<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------------
KERR GROUP, INC.
(Name of Subject Company)
KERR ACQUISITION CORPORATION
FREMONT ACQUISITION COMPANY, LLC
(Bidders)
------------------------
COMMON STOCK, PAR VALUE $0.50 PER SHARE (AND ASSOCIATED PURCHASE RIGHTS)
$1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D, PAR VALUE $0.50
PER SHARE
(Title of Class of Securities)
------------------------
492376108 AND
492376207
(CUSIP Number of Class of Securities)
------------------------
GILBERT H. LAMPHERE
PRESIDENT
FREMONT ACQUISITION COMPANY, LLC
C/O THE FREMONT GROUP
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
Transaction Valuation* $29,757,082
Amount of Filing Fee $5,951.42
* For purposes of calculating fee only. This amount assumes (i) the purchase of
3,933,095 outstanding shares of common stock of Kerr Group, Inc. and 449,235
shares of common stock of Kerr Group, Inc. which may be issued upon exercise of
outstanding options and warrants, in each case, at $5.40 in cash per share and
(ii) the purchase of 487,400 outstanding shares of $1.70 Class B Cumulative
Convertible Preferred Stock, Series D at $12.50 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.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<S> <C>
1. Names of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Kerr Acquisition Corporation
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
782,865
(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)
19.9%
10. Type of Reporting Person
CO
</TABLE>
2
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<S> <C>
1. Names of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Persons
Fremont Acquisition Company, LLC
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
782,865
(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)
19.9%
10. Type of Reporting Person
OO (limited liability company)
</TABLE>
3
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<S> <C>
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
782,865
(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)
19.9%
10. Type of Reporting Person
PN
</TABLE>
4
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<CAPTION>
<S> <C>
1. Names of Reporting Person
S.S. or I.R.S. Identification No. 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
782,865
(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)
19.9%
10. Type of Reporting Person
OO (limited liability company)
</TABLE>
5
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<CAPTION>
<S> <C>
1. Names of Reporting Person
S.S. or I.R.S. Identification No. 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
782,865
(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)
19.9%
10. Type of Reporting Person
OO (limited liability company)
</TABLE>
6
<PAGE>
CUSIP NO. 492376108 AND 492376207
14D-1
<TABLE>
<S> <C>
1. Names of Reporting Person
S.S. or I.R.S. Identification No. 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
782,865
(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)
19.9%
10. Type of Reporting Person
CO
</TABLE>
7
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Kerr Acquisition Corporation, a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Fremont Acquisition Company, LLC,
a Delaware limited liability company ("Fremont"), to purchase all of the
outstanding shares of (i) common stock, par value $.50 per share, including the
associated rights to purchase shares of preferred stock (the "Rights" and,
together with the common stock, the "Common Stock") and (ii) $1.70 Class B
Cumulative Convertible Preferred Stock, Series D, par value $0.50 per share (the
"Series D Preferred Shares" and, together with the Common Stock, the "Shares"),
of Kerr Group, Inc., a Delaware corporation (the "Company"), at $5.40 per share
of Common Stock and $12.50 per share of Series D Preferred Shares, respectively,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated July 8, 1997 (the "Offer to Purchase"), a
copy of which is attached hereto as Exhibit (a)(1), and in the related Letters
of Transmittal, copies of which are attached hereto as Exhibits (a)(2) and
(a)(3) (which together constitute the "Offer"). This Statement also constitutes
a Statement on Schedule 13D of each of the Purchaser, Fremont, Fremont Partners,
L.P. ("Fremont Partners"), FP Advisors, L.L.C. ("FP Advisors"), Fremont Group,
L.L.C. ("The Fremont Group") and Fremont Investors, Inc. ("Fremont Investors")
with respect to the option granted by the Company to purchase up to 782,685
(approximately 19.9%) newly issued shares of Common Stock at $5.40 per share.
The Option can only be exercised in certain circumstances described in Section
11 of the Offer to Purchase. Each of the Purchaser, Fremont, 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 Kerr Group, Inc. and the address of
its principal executive offices is 500 New Holland Avenue, Lancaster,
Pennsylvania 17062.
(b) The class of securities to which this Statement relates is (i) the
Common Stock and (ii) the Series D Preferred Shares of the Company. As of June
23, 1997 there were (a) 3,933,095 shares of Common Stock, issued and outstanding
and (b) outstanding options and warrants to purchase an aggregate of 449,235
shares of Common Stock and (c) 487,400 shares of Series D Preferred Shares
issued and outstanding, convertible into 708,923 shares of Common Stock.
Purchaser is seeking to purchase all of the outstanding Shares at a purchase
price of $5.40 per Share of Common Stock and $12.50 per share of Series D
Preferred Shares, respectively, 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, Fremont,
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
Fremont Partners, Fremont 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, L.P., Fremont 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 the Purchaser or Fremont nor, to
the best knowledge of the Purchaser and Fremont, any of the persons listed in
Schedule I of the Offer to Purchase have been
8
<PAGE>
ITEM 2. IDENTITY AND BACKGROUND. (CONTINUED)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)(1) Other than the transactions described in Item 3(b) below, neither the
Purchaser or Fremont, nor, to the best knowledge of the Purchaser and Fremont,
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 the
Purchaser or Fremont, nor, to the best knowledge of the Purchaser and Fremont,
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 Fremont Partners, Fremont 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 Fremont Partners, Fremont and the Purchaser" and "Section 11 --
Background of the Offer; Purpose of the Offer and the
9
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (CONTINUED)
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.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "Section 9 -- Certain Information Concerning
Fremont Partners, Fremont 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 the Purchaser or Fremont, or to the best knowledge of the Purchaser and
Fremont, 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.
(a)(1) Offer to Purchase, dated July 8, 1997.
(a)(2) Letter of Transmittal with respect to the Common Stock.
(a)(3) Letter of Transmittal with respect to the Series D Preferred Shares.
(a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(5)Letter to Clients.
(a)(6) Notice of Guaranteed Delivery with respect to the Common Stock.
(a)(7) Notice of Guaranteed Delivery with respect to the Series D Preferred
Shares.
10
<PAGE>
ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (CONTINUED)
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(9) Press Release jointly issued by Fremont and the Company, dated July
1, 1997.
(a)(10) Form of Summary Advertisement, dated July 8, 1997.
(a)(11) Fairness Opinion of CIBC Wood Gundy Securities Corp., dated June 30,
1997.
(c)(1) Agreement and Plan of Merger, dated as of July 1, 1997, by and among
Fremont, the Purchaser and the Company.
(c)(2) Option Agreement, dated as of July 1, 1997, by and between Fremont
and the Company.
(c)(3) Guarantee, dated as of July 1, 1997, by and between Fremont Partners,
L.P. and the Company.
(c)(4) Confidentiality Agreement, dated November 6, 1995, by and between
Fremont Group, Inc. and Lehman Brothers Inc. on behalf of the
Company.
(d) None.
(e) Not applicable.
(f) None.
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: July 8, 1997
KERR ACQUISITION CORPORATION
By: /s/ R. S. Kopf
-----------------------------------
Name: R. S. Kopf
Title: Vice President
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: July 8, 1997
FREMONT ACQUISITION COMPANY, LLC
By: /s/ R. S. Kopf
-----------------------------------
Name: R. S. Kopf
Title: Vice President
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: July 8, 1997
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 Principal,
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: July 8, 1997
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 Principal,
General Counsel
and Secretary
15
<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: July 8, 1997
FREMONT GROUP, L.L.C.
By: Fremont Investors, Inc., its
manager
By: /s/ R. S. Kopf
--------------------------------
Name: R. S. Kopf
Title:Managing Principal,
General Counsel
and Secretary
16
<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: July 8, 1997
FREMONT INVESTORS, INC.
By: /s/ R. S. Kopf
-----------------------------------
Name: R. S. Kopf
Title:Managing Principal,
General Counsel
and Secretary
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------- ----------------------------------------------------------------------------------------------
<S> <C> <C>
(a)(1) Offer to Purchase dated July 8, 1997.
(a)(2) Letter of Transmittal with respect to the Common Stock.
(a)(3) Letter of Transmittal with respect to the Series D Preferred Shares.
(a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients.
(a)(5) Letter to Clients.
(a)(6) Notice of Guaranteed Delivery with respect to the Common Stock.
(a)(7) Notice of Guaranteed Delivery with respect to the Series D Preferred Shares.
(a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(9) Press Release jointly issued by Fremont and the Company, dated July 1, 1997.
(a)(10) Form of Summary Advertisement, dated July 8, 1997.
(a)(11) Fairness Opinion of CIBC Wood Gundy Securities Corp., dated June 30, 1997.
(c)(1) Agreement and Plan of Merger, dated as of July 1, 1997, by and among Fremont, the Purchaser
and the Company.
(c)(2) Option Agreement, dated as of July 1, 1997, by and between Fremont and the Company.
(c)(3) Guarantee, dated as of July 1, 1997, by and between Fremont Partners, L.P. and the Company.
(c)(4) Confidentiality Agreement, dated November 6, 1995, by and between Fremont Group, Inc. and
Lehman Brothers Inc. on behalf of the Company.
</TABLE>
18
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
AND ALL OUTSTANDING SHARES OF $1.70 CLASS B
CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
OF
KERR GROUP, INC.
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
AT
$5.40 NET PER SHARE OF COMMON STOCK
AND
$12.50 NET PER SHARE OF $1.70 CLASS B CUMULATIVE
CONVERTIBLE PREFERRED STOCK, SERIES D
----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED AS
OF JULY 1, 1997 AMONG FREMONT ACQUISITION COMPANY, LLC, KERR ACQUISITION
CORPORATION AND KERR GROUP, INC. THE BOARD OF DIRECTORS OF KERR GROUP, INC. HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF BOTH THE COMMON STOCK AND THE $1.70 CLASS B
CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D, 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, ON AN AS-CONVERTED BASIS, WHICH REPRESENTS AT LEAST FIFTY-ONE PERCENT
(51%) 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
<PAGE>
bank, trust company or other nominee must contact such broker, dealer,
commercial bank, trust company or other nominee to tender such 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 location 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:
[MACKENZIE PARTNERS, INC. LOGO]
July 8, 1997
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
INTRODUCTION
THE OFFER
1. Terms of the Offer................................................................................... 3
2. Acceptance for Payment and Payment................................................................... 5
3. Procedure for Tendering Shares....................................................................... 6
4. Withdrawal Rights.................................................................................... 8
5. Certain Federal Income Tax Consequences.............................................................. 9
6. Price Range of the Shares; Dividends on the Shares................................................... 10
7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations........................................................................................ 10
8. Certain Information Concerning the Company........................................................... 12
9. Certain Information Concerning Fremont Partners, Fremont and the Purchaser........................... 15
10. Source and Amount of Funds........................................................................... 16
11. Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements......................................................................................... 17
12. Plans for the Company; Other Matters................................................................. 29
13. Dividends and Distributions.......................................................................... 32
14. Conditions of the Offer.............................................................................. 32
15. Certain Legal Matters................................................................................ 34
16. Fees and Expenses.................................................................................... 35
17. Miscellaneous........................................................................................ 35
</TABLE>
Schedule I--General Partners, Managing Members, Directors and Executive
Officers of Kerr Acquisition Corporation, 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 AND PREFERRED STOCK OF KERR GROUP, INC.:
INTRODUCTION
Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware limited
liability company ("Fremont"), hereby offers to purchase (i) all of the issued
and outstanding shares of common stock, par value $.50 per share, including the
associated rights to purchase shares of preferred stock (the "Rights" and,
together with the common stock, the "Common Stock") issued pursuant to the
Rights Agreement (as defined below), and (ii) all of the issued and outstanding
shares of $1.70 Class B Cumulative Convertible Preferred Stock Series D, par
value $0.50 per share, (the "Series D Preferred Shares" and, together with the
Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware corporation (the
"Company"), for $5.40 per share of Common Stock (the "Common Per Share Amount")
and $12.50 per share of Series D Preferred Share (the "Series D Per Share
Amount"), in each case 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 Boston EquiServe, L.P. 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 AND SERIES D PREFERRED SHARES (ASSUMING THE CONVERSION OF
ALL SUCH SERIES D PREFERRED SHARES INTO SHARES OF COMMON STOCK) WHICH REPRESENTS
AT LEAST FIFTY-ONE PERCENT (51%) OF THE SHARES OF COMMON STOCK (OTHER THAN THE
OPTION (AS DEFINED BELOW)) 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 Series D
Preferred Shares, options, warrants and other rights and securities exercisable
or convertible into shares of Common Stock. The Company has informed the
Purchaser that, as of July 1, 1997, there were (i) 3,933,095 shares of Common
Stock issued and outstanding, (ii) outstanding options and warrants to purchase
an aggregate of 449,235 shares of Common Stock and (iii) 487,400 shares of
Series D Preferred Shares issued and outstanding, convertible into 708,923
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
Fremont, issue any additional Shares (except on the exercise of outstanding
options and warrants or conversion of the Series D Preferred Shares). Based on
the foregoing and giving effect to the exercise of all outstanding options and
warrants, the Purchaser believes that the Minimum Condition will be satisfied if
2,596,539 shares of Common Stock, on an as-converted basis, are validly tendered
and not withdrawn prior to the expiration of the Offer.
As a condition and inducement to Fremont's and Purchaser's entering into the
Merger Agreement (as defined below), concurrently with the execution and
delivery of the Merger Agreement, Fremont and the Company have entered into an
Option Agreement, dated July 1, 1997, pursuant to which, among other things, the
Company has granted Fremont an irrevocable option to purchase up to 782,685
(approximately 19.9%) newly issued shares of Common Stock at $5.40 per share
(the "Option"). The Option can only be exercised in certain circumstances
described herein. See Section 11.
As a condition and inducement to the Company's entering 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 July 1, 1997 (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 Fremont and the Purchaser pursuant to the
Merger Agreement. Fremont Partners has represented in the
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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, Fremont or any of their respective affiliates of
any Shares pursuant to the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 1, 1997 (the "Merger Agreement"), by and among Fremont, 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 separate 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 and Series D Preferred Shares then outstanding (other than
Shares held by Fremont 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, respectively, (i) the
Common Per Share Amount or any higher price per share of Common Stock paid in
the Offer (the "Common Stock Merger Consideration"), and (ii) the Series D Per
Share Amount or any higher price per share of Series D Preferred Shares paid in
the Offer (the "Series D Merger Consideration" and, together with the Common
Stock Merger Consideration, the "Merger Consideration"), in each case, 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, 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 BOTH
THE COMMON STOCK AND THE SERIES D PREFERRED SHARES, AND UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
CIBC Wood Gundy Securities Corp., the Company's financial advisor ("CIBC
Wood Gundy"), 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, on the one hand, and the Series D
Preferred Shares (as defined in the Fairness Opinion), on the other, pursuant to
the Offer and under the terms of the Merger Agreement, is fair to such holders
(other than Fremont or any other subsidiary of Fremont), 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
(as it may be extended), the Shares tendered and not withdrawn pursuant to the
Offer equal less than 90% of the outstanding shares of Common Stock or Series D
Preferred Shares, the Purchaser may extend the Offer for a period not to exceed
five business days, notwithstanding that all conditions to the Offer are
satisfied as of such expiration date of the Offer, so long as the Purchaser
expressly irrevocably waives any condition (other than the Minimum Condition)
that subsequently may not be satisfied during such extension of the Offer. The
Offer will not remain open following the time Shares are accepted for payment.
