabilities or will engage in any activities other than those
incident to the Offer and the Merger and the financing thereof. The offices of
the Purchaser are located at c/o Parent at 500 New Holland Avenue, Lancaster,
Pennsylvania 17602.
For certain information concerning the executive officers and directors, of
the Purchaser, and Parent, see Schedule I. Each of the Fremont Entities
disclaims that it is a "bidder" for purposes of this Offer.
14
<PAGE>
Pursuant to the Option Agreement and the Stockholder Agreement, Parent may
be deemed to beneficially own approximately 938,000 shares of Common Stock
constituting approximately 20.3% of the shares of Common Stock (after giving
effect to the Option pursuant to the Option Agreement). Each of the Purchaser,
Parent and the Fremont Entities disclaims beneficial ownership of such shares.
Except as set forth in this Offer to Purchase, none of the Purchaser, Parent
or any of the Fremont Entities, nor, to the best knowledge of the Purchaser or
Parent, or any of the persons listed on Schedule I, nor any associate or
majority-owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares, and none of the Purchaser, Parent or any of the
Fremont Entities nor, to the best of knowledge of the Purchaser or Parent any
of the persons or entities referred to above, nor any of the respective
executive officers, directors or subsidiaries of any of the foregoing, has
effected any transaction in Shares during the past 60 days.
Except as set forth in this Offer to Purchase, none of the Purchaser, Parent
or any of the Fremont Entities, nor, to the best knowledge of the Purchaser or
Parent of the persons listed on Schedule I, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, none of the Purchaser, Parent or any of the Fremont Entities, or any
of their respective affiliates, nor, to the best knowledge of the Purchaser or
Parent, none of the persons listed on Schedule I, has had, since July 1, 1994,
any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission. Except as set forth in this Offer to Purchase,
since July 1, 1994, there have been no contacts, negotiations or transactions
between the Purchaser, Parent or any of the Fremont Entities, any of their
respective affiliates or, to the best knowledge of the Purchaser or Parent,
any of the persons listed on Schedule I, and the Company or its affiliates
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer
of a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase Shares
pursuant to the Offer, to refinance certain existing indebtedness of the
Company and to pay fees and expenses of Parent and Purchaser related to the
Offer and the Merger is estimated to be approximately $56 million. The Offer
is not conditioned upon any financing arrangements. Fremont Partners has
guaranteed the obligations of Parent and the Purchaser under the Merger
Agreement. See Section 11. Fremont Partners, together with its affiliated
partnerships, is a private investment fund headquartered in San Francisco,
California formed with committed capital of approximately $605 million.
The Purchaser plans to obtain all funds needed for the Offer and the Merger
through a bank credit facility, as described below, and from capital
contributions and/or unsecured loans to Parent from Fremont Partners and its
affiliated partnerships on terms to be determined.
Senior Credit Facility. Immediately prior to the consummation of the Offer,
it is expected that the Purchaser will form a wholly owned subsidiary
("Acquisition Co."), all of the issued and outstanding shares of which will be
pledged to the bank providing the bank credit facility described below, for
the purpose of purchasing the Shares tendered to the Purchaser in the Offer.
In connection with the Offering, Acquisition Co. is expected to enter into a
Senior Credit Facility with a bank to be determined, under which such bank
will provide an aggregate amount of up to $30 million. The Senior Credit
Facility is expected to consist of (i) a $5 million revolving credit facility,
which will include a $1 million sublimit for the issuance of standby and
commercial letters of credit, and (ii) a $25 million term loan facility
comprised of (a) a $15 million Tranche A Term Loan and (b) a $10 million
Tranche B Term Loan. As part of the Merger, the Senior Credit Facility will be
assumed by the Company. The obligations of the Company under the Senior Credit
Facility will be guaranteed by Parent, the Purchaser and all existing and
hereafter acquired domestic subsidiaries of Acquisition Co. (excluding the
Company and its subsidiaries prior to completion of the Merger and including
the Company and its subsidiaries after completion of the Merger). Drawdowns
under the Senior Credit Facility will be subject to certain conditions,
covenants, representations and warranties.
15
<PAGE>
The Secured Credit Facility will be secured by a first priority protected
security interest in (i) all of the capital stock of Acquisition Co. and each
of its direct and indirect domestic subsidiaries (including the Company to the
maximum extent permitted by Regulation U, but excluding subsidiaries of the
Company prior to completion of the Merger and including subsidiaries of the
Company after completion of the Merger), (ii) 65% of the capital stock of each
direct and indirect foreign subsidiary of Acquisition Co. (excluding foreign
subsidiaries of the Company prior to completion of the Merger and including
foreign subsidiaries of the Company after completion of the Merger), which
capital stock may not be subject to any other lien or encumbrance, and (iii)
all other presently unencumbered and future domestic assets and properties of
Acquisition Co. and its subsidiaries (excluding the Company and its domestic
subsidiaries prior to completion of the Merger and including the Company and
its domestic subsidiaries after completion of the Merger).
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
The following description was prepared by Parent and the Company.
Information about the Company was provided by the Company and neither the
Purchaser nor Parent takes any responsibility for the accuracy or completeness
of any information regarding meetings or discussions in which Parent or its
representatives did not participate.
BACKGROUND OF THE OFFER.
In April 1997, Mr. Gregory P. Spivy contacted the Company on behalf of
Fremont Partners, to inquire as to the Company's interest in discussing a
potential transaction. Mr. Spivy first contacted Mr. Steven P. Smiley, a
former Chairman of the Board of the Company. Mr. Smiley referred Mr. Spivy to
Mr. James D. Ireland III, who had replaced Mr. Smiley as Chairman of the Board
of the Company in 1996. Mr. Spivy and Mr. Ireland discussed Fremont Partners'
interest in finding an acquisition in the plastic closures industry and the
status of the Company's restructuring efforts. Mr. Spivy and Mr. Ireland
mutually determined not to pursue further discussions but agreed that when the
Company made further progress in its restructuring efforts and after Fremont
Partners had consummated an initial acquisition in the plastic closures
industry, further discussions might be appropriate.
On July 1, 1997 Fremont Partners signed a definitive acquisition agreement
to acquire Parent. Fremont Partners' cash tender offer for Parent was
consummated on August 26, 1997, at which time Fremont Partners and its
affiliates assumed control of Parent.
In late August and September 1997, Mr. Ireland contacted Fremont Partners to
inquire whether Fremont Partners would be interested in discussing a strategic
business combination of Parent and the Company. At a meeting held at Fremont
Partners's offices in San Francisco on September 23, 1997, Mr. Ireland, Mr.
Eddie Lesok and Mr. Arno Pirkau of the Company apprised Mr. Spivy and Mr.
Gilbert H. Lamphere of Fremont Partners of the Company's business and recent
historical performance. The group also discussed the status of the Company's
restructuring efforts with regard to its non-closures businesses. During that
discussion, Mr. Spivy and Mr. Lamphere expressed an interest in a possible
acquisition of the closures business, but indicated that Fremont Partners had
no long-term interest in the other lines of business, although some discussion
was held concerning a possible acquisition of the Company with a subsequent
divestiture of the non-closures business. In response to questions from the
Company as to whether Fremont Partners might be interested in an equity merger
of the Company and Parent, Mr. Spivy and Mr. Lamphere also stated that it
would be difficult to offer the equity of Parent as consideration to the
stockholders of the Company, but that Parent might be able to offer an
attractive cash proposal, backed by Fremont Partners. Mr. Spivy and Mr.
Lamphere indicated that Parent was reviewing a number of other potential
acquisitions and that Parent's management team was busy with a number of
operational restructuring initiatives at Parent, but that Fremont Partners and
Parent would consider engaging in further discussions regarding a strategic
combination with the Company.
On November 7, 1997, Mr. Lamphere called Mr. Ireland and told him that he
was submitting a letter dated November 5, 1997 indicating Fremont Partners'
serious interest in structuring an acquisition of the Company by Parent and
outlining a proposed time schedule, but only if this met with the approval of
the Company's Board of Directors.
16
<PAGE>
Fremont Partners proposed to commence immediately its due diligence review and
outlined a process to reach agreement on a transaction within sixty to ninety
days.
Over the next few days, representatives of the Company responded to the
indication of interest with a series of telephone calls to representatives of
Fremont Partners. On November 14, 1997, Messrs. Ireland, Lesok and Ms. Cynthia
Morris telephoned Messrs. Lamphere and Spivy. During this telephone
conversation, representatives of the Company indicated that the Company might
be interested in pursuing discussions with Fremont Partners regarding an all
cash acquisition, but only at the highest end of a range of value that they
believed could be achieved for the Company's stockholders in a sale of the
Company, that was defined by the Company as at least a double-digit number per
share. The Company representatives outlined the reasons in support of such a
premium valuation and the Company's requirements to proceed with further
discussions. Messrs. Spivy and Lamphere then requested a meeting with the
Company's management team and two weeks to complete an initial due diligence
review. They further stated that following such review, Fremont Partners would
confirm that it was willing to proceed with further discussions of an
acquisition at the valuation levels discussed by the Company. Upon the
Company's determination to proceed on this basis, the parties negotiated and
signed a confidentiality agreement.
Representatives of Fremont Partners and Parent commenced their due diligence
review which included document review and meetings with Messrs. Lesok, Pirkau
and Ireland and Ms. Morris, and meetings with the Company's investment
advisors and tax and accounting advisors.
On December 8, 1997, Fremont Partners communicated to the Company that based
on the results of its due diligence review since November 14, 1997 it was
prepared to propose an increased acquisition price of $9.50 per share. Fremont
Partners outlined its understanding of the non-closures division assets and
liabilities and predicated its valuation on further due diligence of the
closures division confirming the financial performance and prospects that had
been generally discussed with the Company management. Representatives of
Fremont Partners also indicated that they needed to complete additional tax,
legal, accounting and environmental due diligence.
On December 9, 1997, a representative of Stephens Inc., financial advisor to
the Company, responded to Fremont Partners on behalf of the Company. The
Stephens' representative identified several items where the Company believed
Fremont Partners was not reflecting appropriate valuations. He also indicated
that the Company was not prepared to proceed on the basis of anything less
than a double-digit valuation per share.
Fremont Partners responded on December 11, 1997, that it was prepared to
accept a number of the Company's positions with respect to valuation and would
proceed on the basis that a final proposal would need to equal or exceed $10
per share. However, Fremont Partners requested a commitment from the Board of
Directors of the Company that if subsequent due diligence review uncovered
significant issues with negative consequences to valuation that the Board of
Directors would consider proceeding with a sale at the appropriate lower
valuation. Fremont Partners also requested an exclusive negotiation
arrangement with the Company and asked the Company to consider a break-up fee
of $5 million.
The Company responded on December 12, 1997, that it was willing to allow
Fremont Partners and Parent to proceed with further due diligence review with
the understanding that Fremont Partners was targeting a valuation in excess of
$10 per share. Company representatives stated that, in accordance with Fremont
Partners request, while it would not actively "shop" Fremont Partners'
proposal it would continue to respond to unsolicited interest from third
parties. In accordance with such understanding, the Company instructed
Stephens Inc. to cease its efforts to solicit other third parties. In
addition, the Company agreed to inform Fremont Partners should it receive a
proposal from another third party. The Company indicated that it wanted to
reserve the right to decide whether or not to proceed until Fremont Partners
and Parent had completed their due diligence review and submitted their final
proposal. Representatives of the Company also indicated that a $5 million
termination fee was not acceptable, but that if a final proposal were
submitted that achieved the valuation levels requested by the Company, the
Company would consider a lower amount in the definitive agreement.
Fremont Partners and Parent agreed to proceed on the Company's terms and a
schedule was outlined to try to reach agreement on a transaction by the middle
of January 1998. An initial meeting and due diligence session at the Sarasota,
Florida facility was arranged for Tuesday, December 16, 1997. Due diligence
continued over the next several weeks.
17
<PAGE>
On January 2, a representative of the Company's financial advisor, Stephens
Inc. pursuant to the Company's instruction, notified Fremont Partners that a
third party had submitted a credible and competitive transaction proposal. The
Company indicated that Fremont Partners needed to complete its due diligence
review and submit its final proposal so that the Board of Directors could
consider this proposal in the context of other options it had available to it
and decide how to proceed.
In response, Fremont Partners accelerated its due diligence review. On
January 13, 1998, Fremont Partners submitted its final proposal for the
Company at $10.75 per share, with neither a due diligence nor a financing
contingency provision to be included in a definitive agreement, subject only
to negotiation of acceptable definitive agreements. Fremont Partners indicated
that it was only willing to proceed with final negotiations at that premium
valuation level under an executed exclusivity agreement and pre-determined
termination arrangements.
Following several conversations and negotiation of the termination
arrangements and the exclusivity agreement language, the Company and Fremont
Partners and Parent agreed to sign an exclusivity agreement on January 15,
1998 and proceed with negotiation of a definitive agreements. Over the course
of the following week and a half the parties' legal counsel negotiated the
definitive agreements.
At a meeting of the Board of Directors of the Company held on January 27,
1998, the Board of Directors unanimously approved the Merger Agreement and the
transactions contemplated thereby, including 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 recommend
that stockholders of the Company accept the Offer and tender their Shares. On
January 27, 1998, Stephens, Inc. delivered to the Company's Board of Directors
its opinion to the effect that the consideration to be received by the holders
of Common Stock pursuant to the Offer and under the terms of the Merger
Agreement is fair to such holders, from a financial point of view. The written
opinion of Stephens Inc. is set forth in full as an exhibit to the Company's
Schedule 14D-9, which is being mailed to stockholders of the Company.
Stockholders of the Company are urged to read that opinion in its entirety.
Following the approval of the Board of Directors, on January 28, 1998,
Parent, the Purchaser and the Company executed and delivered the Merger
Agreement.
On February 3, 1998, the Purchaser and Parent commenced the Offer.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer is being made pursuant to the Merger Agreement and is intended to
increase the likelihood that the Merger will be effected. The purpose of the
Merger is to acquire all outstanding Shares not purchased pursuant to the
Offer. The transaction is structured as a merger in order to ensure the
acquisition by Parent of all the outstanding Shares.
If the Merger is consummated, Parent's common equity interest in the Company
would increase to 100% and Parent would be entitled to all benefits resulting
from that interest. These benefits include complete management with regard to
the future conduct of the Company's business and any increase in its value.
Similarly, Parent will also bear the risk of any losses incurred in the
operation of the Company and any decrease in the value of the Company.
Stockholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company and to participate in its earnings and
any future growth. If the Merger is consummated, the stockholders will no
longer have an equity interest in the Company and instead will have only the
right to receive cash consideration pursuant to the Merger Agreement or to
exercise statutory appraisal rights under Delaware law. See Section 12.
Similarly, the stockholders of the Company will not bear the risk of any
decrease in the value of the Company after selling their Shares in the Offer
or the subsequent Merger.
18
<PAGE>
The primary benefits of the Offer and the Merger to the stockholders of the
Company are that such stockholders are being afforded an opportunity to sell
all of their Shares for cash at a price which represents a premium of
approximately 56% over the closing market price of the Common Stock on the
last full trading day prior to the initial public announcement that the
Company, Parent and the Purchaser executed the Merger Agreement, and a more
substantial premium over recent historical trading prices.
MERGER AGREEMENT
As of January 28, 1998, Parent, the Purchaser and the Company entered into
the Merger Agreement, pursuant to which the Purchaser agreed to make the
Offer. The following description of the Merger Agreement does not purport to
be complete and is qualified by reference to the text of the Merger Agreement,
a copy of which is filed as Exhibit (c)(1) hereto and incorporated herein by
reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Merger Agreement. The Merger Agreement may be examined and
copies may be obtained at the places and in the manner set forth in Section 8
of this Offer to Purchase.
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 described in Annex I to the Merger Agreement. The
Merger Agreement provides that the Purchaser may not amend or waive the
Minimum Condition, decrease the Offer 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.
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 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 shall 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 shall 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 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
19
<PAGE>
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)) shall 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 canceled 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 the 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 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 contemporaneous 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 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 and Pru Supply Capital
20
<PAGE>
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 into 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 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 set forth in Section 14
not to be satisfied.
Company Stockholder Meeting. If required by applicable law, the Company has
agreed to: (i) hold a special meeting of its 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 its
stockholders following acceptance for payment of Shares pursuant to the Offer
and (B) obtain the necessary approvals of the Merger Agreement by its
stockholders. Parent and the Purchaser have agreed to vote all Shares owned by
them
21
<PAGE>
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 the stockholders of the Company in
accordance with the DGCL.
Stock Options, Stock Appreciation Rights and Stock Purchase Plan. The Merger
Agreement requires, the Company to take all actions necessary to provide that
at 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 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. The Company will use all reasonable efforts to obtain all necessary
consents or releases from holders of the Options or SARs to effect the
foregoing. 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) shall take all actions necessary to ensure that
following the Effective Time, 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 also 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 exercised or deemed
exercised and (ii) in lieu of the issuance of certificates, each option or
right holder under the Stock Purchase Plan 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.
22
<PAGE>
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 (as defined in the Merger Agreement) 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 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 that 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 (6) 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, Fremont,
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
23
<PAGE>
investigation, including without limitation, liabilities arising out of the
Merger. The Merger Agreement also provides that Fremont or 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 Fremont 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 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 (10) days of the receipt of written notice thereof or (B) to
allow the Company to enter into an agreement regarding a Superior Proposal in
accordance with Section 5.3(b) of the Merger Agreement, provided that it 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 (40) business days after the date or receipt of such
Acquisition Proposal, (D) an Acquisition Proposal that is
24
<PAGE>
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 (40) business days of its receipt or, 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) of 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) of the preceding paragraph) 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 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 expenses
as described in the preceding paragraph, the Merger 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.
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 (c)(2) to the Schedule 14D-1. The Option
Agreement may be examined and copies may be obtained at the places and in the
manner set forth in Section 8 of this Offer to Purchase.
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 have entered into an 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
25
<PAGE>
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.
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.