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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 Fremont and the Purchaser
acquire in the aggregate at least 90% of the outstanding shares of Common Stock
and at least 90% of the outstanding Series D Preferred Shares, pursuant to the
Offer or otherwise, then, at the election of Fremont, a short-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 Fremont and the Purchaser do not own 90% of the outstanding shares
of Common Stock and 90% of the outstanding Series D Preferred Shares following
consummation of the Offer, Fremont 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.
Fremont presently intends to effect a short-form merger if permitted to do so
under the DGCL.
The Company has distributed one Right for each outstanding share of Common
Stock pursuant to a Rights Agreement, dated as of July 25, 1995, between the
Company and BankBoston, N.A. (formerly The First National Bank of Boston), as
Rights Agent, as amended (the "Rights Agreement"). The Company has represented
in the Merger Agreement that it has taken all action which may be necessary
under the Rights Agreement so that the (x) execution of the Merger Agreement and
any amendments thereto and the consummation of the transactions contemplated
thereby will not cause (i) Fremont and/or the Purchaser to become an Acquiring
Person (as defined in the Rights Agreement) or (ii) 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 and (y) the Rights shall expire upon the
acceptance of Shares for payment pursuant to the Offer.
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 Monday, August 4, 1997, 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.
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
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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 COMMON STOCK PER SHARE AMOUNT OR THE SERIES D PER
SHARE AMOUNT TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Merger Agreement provides that the Purchaser will not amend or waive the
Minimum Condition and will not decrease the Common Stock Per Share Amount or the
Series D Per Share Amount 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 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 or Series D Preferred Shares, the
Purchaser may extend the Offer for a period not to exceed five business days,
notwithstanding that all conditions to the Offer may have been satisfied, so
long as the Purchaser expressly irrevocably waives any condition (other than the
Minimum Condition) that subsequently may not be satisfied during such extension
of the Offer.
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 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 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 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.
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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 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 and any holder of Series D
Preferred Shares 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.
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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 Fremont or to any affiliate of Fremont, 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 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 below), and any
other required documents, must be received by the Depositary at its address 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
Depository Trust Company or the Philadelphia Depository Trust Company (each 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 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
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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 has 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
(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.
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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, Fremont, 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 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 to Purchase Shares may be subject to backup
withholding tax at a rate of 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 August
4, 1997.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover of this Offer to
8
<PAGE>
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 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, Fremont, 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 also may 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 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 generally will be capital gain or loss if the
Shares disposed of were held as capital assets by the stockholder, and will be
long-term capital gain or loss if the Shares disposed of were held for more than
one year at the date of sale.
A holder of Shares who perfects such stockholder's appraisal rights, if any,
under the DGCL probably will 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
generally should 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 foregoing summary is a general description of certain U.S. federal
income tax consequences of the Offer and the Merger without regard to the
particular facts and circumstances of each stockholder of the Company and is
based on the provisions of the Internal Revenue Code of 1986, as amended,
Treasury Department Regulations issued pursuant thereto and published rulings
and court decisions in effect as of the date hereof, all of which are subject to
change, possibly with retroactive effect. Special tax consequences not described
herein may be applicable to certain stockholders subject to special tax
treatment (including, but not limited to, insurance companies, tax-exempt
organizations, financial institutions or broker dealers, foreign stockholders
and stockholders who have acquired their Shares pursuant to the exercise of
employee stock options or otherwise as compensation). ALL STOCKHOLDERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO
THEM OF THE OFFER AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL AND FOREIGN TAX LAWS.
9
<PAGE>
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The shares of
Common Stock and Series D Preferred Shares are both traded on the NYSE under the
symbol "KGM" and "KGMD", respectively. The following table sets forth, for each
of the calendar quarters indicated, the high and low reported sales price per
share of Common Stock and of Series D Preferred Shares on the NYSE and quarterly
cash dividends based on published financial sources.
<TABLE>
<CAPTION>
COMMON STOCK SERIES D PREFERRED SHARES
--------------------------------------- ---------------------------------------
HIGH LOW CASH DIVIDENDS HIGH LOW CASH DIVIDENDS
--------- --------- ----------------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............................. $ 9 3/8 $ 6 7/8 $ -- $ 20 5/8 $ 19 1/8 $ .425
Second Quarter............................ 8 3/8 7 1/8 -- 20 1/8 19 1/4 .425
Third Quarter............................. 8 1/2 7 -- 20 1/4 19 .425
Fourth Quarter............................ 10 3/8 6 1/2 -- 20 16 3/8 .425
1996
First Quarter............................. $ 9 7/8 $ 5 3/4 $ -- $ 28 $ 17 3/4 $ .425
Second Quarter............................ 6 1/4 3 3/4 -- 18 1/8 13 1/2 --
Third Quarter............................. 4 3/8 2 3/8 -- 14 12 1/8 --
Fourth Quarter............................ 4 3/8 2 1/8 -- 12 3/8 7 1/2 --
1997
First Quarter............................. $ 2 5/8 $ 1 7/8 $ -- $ 7 5/8 $ 4 1/4 $ --
Second Quarter............................ 4 1/4 2 -- 14 4 1/4 --
Third Quarter (through July 7, 1997)...... 5 3/8 3 7/8 -- 12 1/2 12 1/4 --
</TABLE>
On June 13, 1997, the last full trading day prior to the first public
announcement by the Company that it was engaged in discussions with several
third parties regarding a possible sale of the Company, the last reported sales
price of the Shares on the NYSE was $3 3/4 per share of Common Stock and $10 per
share of Series D Preferred Shares. On June 30, 1997, the last full trading day
prior to the first public announcement of the Purchaser's intention to commence
the Offer, the last reported sales price of the Shares on the NYSE was $3 7/8
per share of Common Stock and $12 1/2 per share of Series D Preferred Shares. On
July 7, 1997, the last full trading day prior to the commencement of the Offer,
the last reported sales price of the Shares on the NYSE was $5 1/4 per share of
Common Stock and $12 1/2 per share of Series D Preferred Shares. STOCKHOLDERS
ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company has advised the Purchaser that the cumulative Series D Preferred
Shares annual dividend requirement is $828,580, or $1.70 per share. The Company
has not declared a dividend on its Series D Preferred Shares since the first
quarter of 1996. The cumulative amount of undeclared dividends as of June 30,
1997 is currently $1,038,162, or $2.13 per share. Under the terms of an
agreement with its lenders, the Company is not currently permitted to declare or
pay any dividends on its Series D Preferred 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 either the Common Stock
or the Series D Preferred Shares. No portion of the cumulative undeclared
dividends on the Series D Preferred Shares dividend requirement will be paid as
part of or in connection with the Offer.
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 holders of Shares and the number of Shares
that might otherwise trade publicly and, depending
10
<PAGE>
upon the number of Shares so purchased, could adversely affect the liquidity and
market value of the remaining Shares held by the public.
STOCK LISTING. The Common Stock and Series D Preferred Shares are 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 or the Series D
Preferred Shares 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 or the Series D Preferred Shares if, among other
things, the number of record holders of at least 100 or more shares of Common
Stock or Series D Preferred Shares should fall below 1,200, the number of
publicly held shares of Common Stock or Series D Preferred Shares (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 December 31, 1996, there were approximately 1,257 and 189 holders of
record of shares of Common Stock and Series D Preferred Shares, respectively, on
February 28, 1997 and according to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, as of April 30, 1997, there were 3,933,095
and 487,400 Shares of Common Stock and Series D Preferred Shares, respectively,
outstanding.
If the NYSE were to delist the Common Stock or the Series D Preferred
Shares, 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 each of
the Common Stock and Series D Preferred Shares 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 requirement of the NYSE for
continued inclusion in the NYSE and the Shares are no longer included in the
NYSE, the market for, and the value of, the Shares should be adversely affected.
EXCHANGE ACT REGISTRATION. The Common Stock and Series D Preferred Shares
currently are 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 shares of Common Stock or of the Series D Preferred Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of either the Common Stock or the Series
D Preferred 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 either the Common Stock or the Series D Preferred Shares 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.
11
<PAGE>
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 Common Stock and Series D Preferred 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 such 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.
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 Fremont 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 Fremont or the
Purchaser.
The Company is a major producer of plastic packaging products. The Company
is a Delaware corporation with its principal executive offices at 500 New
Holland Avenue, Lancaster, Pennsylvania 17602. The telephone number of the
Company at such offices is (717) 299-6511.
SELECTED FINANCIAL INFORMATION. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, both filed with the Commission pursuant to the Exchange Act.
More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information (including any related notes) contained
therein. Such reports and other documents may be inspected and copies may be
obtained from the Commission in the manner set forth below.
12
<PAGE>
KERR GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEARS ENDED
------------------------ -------------------------------------------------
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994
----------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net Sales......................... $ 28,732 $ 25,096 $ 107,369 $ 109,187 $ 106,792
Operating Income (loss)........... (1,130) (7,666) (12,722) (1,416) 7,152
Net Earnings (loss)............... (1,337) (6,442) (23,122) (6,136) 2,575
Net Earnings (loss) per share..... (0.34) (1.64) (5.88) (1.60) 0.70
Balance Sheet Data
(at end of period):
Total Assets...................... $ 86,011 $ 116,747 $ 85,526 $ 119,497 $ 122,660
Total Liabilities................. 83,839 97,765 82,224 95,590 89,607
Stockholders' Equity.............. 2,172 18,982 3,302 23,907 33,053
</TABLE>
CERTAIN COMPANY PROJECTIONS. To the knowledge of Fremont and the Purchaser,
the Company does not as a matter of course make public forecasts as to its
future financial performance. However, in connection with the preliminary
discussions concerning the feasibility of the Offer and the Merger, the Company
prepared and furnished Fremont with certain financial projections.
The summary projections presented in the tables below (the "Projections")
are derived or excerpted from information provided by the Company and are based
on numerous assumptions concerning future events. The Projections have not been
adjusted to reflect the effects of the Offer or the Merger or the incurrence of
indebtedness in connection therewith. The Projections should be read together
with the other information contained in this Section 8.
In May, 1997, the Company provided Fremont with the Projections for the
fiscal years ending December 31, 1997, 1998 and 1999, which are set forth in the
table below.
13
<PAGE>
KERR GROUP, INC.
ESTIMATED FINANCIAL STATEMENT ITEMS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Net Sales............................................................................. $ 114.1 $ 119.9 $ 130.2
Earnings (Loss) Before Interest and Taxes............................................. $ 6.7 $ 10.3 $ 12.0
Total Current Assets.................................................................. $ 30.8 $ 31.3 $ 33.9
Total Assets.......................................................................... 80.7 78.0 78.0
Total Current Liabilities............................................................. 11.3 12.9 14.0
Long-Term Pension and SERP Liabilities................................................ 12.1 8.4 4.5
Long-Term Retiree Health Liability(a)................................................. 2.6 2.6 2.6
Other Long-Term Liabilities........................................................... 1.1 1.1 1.1
Total Liabilities..................................................................... 73.0 68.4 65.4
Capital Expenditures.................................................................. $ 9.3 $ 9.7 $ 11.2
Reduction in Pension Liability........................................................ 1.8 3.7 3.8
Payments associated with restructuring, net of tax.................................... 1.7 0.0 0.0
</TABLE>
- ------------------------
(a) Does not include the unaccrued portion of the Accumulated Benefit Obligation
In Excess Of Plan Assets, which at December 31, 1996 was $6.8 million. The
Accumulated Benefit Obligation In Excess Of Plan Assets as disclosed in the
Notes to the Company's Financial Statements at and for the year ended
December 31, 1996 equaled $9.3 million.
In June 1997, the Company provided Fremont with revised forecasts for the
fiscal year ending December 31, 1997 which incorporated actual financial results
through April 1997. These revised forecasts showed increased net sales of
approximately $116.6 million but reduced profitability, with Earnings Before
Interest and Taxes forecast at approximately $6.2 million. The forecasts for the
fiscal years ending December 31, 1998 and 1999 were not revised.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE
WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR
FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
FREMONT. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY
MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL
BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, ALL OF
WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL
AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY FREMONT OR THE PURCHASER.
ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING
THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY
GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE
PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF FREMONT,
THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE
EVENTS, AND
14
<PAGE>
THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF FREMONT, THE
PURCHASER, THE COMPANY AND THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR
COMPLETENESS OF THE PROJECTIONS. NONE OF FREMONT, THE PURCHASER, THE COMPANY AND
ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES ANY
REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE
PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE
PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO
REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE
ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR.
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 FREMONT PARTNERS, FREMONT AND THE
PURCHASER.
FREMONT PARTNERS. Fremont Partners, and affiliated partnerships, is a
private investment fund headquartered in San Francisco with available 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 either the Merger Agreement or the Option Agreement. None of the other
Fremont Entities is a party to any of the Merger Agreement, the Option 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.
FREMONT AND THE PURCHASER. Each of Fremont and the Purchaser is a Delaware
entity, newly formed at the direction of Fremont Partners for the purpose of
effecting the Offer and the Merger. Fremont owns all of the outstanding capital
stock of the Purchaser. It is not anticipated that, prior to the consummation of
the Offer, the Purchaser or Fremont 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 Fremont and the
Purchaser are located at 50 Fremont Street, Suite 3700, San Francisco,
California 94105-1895.
After the completion of the sale of equity interests in Fremont, Fremont
Partners and affiliated partnerships of which FP Advisors or The Fremont Group
are the general partners, will own in excess of 90% of the outstanding equity
interests of Fremont. It is anticipated that Fremont Partners, as sole
15
<PAGE>
managing member of Fremont, will have sole voting and investment power with
respect to such equity interests.
In its prior acquisitions, entities affiliated with Fremont Partners have
offered equity ownership opportunities to the key management of the companies
they have acquired, and may offer key management of the Company and related
entities an opportunity to acquire a portion of the equity interest in Fremont
or the Company. Such entities may include New Canaan Investments, Inc. ("New
Canaan"), a private company headquartered in Stamford, Connecticut engaged in
making equity investments and acquisitions, which has assisted Fremont Partners
in its review and assessment of the business of the Company. Although general
discussions have taken place with the management of the Company and New Canaan,
no decisions have been made at this time, either as to the identity of the
persons or entities who may be offered the opportunity to invest in Fremont or
the Company or as to the amount or nature of any equity interest any members of
management of the Company or New Canaan may be offered. If and to the extent
members of management of the Company and related entities are given the
opportunity to, and do, invest in the equity of Fremont or the Company, the
equity interest of Fremont Partners and its affiliated partnerships in Fremont
or the Company would be reduced.
For certain information concerning the general partners, managing members or
executive officers and directors, as the case may be, of the Purchaser, Fremont
and the Fremont Entities, see Schedule I. Each of the Fremont Entities disclaims
that it is a "bidder" for purposes of this Offer.
Pursuant to the Option Agreement, Fremont may be deemed to beneficially own
782,685 shares of Common Stock constituting approximately 19.9% of the total
currently outstanding shares of Common Stock. Each of the Purchaser, Fremont and
the Fremont Entities disclaims beneficial ownership of such shares. Except as
set forth in this Offer to Purchase, none of the Purchaser, Fremont or any of
the Fremont Entities, nor, to the best knowledge of the Purchaser, Fremont or
Fremont Partners, 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, Fremont or any of the
Fremont Entities nor, to the best of knowledge of the Purchaser, Fremont or
Fremont Partners, 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,
Fremont or any of the Fremont Entities, nor, to the best knowledge of the
Purchaser, Fremont or Fremont Partners, any 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, Fremont or any of the Fremont Entities, or
any of their respective affiliates, nor, to the best knowledge of the Purchaser,
Fremont or Fremont Partners, any of the persons listed on Schedule I, has had,
since January 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 January 1, 1994, there have been no contacts,
negotiations or transactions between the Purchaser, Fremont or any of the
Fremont Entities, any of their respective affiliates or, to the best knowledge
of the Purchaser, Fremont or Fremont Partners, 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.
Fremont and the Purchaser estimate that the total amount of funds required
by the Purchaser to (i) purchase all of the Shares pursuant to the Offer and
finance the Merger Consideration, (ii) refinance certain existing indebtedness
and accrued liabilities of the Company, and (iii) pay fees and expenses
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<PAGE>
incurred in connection with the Offer and the Merger will be approximately $91.9
million. Of these funds, it is anticipated that (i) approximately $1.8 million
will be obtained from cash on hand of the Company, (ii) approximately $44.3
million will be obtained by Fremont through the sale of equity interests to
Fremont Partners and affiliated partnerships, (and possibly to key management of
the Company and related entities) and Fremont will in turn contribute such
amount to the Purchaser, and (iii) approximately $47.6 million will be financed
either through a permanent bank financing (the "Bank Financing"), or, if the
Bank Financing cannot be obtained prior to the date on which the Shares are
acquired by the Purchaser pursuant to the Offer, through a bridge facility (the
"Bridge Facility") provided by Fremont Partners, the principal terms of which
are described below.
The following table has been prepared by the Purchaser after discussions
with management of the Company and sets forth the approximate amounts, proposed
sources and uses of funds necessary to consummate the proposed Offer, Merger and
related refinancings:
<TABLE>
<CAPTION>
$IN MILLIONS
<S> <C>
Sources:
Cash of the Company............................................................................ $ 1.8
Equity Contributions from Fremont.............................................................. 44.3
Borrowings under Bridge Facility or Bank Financing............................................. 47.6
-----
Total........................................................................................ $ 91.9
-----
-----
Uses:
Purchase Equity................................................................................ $ 27.8
Refinance Existing Debt and Accrued Liabilities of Company..................................... 56.5
Fees and Expenses.............................................................................. 7.6
-----
Total........................................................................................ $ 91.9
-----
-----
</TABLE>
The proposed Bridge Facility will be structured as a term loan, and will be
fully secured by a first priority, perfected security interest on substantially
all of the tangible and intangible assets of the Company. The Bridge Facility
will mature and be payable in full on the date which is 364 days after the date
on which the Shares are acquired by the Purchaser pursuant to the Offer (the
"Bridge Maturity Date"). If the Bridge Facility is not refinanced on or prior to
the Bridge Maturity Date, it would, at such time, convert (the "Conversion") to
a permanent loan facility with a five-year term.
Prior to the Bridge Maturity Date, the Bridge Facility will accrue interest
at a rate per annum equal to LIBOR plus a margin of 250 basis points. Following
the Conversion, the Bridge Facility will accrue interest at a rate per annum
equal to the rate for five-year U.S. Treasuries as of the date of the Conversion
plus a margin of 600 basis points.
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 Fremont and the Company.
Information about the Company was provided by the Company and neither the
Purchaser nor Fremont takes any responsibility for the accuracy or completeness
of any information regarding meetings or discussions in which Fremont or its
representatives did not participate.
BACKGROUND OF THE OFFER.
In October 1995, a representative of Lehman Brothers Inc. ("Lehman
Brothers") contacted representatives of The Fremont Group to inquire as to The
Fremont Group's potential interest in pursuing a transaction with the Company.
Following this contact, The Fremont Group initiated a review of certain publicly
available information concerning the Company.
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<PAGE>
On November 6, 1995, The Fremont Group entered into a confidentiality
agreement with Lehman Brothers on behalf of the Company, pursuant to which The
Fremont Group agreed to treat as confidential certain information provided to it
by or on behalf of the Company and agreed for a period of two years not to
acquire any voting securities of the Company without the consent of the Board of
Directors of the Company. On November 7, 1995, Lehman Brothers furnished to The
Fremont Group a descriptive memorandum containing limited non-public information
concerning the Company.
On November 30, 1995, in compliance with bid instructions provided by Lehman
Brothers, The Fremont Group submitted an initial indication of interest together
with a due diligence request list. Based on an indication of interest to acquire
all the outstanding Common Stock for $10 to $12 a share, The Fremont Group was
invited to attend a due diligence session at the Company's headquarters. On
January 11, 1996, The Fremont Group met with the senior management of the
Company and reviewed documents provided in a data room set up by the Company and
Lehman Brothers. Over the next several weeks, The Fremont Group and its advisors
engaged in a series of telephone conversations, plant tours and meetings with
senior and operating management of the Company to further investigate the
business, strategies and prospects of the Company. During this time period, The
Fremont Group, with the assistance of its outside advisors, also conducted a
detailed independent due diligence review of the Company's assets and
liabilities, including its underfunded pension plan liabilities, unfunded
retiree medical and health liabilities and potential environmental liabilities.
At the end of January 1996, The Fremont Group communicated to Lehman
Brothers that following its review of the data room documents, discussions with
senior management and its independent due diligence review of the assets and
liabilities of the Company, it was no longer willing to proceed at the valuation
levels indicated in its initial indication of interest of November 30, 1995. The
Fremont Group indicated that its current view was based on the understanding it
had now acquired with respect to the Company's significant off-balance sheet
liabilities and deteriorating operating performance and financial condition. The
Fremont Group communicated that it would, however, continue to have an interest
in pursuing a transaction with the Company at substantially lower valuations.
At the time, representatives of Lehman Brothers discouraged The Fremont
Group from further proceeding with its review of the Company or further
discussions, indicating that the Company's Board of Directors was unwilling to
accept an offer below the approximate range of $10 to $12 per share of Common
Stock provided by The Fremont Group in its initial indication of interest. At
the time of these discussions, the Common Stock was trading within a range of
approximately $8 to $10 per share.
In early March 1996, a representative of Lehman Brothers contacted a
representative of Fremont Partners, which had been formed in the meantime in
February 1996 to carry on the direct investment activities of The Fremont Group,
and suggested the Board of Directors of the Company might now be prepared to
consider Fremont Partners' proposal if Fremont Partners remained interested in
an acquisition of the Company. On March 7, 1996, Fremont Partners submitted a
transaction proposal that provided for the acquisition of all equity interests
in the Company and contemplated an arrangement where repayment of a portion of
the existing senior notes would be contingent upon the receipt of a specified
level of net proceeds from the sale of the Company's consumer products division,
which was then actively being undertaken. Under this structure, Fremont Partners
indicated that it was prepared to pay $2.62 to $4.00 per share of Common Stock,
assuming the disposition of the Company's consumer products division.
On April 3, 1996, a representative of Lehman Brothers informed a
representative of Fremont Partners that following the sale of the consumer
products division, Lehman Brothers would no longer be actively working with the
Company. Lehman Brothers indicated that the Company continued to have a need for
new capital and that if Fremont Partners remained interested in a transaction
with the Company, Fremont Partners should communicate with the new Chief
Executive Officer, Mr. D. Gordon Strickland, directly. Fremont Partners
telephoned Mr. Strickland on April 3, 1996 and inquired whether the Company
would have an interest in pursuing a recapitalization transaction led by Fremont
Partners.
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<PAGE>
On April 4, 1996, Mr. Strickland provided Fremont Partners with a package of
updated financial information that detailed the Company's planned restructuring.
Fremont Partners held a number of discussions during the month of April with Mr.
Strickland and other members of senior management of the Company regarding a
potential recapitalization of the Company. On April 19, 1996, Mr. Strickland met
with Fremont Partners in Fremont Partners' offices in San Francisco. In this
meeting, representatives of Fremont Partners outlined a number of
recapitalization alternatives that generally involved a capital infusion by
Fremont Partners of up to $25 million in return for a substantial but minority
stake in the Company. Mr. Strickland expressed an interest in pursuing such a
transaction, but expressed concern with the proposed financial terms of the
proposed investment as it implied a valuation of the common equity below the
then-current market price of the Common Stock of approximately $6 per share. Mr.
Strickland agreed to discuss the proposal with members of the Board of Directors
of the Company and the Company's advisors. Several days later, Mr. Strickland
responded that the Company was unwilling to pursue a recapitalization with an
implied common equity valuation below current market prices.
On August 12, 1996, a representative of Fremont Partners spoke to Mr.
Strickland, inquiring as to the current status of its negotiations with its
noteholders concerning a financial restructuring of the Company. Mr. Strickland
indicated an interest in reopening discussions with Fremont Partners concerning
a possible investment in the Company. Fremont Partners requested updated
financial information with respect to the Company, which was provided. A series
of conversations were held over the next several weeks between senior management
of the Company and representatives of Fremont Partners, but did not result in
significant progress concerning the terms of a possible recapitalization
transaction.
On November 19, 1996, a representative of Fremont Partners spoke with Mr.
Strickland regarding the Company's recent public announcement that the holders
of the Company's long-term unsecured debt had sold such debt to third parties.
On December 18, 1996, a representative of Fremont Partners spoke to Mr. Herb
Elish, Chairman of the Board of the Company, inquiring whether the Company would
have an interest in pursuing a recapitalization transaction lead by Fremont
Partners that would provide sufficient capital to the Company to facilitate a
repurchase of the Company's unsecured long-term debt from the new debtholders.
On January 7, 1997, Mr. Elish requested that Fremont Partners contact the
Company's new financial advisor, CIBC Wood Gundy, in order to obtain updated
financial information needed to prepare and resubmit a transaction proposal.
In a series of conversations throughout January 1997, representatives of
Fremont Partners discussed a potential recapitalization of the Company with CIBC
Wood Gundy and the Company's senior management. Fremont Partners also reviewed
with the Company's senior management the progress of its various business and
financial restructuring efforts and the Company's operating prospects in the
aftermath of its disappointing performance in fiscal year 1996. Fremont Partners
also updated its independent due diligence review of the Company's assets and
liabilities, including its underfunded pension plan liabilities, unfunded
retiree medical and health liabilities and potential environmental liabilities.
On January 16, 1997, Fremont Partners submitted to CIBC Wood Gundy a letter
detailing the terms of its recapitalization proposal. These terms included a new
equity investment of $25 million in the form of new preferred and new common
equity with an implied common equity valuation of approximately $2.00 per share.
On January 28, 1997, a representative of CIBC Wood Gundy contacted Fremont
Partners and indicated that CIBC Wood Gundy had presented Fremont Partners'
proposal to the Company's Board of Directors along with a number of other
transaction alternatives. According to the representative of CIBC Wood Gundy,
the Company's Board of Directors chose to pursue a refinancing transaction that
would not involve a new equity capital contribution, but instead would effect a
refinancing of the Company's existing unsecured debt obligations with a new
senior secured credit facility together with senior subordinated secured notes
with equity warrants. CIBC Wood Gundy indicated that it expected this
transaction would be completed within two to three weeks.
19
<PAGE>
On March 12, 1997, a representative of Fremont Partners contacted CIBC Wood
Gundy and inquired regarding the apparent delay in completing the refinancing
previously discussed. CIBC Wood Gundy responded that it still expected the
refinancing transaction to be completed shortly. Fremont Partners submitted
another proposal letter to CIBC Wood Gundy that reiterated Fremont Partners'
interest in pursuing a recapitalization transaction and indicated a willingness
to improve its terms by providing an effective common equity valuation of
approximately $3.00 per share. CIBC Wood Gundy responded that the Board of
Directors remained unwilling to consider Fremont Partners' proposal and would
continue to pursue the refinancing alternative.
On May 23, 1997, a representative of CIBC Wood Gundy contacted Fremont
Partners and stated that the Company had received and was reviewing an
acquisition proposal from a third party and was willing to reconsider an
acquisition proposal from Fremont Partners. CIBC Wood Gundy indicated that the
refinancing transaction remained an alternative that was also under active
consideration. Fremont Partners commenced a series of discussions and meetings
with the Company's senior and operating management and Kerr's advisors that
culminated in a letter to Mr. Strickland, dated June 10, 1997 that proposed a
Fremont Partners acquisition of all Common Stock at a price of $4.50 per share.
The Company and its advisors responded to this proposal by asking Fremont
Partners to clear all due diligence issues and to resubmit its letter as a
formal offer with a marked-up purchase contract provided by counsel to the
Company by no later than June 16, 1997. Fremont Partners accelerated its already
commenced full due diligence review and prepared a final proposal, including a
contract mark-up, which Fremont Partners submitted to CIBC Wood Gundy, in
accordance with CIBC Wood Gundy's instructions, on June 16, 1997. The proposal
provided for, among other things, a tender offer for all outstanding shares of
Common Stock and Series D Preferred Shares at $4.50 per share and $8.50 per
share, respectively, to be followed by a back-end merger at the same price. The
proposal provided for an option for a number of newly issued shares of Common
Stock equal to approximately 19.9% of the then-outstanding shares of Common
Stock at an exercise price equal to the price to be paid for the Common Stock in
the tender offer, to be exercisable in certain circumstances, and for a
termination fee, payable in certain circumstances, of $5 million, plus expenses
not to exceed $1.5 million.
Fremont Partners and its legal counsel held a number of discussions over the
telephone with the Company and its advisors and counsel in the days following
June 16 to negotiate the terms of the proposed acquisition, including various
contractual provisions. On June 25, a member of the Company's Executive
Committee telephoned a representative of Fremont Partners and stated that the
Company was prepared to work with Fremont Partners toward the signing of a
definitive agreement and to recommend Fremont Partners' proposal to the
Company's Board of Directors, subject to resolution of a number of contractual
issues and subject to Fremont Partners' agreeing to pay $5.90 per share for the
Common Stock and $14.50 per share for the Series D Preferred Shares. Fremont
Partners and the Company and the Company's advisors negotiated over the next
several days to resolve the open issues including the price differential, the
amount of the termination fee and the circumstances under which the termination
fee would become payable and the Option would become exercisable.