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 (c)(3) to the Schedule
14D-1. The Stockholder Agreement may be examined and copies may be obtained at
the places and in the manner set forth in Section 8 of this Offer to Purchase.
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. (the
"Stockholder"), who has voting power and dispositive power with respect to
approximately 10.64% of the 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
26
<PAGE>
$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 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.
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 (c)(4) to the Schedule 14D-1. The Guarantee may be
examined and copies may be obtained at the places and in the manner set forth
in Section 8 of this Offer to Purchase.
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 and the Company executed the Guarantee pursuant to which,
among other things, Fremont Partners has agreed to unconditionally and
irrevocably guarantee, for the benefit of the Company the performance of all
obligations of Parent and the Purchaser pursuant to the Merger Agreement.
Fremont Partners 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.
CONFIDENTIALITY AGREEMENTS
The following is a summary of certain provisions of the Confidentiality
Agreement, dated November 14, 1997, by and between Fremont Partners and the
Company (the "Company Confidentiality Agreement") and the Confidentiality
Agreement, dated January 8, 1998, by and among Fremont Partners, 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 text of the Confidentiality
Agreements, copies of which are filed as Exhibits (c)(5) and (c)(6) hereto and
incorporated herein by reference.
27
<PAGE>
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.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company. Parent is conducting a detailed review of the Company
and its assets, corporate structure, dividend policy, capitalization,
operations, properties, policies, management and personnel and will consider,
subject to the terms of the Merger Agreement, what, if any, changes would be
desirable in light of the circumstances which exist upon completion of the
Offer. Such changes could include changes in the Company's business, corporate
structure, certificate of incorporation, by-laws, capitalization, Board of
Directors, management or dividend policy, although, except as disclosed in
this Offer to Purchase, Parent has no current plans with respect to any of
such matters. The Merger Agreement provides that, promptly after the purchase
by the Purchaser of any Shares 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) 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 Section 1.3 of the Merger Agreement 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
of the Company and (iii) each committee (or similar body) of each such board.
The Merger Agreement provides that the directors of the Purchaser and the
officers of the Company at the Effective Time of the Merger will, from and
after the Effective Time, be the initial directors and officers, respectively,
of the Surviving Corporation.
Except as disclosed in this Offer to Purchase, neither Parent nor the
Purchaser has any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
OTHER MATTERS
STOCKHOLDER APPROVAL. Under the DGCL, the approval of the Board of Directors
of the Company and the affirmative vote of the holders of a majority of the
outstanding Shares are required to adopt and approve the Merger Agreement and
the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement by
the Company and the consummation by the Company of the transactions
contemplated by the Merger Agreement and the Option Agreement have been duly
authorized by all necessary corporate action on the part of the Company,
subject to the approval of the Merger by the Company's stockholders in
accordance with the DGCL. In addition, the Company has represented that the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is the only vote of the holders of any class or series of the
Company's capital stock which is necessary to approve the Merger Agreement and
the transactions contemplated thereby, including the Merger. Therefore, unless
the Merger is consummated pursuant to the short-form merger provisions under
the DGCL described below (in which case no further corporate action by the
stockholders of the Company will be required to complete the Merger), the only
28
<PAGE>
remaining required corporate action of the Company will be the approval of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the shares of Common Stock. The Merger
Agreement provides that Parent will vote, or cause to be voted, all of the
Shares then owned by Parent, the Purchaser or any of Parent's other
subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of the Merger Agreement. In the event that Parent, the Purchaser and
Parent's other subsidiaries acquire in the aggregate at least a majority of
the shares of Common Stock, the vote of no other stockholder of the Company
will be required to approve the Merger and the Merger Agreement.
SHORT-FORM MERGER. Section 253 of the DGCL provides that, if a corporation
owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge such other
corporation into itself without any action or vote on the part of the board of
directors or the stockholders of such other corporation (a "short-form
merger"). In the event that Parent, the Purchaser and any other subsidiaries
of Parent acquire in the aggregate at least 90% of the outstanding shares of
Common Stock, pursuant to the Offer or otherwise, then, at the election of
Parent, a short-form merger could be effected without any approval of the
Company Board of Directors or the stockholders of the Company, subject to
compliance with the provisions of Section 253 of the DGCL. Even if Parent and
the Purchaser do not own 90% of the outstanding shares of Common Stock
following consummation of the Offer, Parent and the Purchaser could seek to
purchase additional shares in the open market or otherwise in order to reach
the 90% thresholds and employ a short-form merger. The per share consideration
paid for any Shares so acquired may be greater or less than that paid in the
Offer. Parent presently intends to effect a short-form merger if permitted to
do so under the DGCL.
DELAWARE BUSINESS COMBINATION STATUTE.
SECTION 203. Section 203 of the DGCL, in general, prohibits a Delaware
corporation such as the Company from engaging in a "Business Combination"
(defined as a variety of transactions, including mergers, as set forth below)
with an "Interested Stockholder" (defined generally as a person that is the
beneficial owner of 15% or more of a corporation's outstanding voting stock)
for a period of three years following the date that such person became an
Interested Stockholder unless (a) prior to the date such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder, (b) upon consummation of the
transaction that resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced,
excluding stock held by directors who are also officers of the corporation and
employee stock ownership plans that do not provide employees with the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer or (c) on or subsequent to the date
such person became an Interested Stockholder, the Business Combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders, and not by written consent, by the affirmative vote
of the holders of a least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
Under Section 203 of the DGCL, the restrictions described above do not apply
if, among other things (A) the corporation's original certificate of
incorporation contains a provision expressly electing not to be governed by
Section 203 of the DGCL; (B) the corporation, by action of its stockholders,
adopts an amendment to its certificate of incorporation or by-laws expressly
electing not to be governed by Section 203 of the DGCL, provided that, in
addition to any other vote required by law, such amendment of the certificate
of incorporation or by-laws must be approved by the affirmative vote of a
majority of the shares entitled to vote, which amendment would not be
effective until 12 months after the adoption of such amendment and would not
apply to any Business Combination between the corporation and any person who
became an Interested Stockholder of the corporation on or prior to the date of
such adoption; (C) the corporation does not have a class of voting stock that
is (1) listed on a national securities exchange, (2) authorized for quotation
on an inter-dealer quotation system of a registered national securities
association or (3) held of record by more than 2,000 stockholders, unless any
of the foregoing results from action taken, directly or indirectly, by an
Interested Stockholder or from a transaction in which a person became an
Interested Stockholder; or (D) a stockholder becomes an Interested
29
<PAGE>
Stockholder "inadvertently" and thereafter divests itself of a sufficient
number of shares so that such stockholder ceases to be an Interested
Stockholder. Under Section 203 of the DGCL, the restrictions described above
also do not apply to certain Business Combinations proposed by an Interested
Stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an Interested Stockholder during the previous three years or who became
an Interested Stockholder with the approval of a majority of the corporation's
directors.
Section 203 of the DGCL provides that, during such three-year period, the
corporation may not merge or consolidate with an Interested Stockholder or any
affiliate or associate thereof and also may not engage in certain other
transactions with an Interested Stockholder or any affiliate or associate
thereof, including, without limitation, (A) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets (except
proportionately as a stockholder of the corporation) having an aggregate
market value equal to 10% or more of the aggregate market value of all assets
of the corporation determined on a consolidated basis or the aggregate market
value of all the outstanding stock of a corporation; (B) any transaction that
results in the issuance or transfer by the corporation or by certain
subsidiaries thereof of any stock of the corporation or such subsidiaries to
the Interested Stockholder, except pursuant to a transaction which effects a
pro rata distribution to all stockholders of the corporation; (C) any
transaction involving the corporation or certain subsidiaries thereof which
has the effect of increasing the proportionate share of the stock of any class
or series, or securities convertible into the stock of any class or series, of
the corporation or any such subsidiary which is owned directly or indirectly
by the Interested Stockholder (except as a result of immaterial changes due to
fractional share adjustments); or (D) any receipt of the Interested
Stockholder of the benefit (except proportionately as a stockholder of such
corporation) of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
The Company has represented in the Merger Agreement that the provisions of
Section 203 of the DGCL are not applicable to any of the transactions
contemplated by the Merger Agreement or the Option Agreement, including the
Merger and the purchase of Shares in the Offer or pursuant to the exercise of
the option granted under the Option Agreement.
APPRAISAL RIGHTS. Holders of the Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of the
Shares at the effective time of the Merger will have certain rights pursuant
to the provisions of Section 262 of the DGCL. Dissenting stockholders of the
Company who comply with the applicable statutory procedures will be entitled
to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest thereon, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors
other than, or in addition to, the price per share of Common Stock, as the
case may be, to be paid in the Merger or the market value of the Shares. The
value so determined could be more or less than the price per Share to be paid
in the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO
THE APPLICABLE PROVISIONS OF THE DGCL.
The foregoing description of the DGCL, including the descriptions of
Sections 203 and 262, is not necessarily complete and is qualified in its
entirety by reference to the DGCL.
RULE 13E-3. The Merger would have to comply with any applicable Federal law
operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions; however, the Purchaser believes that
Rule 13e-3 will not be applicable to the Merger. If Rule 13e-3 were applicable
to the Merger, it would require, among other things, that certain financial
information concerning the Company, and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such a transaction, be filed with the Commission and disclosed
to minority stockholders prior to consummation of the transaction.