At a meeting of the Board of Directors of the Company held on June 30, 1997,
the Board of Directors unanimously approved the Merger Agreement, the Offer and
the Merger and determined that the terms of the Offer and the Merger are fair
to, and in the best interests of, the holders of both the Common Stock and the
Series D Preferred Shares, and unanimously recommend that stockholders of the
Company accept the Offer and tender their Shares. On June 30, 1997, CIBC Wood
Gundy delivered to the Company's Board of Directors its opinion to the effect
that, based on the assumptions, limited procedures and matters referred to
therein, the consideration to be received by the holders of Common Stock, on the
one hand, and the Series D Preferred Shares, on the other, pursuant to the Offer
and under the terms of the Merger Agreement, is fair to such holders (other than
Fremont or any other subsidiary of Fremont), from a financial point of view. The
written opinion of CIBC Wood Gundy is set forth in full as an exhibit to the
20
<PAGE>
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 July 1, 1997, Fremont,
the Purchaser and the Company executed and delivered the Merger Agreement, and
the parties thereto executed the Option Agreement and Guarantee.
On July 8, 1997, the Purchaser and Fremont commenced the Offer.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Fremont 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
Fremont of all the outstanding Shares.
If the Merger is consummated, Fremont's common equity interest in the
Company would increase to 100% and Fremont 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, Fremont will also bear the risk of 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.
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
44% over the closing market price of the Common Stock and 25% over the closing
market price of the Series D Preferred Shares on the last full trading day prior
to the initial public announcement that the Company was engaged in discussions
with several third parties regarding a possible sale of the Company, and a more
substantial premium over recent historical trading prices. In addition, the
Company has informed the Purchaser that, since March 7, 1997 (following the
expiration of waivers previously granted beginning in September 1995), the
Company has been in default of several covenants under loan agreements related
to its $50,900,000 of unsecured debt, including, currently, covenants related to
current ratio, leverage ratio, interest coverage, net worth and negative pledge
covenants. Moreover, the Company's failure to pay a note in the principal amount
of $5,856,000, which matured on March 7, 1997, constituted a default under such
loan agreements. Pursuant to a letter dated June 10, 1997, the holders of the
Company's $50,900,000 unsecured debt agreed not to accelerate before July 3,
1997 in exchange for the current payment of interest on a monthly basis at the
default rate of interest and a fee in the amount of $500,000, $150,000 of which
was credited to the "make-whole" payment due to such holders upon a prepayment.
MERGER AGREEMENT.
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 9 of this Offer to Purchase.
21
<PAGE>
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 Merger Agreement provides that,
without the written consent of the Company, the Purchaser will not (i) decrease
the Common Per Share Amount or the Series D Per Share Amount, (ii) decrease the
number of Shares sought in the Offer, (iii) amend or waive satisfaction of the
Minimum Condition, or (iv) impose additional conditions of the Offer in any
manner adverse to the holders of Shares, except that if on the initial scheduled
Expiration Date 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. The Merger Agreement provides that if, immediately prior to the
Expiration Date, as it may be extended, the Shares tendered and not withdrawn
pursuant to the Offer equal less than 90% of the outstanding Common Stock or
Series D Preferred Shares, the Purchaser may extend the Offer for a period not
to exceed 5 business days, so long as the Purchaser expressly irrevocably waives
any condition (other than the Minimum Condition) that subsequently may not be
satisfied during such extension of the Offer.
THE MERGER. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, at the Effective
Time the Purchaser shall be merged with and into the Company and, as a result of
the Merger, the separate corporate existence of the Purchaser shall cease and
the Company shall continue as the surviving corporation (sometimes referred to
as the "Surviving Corporation").
The respective obligations of Fremont 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) Fremont 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 Fremont'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; and (iii) no statute, rule or regulation judgment,
writ, decree, order or injunction 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.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by the Company as treasury stock, any Shares
owned by Fremont, the Purchaser or any Shares which are held by stockholders
properly exercising dissenters' rights under Delaware law) will be converted
into the right to receive the Common Per Share Amount or the Series D Per Share
Amount, as the case may be, paid pursuant to the Offer and (ii) each issued and
outstanding share of the common stock, par value $.01 per share, of the
Purchaser will be converted into one share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the purchase by the Purchaser of any Shares pursuant to the Offer,
Fremont shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company's Board of Directors as will give Fremont
representation on the Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the
Company's Board of Directors (giving effect to the directors designated by
Fremont and including directors serving as officers of the Company) multiplied
by the percentage that the number of Shares beneficially owned by the Purchaser
or any of its affiliates (including Shares as are accepted for payment pursuant
to the Offer, but excluding Shares held by the Company) bears to the number of
Shares outstanding. The Company will, upon request of the Purchaser, promptly
increase the size of the Board of Directors or use its best efforts to secure
the resignations of such number of its incumbent directors as is necessary to
enable Fremont's designees to be elected to the Company's Board of Directors,
provided that (i) in the event that Fremont's designees are appointed or
22
<PAGE>
elected to the Company's Board of Directors, until the Effective Time the
Company's Board of Directors will have at least one director who is a director
as of the date of the execution of the Merger Agreement and who is neither an
officer of the Company nor a designee, stockholder, affiliate or associate
(within the meaning of Federal securities laws) of Fremont (one or more of such
directors, the "Independent Directors") and (ii) if no Independent Directors
remain, the other directors will designate one person to fill one of the
vacancies 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 Fremont's designees
to the Company's Board of Directors is subject to compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder.
STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its stockholders 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 the Merger Agreement. The
Merger Agreement provides that the Company will, if required by applicable law
in order to consummate the Merger, prepare and file with the Commission a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and use its best efforts (i) to obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as hereinafter
defined) and, after consultation with Fremont, to respond promptly to any
comments made by the Commission 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 Fremont
and its counsel and (ii) to obtain the necessary approvals of the Merger and the
Merger Agreement by its Stockholders. If the Purchaser acquires at least a
majority of the outstanding shares of Common Stock, the Purchaser will have
sufficient voting power to approve the Merger, even if no other stockholder
votes in favor of the Merger. The Company has agreed to include in the Proxy
Statement the recommendation of the Company's Board of Directors that
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of the Merger Agreement.
The Merger Agreement provides that in the event that Fremont or the
Purchaser acquires at least 90% of outstanding shares of Common Stock and Series
D Preferred Shares, respectively, pursuant to the Offer or otherwise, Fremont,
the Purchaser and the Company will, at the request of Fremont and subject to the
terms of the Merger Agreement, 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 Delaware law.
OPTIONS. Pursuant to the Merger Agreement, at the Effective Time, the
Company will use reasonable efforts (without incurring any liability in
connection therewith) to provide that (i) each then-outstanding option to
purchase shares of Common Stock (the "Options") granted under any of the
Company's 1984 Stock Option Plan, 1987 Stock Option Plan, 1993 Stock Option
Plan, 1988 Non-Employee Directors Plan or 1993 Non-Employee Director Plan, each
as amended (collectively, the "Option Plans"), whether or not then exercisable
or vested, shall be cancelled and in consideration therefor will receive an
amount in cash equal to the product of (A) the difference between the Common Per
Share Amount and the per share exercise price of such Option and (B) the number
of Shares subject to such Option (such amount, the "Option Price"). The Company
will obtain all necessary consents or releases from holders of the Options to
effect the foregoing. Upon receipt of the Option Price, the Option will be
cancelled. The surrender of an Option to the Company will be deemed a release of
any and all rights a holder had or may have had in respect of such Option.
Except as may be otherwise agreed to by Fremont or the Purchaser and the
Company, the Company (i) shall cause the Option Plans to terminate as of the
Effective Time, and (ii) following the Effective Time, shall take all actions
necessary to ensure that no holder of Options or any
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<PAGE>
participant in the Option Plans shall have any right thereunder to acquire any
equity securities of the Company, the Surviving Corporation or any subsidiary
thereof.
INTERIM OPERATIONS; COVENANTS. Pursuant to the Merger Agreement, the
Company has agreed that, except as expressly contemplated or provided by the
Merger Agreement or the Option Agreement or agreed to in writing by Fremont,
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 reasonable best 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 Options or other rights to purchase shares of
Common Stock pursuant to the Option Plans outstanding on the date of the Merger
Agreement or upon exercise of outstanding warrants or conversion of outstanding
Series D Preferred Shares; (ii) amend its Certificate 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, other
than Shares reserved for issuance on the date of the Merger Agreement pursuant
to the exercise of warrants or Options outstanding on the date of the Merger
Agreement or upon the conversion of Series D Preferred Shares; (iii) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any assets, or
incur any indebtedness or other liability other than in the ordinary course of
business, or mortgage, pledge or encumber any assets or modify any indebtedness;
(iv) redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; (v) grant any increase in the compensation payable or to become
payable by the Company to any of its executive officers 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 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 Fremont except in
the ordinary course of business and consistent with past practice unless the
Company shall have obtained a comparable replacement policy; (viii) enter into
any material contract or material transaction relating to the purchase of assets
other than in the ordinary course of business; assume, guarantee or become
liable for the obligations of any person, except in the ordinary course of
business and consistent with past practice; (ix) 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; (x) make any loans, advances or capital contributions to or
investments in any other person; 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 except for borrowings under the
Company's existing credit facility in the ordinary course of business and
consistent with past practice; (xi) 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; (xii) adopt a plan of liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company (other than the Merger); (xiii) 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
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ability to consummate the Merger or materially delays such consummation; (xiv)
redeem the Rights or terminate, amend or modify the Rights Plan prior to the
consummation of the Offer; (xv) 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 (xvi) 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.
Pursuant to the Merger Agreement, the Purchaser has agreed that, promptly
following the consummation of the Offer, the Purchaser will join with the
defendants in the action entitled KUPFERBERG V. NORIAN, ET AL. (Del. Ch. Civ.
Act. No. 12709) in a motion to dismiss or withdraw such action with prejudice,
and will not assert or permit the Company to assert any claim against the
defendants thereunder relating to the subject matter thereof.
NO SOLICITATION. Pursuant to 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 Takeover Proposal (as defined below) or the possibility
or consideration of making a Takeover Proposal ("Takeover Proposal Interest")
indicating, in connection with such notice, the name of the Person (as defined
in the Merger Agreement) indicating such Takeover Proposal Interest and the
terms and conditions of any proposals or offers. In addition, 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 Takeover Proposal Interest and
that it will keep Fremont informed, on a current basis, on the status and terms
of any Takeover Proposal Interest. In addition, pursuant to the Merger
Agreement, the Company has agreed that the Company will not (and the Company
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 Takeover Proposal, (ii) enter into any
agreement with respect to any Takeover Proposal, or in the event of an
unsolicited written Takeover Proposal for the Company engage in negotiations or
discussion with, or provide information or data to, any Person (other than
Fremont, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company) relating to any
Takeover 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, after receiving advice from outside
counsel, is required under applicable law. A "Takeover 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.
Notwithstanding the foregoing, prior to the acceptance of Shares pursuant to
the Offer, the Company may furnish information concerning its business to any
Person pursuant to confidentiality agreements and negotiate a Takeover 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 Company's
Board of Directors
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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 would create a
reasonable possibility of a breach of the fiduciary duties of the Company's
Board of Directors to the Company's stockholders under applicable law (a
Takeover Proposal which satisfied clauses (a) and (b), a "Superior Proposal").
Within two business days following receipt by the Company of a Superior
Proposal, the Company must notify Fremont of the receipt thereof. The Company
must then provide Fremont any material nonpublic information regarding the
Company provided to the other party which was not provided to Fremont. At any
time after two business days following notification to Fremont 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, 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 Takeover Proposal, (ii) enter into any
agreement with respect to any Takeover Proposal or (iii) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Fremont 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 five 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, fiduciary, 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
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 to provide the maximum coverage then available at an
annual premium equal to 200% of such rate.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Fremont and the
Purchaser with respect to, among other things, its organization, capitalization,
authority relative to the Merger, 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, its rights plan, information in the
Proxy Statement and the absence of any material adverse effect on the Company
since December 31, 1996. 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 modified its relationship
with the Company.
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TERMINATION; FEES. The Merger Agreement may be terminated and the
transactions contemplated therein abandoned at any time prior to the Effective
Time, whether before or after approval of the stockholders of the Company, (a)
by mutual written consent of Fremont and the Company; (b) by either the Company
or Fremont if there is a material breach by the other, which breach cannot or
has not been cured within 10 days of receipt of notice thereof; (c) by Fremont
if (i) the Company's Board of Directors withdraws, modifies or changes its
recommendation in respect of the Merger Agreement in a manner adverse to
Fremont; (ii) subject to the "No Solicitation" provision, if (X) the Company's
Board of Directors recommends any proposal other than Fremont's proposal in
respect of a Takeover Proposal, (Y) the Company continues discussions with a
third party concerning a Takeover Proposal for more than 20 business days after
the receipt thereof, or (Z) a Takeover Proposal containing a proposed price is
commenced or made public and the Company does not reject such Takeover Proposal
within 20 business days of its receipt, or if sooner, the date its existence
first becomes publicly disclosed; and (iii) if any person other than Gabelli
Funds, Inc. and its affiliates acquires beneficial ownership of at least 15% of
the outstanding Common Stock; (d) by the Company in order to allow it to enter
into a transaction with a third party, which transaction the Company's Board of
Directors has determined is more favorable to the Company's stockholders than
the proposed transaction with Fremont, PROVIDED, that the Company gives notice
thereof and it makes simultaneous payment to Fremont of the Termination Fee and
reimbursement of expenses (as discussed below); (e) by Fremont if (i) the Offer
shall have expired or been terminated without any Shares being purchased
thereunder by the Purchaser as the result of the occurrence of any of the
conditions set forth in Annex I to the Merger Agreement or (ii) 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 would give rise to the failure of a condition set forth
in paragraphs (d) or (e) of Annex I to the Merger Agreement and such breach
cannot or has not been cured within 10 days of receipt of notice thereof; (f) by
either the Company or Fremont if a court of competent jurisdiction or
governmental entity shall have issued an order, decree or ruling or taken any
other actions, in each case permanently enjoining, restraining or otherwise
prohibiting the Offer, the Merger and the transaction contemplated by the Merger
Agreement; or (g) by either the Company or Fremont if, without any material
breach on its respective part, the purchase of Shares pursuant to the Offer
shall not have occurred on or before 120 days from the date of the Merger
Agreement.
In accordance with the Merger Agreement, if (A) Fremont shall have
terminated the Merger Agreement pursuant to the foregoing clauses, (c)(i) or
(c)(ii)(X); or (B)(i) if Fremont shall have terminated the Merger Agreement
pursuant to the foregoing clauses (c)(ii)(Y), (c)(ii)(Z), (c)(iii) or (e)(ii)
and (2) within 18 months of any such termination the Company shall have entered
into a definitive agreement with respect to a Takeover Proposal or a Takeover
Proposal with respect to the Company shall have been consummated; or (C) the
Company shall have terminated the Merger Agreement pursuant to the foregoing
clause (d), then in either case the Company shall pay simultaneously with such
termination pursuant to clause (d) and promptly, but in no event later than two
business days after the date of such termination or event if pursuant to clauses
(c) or (e)(ii), to Fremont a termination fee (the "Termination Fee") of
$2,000,000 plus an amount, not in excess of $1,500,000, equal to Fremont's
actual and reasonably documented reasonable out-of-pocket expenses incurred by
Fremont and the Purchaser in connection with the Offer, the Merger, the Merger
Agreement and the consummation of the transactions contemplated thereby, which
amount shall be payable by wire transfer.
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 an exhibit 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 9 of this Offer to Purchase.
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As a condition and inducement to Fremont's and Purchaser's entering into the
Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Fremont and the Company have entered into an Option Agreement, dated
July 1, 1997, pursuant to which, among another things, the Company has granted
Fremont an irrevocable option to purchase up to 782,685 (approximately 19.9%)
newly issued shares of Common Stock at $5.40 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 Fremont or any of its affiliates (i)
commences a bona fide tender offer or exchange offer for any shares of Common
Stock, the consummation of which would result in beneficial ownership by such
third party (together with its affiliates and associates) of 15% or more of the
then outstanding Common Stock (either on a primary or fully diluted basis); (ii)
acquires beneficial ownership of 15% of the Common Stock, other than the Gabelli
Funds, Inc. and its affiliates; (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 Fremont to terminate the Merger Agreement has
occurred (but without the necessity of Fremont 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 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 Fremont will receive upon exercise of the Option the number
and class of shares or other securities or property that Fremont 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 Fremont or one of its subsidiaries, and is not the continuing
or surviving corporation, (ii) to permit any person, other than Fremont or one
of its subsidiaries, to merge into the Company, and the Company is not 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 then outstanding shares of Common Stock after such merger represent
less than 50% of the corporation or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Fremont or one of its
subsidiaries, then, in each case, proper provision must be made in such
governing agreements so that Fremont will receive upon exercise of the Option
the number and class of shares or other securities or property that Fremont
would have received in respect of any Common Stock if the Option had been
exercised immediately prior to such transaction.
In addition, the Total Profit (as defined below) that Fremont may make upon
the exercise of the Option is capped at $1,000,000. Total Profit means the
aggregate amount (before taxes) of the following: (i)(x) the net cash amounts
received by Fremont pursuant to the sale of Option Shares (or any securities
into which such Option Shares are converted or exchanged) to any unaffiliated
party, less (y) Fremont's purchase price of such Option Shares and (ii) any
Notional Total Profit, which is, with respect to any number of shares as to
which Fremont may propose to exercise the Option, the Total Profit determined as
of the date of such proposal assuming that the Option were exercised on such
date for such number of shares and assuming that such shares, together with all
other shares of Common Stock held by Fremont and its affiliates as of such date,
were sold for cash at the closing market price for the Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions).
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The Option Agreement terminates, and the Option expires, on the earlier of
(i) the Effective Time and (ii) to the extent that a notice to exercise the
Option has not theretofore been given by Fremont, six months after termination
of the Merger Agreement.
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 an exhibit 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
9 of this Offer to Purchase.
As a condition and inducement to the Company's entering 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
Fremont 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, Fremont or
any of its affiliates of any Shares pursuant to the Offer.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
PLANS FOR THE COMPANY.
Fremont 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,
Fremont 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, Fremont has the right to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as is equal to the product of the total number of directors on the
Company's Board of Directors (giving effect to the directors designated by
Fremont) multiplied by the percentage that the number of Shares beneficially
owned by the Purchaser or any affiliate of the Purchaser (including such Shares
as are accepted for payment pursuant to the Offer) bears to the total number of
Shares then outstanding. See Section 11. 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 Fremont 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
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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
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 Fremont will vote, or cause to be voted, all of the
Shares then owned by Fremont, the Purchaser or any of Fremont's other
subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of the Merger Agreement. In the event that Fremont, the Purchaser and
Fremont'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 Fremont, the Purchaser and any other subsidiaries of Fremont acquire in the
aggregate at least 90% of the outstanding shares of Common Stock and at least
90% of the outstanding Series D Preferred Shares, pursuant to the Offer or
otherwise, then, at the election of Fremont, a short-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 Fremont and the Purchaser do not own 90% of the outstanding shares
of Common Stock and 90% of the outstanding Series D Preferred Shares following
consummation of the Offer, Fremont 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.
Fremont 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
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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, 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; (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, 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 become an Interested 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, the restrictions described above also do not apply to certain Business
Combinations proposed by an Interested Stockholder following the announcement or
notification or 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 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 which 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
31
<PAGE>
could be based upon factors other than, or in addition to, the price per share
of Common Stock or of Series D Preferred Shares, 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 of Common Stock or Series D Preferred
Shares 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.
13. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Merger Agreement provides that, prior to the time
the designees of Fremont have been elected to, and constitute a majority of, the
Board of Directors of the Company, without the prior written consent of Fremont,
(i) the Company will not, directly or indirectly, (A) except upon exercise of
stock options or other rights to purchase shares of Common Stock pursuant to the
Option Plans outstanding on the date of the Merger Agreement or upon exercise of
outstanding warrants or conversion of outstanding Series D Preferred Shares,
issue, sell, transfer or pledge or agree to sell, transfer or pledge any
treasury stock of the Company; (B) amend its Certificate of Incorporation or
by-laws or similar organizational documents; or (C) split, combine or reclassify
the outstanding Shares; and (ii) the Company shall not (A) declare, set aside or
pay any dividend or other distribution payable in cash, stock or property with
respect to its capital stock; (B) 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, other than Shares reserved
for issuance on the date of the Merger Agreement pursuant to the exercise of
warrants or options outstanding on such date or upon conversion of the Series D
Preferred Shares; (C) transfer, lease, license, sell or dispose of any assets,
or incur any indebtedness or other liability 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 (D) 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 (subject to any such rules or regulations) may delay
the acceptance for payment of any tendered Shares, and (except as provided in
the Merger Agreement) may terminate or amend the Offer as to any Shares not then
paid for, if (i) any applicable waiting period
32
<PAGE>
under the HSR Act has not expired or terminated, (ii) the Minimum Condition has
not been satisfied, or (iii) at any time after the date of the Merger Agreement
and before the time of acceptance for payment for any such Shares (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any of the following conditions exist:
(a) there shall be pending in effect an injunction or other order,
decree, judgment or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission of competent
jurisdiction or a statute, rule, regulation, executive order or other action
shall have been promulgated, enacted, taken or threatened by a governmental
authority or a governmental, regulatory or administrative agency or
commission of competent jurisdiction which in any such case (i) restrains or
prohibits the making or consummation of the Offer or the consummation of the
Merger, (ii) prohibits or restricts the ownership or operation by the
Purchaser (or any of its affiliates or subsidiaries) or any portion of its
or the Company's business or assets which is material to the business of all
such entities taken as a whole or compels the Purchaser (or any of its
affiliates or subsidiaries) to dispose of or hold separate any portion of
its or the Company's business or assets which is material to the business of
all such entities taken as a whole, (iii) imposes material limitations on
the ability of the Purchaser effectively to acquire or to hold or to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by the Purchaser on all
matters properly presented to the stockholders of the Company, (iv) imposes
any material limitations on the ability of the Purchaser or any of their
respective affiliates or subsidiaries effectively to control in any material
respect the business and operations of the Company; or
(b) the Merger Agreement shall have been terminated by the Company or
the Purchaser in accordance with its terms; or
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter 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 this Agreement, a material acceleration or worsening thereof;
or
(d) 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 Expiration Date (without giving effect to any materiality
qualification or standard contained in any such representations and
warranties); or
(e) 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 effect to
any materiality qualification or standard contained in any such agreements
or covenants); or
(f) the Purchaser shall have failed to receive a certificate executed by
the President or a Vice President of the Company, dated as of the Expiration
Date, to the effect that the conditions set forth in paragraphs (d) and (e)
of Annex I have not occurred; or
33
<PAGE>
(g) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, reasonably likely to result in any
change) that constitutes a Material Adverse Effect; or
(h) any person (other than the Gabelli Funds, Inc. and its affiliates
and associates) acquires beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act), of at least 15% of the outstanding
Common Stock.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances (including any
action or inaction by the Purchaser) giving rise to any such conditions and may
be waived by the Purchaser in whole or in part at any time and from time to
time, in each case, in the exercise of the good faith judgment of the Purchaser
and subject to the terms of this Agreement. The failure by the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such time, in each case, in the exercise of the good faith judgment of the
Purchaser and subject to the terms of this Agreement. The failure by 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 Fremont 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 Fremont 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 conducts business in a number of other
states throughout the United States, some of which have enacted takeover laws
and regulations. Neither Fremont 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
Fremont 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 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.
34
<PAGE>
ANTITRUST. The Purchaser has determined that a Pre-Merger Notification
under the HSR Act is not required with respect to the Offer and the Merger.
Nevertheless, the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") frequently
scrutinize the legality under the antitrust laws of transactions such as the
Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any
time before or after the Purchaser's acquisition of Shares, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture
of Shares acquired by the Purchaser or divestiture of substantial assets of
Fremont or its subsidiaries. Private parties, as well as state governments, may
also bring legal action under the antitrust laws under certain circumstances.
Based upon an examination of publicly available information relating to the
businesses in which Fremont and the Company are engaged, Fremont and the
Purchaser believe that the acquisition of Shares by the Purchaser will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer or other acquisition of Shares by the Purchaser on
antitrust grounds will not be made or, if such a challenge is made, of the
result. See Section 14 for certain conditions to the Offer, including conditions
with respect to litigation and certain governmental actions.
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.
16. FEES AND EXPENSES.
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and Boston EquiServe, L.P. 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.
35
<PAGE>
No person has been authorized to give any information or to make any
representation on behalf of Fremont 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.
The Purchaser and Fremont 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 8 of
this Offer to Purchase (except that they will not be available at the regional
offices of the Commission).
KERR ACQUISITION CORPORATION
July 8, 1997
36
<PAGE>
SCHEDULE I
GENERAL PARTNERS, MANAGING MEMBERS,
DIRECTORS AND EXECUTIVE OFFICERS
OF
KERR ACQUISITION CORPORATION,
FREMONT ACQUISITION COMPANY, LLC,
FREMONT PARTNERS, L.P.,
FP ADVISORS, L.L.C.,
FREMONT GROUP, L.L.C. AND
FREMONT INVESTORS, INC.
1. KERR ACQUISITION CORPORATION. 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 the Purchaser. 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.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
<S> <C>
G. H. Lamphere Director of the Purchaser and President of the Purchaser and Fremont from
formation; Managing Director and Director of The Fremont Group, Fremont
Investors and Sequoia Ventures Inc. ("Sequoia") since 1994; Director and
Chairman of Illinois Central Corporation; Co-Chairman and Chief Executive
Officer of the Noel Group prior to 1994; Chairman and Chief Executive
Officer of the Prospect Group (1990-1994); Director of Recognition
International, Inc. (1990-1995); Cleveland-Cliffs, Inc. (1991-1994); R.P.
Scherer Corporation (1991-1995); Global Natural Resources Corporation
(resigned 1994); Belding Heminway Company, 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 Director of the Purchaser and Vice President and Treasurer of the Purchaser
and Fremont from formation; Principal of The Fremont Group since 1995;
Director and Associate of The Bridgeford Group from 1992 through 1995.
R. S. Kopf Director of the Purchaser and Vice President and Secretary of the Purchaser
and Fremont from formation; Managing Principal, General Counsel and
Secretary of The Fremont Group, Fremont Investors and Sequoia since 1988;
General Counsel, Secretary and Director of Bechtel International
Constructors, Inc. since 1988; Vice President, General Counsel and
Secretary of HLQ Corp. since 1987; Vice President, General Counsel,
Secretary and Director of Offshore Bechtel Exploration Corporation since
1988.
</TABLE>
1
<PAGE>
2. 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 HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
<S> <C>
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 See Part 1 of this Schedule I.
</TABLE>
3. 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
NAME AND ADDRESS DURING THE PAST FIVE YEARS
<S> <C>
FP Advisors, L.L.C. Not Applicable.
</TABLE>
4. 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
NAME AND ADDRESS DURING THE PAST FIVE YEARS
<S> <C>
Fremont Group, L.L.C. Not Applicable.
</TABLE>
5. 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 HELD DURING
NAME AND ADDRESS THE PAST FIVE YEARS
<S> <C>
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 from 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
Advisors, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING
NAME AND ADDRESS THE PAST FIVE YEARS
<S> <C>
G. P. Shultz Director of The Fremont Group, Fremont Investors and Sequoia; Director and
Senior Counselor of Bechtel Group, Inc.; Professor of International
Economics at Stanford 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 Lane, 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.
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 1 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>
6. 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.
4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME AND ADDRESS DURING THE PAST FIVE YEARS
- ------------------------------------------------------------------------- ---------------------------------------
<S> <C>
A. M. Dachs.............................................................. See Part 5 of this Schedule I.
S. D. Bechtel, Jr........................................................ See Part 5 of this Schedule I.
Richard E. Cavanagh...................................................... See Part 5 of this Schedule I.
H. J. Haynes............................................................. See Part 5 of this Schedule I.
C. W. Hull............................................................... See Part 5 of this Schedule I.
R. Jaunich II............................................................ See Part 5 of this Schedule I.
G. H. Lamphere........................................................... See Part 1 of this Schedule I.
D. L. Redo............................................................... See Part 5 of this Schedule I.
G. P. Shultz............................................................. See Part 5 of this Schedule I.
J. W. Weiser............................................................. See Part 5 of this Schedule I.
J. D. Mahaffey........................................................... See Part 5 of this Schedule I.
J. S. Higgins............................................................ See Part 5 of this Schedule I.
R. S. Kopf............................................................... See Part 1 of this Schedule I.
D. W. Aronson............................................................ See Part 5 of this Schedule I.
</TABLE>
5
<PAGE>
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:
The Depositary for the Offer is:
BOSTON EQUISERVE, L.P.
<TABLE>
<CAPTION>
<S> <C> <C>
BY MAIL: BY HAND: BY POSTAL EXPRESS
Boston EquiServe, L.P. BankBoston, N.A. OR OVERNIGHT COURIER:
Corporate Reorganization Securities Transfer & BankBoston, N.A.
Post Office Box 2089 Reporting Services Inc. Boston EquiServe L.P.
Boston, MA 02266-2089 55 Broadway, 3rd Floor Corporate Reorganization
New York, NY 10006 150 Royall Street
Attn: Delivery Window Mail Stop 45-02-53
Canton, MA 02021
</TABLE>
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 location 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:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
Call Toll-Free (800) 322-2885
6
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
KERR GROUP, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 8, 1997
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
BOSTON EQUISERVE, L.P.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY POSTAL EXPRESS OR
Boston EquiServe, L.P. BankBoston, N.A. OVERNIGHT COURIER:
Corporate Securities Transfer & BankBoston, N.A.
Reorganization Reporting Services, Inc. Boston EquiServe, L.P.