30
<PAGE>
13. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that 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
reserved for issuance on the date hereof pursuant to the exercise of the
Warrant or Options outstanding as of January 28, 1998; (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 of its capital stock.
14. 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-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 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 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 (as
defined in the Merger Agreement) 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
31
<PAGE>
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
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, (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 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 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 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,
32
<PAGE>
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 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 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.
15. CERTAIN LEGAL MATTERS.
Except as described in this Section 15, based on information provided by the
Company, none of the Company, Purchaser or Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
that might be adversely affected by the Purchaser's acquisition of Shares as
contemplated herein or of any approval or other action by a domestic or
foreign governmental, administrative or regulatory agency or authority that
would be required for the acquisition and ownership of the Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required, the Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase, the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of or other
substantial conditions complied with in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer, including conditions with respect to governmental
actions.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware, and the Company's principal executive offices are located in
Dallas, Texas. Because the Company's Board of Directors has approved the Offer
and the Merger, Section 203 of the DGCL, as described in Section 12 of this
Offer to Purchase, is inapplicable to the Offer and the Merger. A number of
other states have adopted laws and regulations applicable to attempts to
acquire securities of corporations which are incorporated, or have substantial
assets, stockholders, principal executive offices or principal places of
business or whose business operations otherwise have substantial economic
effects in such states. In Edgar v. Mite Corp., in 1982, the Supreme Court of
the United States (the "U.S. Supreme Court") invalidated on constitutional
grounds the Illinois Business Takeover statute, which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements
more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America,
the U.S. Supreme Court held that the State of Indiana may, as a matter of
corporate law and, in particular, with respect to those aspects of corporate
law concerning corporate governance, constitutionally disqualify a potential
acquirer from voting on the affairs of a target corporation without the prior
approval of the remaining stockholders. The state law before the U.S. Supreme
Court was by its terms applicable only to corporations that had a substantial
number of stockholders in the state and were incorporated there. The Company,
directly or through its Subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted takeover laws and
regulations. Neither Parent nor the Purchaser knows whether any or all of
these takeover laws and regulations will by their terms apply to the Offer,
and, except as set forth above with respect to Section 203 of the DGCL,
neither Parent nor the Purchaser has currently complied with any other state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly
33
<PAGE>
applicable to the Offer and nothing in this Offer to Purchase or any action
taken in connection with the Offer is intended as a waiver of such right. If
it is asserted that any state takeover statute is applicable to the Offer and
an appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Purchaser might be required to file certain
information with or to receive approvals from the relevant state authorities,
and the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer or may be delayed in consummating the Offer. In
such case, the Purchaser may not be obligated to accept for payment or pay for
any Shares tendered pursuant to the Offer. See Section 14.
Under the provisions of the HSR Act applicable to the Offer, the acquisition
of Shares under the Offer may be consummated only following the expiration or
early termination of the applicable waiting period under the HSR Act.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
Report From under the HSR Act by the Parent, which Parent expects to submit on
February 10, 1998. Accordingly, if the Notification and Report Form is filed
on February 10, 1998, the waiting period under the HSR Act would expire at
11:59 P.M., New York City time, on February 25, 1998, unless early termination
of the waiting period is granted by the FTC and the Department of Justice,
Antitrust Division (the "Antitrust Division") or the Parent receives a request
for additional information or documentary material prior thereto. If either
the FTC or the Antitrust Division issues a request for additional information
or documentary material from the Parent prior to the expiration of the 15-day
waiting period, the waiting period will be extended and will expire at 11:59
P.M., New York City time, on the tenth calendar day after the date of
substantial compliance by the Parent with such request unless terminated
earlier by the FTC and the Antitrust Division. If such a request is issued,
the purchase of and payment for Shares pursuant to the Offer will be deferred
until the additional waiting period expires or is terminated. Only one
extension of such waiting period pursuant to a request for additional
information or documentary material is authorized by the rules promulgated
under the HSR Act. Thereafter, the waiting period can be extended only by
court order. Although the Company is required to file certain information and
documentary material with the Antitrust Division and the FTC in connection
with the Offer, neither the Company's failure to make such filings nor a
request to the Company from the Antitrust Division or the FTC for additional
information or documentary material will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition
of the Company. At any time before or after the Offeror's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Offeror or the divestiture of
substantial assets of the Company or its Subsidiaries or the Parent or its
subsidiaries. Private parties and states Attorneys General may also bring
legal action under the antitrust laws under certain circumstances. There can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made, or, if such a challenge is made, of the result thereof. See Section 14
for certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
If the Antitrust Division, the FTC, a state or a private party raises
antitrust concerns in connection with a proposed transaction, the Offeror may
engage in negotiations with the relevant governmental agency or party
concerning possible means of addressing these issues and may delay
consummation of the Offer or the Merger while such discussions are ongoing.
Both the Parent and the Company have agreed to use their respective best
efforts to resolve any antitrust issues.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by
margin stock. Such secured credit may not be extended or maintained in an
amount that exceeds the maximum loan value of all the direct and indirect
collateral securing the credit, including margin stock and other collateral.
All financing for the Offer will be structured so as to be in full compliance
with the Margin Regulations.
34
<PAGE>
16. FEES AND EXPENSES.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and American Stock Transfer & Trust Company to act as the
Depositary in connection with the Offer. Such firms each will receive
reasonable and customary compensation for their services. The Purchaser has
also agreed to reimburse each such firm for certain reasonable out-of-pocket
expenses and to indemnify each such firm against certain liabilities in
connection with their services, including certain liabilities under federal
securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent) for making solicitations or
recommendations in connection with the Offer. Brokers, dealers, banks and
trust companies will be reimbursed by the Purchaser for customary mailing and
handling expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Company. The
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, the Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, the Purchaser cannot comply with
any such law, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Parent or the Purchaser not contained herein or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
Parent and the Purchaser have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the offices of the Commission and the NYSE in the manner set forth in Section
9 of this Offer to Purchase (except that they will not be available at the
regional offices of the Commission).
35
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
SAFFRON ACQUISITION CORP. AND
KERR GROUP, INC.
1. SAFFRON ACQUISITION CORP. Set forth below is the name, business address
and present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of each director
and executive officer of Saffron Acquisition Corp. Each such person is a
citizen of the United States of America, and, unless otherwise indicated, the
business address of each such person is c/o Fremont Partners, L.P., Fifty
Fremont Street, Suite 3700, San Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Lawrence C. Caldwell Mr. Caldwell is Director, Vice President and Treasurer of
Purchaser; Director and Chief Financial Officer Treasurer
and Secretary of Kerr Group, Inc. since 1997; Vice
President of New Caanan Investments, Inc. since 1989.
Gilbert H. Lamphere Mr. Lamphere is a Chairman of the Board of Directors of
Kerr Group, Inc. and Director and President of the
Purchaser; Managing Director and Director of The Fremont
Group, L.L.C., Fremont Investors and Sequoia Ventures,
Inc. 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,
Inc. (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).
Gregory P. Spivy Mr. Spivy is a Director, Vice President and Secretary of
Purchaser and a Director of Kerr Group, Inc.; Managing
Director of The Fremont Group since January 1, 1998;
Principal of The Fremont Group from 1995 to 1997;
Director and Associate of The Bridgeford Group from 1992
through 1995.
</TABLE>
2. KERR GROUP, INC. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of the sole
managing member and executive officers of Kerr Group, Inc. Each such person is
a citizen of the United States of America and, unless otherwise indicated, the
business address of each such person is c/o Fremont Partners, L.P., Fifty
Fremont Street, Suite 3700, San Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Lawrence C. Caldwell See Part 1 of this Schedule I.
Richard D. Hofmann Director and Chief Executive Officer and President of
Kerr Group, Inc. since 1997; Chairman of New Canaan
Investments, Inc. since 1989.
Gilbert H. Lamphere See Part 1 of this Schedule I.
Gregory P. Spivy See Part 1 of this Schedule I.
</TABLE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
1
<PAGE>
3. FREMONT ACQUISITION COMPANY, LLC. Set forth below is the name, business
address and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of
each of the sole managing member and executive officers of Fremont. Each such
person is a citizen of the United States of America and, unless otherwise
indicated, the business address of each such person is c/o The Fremont Group,
50 Fremont Street, Suite 3700, San Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Fremont Partners, L.P. Not Applicable.
G.H. Lamphere See Part 1 of this Schedule I.
Gregory P. Spivy See Part 1 of this Schedule I.
R.S. Kopf Vice President and Secretary of Fremont Acquisition
Company; Managing Director--Operations, General Counsel
and Secretary of Fremont Group and Fremont Investors
since 1986; General Counsel, Secretary and Director of
Bechtel International Constructors, Inc.; Vice
President, General Counsel and Secretary of HLQ Corp.;
Vice President, General Counsel, Secretary and Director
of Offshore Bechtel Exploration Corporation; Managing
Principal, General Counsel and Secretary of Sequoia.