Post Office Box 2089 55 Broadway, 3rd Floor Corporate
Boston, MA 02266-2089 New York, NY 10006 Reorganization
Attn: Delivery Window 150 Royall Street
Mail Stop 45-02-53
Canton, MA 02021
</TABLE>
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.
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 Depository.
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.
<PAGE>
/ / 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 ____________________________________________________
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK SHARES TENDERED
- ------------------------------------------------------------------------------------------
NAME(S) AND
ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN, IF
BLANK, EXACTLY
AS NAME(S) APPEAR(S)
ON SHARE SHARE CERTIFICATE(S) AND SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE SHARES
CERTIFICATE EVIDENCED BY SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL SHARES:
- -------------------------------------------------------------------------------------------
* 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.
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
/ / 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.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition
Company, LLC, a Delaware limited liability company ("Parent"), the
above-described shares of Common Stock, par value $.50 per share (the "Common
Stock"), including the associated rights to purchase shares of preferred stock,
issued pursuant to the Rights Agreement (as defined below) (the "Rights"
together with the Common Stock, the "Shares") pursuant to the Offeror's offer to
purchase all outstanding Shares at a price of $5.40 per share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated July 8, 1997 (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.
Kerr Group, Inc., a Delaware corporation (the "Company"), has distributed
one Right for each outstanding share of Common Stock pursuant to the Rights
Agreement, dated as of July 25, 1995, between the Company and BankBoston, N.A.
(formerly The First National Bank of Boston), as Rights Agent, as amended (the
"Rights Agreement"). The Company has represented in the Merger Agreement (as
defined in the Offer to Purchase) that it has taken all action which may be
necessary under the Rights Agreement so that the execution of the Merger
Agreement and any amendments thereto and the consummation of the transactions
contemplated thereby will not cause (i) Parent and/or the Offeror to become an
Acquiring Person (as defined in the Rights Agreement), (ii) a Distribution Date,
a Stock Acquisition Date or a Trigger Event (as such terms are defined in the
Rights Agreement) to occur, irrespective of the number of Shares acquired
pursuant to the Offer, and (iii) the Rights shall expire upon the acceptance of
Shares for payment 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
<PAGE>
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 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 to Offeror
pursuant to any one of the procedures described in Section 3 of the Offer 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.
<PAGE>
- -------------------------------------------
SPECIAL PAYMENT
INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or Share
Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue check and/or certificate(s) to:
Name: ______________________________________________________________________
PLEASE PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
INCLUDE ZIP CODE
__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail check and/or certificate(s) to:
Name: ______________________________________________________________________
PLEASE PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
INCLUDE ZIP CODE
- -----------------------------------------------------
<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
Tax 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 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 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 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.
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.
<PAGE>
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 Certificate(s) 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 Shares 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 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
<PAGE>
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. TAXPAYER IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income
tax law generally requires that a registered holder whose tendered stock is
accepted for purchase, or such registered holder's assignee (in either case, the
"Payee") provide the Depositary ("the Payor") with a correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Depositary is not
provided with the correct TIN or an adequate basis for an exemption, such Payee
may be subject to a $50 penalty imposed by the Internal Revenue Service and
backup withholding in an amount equal to 31% of the gross proceeds of the
purchase price. If withholding results in an overpayment of taxes, a refund may
be obtained.
To prevent backup withholding, each payee must provide such payee's correct
TIN by completing the "Substitute Form W-9" set forth herein, certifying that
the TIN provided is correct (or that such Payee is awaiting a TIN) and that (i)
the Payee is exempt from backup withholding (ii) the Payee has not been notified
by the Internal Revenue Service that such Payee is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the
Internal Revenue Service has notified the payee that such Payee is no longer
subject to backup withholding.
If the Payee does not have a TIN, such Payee should consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write
"Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and
sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer
Identification Number set forth herein. If the payee does not provide such
payee's TIN to the Payor within 60 days, backup withholding will begin and
continue until such payee furnishes such payee's TIN to the Payor. Note: Writing
"Applied for" on the form means that the payee has already applied for a TIN or
that such Payee intends to apply for one in the near future.
If the Shares are held in more than one name, or is not in the name of the
actual owner, consult the W-9 Guidelines for information on which TIN to report.
Exempt Payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of the Substitute Form W-9. See the W-9
Guidelines for additional instructions. In order for a non-resident alien or
foreign entity to qualify as exempt, such person must substitute a completed
form W-8, "Certificate of Foreign Status", signed under penalty of perjury
attesting to such exempt status. Such forms may be obtained from the Payor.
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.
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PAYER'S NAME: BANKBOSTON, N.A.
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PART I--Taxpayer
SUBSTITUTE Identification Number--For
FORM W-9 all accounts, enter your TIN
Department of the Treasury in the box at right. (For ----------------------------
Internal Revenue Service most individuals, this is SOCIAL SECURITY NUMBER
your social security number. OR
PAYER'S REQUEST FOR TAXPAYER If you do not have a TIN,
IDENTIFICATION NUMBER (TIN) see Obtaining a Number in
the enclosed GUIDELINES.) ----------------------------
Certify by signing and EMPLOYER IDENTIFICATION
dating below. Note: If the NUMBER
account is in more than one
name, see the chart in the (IF AWAITING TIN WRITE
enclosed GUIDELINES to "APPLIED FOR")
determine which number to
give the payer.
<CAPTION>
----------------------------------------------------------
<S> <C> <C>
PART II--For Payees Exempt from backup Withholding, see
the enclosed GUIDELINES and complete as instructed
therein.
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
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.)
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
SIGNATURE DATE ,
199
<CAPTION>
- ----------------------------------------------------------------------------------------
</TABLE>
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 BY THE TIME OF PAYMENT, 31%
OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I
PROVIDE A NUMBER. __________ DATE _____________________________________
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:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
<PAGE>
BANKS AND BROKERS CALL COLLECT (212) 929-5500
ALL OTHERS CALL TOLL FREE: (800) 322-2885
<PAGE>
EXHIBIT (a)(3)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF
$1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
OF
KERR GROUP, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 8, 1997
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
BOSTON EQUISERVE, L.P.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY POSTAL EXPRESS OR
Boston EquiServe, L.P. BankBoston, N.A. OVERNIGHT COURIER:
Corporate Securities Transfer & BankBoston, N.A.
Reorganization Reporting Services, Inc. Boston EquiServe, L.P.
Post Office Box 2089 55 Broadway, 3rd Floor Corporate
Boston, MA 02266-2089 New York, NY 10006 Reorganization
Attn: Delivery Window 150 Royall Street
Mail Stop 45-02-53
Canton, MA 02021
</TABLE>
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.
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.
<PAGE>
/ / 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 ____________________________________________________
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
DESCRIPTION OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED
STOCK, SERIES D SHARES TENDERED
- ------------------------------------------------------------------------------------------
NAME(S) AND
ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN, IF
BLANK, EXACTLY
AS NAME(S) APPEAR(S)
ON SHARE SHARE CERTIFICATE(S) AND SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARE SHARES
CERTIFICATE EVIDENCED BY SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
TOTAL SHARES:
- -------------------------------------------------------------------------------------------
* 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.
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
/ / 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.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Kerr Acquisition Corporation, a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition
Company, LLC, a Delaware limited liability company ("Parent"), the
above-described shares of $1.70 Class B Cumulative Convertible Preferred Stock
Series D, par value $.50 per share (the "Shares") pursuant to the Offeror's
offer to purchase all outstanding Shares at $12.50 per share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated July 8, 1997 (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.
Kerr Group, Inc., a Delaware corporation (the "Company"), has distributed
one Right for each outstanding share of common stock of the Company pursuant to
the Rights Agreement, dated as of July 25, 1995, between the Company and
BankBoston, N.A. (formerly The First National Bank of Boston), as Rights Agent,
as amended (the "Rights Agreement"). The Company has represented in the Merger
Agreement (as defined in the Offer to Purchase) that it has taken all action
which may be necessary under the Rights Agreement so that the execution of the
Merger Agreement and any amendments thereto and the consummation of the
transactions contemplated thereby will not cause (i) Parent and/or the Offeror
to become an Acquiring Person (as defined in the Rights Agreement), (ii) a
Distribution Date, a Stock Acquisition Date or a Trigger Event (as such terms
are defined in the Rights Agreement) to occur, irrespective of the number of
Shares acquired pursuant to the Offer, and (iii) the Rights shall expire upon
the acceptance of Shares for payment 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
<PAGE>
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 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 to Offeror
pursuant to any one of the procedures described in Section 3 of the Offer 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.
<PAGE>
- -------------------------------------------
SPECIAL PAYMENT
INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or Share
Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue check and/or certificate(s) to:
Name: ______________________________________________________________________
PLEASE PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
INCLUDE ZIP CODE
__________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- ------------------------------------------------------
- ------------------------------------------------------
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail check and/or certificate(s) to:
Name: ______________________________________________________________________
PLEASE PRINT
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
INCLUDE ZIP CODE
- -----------------------------------------------------
<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
Tax 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 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 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 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.
<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 Certificate(s) 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.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of and/or Shares 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 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. TAXPAYER IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income
tax law generally requires that a registered holder whose tendered stock is
accepted for purchase, or such registered holder's assignee (in either case, the
"Payee") provide the Depositary ("the Payor") with a correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Depositary is not
provided with the correct TIN or an adequate basis for an exemption, such Payee
may be subject to a $50 penalty imposed by the Internal Revenue Service and
backup withholding in an amount equal to 31% of the gross proceeds of the
purchase price. If withholding results in an overpayment of taxes, a refund may
be obtained.
To prevent backup withholding, each payee must provide such payee's correct
TIN by completing the "Substitute Form W-9" set forth herein, certifying that
the TIN provided is correct (or that such Payee is awaiting a TIN) and that (i)
the Payee is exempt from backup withholding (ii) the Payee has not been notified
by the Internal Revenue Service that such Payee is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the
Internal Revenue Service has notified the payee that such Payee is no longer
subject to backup withholding.
If the Payee does not have a TIN, such Payee should consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write
"Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and
sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer
Identification Number set forth herein. If the payee does not provide such
payee's TIN to the Payor within 60 days, backup withholding will begin and
continue until such payee furnishes such payee's TIN to the Payor. Note: Writing
"Applied for" on the form means that the payee has already applied for a TIN or
that such Payee intends to apply for one in the near future.
If the Shares are held in more than one name, or is not in the name of the
actual owner, consult the W-9 Guidelines for information on which TIN to report.
Exempt Payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of the Substitute Form W-9. See the W-9
Guidelines for additional instructions. In order for a non-resident alien or
foreign entity to quality as exempt, such person must substitute a completed
form W-8, "Certificate of Foreign Status", signed under penalty of perjury
attesting to such exempt status. Such forms may be obtained from the Payor.
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
<PAGE>
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.
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.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PAYER'S NAME: BANKBOSTON, N.A.
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PART I--Taxpayer
SUBSTITUTE Identification Number--For
FORM W-9 all accounts, enter your TIN
Department of the Treasury in the box at right. (For ----------------------------
Internal Revenue Service most individuals, this is SOCIAL SECURITY NUMBER
your social security number. OR
PAYER'S REQUEST FOR TAXPAYER If you do not have a TIN,
IDENTIFICATION NUMBER (TIN) see Obtaining a Number in
the enclosed GUIDELINES.) ----------------------------
Certify by signing and EMPLOYER IDENTIFICATION
dating below. Note: If the NUMBER
account is in more than one
name, see the chart in the (IF AWAITING TIN WRITE
enclosed GUIDELINES to "APPLIED FOR")
determine which number to
give the payer.
<CAPTION>
----------------------------------------------------------
<S> <C> <C>
PART II--For Payees Exempt from backup Withholding, see
the enclosed GUIDELINES and complete as instructed
therein.
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
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.)
<CAPTION>
- ----------------------------------------------------------------------------------------
<S> <C> <C>
SIGNATURE DATE ,
199
<CAPTION>
- ----------------------------------------------------------------------------------------
</TABLE>
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 BY THE TIME OF PAYMENT, 31%
OF ALL REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD UNTIL I
PROVIDE A NUMBER. __________ DATE _____________________________________
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:
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
<PAGE>
BANKS AND BROKERS CALL COLLECT (212) 929-5500
ALL OTHERS CALL TOLL FREE: (800) 322-2885
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
AND
ALL OUTSTANDING SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES D
OF
KERR GROUP, INC.
AT
$5.40 NET PER SHARE OF COMMON STOCK
AND
$12.50 NET PER SHARE OF $1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS EXTENDED.
July 8, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Kerr Acquisition Corporation, a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of Fremont Acquisition
Company, LLC, a Delaware limited liability company (the "Parent"), to act as
Information Agent in connection with the Offeror's offer to purchase all
outstanding shares of common stock, par value $.50 per share, including the
associated rights to purchase shares of preferred stock (the "Rights"), issued
pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group,
Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The
First National Bank of Boston), as amended (the "Rights Agreement") (the Rights
together with the common stock, the "Common Stock") and the shares of $1.70
Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per
share (the "Series D Preferred Shares" and together with the Common Stock, the
"Shares"), of the Company, at a price of $5.40 per share of Common Stock and
$12.50 per share of Series D Preferred Shares, each, 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 July 8, 1997 (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 July 1,
1997, as amended, by and among the 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;
<PAGE>
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 D. Gordon Strickland,
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.
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 MONDAY, AUGUST 4, 1997, 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) and 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 nor 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.
2
<PAGE>
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.
3
<PAGE>
EXHIBIT (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
AND
ALL OUTSTANDING SHARES OF $1.70 CLASS B CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES D
OF
KERR GROUP, INC.
AT
$5.40 NET PER SHARE OF COMMON STOCK
AND $12.50 NET PER SHARE OF $1.70 CLASS B
CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, AUGUST 4, 1997, UNLESS THE
OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated July 8, 1997
(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 Kerr Acquisition Corporation, a Delaware corporation
(the "Offeror") and a wholly owned subsidiary of Fremont Acquisition Company,
LLC, a Delaware limited liability company (the "Parent"), to purchase all
outstanding shares of common stock, par value $0.50 per share, including the
associated rights to purchase shares of preferred stock (the "Rights"), issued
pursuant to the Rights Agreement, dated as of July 25, 1995, between Kerr Group,
Inc., a Delaware corporation (the "Company") and BankBoston, N.A. (formerly The
First National Bank of Boston), as amended (the "Rights Agreement") (the Rights
together with the common stock, the "Common Stock") and the shares of $1.70
Class B Cumulative Convertible Preferred Stock, Series D, par value $.50 per
share (the "Series D Preferred Shares" and together with the Common Stock, the
"Shares") of the Company at a price of $5.40 per share of Common Stock and
$12.50 per share of Series D Preferred Shares, each, 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 July 1, 1997, by and among the Parent, the Offeror and the
Company (the "Merger Agreement"). Also enclosed is the Letter to Stockholders of
the Company from M. Gordon Strickland, 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 $5.40 per share of Common Stock and $12.50 per
share of Series D Preferred Shares, each 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
both the Common Stock and the Series D Preferred Shares 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 Monday, August 4, 1997, 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.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS) AND $1.70 CLASS B
CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
OF
KERR GROUP, INC.