</TABLE>
4. FREMONT PARTNERS, L.P. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of the sole general
partner of Fremont Partners. Each such person is a citizen of the United
States of America and, unless otherwise indicated, the business address of
each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San
Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT
PRINCIPAL
OCCUPATION OR
EMPLOYMENT;
MATERIAL
POSITIONS
HELD DURING THE
NAME AND ADDRESS PAST FIVE YEARS
---------------- ---------------
<C> <S>
FP Advisors, L.L.C. Not Applicable.
</TABLE>
5. FP ADVISORS, L.L.C. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of the sole
managing member of FP Advisors. Each such person is a citizen of the United
States of America and, unless otherwise indicated, the business address of
each such person is c/o The Fremont Group, 50 Fremont Street, Suite 3700, San
Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT
PRINCIPAL
OCCUPATION OR
EMPLOYMENT;
MATERIAL
POSITIONS
HELD DURING THE
NAME AND ADDRESS PAST FIVE YEARS
---------------- ---------------
<C> <S>
Fremont Group, L.L.C. Not Applicable.
</TABLE>
6. FREMONT GROUP, L.L.C. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of each of the sole
manager, the executive officers and directors of The Fremont Group. Unless
otherwise indicated, each person has held the position listed below with The
Fremont Group and Fremont Investors during the last five years. Each such
person is a citizen of the United States of America and, unless otherwise
indicated, the business address of each such person is c/o The Fremont Group,
50 Fremont Street, Suite 3700, San Francisco, California 94105.
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
Fremont Investors, Inc. Not Applicable.
A.M. Dachs President, Chief Executive Officer and Director of The
Fremont Group, Fremont Investors and Sequoia;
President and Director of Bechtel Constructors, Inc.;
Director of Offshore Bechtel Exploration Corporation
and BPT Properties, L.P. and related entities;
Director of Bechtel Enterprises, Inc., Esco
Corporation and The Brookings Institution; Chairman of
the Board of Trustees of Wesleyan University.
S.D. Bechtel, Jr. Chairman Emeritus and Director of The Fremont Group,
Fremont Investors and Sequoia; Chairman Emeritus of
Bechtel Group, Inc.; Director of Remington Arms since
1993; Director of IBM form 1976-1993.
Richard E. Cavanagh Director of The Fremont Group, Fremont Investors and
Sequoia; President and Chief Executive Officer of The
Conference Board, Inc., 845 Third Avenue, New York,
New York 10022, since 1995; Executive Dean of Harvard
University (Kennedy School of Government) from 1988 to
1995; Director of Black Rock Mutual Fund and related
funds; Director of Olin Corporation and LCI
International.
H.J. Haynes Director of The Fremont Group, Fremont Investors and
Sequoia; Director and Senior Counselor of Bechtel
Group, Inc.; Director of Hewlett-Packard Co., Paccar,
Inc., Boeing Co., Citicorp, Saudi Arabian Oil Co. and
Bechtel Enterprises, Inc.
C.W. Hull Director of The Fremont Group, Fremont Investors and
Sequoia; Chairman of Energy Asset Management, L.L.C.,
250 Montgomery Street, Suite 1600, San Francisco,
California 94104; Director of Bechtel Group, Inc. and
Bechtel Enterprises, Inc.
R. Jaunich II Managing Director and Director of The Fremont Group,
Fremont Investors and 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.
G.H. Lamphere See Part 1 of this Schedule I.
D.L. Redo Managing Director and Director of The Fremont Group,
Fremont Investors and Sequoia; President and Chief
Executive Officer of Fremont Investment Advisor, Inc.
G.P. Schultz Director of The Fremont Group, Fremont Investors and
Sequoia; Director and Senior Counselor of Bechtel
Group, Inc.; Professor of International Economics at
Standford University and Distinguished Fellow at the
Hoover Institution; Director of Gulfstream Aerospace
Corp., Charles Schwab, Gilead Sciences, Airtouch
Communications, Ziff-Davis Publishing Company
(resigned 1996) and Bechtel Enterprises, Inc.
J.W. Weiser Director of The Fremont Group, Fremont Investors and
Sequoia; Director and Senior Counselor of Bechtel
Group, Inc.
J.D. Mahaffey Managing Director of The Fremont Group, Fremont
Investors and Sequoia; President of Fremont Energy,
L.P., 5956 Sherry Lance, Suite 1310, Dallas, Texas,
since 1995; prior to such time, Chief Executive
Officer and Director of United Meredian Corp.;
President and Director of Offshore Bechtel Exploration
Corporation; Director of Xpronet, Inc. since 1997.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND ADDRESS HELD DURING THE PAST FIVE YEARS
---------------- -------------------------------
<C> <S>
J.S. Higgins Managing Principal and Chief Financial Officer of The Fremont
Group, Fremont Investors and Sequoia; Director of Fremont
Investment Advisors, Inc.; Vice President and Director of HLQ
Corp.; Chief Financial Officer of Bechtel International
Constructors and Offshore Bechtel Exploration Corp.
R.S. Kopf See Part 3 of this Schedule I.
D.W. Aronson Treasurer of The Fremont Group, Fremont Investors and
Sequoia; Chief Financial Officer and Vice President of
Operations of Redwood Microsystems, Inc. from 1990 through
1994; Treasurer of Bechtel International Constructors, Inc.,
CRMF Corp., and Offshore Bechtel Exploration Corporation.
</TABLE>
7. FREMONT INVESTORS, INC. Set forth below is the name, business address and
present principal occupation or employment, and material occupations,
positions, offices or employments for the past five years, of each director
and executive officer of Fremont Investors. Each such person is a citizen of
the United States of America and, unless otherwise indicated, the business
address of each such person is c/o The Fremont Group, 50 Fremont Street, Suite
3700, San Francisco, California 94105.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR
EMPLOYMENT; MATERIAL POSITIONS
HELD DURING THE PAST FIVE
NAME AND ADDRESS YEARS
---------------- ------------------------------
<C> <S>
A.M. Dachs See Part 6 of this Schedule I.
S.D. Bechtel, Jr. See Part 6 of this Schedule I.
Richard E. Cavanagh See Part 6 of this Schedule I.
H.J. Haynes See Part 6 of this Schedule I.
C.W. Hull See Part 6 of this Schedule I.
R. Jaunich II See Part 6 of this Schedule I.
G.H. Lamphere See Part 1 of this Schedule I.
D.L. Redo See Part 6 of this Schedule I.
G.P. Shultz See Part 6 of this Schedule I.
J.W. Weiser See Part 6 of this Schedule I.
J.D. Mahaffey See Part 6 of this Schedule I.
J.S. Higgins See Part 6 of this Schedule I.
R.S. Kopf See Part 3 of this Schedule I.
D.W. Aronson See Part 6 of this Schedule I.
</TABLE>
4
<PAGE>
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY MAIL, HAND OR OVERNIGHT BY FACSIMILE TRANSMISSION
DELIVERY: (FOR ELIGIBLE INSTRUCTORS ONLY)
(718) 234-5001
40 Wall Street 46th Floor
New York, New York 10005 CONFIRM RECEIPT OF FACSIMILE BY
TELEPHONE:
(718) 921-8200
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification on Substitute Form W-9
may be directed to the Information Agent at the locations and telephone
numbers set forth below. Stockholders may also contact their broker, dealer,
commercial bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED FEBRUARY 3, 1998
BY
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, MARCH 3, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
American Stock Transfer & Trust Company
By Mail, Hand or Overnight By Facsimile Transmission:
Delivery: (For Eligible Institutions Only)
40 Wall Street (718) 234-5001
46th Floor
New York, New York 10005 Confirm Receipt of Facsimile
by Telephone:
(718) 921-8200
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFORE AND COMPLETE THE
SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF COMMON STOCK SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY
AS NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARES TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE CERTIFICATE SHARES EVIDENCED BY NUMBER OF SHARES
NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
TOTAL SHARES:
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by Book-Entry
Transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made
by book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company
("PDTC," and together with DTC each a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase (as defined below). Delivery
of documents to a Book-Entry Transfer Facility does not constitute delivery to
the Depositary. Stockholders who deliver Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders" and other stockholders are
referred to herein as "Certificate Stockholders."
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
See Instruction 2.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT ONE OF THE BOOK-ENTRY
TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: ________________________________________________
Check Box of Applicable Book-Entry Transfer Facility
(check one) [_] DTC [_] PDTC
Account Number: _______________________________________________________________
Transaction Code Number: ______________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ______________________________________________
Window Ticket No. (if any): ___________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Name of Institution which Guaranteed Delivery: ________________________________
If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
[_] DTC
[_] PDTC
Account Number (if delivered by Book-Entry Transfer): _________________________
Transaction Code Number: ______________________________________________________
[_]CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF
TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY
WITH REPLACEMENT INSTRUCTIONS.