BY
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS L.P.
AN INVESTMENT FUND MANAGED
BY AN AFFILIATE OF
THE FREMONT GROUP
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated July 8, 1997, and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer")
in connection with the offer by Kerr Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a
Delaware limited liability company, to purchase all outstanding shares of common
stock, par value $0.50 per share (the "Common Stock"), including the associated
rights to purchase shares of preferred stock (the "Rights"), issued pursuant to
the Rights Agreement, dated as of July 25, 1995, between Kerr Group, Inc., a
Delaware corporation (the "Company") and BankBoston, N.A. (formerly The First
National Bank of Boston), as amended (the "Rights Agreement") (the "Rights"
together with the Common Stock, the "Common Stock Shares") and the shares of
$1.70 Class B Cumulative Convertible Preferred Stock, par value $.50 per share,
Series D (the "Series D Preferred Shares" and together with the Common Stock
Shares, the "Shares") of the Company.
3
<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.
<TABLE>
<S> <C>
Dated: --------------, 1997 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
- ------- shares of Series D Preferred
Shares*
------------------------------------------
Zip Code
------------------------------------------
Area Code and Telephone Number
------------------------------------------
Taxpayer Identification or Social Security
Number
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
4
<PAGE>
EXHIBIT (a)(6)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
KERR GROUP, INC.
TO
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
(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 of common stock, par value $0.50 per share (the "Common Stock"),
including the associated rights to purchase shares of preferred stock (the
"Rights"), issued pursuant to the Rights Agreement, dated as of July 25, 1995,
between Kerr Group, Inc., a Delaware corporation (the "Company") and BankBoston,
N.A. (formerly The First National Bank of Boston) as Rights Agent, as amended
(the "Rights Agreement")(the Rights together with the Common Stock, the
"Shares"), of the Company, are not immediately available or time will not permit
all required documents to reach Boston EquiServe, L.P., 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:
BOSTON EQUISERVE, L.P.
<TABLE>
<S> <C> <C>
BY POSTAL EXPRESS OR OVERNIGHT
BY MAIL: BY HAND: COURIER:
Boston EquiServe, L.P. BankBoston, N.A. BankBoston, N.A.
Corporate Reorganization Securities Transfer & Boston EquiServe, L.P.
Post Office Box 2089 Reporting Services, Inc. Corporate Reorganization
Boston, MA 02266-2089 55 Broadway, 3rd Floor 150 Royall Street
New York, NY 10006 Mail Stop 45-02-53
Attn: Delivery Window Canton, MA 02021
</TABLE>
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 Kerr Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a
Delaware limited liability company, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated July 8, 1997 (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):
<TABLE>
<S> <C>
Common Stock, par value $.50 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: -------------------------------------
</TABLE>
Check one box if Shares will be delivered by
book-entry transfer:
/ / The Depositary Trust Company
/ / Philadelphia Depositary Trust Company
Account No.:
- ---------------------------------
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 is open for business after the
date hereof.
2
<PAGE>
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.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- Title: --------------------------------------
Address
-------------------------------------------- Name: -------------------------------------
Zip Code Please Type or Print
- -------------------------------------------- Dated: --------------------------------, 199
Area Code and Telephone No. -
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(7)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF
$1.70 CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES D
OF
KERR GROUP, INC.
TO
KERR ACQUISITION CORPORATION
A CORPORATION FORMED AT THE DIRECTION OF
FREMONT PARTNERS
(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 of $1.70 Class B Cumulative Convertible Preferred Stock, Series D, par
value $.50 per share (the "Shares") of Kerr Group, Inc., a Delaware corporation
(the "Company"), are not immediately available or time will not permit all
required documents to reach Boston EquiServe, L.P., 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:
BOSTON EQUISERVE, L.P.
<TABLE>
<S> <C> <C>
BY POSTAL EXPRESS OR
BY MAIL: BY HAND: OVERNIGHT COURIER:
Boston EquiServe, L.P. BankBoston, N.A. BankBoston, N.A.
Corporate Reorganization Securities Transfer & Boston EquiServe, L.P.
Post Office Box 2089 Reporting Services, Inc. Corporate Reorganization
Boston, MA 02266-2089 55 Broadway, 3rd Floor 150 Royall Street
New York, NY 10006 Mail Stop 45-02-53
Attn: Delivery Window Canton, MA 02021
</TABLE>
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 Kerr Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Fremont Acquisition Company, LLC, a
Delaware limited liability company, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated July 8, 1997 (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):
<TABLE>
<S> <C>
$1.70 Class B Cumulative Convertible Name(s) of Record Holder(s)
Preferred Shares, Series D, par value $.50
Certificate Nos.
- ----------------------------- --------------------------------------------
Number of Shares Tendered
- ---------------- / /
--------------------------------------------
Please Type or Print
--------------------------------------------
Address(es): --------------------------------
--------------------------------------------
Zip Code
Area Code and Tel. No.: ---------------------
Signature(s):
--------------------------------
Dated: -------------------------------------
</TABLE>
Check one box if Shares will be delivered by
book-entry transfer:
/ / The Depositary Trust Company
/ / Philadelphia Depositary Trust Company
Account No.:
- ----------------------------
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 is open for business after the
date hereof.
2
<PAGE>
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.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- Title: --------------------------------------
Address
-------------------------------------------- Name: -------------------------------------
Zip Code Please Type or Print
- -------------------------------------------- Dated: --------------------------------, 199
Area Code and Telephone No. -
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(8)
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 GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<C> <S> <C> <C> <C> <C>
- ------------------------------------------------------------- -------------------------------------------------------------
1. An individual's account The individual 8. Sole proprietorship The owner(4)
account
2. Two or more individuals The actual owner of the 9. A valid trust, estate, The legal entity (do not
(joint account) account or, if combined or pension trust furnish the identifying
funds, the first number of the personal
individual on the representative or
account(1) trustee unless the legal
entity itself is not
designated in the
account title)(5)
3. Husband wife (joint The actual owner of the 10. Corporate account The corporation
account) account or, if joint
funds, either person (1)
4. Custodian account of a The minor (2) 11. Religious, charitable, The organization
minor (Uniform Gift to or educational
Minors Act) organization account
5. Adult and minor (joint The adult or, if the 12. Partnership account held The partnership
account) minor is the only in the name of the
contributor, the business
minor(1)
6. Account in the name of The ward, minor, or 13. Association, club, or The organization
guardian or committee incompetent person(3) other tax-exempt
for a designated ward, organization
minor, or incompetent
person
7. a. A revocable savings The grantor-trustee(1) 14. A broker or registered The broker or nominee
trust account (in nominee
which grantor is
also trustee)
b. Any "trust" account The actual owner(1) 15. Account with the The public entity
that is not a legal Department of
or valid trust under Agriculture in the name
State law of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
<CAPTION>
- ------------------------------------------------------------- -------------------------------------------------------------
</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 entitites), for 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), or 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
politial 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.
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
reason-able 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.
- --------------------------
* Unless otherwise noted herein, all references below to section numbers or to
regulations are references to the Internal Revenue Code and the regulation
promulgated thereunder.
<PAGE>
EXHIBIT (a)(9)
[KERR GROUP, INC. LOGO OMITTED]
500 New Holland Avenue
Lancaster, PA
17602-2104
(717) 299-6511
FOR IMMEDIATE RELEASE
--------------------------
FREMONT PARTNERS TO ACQUIRE KERR GROUP, INC.
-----------------------------------------------------
LANCASTER, PENNSYLVANIA (July 1, 1997) -- Fremont Partners ("Fremont") and
Kerr Group, Inc. (NYSE:KGM) jointly announced that they have signed a definitive
merger agreement for Fremont to acquire all of the outstanding common and
preferred shares of Kerr. Pursuant to the agreement, Fremont will pay $5.40 per
share for each outstanding share of Kerr common stock and $12.50 per share for
each outstanding share of Kerr Class B Cumulative Convertible Preferred Stock,
Series D. Kerr currently has 3,933,095 shares of common stock and 487,400 shares
of preferred 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 Kerr's Board of Directors and approved by Fremont.
Fremont expects to commence its cash tender offer on July 8, 1997. The cash
tender offer is subject to Fremont receiving at least 51% of the fully diluted
shares of common stock of Kerr. The closing of the transaction is subject to the
satisfaction of various conditions, including expiration of the waiting period
under the Hart-Scott-Rodino Act.
Fremont Partners is a $600 million private equity fund, headquartered in San
Francisco.
Kerr, headquartered in Lancaster, Pennsylvania, is a major producer of
plastic packaging products.
###
Company Contact: D. Gordon Strickland
President and
Chief Executive Officer
(717) 390-8438
Fremont Contact: Gregory P. Spivy
Principal
(415) 284-8793
<PAGE>
EXHIBIT (a)(10)
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 July 8, 1997 ("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
Kerr Acquisition Corporation 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)
and All Outstanding Shares of $1.70 Class B Cumulative
Convertible Preferred Stock, Series D
of
Kerr Group, Inc.
at
$5.40 Net Per Share of Common Stock
and
$12.50 Net Per Share of $1.70 Class B Cumulative
Convertible Preferred Stock, Series D
by
Kerr Acquisition Corporation
a corporation formed at the direction of
Fremont Partners
<PAGE>
Kerr Acquisition Corporation, a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of Fremont Acquisition Company, LLC, a Delaware
limited liability company ("Fremont"), is offering to purchase (i) all of the
issued and outstanding shares of common stock, par value $.50 per share,
including the associated rights to purchase shares of preferred stock (the
"Rights"), together with the common stock (the "Common Stock") issued pursuant
to the Rights Agreement (as defined below), and (ii) all of the issued and
outstanding shares of $1.70 Class B Cumulative Convertible Preferred Stock, par
value $0.50 per share, Series D (the "Series D Preferred Shares" and, together
with the Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware
corporation (the "Company"), for $5.40 per share of Common Stock (the "Common
Per Share Amount") and $12.50 per share of Series D Preferred Shares (the
"Series D Per Share Amount"), in each case 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 MONDAY, AUGUST 4, 1997, UNLESS THE OFFER IS
EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 1, 1997 (the "Merger Agreement"), by and among Fremont, 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 separate 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 and Series D Preferred Shares then outstanding (other than
Shares held by Fremont 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
2
<PAGE>
to receive, respectively, (i) the Common Per Share Amount or any higher price
per share of Common Stock paid in the Offer and (ii) the Series D Per Share
Amount or any higher price per share of Series D Preferred Shares paid in the
Offer, in each case, in cash payable to the holder thereof without interest.
The Company has represented in the Merger Agreement that it has taken all action
which may be necessary under the Rights Agreement, dated as of July 25, 1995, as
amended (the "Rights Agreement"), by and between the Company and BankBoston,
N.A. (formerly The First National Bank of Boston) so that the (x) execution of
the Merger Agreement and any amendments thereto and the consummation of the
transactions contemplated thereby will not cause (i) Fremont and/or the
Purchaser to become an Acquiring Person (as defined in the Rights Agreement) or
(ii) 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 (y) the Rights shall expire upon the
acceptance of Shares for payment pursuant to the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF BOTH
THE COMMON STOCK AND THE SERIES D PREFERRED SHARES, 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 AND SERIES D PREFERRED SHARES (ASSUMING THE CONVERSION OF ALL SUCH
SERIES D PREFERRED SHARES INTO SHARES OF COMMON STOCK) WHICH REPRESENTS AT LEAST
FIFTY-ONE PERCENT (51%) 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 Series D Preferred Shares,
options, warrants and other rights and securities exercisable or convertible
into shares of Common Stock.
As a condition and inducement to Fremont's and Purchaser's entering into
the Merger Agreement concur-
3
<PAGE>
rently with the execution and delivery of the Merger Agreement, Fremont and the
Company have entered into an Option Agreement, dated July 1, 1997, pursuant to
which, among other things, the Company has granted Fremont an irrevocable option
to purchase up to 782,685 (approximately 19.9%) newly issued shares of Common
Stock at $5.40 per share (the "Option"). The Option can only be exercised in
certain circumstances as described in Section 11 of the Offer to Purchase. In
addition, the maximum profit Fremont may make upon the exercise of the Option is
capped at $1,000,000.
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
Boston EquiServe (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 and any holder of
Series D Preferred Shares 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.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the
4
<PAGE>
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 August 4, 1997.
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.
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, Fremont, 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
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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 shareholder 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 shareholder 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.
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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 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:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
July 8, 1997
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EXHIBIT (a)(11)
[Letterhead]
June 30, 1997
The Board of Directors
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, PA 17602-2104
Dear Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Common Stock, par value $0.50 per share
("Common Stock"), and to the holders of Class B Cumulative Convertible Preferred
Stock, Series D (the "Preferred Stock"), of Kerr Group, Inc. (the "Company") of
the consideration to be received by each class of such securities in a series of
transactions (collectively, the "Transactions") pursuant to the Agreement and
Plan of Merger among the Company, Fremont Acquisition Company, LLC ("Fremont")
and Kerr Acquisition Corporation ("Purchaser"), dated as of July 1, 1997
(collectively, the "Merger Agreement"). Pursuant to the Merger Agreement,
Purchaser is required to commence a tender offer to purchase, subject to certain
conditions (the "Offer"), any and all of the outstanding shares of Common Stock
of the Company at a price of $5.40 per share, net to the seller in cash, and any
and all of the outstanding shares of Preferred Stock of the Company at a price
of $12.50 per share, net to the seller in cash (collectively, the "Offer
Consideration"). Following consummation of the Offer, subject to, among other
things, the favorable required vote of holders of shares of Common Stock (if
necessary), pursuant to the Merger (as defined in the Merger Agreement), each
remaining outstanding share (other than shares of Common Stock owned by the
Company as treasury stock or owned by Purchaser or any other subsidiary of
Fremont and other than shares of Common Stock held by holders who properly
exercise and perfect dissenter's rights, if any) will converted into the right
to receive $5.40 per share, net to the seller in cash, and each remaining
outstanding share of Preferred Stock (other than shares of Preferred Stock owned
by the Company as treasury stock or owned by Purchaser or any other subsidiary
of Fremont and other than shares of Preferred Stock held by holders who properly
exercise and perfect dissenter's rights, if any) will be converted into the
right to receive $12.50 per share, net to the seller in cash (collectively, the
"Merger Considerations" and together with the Offer Consideration, the
"Consideration").