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Saffron Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of Kerr Group, Inc.,
a Delaware corporation ("Parent"), the above-described shares of common stock
(the "Shares"), par value $.01 per share, including the associated rights to
purchase shares of common stock issued pursuant to the Rights Agreement
between the Company and the American Stock Transfer & Trust Company, dated
June 6, 1995, as amended (the "Rights" and, together with the common stock,
the "Common Stock"), pursuant to the Offeror's offer to purchase all
outstanding 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"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with
the Offer to Purchase and any amendments or supplements hereto or thereto,
constitute the "Offer"). The undersigned understands that the Offeror reserves
the right to transfer or assign, in whole or in part from time to time, to any
affiliate of Parent the right to purchase Shares tendered pursuant to the
Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to, or upon the order of the Offeror, all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof (collectively,
"Distributions")) and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates for such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, upon receipt by the Depositary, as the undersigned's agent, of
the purchase price (adjusted, if appropriate, as provided in the Offer to
Purchase), (b) present such Shares and all Distributions for cancellation and
transfer on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
and all Distributions and that, when the same are accepted for payment by the
Offeror, the Offeror will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of the Offeror any such Distributions issued
to the undersigned, in respect of the tendered Shares, accompanied by
documentation of transfer, and pending such remittance or appropriate
assurance thereof, the Offeror shall be entitled to all rights and privileges
as owner of any such Distributions and, subject to the terms of the Merger
Agreement, may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Offeror, in its sole
discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Gilbert H. Lamphere or Gregory
P. Spivy and each of them, and any other designees of the Offeror, the
attorneys and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's stockholders or otherwise act (including pursuant to written
consent) in such manner as each such attorney and proxy or his or her
substitute shall in his or her sole discretion deem proper, to execute any
written consent concerning any matter as each such attorney and proxy or his
or her substitute shall in his or her sole discretion deem proper with respect
to, and to otherwise act with respect to, all the Shares tendered hereby which
have
<PAGE>
been accepted for payment by the Offeror prior to the time any such vote or
action is taken (and any and all Distributions issued or issuable in respect
thereof) and with respect to which the undersigned is entitled to vote. This
appointment is effective when, and only to the extent that, the Offeror
accepts for payment such Shares as provided in the Offer to Purchase. This
power of attorney and proxy is coupled with an interest in the tendered
Shares, is irrevocable and is granted in consideration of the acceptance for
payment of such Shares in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior powers of attorney and proxies
given by the undersigned at any time with respect to such Shares and no
subsequent powers of attorney or proxies may be given by the undersigned (and,
if given, will not be deemed effective). The Offeror reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Offeror's acceptance for payment of such Shares, the Offeror must be
able to exercise full voting and other rights with respect to such Shares,
including voting at any stockholders meeting then scheduled.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase to
Offeror and in the instructions hereto will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the tendered Shares. The Offeror's
acceptance for payment of Shares pursuant to the Offer will constitute a
binding agreement between the undersigned and the Offeror upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates for Shares not tendered or accepted for payment, in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased, and/or any certificates for Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of
any Shares purchased, and/or return any certificates for Shares not tendered
or accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-
entry delivery of Shares, please credit the account maintained at a Book-Entry
Transfer Facility indicated above with any Shares not accepted for payment.
The undersigned recognizes that the Offeror has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check To be completed ONLY if the check
for the purchase price of Shares or for the purchase of Shares
Share Certificates evidencing purchased or Share Certificates
Shares not tendered or not evidencing Shares not tendered or
purchased are to be issued in the not purchased are to be mailed to
name of someone other than the someone other than the undersigned,
undersigned. or to the undersigned at an address
other than that shown under
"Description of Shares Tendered."
Issue check and/or certificate(s)
to:
Mail check and/or certificate(s) to:
Name: ______________________________
(PLEASE PRINT) Name: ______________________________
Address: ___________________________ (PLEASE PRINT)
------------------------------------ Address: ___________________________
(INCLUDE ZIP CODE)
------------------------------------
------------------------------------ (INCLUDE ZIP CODE)
Taxpayer Identification or Social
Security Number ------------------------------------
(See Substitute Form W-9 on reverse
side)
<PAGE>
IMPORTANT
STOCKHOLDER(S): SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
----------------------------------------
----------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: ________________________________________________________________ , 199
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
Name(s): _____________________________________________________________________
------------------------------------------------------------------------------
PLEASE PRINT
Capacity: ____________________________________________________________________
PLEASE PROVIDE FULL TITLE
Address: _____________________________________________________________________
INCLUDE ZIP CODE
Telephone No.: _______________________________________________________________
INCLUDE AREA CODE
Taxpayer Identification or
Social Security Number: ______________________________________________________
SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL
INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations
and brokerage houses) that is a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each an "Eligible
Institution," and collectively, "Eligible Institutions"). No signature
guarantee is required on this Letter of Transmittal (i) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares tendered herewith, unless such holder(s) has (have) completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" in this Letter of Transmittal or (ii) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. For Shares to be
validly tendered pursuant to the Offer, either (i) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees, or in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents, must be received by the Depositary at one of the Depositary's
addresses set forth herein prior to the Expiration Date (as defined in the
Offer to Purchase) and either certificates for tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered pursuant to the procedures for book-entry transfer (and a Book Entry
Confirmation received by the Depositary), in each case, prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
Stockholders whose Share Certificates are not immediately available or who
cannot complete the procedures for book-entry transfer on a timely basis or
for whom time will not permit all required documents to reach the Depositary
prior to the Expiration Date, may tender their Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedures, (i) such tender must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Offeror (or
facsimile thereof), must be received by the Depositary prior to the Expiration
Date and (iii) the certificates for (or a Book-Entry Confirmation with respect
to) such Shares, together with this properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents are received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading
day" is any day on which the New York Stock Exchange, Inc. is open for
business. The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER
FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARE
CERTIFICATES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
6
<PAGE>
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers and/or the
number of Shares evidenced by such Share Certificates and the number of Shares
tendered should be listed on a separate schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered, fill in
the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, new Share Certificates for the remainder of
the Shares that were evidenced by the Share Certificate(s) delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the
expiration or termination of the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificate(s) evidencing such shares without any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
such Shares.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Offeror of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and tendered hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or Share Certificates
evidencing Shares not tendered or not accepted for payment are to be issued in
the name of a person other than the registered holder(s), in which case the
Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) or such Share Certificate(s).
Signatures on such Share Certificate(s) or stock powers must be guaranteed by
an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the shares tendered hereby, the certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificates. Signatures on such
Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Offeror will pay, or cause to be paid, any stock transfer taxes with respect
to the transfer and sale of Shares to it or its assignee pursuant to the
Offer. If, however, payment of the purchase price of any Shares is to be made
to, or if Share Certificates evidencing Shares not tendered or accepted for
payment are to be issued in the name of, a person other than the registered
holder(s), or if tendered Share Certificates are registered in the name of a
person other than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s) or
such person or otherwise payable on the account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased,
unless evidence satisfactory to the Offeror of the payment of such taxes, or
exemption therefrom, is submitted. Except as provided in this Instruction 6,
it will not be necessary for transfer tax stamps to be affixed to the Share
Certificates evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or Share Certificates not accepted for payment are to be
returned to a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such Share Certificates are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown in the box entitled "Description of Shares Tendered" on
the
7
<PAGE>
reverse hereof, the appropriate boxes on the reverse side of this Letter of
Transmittal should be completed. Any stockholder tendering Shares by book-
entry transfer will have any Shares not accepted for payment returned by
crediting the account maintained by such stockholder at a Book-Entry Transfer
Facility from which such transfer was made.
8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Offeror reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders.
9. SUBSTITUTE FORM W-9. The tendering stockholder (or other payee) is
required, unless an exemption applies, to provide the Depositary with a
correct Taxpayer Identification Number ("TIN"), generally the stockholder's
social security or U.S. federal employer identification number, and with
certain other information, on Substitute Form W-9, which is provided under
"Important Tax Information" below, and to certify under penalties of perjury,
that such number is correct and that the stockholder (or other payee) is not
subject to backup withholding. If a tendering stockholder is subject to backup
withholding, he or she must cross out item (2) of the Certification Box on
Substitute Form W-9 before signing such Form. Failure to furnish the correct
TIN on the Substitute Form W-9 may subject the tendering stockholder (or other
payee) to a $50 penalty imposed by the Internal Revenue Service and payments
of cash to the tendering stockholder (or other payee) pursuant to the Offer
may be subject to backup withholding of 31%. If the tendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number. If
"Applied For" is written in Part I and the Depositary is not provided with a
TIN by the time of payment, the Depositary will withhold 31% of all such
payments for surrendered Shares thereafter until a TIN is provided to the
Depositary.
10. LOST OR DESTROYED CERTIFICATES. If any Share Certificate(s) has (have)
been lost or destroyed, the stockholder should check the appropriate box on
the reverse side of the Letter of Transmittal. The Company's stock transfer
agent will then instruct such stockholder as to the procedure to be followed
in order to replace the Share Certificate(s). The stockholder will have to
post a surety bond of approximately 2% of the current market value of the
stock. This Letter of Transmittal and related documents cannot be processed
until procedures for replacing lost or destroyed Share Certificates have been
followed.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the locations and telephone numbers set
forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF),
TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE CASE OF A BOOK-
ENTRY TRANSFER, AN AGENT'S MESSAGE, AND SHARE CERTIFICATES, OR A BOOK-ENTRY
CONFIRMATION, FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY
THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION
DATE.
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a stockholder surrendering Shares must,
unless an exemption applies, provide the Depositary (as payor) with his
correct TIN on Substitute Form W-9 included in this Letter of Transmittal. If
the stockholder is an individual, his TIN is such stockholder's social
security number. If the correct TIN is not provided, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service and payments
of cash to the tendering stockholder (or other payee) pursuant to the Offer
may be subject to backup withholding of 31% of all payments of the purchase
price.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. In
order for an exempt foreign stockholder to avoid backup withholding, such
person should complete, sign and submit a Form W-8, Certificate of Foreign
Status, signed under penalties of perjury, attesting to his
8
<PAGE>
exempt status. A Form W-8 can be obtained from the Depositary. Exempt
stockholders, other than foreign stockholders, should furnish their TIN, write
"Exempt" on the face of the Substitute Form W-9 and sign, date and return the
Substitute Form W-9 to the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to payee. Backup withholding is not an additional tax.
Rather, the U.S. federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If backup
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his correct TIN (or the TIN of any other
payee) by completing the Substitute Form W-9 included in this Letter of
Transmittal certifying (1) that the TIN provided on the Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN), and that (2) the
stockholder is not subject to backup withholding because (i) the stockholder
has not been notified by the Internal Revenue Service that the stockholder is
subject to backup withholding as a result of a failure to report all interest
and dividends or (ii) the Internal Revenue Service has notified the
stockholder that the stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record holder
of the Shares tendered hereby. If the Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number, which
appears in a separate box below the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase
price until a TIN is provided to the Depositary.
9
<PAGE>
PAYER'S NAME: [BANK BOSTON, N.A.]
- -------------------------------------------------------------------------------
PART I--Taxpayer
SUBSTITUTE Identification Number--For ________________________
all accounts, enter your Social Security Number
TIN in the box at right.
FORM W-9 (For most individuals, this OR _____________________
DEPARTMENT OF THE is your social security Employer Identification
TREASURY INTERNAL number. If you do not have Number
REVENUE SERVICE a TIN, see Obtaining a
Number in the enclosed
PAYER'S REQUEST Guidelines.) Certify by
FOR TAXPAYER signing and dating below. (If awaiting TIN write
IDENTIFICATION Note: If the account is in "Applied For")
NUMBER (TIN) more than one name, see the
chart in the enclosed
Guidelines to determine
which number to give the
payer.
---------------------------------------------------------
PART II--For Payees Exempt from backup Withholding,
see the enclosed Guidelines and complete as instructed
therein.
- --------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are not longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
SIGNATURE _________________________________________________________ DATE , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER THE PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION
NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR
(B) I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I
UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN 60
DAYS, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD
UNTIL I PROVIDE A NUMBER.
SIGNATURE: ________________________________________ DATE: ____________________
10
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Information Agent at the locations and telephone numbers set
forth below:
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC APPEARS HERE]
156 Fifth Avenue
New York, NY 10010
Banks and Brokers call collect (212) 929-5500
All Others Call Toll Free: 1 (800) 322-2885
<PAGE>
EXHIBIT (a)(3)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
AT
$10.75 NET PER SHARE
BY
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, MARCH 3, 1998, UNLESS THE OFFER IS EXTENDED.
February 3, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Saffron Acquisition Corp., a Delaware corporation
(the "Offeror") and a wholly owned subsidiary of Kerr Group, Inc., a Delaware
corporation ("Parent"), to act as Information Agent in connection with the
Offeror's offer to purchase all outstanding shares (the "Shares") of common
stock, par value $.01 per share, including the associated rights issued
pursuant to the Rights Agreement between Sun Coast Industries, Inc., a
Delaware corporation (the "Company") and American Stock Transfer & Trust
Company, dated June 6, 1995, as amended (the "Rights" and, together with the
common stock, the "Common Stock"), of the Company at a price of $10.75 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offeror's Offer to Purchase, dated February
3, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") enclosed herewith. The Offer is being made in connection with the
Agreement and Plan of Merger, dated as of January 28, 1998, by and among
Parent, the Offeror and the Company. Please furnish copies of the enclosed
materials to those of your clients for whose accounts you hold Shares
registered in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee we are enclosing
copies of the following documents:
1.Offer to Purchase;
2.Letter of Transmittal to tender Shares for your use and for the
information of your clients;
3.Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed on a timely basis.
4.A letter to stockholders of the Company from Eddie M. Lesok, President
and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5.A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
6.Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7.Return envelope addressed to the Depositary.
<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, MARCH 3, 1998, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase), (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery, and (iii) any
other documents required by the Letter of Transmittal.
If holders of Shares wish to tender Shares, but cannot deliver such holders'
certificates or other required documents, or cannot comply with the procedure
for book-entry transfer, prior to the expiration of the Offer, a tender may be
effected by following the guaranteed delivery procedure described in Section 3
of the Offer to Purchase.
Neither the Offeror or the Parent will pay any fees or commissions to any
broker, dealer or other person (other than the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. However, upon request, the
Offeror will reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
The Offeror will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
MacKenzie Partners, Inc., the Information Agent, at the addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
MacKenzie Partners, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE
OFFEROR, THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
AT
$10.75 NET PER SHARE
BY
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
----------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, MARCH 3, 1998, UNLESS THE
OFFER IS EXTENDED.
----------------------------------------------------------------
To Our Clients: February 3, 1998
Enclosed for your consideration are an Offer to Purchase, dated February 3,
1998 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to the offer by Saffron Acquisition Corp., a Delaware corporation
(the "Offeror") and a wholly owned subsidiary of Kerr Group, Inc., a Delaware
corporation ("Parent"), to purchase all outstanding shares (the "Shares") of
common stock, par value $.01 per share, including the associated rights to
purchase shares of common stock pursuant to the Rights Agreement between Sun
Coast Industries, Inc., a Delaware corporation (the "Company") and American
Stock Transfer & Trust Company, dated June 6, 1995, as amended ( the "Rights"
and, together with the common stock, the "Common Stock"), of the Company at a
price of $10.75 per Share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer. The Offer is
being made in connection with the Agreement and Plan of Merger, dated as of
January 28, 1998, by and among Parent, the Offeror and the Company (the
"Merger Agreement"). Also enclosed is the Letter to Stockholders of the
Company from Eddie M. Lesok, President and Chief Executive Officer of the
Company, together with a Solicitation/Recommendation Statement on Schedule
14D-9.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE>
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us (or our nominee) for
your account, upon the terms and subject to the condition set forth in the
Offer.
Your attention is invited to the following:
1. The tender price is $10.75 per Common Stock net to the seller in cash,
without interest.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement and the transactions contemplated thereby, has determined
that each of the Merger Agreement and the transactions contemplated thereby
are fair to, and in the best interests of, the Company and the holders of
the Common Stock and recommends that the Company's holders tender their
Shares in the Offer.
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, March 3, 1998, unless the Offer is extended.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in the Letter of Transmittal,
stock transfer taxes with respect to the purchase of Shares by the Offeror
pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified in your
instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto, and is being made to
all holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL
OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
BY
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated February 3, 1998, and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") relating to the offer by Saffron Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Kerr Group, Inc., a Delaware
corporation, to purchase all outstanding shares of common stock, par value
$.01 per share, including the associated rights to purchase shares of common
stock pursuant to the Rights Agreement between Sun Coast Industries, Inc., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, dated June 6, 1995, as amended, of the Company.
<PAGE>
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: ________, 1998 SIGN HERE
---------------------------------------
---------------------------------------
Signature(s) of Holder(s)
Name(s) of Holder(s)
- ----------------------------------- ---------------------------------------
Number of Shares to be Tendered:
---------------------------------------
Please Type or Print
______ shares of Common Stock*
- ----------------------------------- ---------------------------------------
Address
---------------------------------------
Zip Code
---------------------------------------
Area Code and Telephone Number
---------------------------------------
Taxpayer Identification or Social
Security Number
- --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
TO
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares (the "Shares") of common stock, par value $.01 per share, including the
associated rights to purchase shares of common stock pursuant to the Rights
Agreement between Sun Coast Industries, Inc. (the "Company") and American
Stock Transfer & Trust Company, dated June 6, 1995, as amended (the "Rights"
and, together with the common stock, the "Common Stock"), of the Company are
not immediately available or time will not permit all required documents to
reach American Stock Transfer & Trust Company as Depositary (the
"Depositary"), prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase (as defined below)) or the procedure for delivery by book-
entry transfer cannot be completed on a timely basis. This Notice of
Guaranteed Delivery may be delivered by hand or transmitted by telegram,
facsimile transmission or mail to the Depositary. See Section 3 of the Offer
to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Mail, Hand or By Facsimile Confirm Receipt of
Overnight Delivery: Transmission: Facsimile by Telephone:
(For Eligible (718) 921-8200
40 Wall Street Institutions Only)
46th Floor (718) 234-5001
New York, New York 10005
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, AND TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Saffron Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Kerr Group, Inc., a Delaware
corporation, 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 Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), receipt of each of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedure described in Section 3 of the Offer to Purchase.
PLEASE CHECK RELEVANT BOX BELOW
Series and Certificate Nos. of Shares (if available):
Common Stock, par value $.01 Name(s) of Record Holder(s)
_____________________________________
Certificate Nos. ____________________
Number of Shares Tendered:_______ [_] _____________________________________
PLEASE TYPE OR PRINT
_____________________________________
Address(es): ________________________
_____________________________________
ZIP CODE
Area Code and Tel. No.: _____________
Signature(s): _______________________
Dated: ______________________________
Check one box if Shares
will be delivered by
book-entry transfer:
[_] The Depositary Trust Company
[_] Philadelphia Depositary Trust Company
Account No.: __________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR THE SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as defined in the Offer to
Purchase), hereby guarantees delivery to the Depositary, at one of its
addresses set forth above, certificates ("Share Certificates") evidencing the
Shares tendered hereby, in proper form for transfer, or confirmation of book-
entry transfer of such Shares into the Depositary's account at The Depositary
Trust Company or The Philadelphia Depositary Trust Company, in each case with
delivery of a Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, or an Agent's Message (as defined in the Offer to Purchase)
in the case of a book-entry delivery, and any other required documents, all
within three days on which the New York Stock Exchange Inc., is open for
business after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Share Certificates to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
_____________________________________ _____________________________________
NAME OF FIRM
AUTHORIZED SIGNATURE
_____________________________________ TITLE: ______________________________
ADDRESS
NAME: _______________________________
_____________________________________ PLEASE TYPE OR PRINT
ZIP CODE
DATED: , 199
_____________________________________
AREA CODE AND TELEPHONE NO.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens, e.g., 000-
00-0000. Employer identification numbers have nine digits separated by only
one hyphen, e.g., 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the account
or, if combined funds, the first
individual on the account(1)
3. Husband and wife (joint account) The actual owner of the account
or, if joint funds, either
person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor(1)
6. Account in the name of a guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor, or incompetent person
7. a. A revocable savings trust account The grantor-trustee(1)
(in which grantor is also trustee)
b. Any "trust" account that is not a The actual owner(1)
legal or valid trust under State law
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------------------------------------------
<S> <C>
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or pension trust The legal entity (do not furnish
the identifying number of the
personal representative or
trustee unless the legal entity
itself is not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name of The partnership
the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification
Number (for businesses and all other entities), or Form W-7 for International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part I, sign and date the Form and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and will continue until you furnish your taxpayer
identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES
Payees specifically exempted from backup withholding on ALL payments include
the following:*
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), an individual
retirement plan or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if (i) this interest is $600 or more,
(ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification
number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
- --------
* Unless otherwise noted herein, all references below to section numbers or
to regulations are references to the Internal Revenue Code and the
regulations promulgated thereunder.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--If you falsify
certifications or affirmations, you are subject to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
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 (a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated February 3, 1998 ("Offer to Purchase") and the
related Letter of Transmittal and is being made to all holders of Shares. The
Offer is not being made to (nor will tenders be accepted from or on behalf of)
holders of Shares in any jurisdiction in which the making of the Offer or the
acceptance thereof would not be in compliance with the laws of such jurisdiction
or any administrative or judicial action pursuant thereto. In any jurisdiction
where securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Saffron Acquisition Corp. by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
SUN COAST INDUSTRIES, INC.
AT
$10.75 NET PER SHARE
BY
SAFFRON ACQUISITION CORP.
A CORPORATION FORMED BY
KERR GROUP, INC.
Saffron Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Kerr Group, Inc., a Delaware corporation ("Kerr
Group"), is offering to purchase all of the issued and outstanding shares (the
"Shares") of common stock, par value $.01 per share, including the associated
rights to purchase shares of common stock (the "Rights" and, together with the
common stock, the "Common Stock") issued pursuant to the Rights Agreement (as
defined below), of Sun Coast Industries, Inc., a Delaware corporation (the
"Company") for $10.75 per Share (the "Offer Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MARCH 3, 1998,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 28, 1998 (the "Merger Agreement"), by and among Kerr Group, the
Purchaser and the Company pursuant to which, as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions to the Merger (as defined below), the Purchaser will be merged with
and into the Company and the corporate existence of the Purchaser will
thereupon cease. The merger, as effected pursuant to the immediately preceding
sentence, is referred to herein as the "Merger," and the Company as the
surviving corporation of the Merger is sometimes herein referred to as the
"Surviving Corporation." At the effective time of the Merger (the "Effective
Time"), each Share of Common Stock then outstanding (other than Shares held by
Kerr Group or the Purchaser and Shares held by stockholders who perfect their
dissenters' rights under Delaware law) will be cancelled and extinguished and
converted into the right to receive the Offer Price or any higher price per
Share paid in the Offer, in cash payable to the holder thereof without
interest. The Company has represented in the Merger Agreement that it has
taken all action that may be necessary under the Shareholder Rights Agreement,
dated June 6, 1995 between the Company and American Stock Transfer & Trust
Company, as amended (the "Rights Agreement") so that (i) the execution of the
Merger Agreement and the Company Option Agreement, dated as of January 28,
1998, by and between Kerr Group and the Company (the "Option Agreement"), and
<PAGE>
any amendments thereto and the consummation of the transactions contemplated
thereby will not cause (A) Kerr Group 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 the Merger Agreement, the Option Agreement and the transactions
contemplated thereby, including the Offer and the Merger.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING 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 RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES OF COMMON STOCK WHICH REPRESENTS AT LEAST A MAJORITY OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). As used herein
"fully diluted basis" takes into account the conversion or exercise of all
outstanding options and other rights and securities exercisable or convertible
into shares of Common Stock.
As a condition and inducement to Kerr Group and the Purchaser to enter into
the Merger Agreement concurrently with the execution and delivery of the
Merger Agreement, Kerr Group and the Company have entered into the Option
Agreement, pursuant to which, among other things, the Company has granted Kerr
Group an irrevocable option to purchase up to 500,000 newly issued shares of
common stock at $10.75 per share (the "Option"). The Option can only be
exercised in certain circumstances as described in Section 11 of the Offer to
Purchase.
As a condition and inducement to Kerr Group and the Purchaser to enter into
the Merger Agreement and incurring the liabilities therein, a major
stockholder (the "Major Stockholder"), who has voting power and dispositive
power with respect to approximately 438,000 Shares, concurrently with the
execution and delivery of the Merger Agreement has entered into a Stockholder
Agreement, dated as of January 28, 1998 with Kerr Group and the Purchaser (the
"Stockholder Agreement"). Pursuant to the Stockholder Agreement, the Major
Stockholder has agreed, among other things, to tender the Shares held by him
in the Offer, and to grant Kerr Group a proxy with respect to the voting of
such Shares in favor of the Merger.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to
American Stock Transfer & Trust Company (the "Depositary") of the Purchaser's
acceptance for payment of such Shares. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from the Purchaser and transmitting payment to tendering
stockholders. In all cases, payment for Shares accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (or a timely Book-Entry Confirmation (as defined
in the Offer to Purchase) with respect thereto), (ii) a Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) and (iii) any other
documents required by the Letter of Transmittal. The per share consideration
paid to any holder of Common Stock pursuant to the Offer will be the highest
per share consideration paid to any other holder of such shares pursuant to
the Offer. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE
TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE
OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
2
<PAGE>
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn pursuant to the
procedures set forth below at any time prior to the Expiration Date (as
defined in the Offer to Purchase) and, unless theretofore accepted for payment
and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at
any time after April 3, 1998.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in Section 3 of the Offer to Purchase), the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility (as defined in the Offer to
Purchase) to be credited with the withdrawn Shares and otherwise comply with
such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 3 of the Offer to Purchase any time prior to the Expiration Date.
The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on
Tuesday, March 3, 1998, unless and until the Purchaser, in accordance with the
terms of the Merger Agreement, shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of Kerr Group,
the Purchaser, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time,
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares by giving oral or
written notice of such extension to the Depositary.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in
the Offer to Purchase and is incorporated herein by reference.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other relevant documents will be mailed by the Purchaser to record holders
of Shares and will be furnished by the Purchaser to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder lists, or, if applicable, who are listed
as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer documents may be
directed to the Information Agent at the address and telephone numbers set
forth below, and copies will be furnished at the Purchaser's expense. The
Purchaser will not pay any fees or
3
<PAGE>
commissions to any broker or dealer or other person (other than the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF MACKENZIE PARTNERS, INC APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
FEBRUARY 3, 1998
4
<PAGE>
EXHIBIT (a)(9)
Stephens Inc.
January 27, 1998
Board of Directors of
Sun Coast Industries, Inc.
2700 S. 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 priced 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;
Investment Bankers
111 Center Street Post Office Box 3507 Little 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 form a financial point of view.
<PAGE>
January 27, 1998
Page 3
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 (c)(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
59
<PAGE>
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
60
<PAGE>
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
61
<PAGE>
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
62
<PAGE>
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
63
<PAGE>
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
64
<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
67
<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
68
<PAGE>
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
70
<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.
72
<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:
73
<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 (c)(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 (c)(3)
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 (c)(4)
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 (c)(5)
[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 (c)(6)
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]
-----------------------