In connection with the rendering of this opinion, we have:
(i) Reviewed the terms and conditions of the Merger Agreement and the
financial terms of the Transactions, all as set forth in the Merger
Agreement, and the option agreement dated July 1, 1997 between the Company
and Fremont pursuant to which Fremont was granted the right to purchase
shares of Common Stock;
(ii) Analyzed certain historical business and financial information
relating to the Company;
(iii) Reviewed certain financial forecasts and other data provided to us
by the Company relating to the business of the Company, including the most
recent business plan for the Company prepared by the Company's senior
management, in the form furnished to us;
(iv) Conducted discussions with members of the senior management of the
Company with respect to the businesses and prospects of the Company, the
strategic objectives of the Company and possible benefits which might be
realized following the Merger;
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(v) Reviewed public information with respect to certain other companies
in the lines of businesses we believe to be generally comparable in whole or
in part to the businesses of the Company and reviewed the financial terms of
certain other business combinations involving companies in lines of
businesses we believe to be generally comparable in whole or in part to
businesses of the Company that have recently been effected;
(vi) Reviewed the historical stock prices and trading volumes of the
Common Stock and Preferred Stock;
(vii) Reviewed the trading prices and yields of selected publicly traded
distressed securities which we deemed comparable to the Company's;
(viii) Conducted discussions with numerous third parties regarding their
potential interest in making an investment in the Company or acquiring it as
a whole; and
(ix) Conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the foregoing financial
and other information and have not assumed any responsibility for independent
verification of such information or conducted any independent valuation or
appraisal of any of the assets of the Company, nor have we been furnished with
any such appraisals. With respect to financial forecasts, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of the Company as to the future
financial performance of the Company. We assume no responsibility for, and
express no view as to, such forecasts or the assumptions on which they are
based.
Our opinion necessarily is based upon market, economic and other conditions
as they exist on, and can be evaluated as of, the date of this letter. In
rendering our opinion, we have assumed that the Transactions will be consummated
substantially on the terms described in the Merger Agreement, without any waiver
of any material terms or conditions by any party thereto. It should be
understood that, although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this opinion to reflect
such developments.
This opinion does not address the business decision of the Board of
Directors of the Company to engage in the Transactions. No opinion is expressed
herein nor should one be implied as to the fair market value of Common Stock or
Preferred Stock. We have advised the Board of Directors of the Company that,
based on the terms of our engagement by the Company, we do not believe that any
person (including any common or preferred stockholder of the Company), other
than the Company and the Board of Directors of the Company, had the legal right
to rely upon this letter to support any claim against us arising under
applicable state law and that, should any such claim be brought against us by
any such person, this assertion would be raised as a defense. In the absence of
applicable state law, the availability of such a defense would be resolved by a
court of competent jurisdiction. Resolution of the question of the availability
of such a defense, however, would have no effect on the rights and
responsibilities of the Board of Directors of the Company under applicable state
law. Furthermore, the availability of such a defense to us would have no effect
on the rights and responsibilities of either us or the Board of Directors of the
Company under the federal securities laws.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors, and our opinion is rendered in connection with its
consideration of the Transactions. This opinion is not intended to and does not
constitute a recommendation to any holder of Common Stock or Preferred Stock as
to whether such holder should tender shares pursuant to the Offer or vote to
approve the Merger Agreement and the transactions contemplated thereby. It is
understood that, except for inclusion of this letter in its entirety in a proxy
statement or tender offer recommendation statement of Schedule 14D-9 from the
Company to holders of Common Stock or Preferred Stock relating to the
Transactions, this letter may not be disclosed or otherwise referred to or used
for any other purpose
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without our prior written consent, except as may otherwise be required by law or
by a court of competent jurisdiction.
In connection with the rendering of this opinion, we have assumed that under
applicable provisions of the General Corporation Law of the State of Delaware,
controlling legal precedent and the Certificate of Designations of the Preferred
Stock, the holders of such Preferred Stock are not entitled to receive amounts
at least equal to the liquidation preference of the Preferred Stock plus accrued
and unpaid dividends or any other amount in connection with the Transactions.
Based on and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Consideration to be received by the holders of Common Stock, on
the one hand, and Preferred Stock, on the other, pursuant to the Offer and under
the terms of the Merger Agreement, is fair to such holders (other than Purchaser
or any other subsidiary of Fremont), from a financial point of view.
Very truly yours,
By: /s/ CIBC Wood Gundy
---------------------------------
CIBC Wood Gundy Securities Corp.
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EXHIBIT (c)(1)
KERR GROUP, INC.,
FREMONT ACQUISITION COMPANY, LLC
AND
KERR ACQUISITION CORPORATION
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I. THE TENDER OFFER
SECTION 1.1. THE OFFER............................................................................. 2
SECTION 1.2. COMPANY ACTION........................................................................ 3
SECTION 1.3. DIRECTORS............................................................................. 4
ARTICLE II. THE MERGER
SECTION 2.1. THE MERGER............................................................................ 5
SECTION 2.2. EFFECTIVE TIME........................................................................ 5
SECTION 2.3. CLOSING............................................................................... 5
SECTION 2.4. EFFECT OF THE MERGER.................................................................. 5
SECTION 2.5. SUBSEQUENT ACTIONS.................................................................... 5
SECTION 2.6. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS......................... 6
SECTION 2.7. STOCKHOLDERS' MEETING................................................................. 6
SECTION 2.8. MERGER WITHOUT MEETING OF STOCKHOLDERS................................................ 6
SECTION 2.9. CONVERSION OF SECURITIES.............................................................. 7
SECTION 2.10. DISSENTING SHARES..................................................................... 7
SECTION 2.11. SURRENDER OF SHARES; STOCK TRANSFER BOOKS............................................. 8
SECTION 2.12. STOCK PLANS........................................................................... 9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
SECTION 3.1. CORPORATE ORGANIZATION................................................................ 9
SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT.................................................. 10
SECTION 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................................ 10
SECTION 3.4. FINANCING ARRANGEMENTS................................................................ 10
SECTION 3.5. NO PRIOR ACTIVITIES................................................................... 10
SECTION 3.6. BROKERS............................................................................... 10
SECTION 3.7. PROXY STATEMENT....................................................................... 11
SECTION 3.8. EMPLOYEE BENEFIT PLANS................................................................ 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.......................................... 11
SECTION 4.2. CAPITALIZATION........................................................................ 12
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT.................................................. 12
SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................................ 12
SECTION 4.5. SEC FILINGS; FINANCIAL STATEMENTS..................................................... 13
SECTION 4.6. UNDISCLOSED LIABILITIES............................................................... 13
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.................................................. 13
SECTION 4.8. LITIGATION............................................................................ 14
SECTION 4.9. EMPLOYEE BENEFIT PLANS................................................................ 14
SECTION 4.10. PROXY STATEMENT....................................................................... 15
SECTION 4.11. BROKERS............................................................................... 15
SECTION 4.12. CONTROL SHARE ACQUISITION............................................................. 15
SECTION 4.13. CONDUCT OF BUSINESS................................................................... 15
SECTION 4.14. TAXES................................................................................. 16
SECTION 4.15. INTELLECTUAL PROPERTY................................................................. 16
SECTION 4.16. EMPLOYMENT MATTERS.................................................................... 18
SECTION 4.17. VOTE REQUIRED......................................................................... 18
</TABLE>
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<TABLE>
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SECTION 4.18. ENVIRONMENTAL MATTERS................................................................. 18
SECTION 4.19. REAL PROPERTY......................................................................... 19
SECTION 4.20. TITLE AND CONDITION OF PROPERTIES..................................................... 19
SECTION 4.21. CONTRACTS............................................................................. 19
SECTION 4.22. POTENTIAL CONFLICTS OF INTEREST....................................................... 20
SECTION 4.23. SUPPLIERS AND CUSTOMERS............................................................... 20
SECTION 4.24. INSURANCE............................................................................. 20
SECTION 4.25. ACCOUNTS RECEIVABLE; INVENTORY........................................................ 20
SECTION 4.26. OPINION OF FINANCIAL ADVISOR.......................................................... 20
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. ACQUISITION PROPOSALS................................................................. 21
SECTION 5.2. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER................................. 21
SECTION 5.3. NO SHOPPING........................................................................... 23
ARTICLE VI. ADDITIONAL AGREEMENTS
SECTION 6.1. PROXY STATEMENT....................................................................... 23
SECTION 6.2. MEETING OF STOCKHOLDERS OF THE COMPANY................................................ 24
SECTION 6.3. ADDITIONAL AGREEMENTS................................................................. 24
SECTION 6.4. NOTIFICATION OF CERTAIN MATTERS....................................................... 24
SECTION 6.5. ACCESS TO INFORMATION................................................................. 24
SECTION 6.6. PUBLIC ANNOUNCEMENTS.................................................................. 25
SECTION 6.7. BEST EFFORTS; COOPERATION............................................................. 25
SECTION 6.8. AGREEMENT TO DEFEND AND INDEMNIFY..................................................... 25
SECTION 6.9. EMPLOYEE BENEFITS..................................................................... 26
SECTION 6.10. PENDING LITIGATION.................................................................... 26
ARTICLE VII. CONDITIONS OF MERGER
SECTION 7.1. OFFER................................................................................. 27
SECTION 7.2. STOCKHOLDER APPROVAL.................................................................. 27
SECTION 7.3. NO CHALLENGE.......................................................................... 27
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION........................................................................... 27
SECTION 8.2. EFFECT OF TERMINATION................................................................. 28
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS............................ 29
SECTION 9.2. NOTICES............................................................................... 29
SECTION 9.3. EXPENSES.............................................................................. 30
SECTION 9.4. CERTAIN DEFINITIONS................................................................... 30
SECTION 9.5. HEADINGS.............................................................................. 30
SECTION 9.6. SEVERABILITY.......................................................................... 30
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES........................................ 30
SECTION 9.8. ASSIGNMENT............................................................................ 30
SECTION 9.9. GOVERNING LAW......................................................................... 30
SECTION 9.10. AMENDMENT............................................................................. 30
SECTION 9.11. WAIVER................................................................................ 31
SECTION 9.12. COUNTERPARTS.......................................................................... 31
ANNEX I Conditions to the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 1, 1997 (the "Agreement"),
among Kerr Group, Inc., a Delaware corporation (the "Company"), Fremont
Acquisition Company, LLC, a Delaware limited liability company (the "Parent"),
and Kerr Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of the Parent ("Purchaser").
W I T N E S S E T H
WHEREAS, the Boards of Directors of each of the Company, Parent and the
Purchaser have determined that it is in the best interests of their respective
stockholders for the Parent to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that the Purchaser will make
a cash tender offer (the "Offer") to acquire all shares of the issued and
outstanding common stock, $.50 par value, of the Company (the "Company Common
Stock"), including the associated Preferred Stock Purchase Rights (the "Rights")
issued pursuant to the Rights Agreement dated as of July 25, 1995, between the
Company and The First National Bank of Boston (the "Rights Agreement"), and all
shares of the issued and outstanding $1.70 Class B Cumulative Convertible
Preferred Stock, Series D, par value $.50 per share (the "Series D Shares"; the
Company Common Stock and the Series D Shares being collectively referred to
herein as the "Shares"), for $5.40 per share of Company Common Stock (the
"Common Per Share Amount") and $12.50 per Series D Shares (the "Series D Per
Share Amount"), or such higher price as may be paid in the Offer, in each case
net to the seller in cash; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors of
the Company, Parent and the Purchaser have each approved the merger (the
"Merger") of the Purchaser with and into the Company following the Offer in
accordance with the General Corporation Law of the State of Delaware ("Delaware
Law") and upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has resolved to recommend acceptance of the Offer and the Merger to the holders
of Shares and has determined that the consideration to be paid for each share of
Company Common Stock and each of the Series D Preferred Shares in the Offer and
the Merger is fair to the holders of such Shares and 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; and
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 an Option Agreement in the form of Exhibit A
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 Company Common Stock, subject to certain conditions;
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NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and the Purchaser
hereby agree as follows:
ARTICLE I.
THE TENDER OFFER
SECTION 1.1. THE OFFER.
(a) Provided that this Agreement shall not have been terminated in accordance
with Section 8.1 hereof and none of the events set forth in Annex I hereto shall
have occurred and be existing, the Purchaser or a direct or indirect subsidiary
thereof shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") the Offer as promptly as
practicable, but in no event later than five business days following the
execution of this Agreement, and shall use all reasonable efforts to consummate
the Offer. The obligation of the Purchaser to accept for payment any Shares
tendered shall be subject to the satisfaction of only those conditions set forth
in Annex I. The Purchaser expressly reserves the right to waive any such
condition or to increase the Common Per Share Amount and the Series D Per Share
Amount. The Common Per Share Amount and the Series D Per Share Amount shall be
net to the seller in cash. The Company agrees that no Shares held by the Company
will be tendered pursuant to the Offer.
(b) Without the prior written consent of the Company, the Purchaser shall not
(i) decrease the Common Per Share Amount or the Series D Per Share Amount or
change the form of consideration payable in the Offer, (ii) decrease the number
of Shares sought, (iii) amend or waive satisfaction of the Minimum Condition (as
defined in Annex I) or (iv) impose additional conditions to the Offer or amend
any other term of the Offer in any manner adverse to the holders of Shares;
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 shall not have been satisfied or waived, the
Purchaser may, from time to time, in its sole discretion, extend the expiration
date. 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 (as it may be
extended), the Shares tendered and not withdrawn pursuant to the Offer equal
less than 90% of the outstanding Company Common Stock or the outstanding Series
D 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, so long as the Purchaser expressly
irrevocably waives any condition (other than the Minimum Condition (as defined
in Annex I hereto)) that subsequently may not be satisfied during such extension
of the Offer.
(c) The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") having only the conditions set forth in Annex I hereto. As soon as
practicable on the date the Offer is commenced, the Purchaser shall file with
the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, and
including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will
contain (including as an exhibit) or incorporate by reference the Offer to
Purchase and forms of the related letter of transmittal and summary
advertisement (which documents, together with any supplements or amendments
thereto, and any other SEC schedule or form which is filed in connection with
the Offer and related transactions, are referred to collectively herein as 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, mailed or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to
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make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by the Purchaser
with respect to information furnished by the Company to the Purchaser, in
writing, expressly for inclusion in the Offer Documents. The information
supplied by the Company to the Purchaser, in writing, expressly for inclusion in
the Schedule 14D-1 will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(d) The Purchaser agrees to take all steps necessary to cause the Schedule
14D-1 to be filed with the SEC and the Offer Documents to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
Federal securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on any Offer Documents before they are filed
with the SEC. Each of Parent, the Purchaser and the Company agrees promptly (i)
to correct any information provided by it for use in the Schedule 14D-1 or the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect and (ii) to 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 therein, in light of the circumstances under which they
were made, not misleading. The Purchaser further agrees to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and to be disseminated to the Company's stockholders in each case and as to the
extent required by applicable Federal securities laws.
SECTION 1.2. COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors, at a meeting duly called and held on
June 30, 1997, at which a majority of the Directors were present: (i) duly
approved and adopted this Agreement, the Option Agreement and the transactions
contemplated hereby and thereby, including the Offer and the Merger, recommended
that the stockholders of the Company accept the Offer, tender their Shares
pursuant to the Offer and approve this Agreement and the transactions
contemplated hereby, including the Merger, and determined that this Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
are fair to and in the best interests of the holders of both the Company Common
Stock and the Series D Shares; and (ii) with respect to the Rights Agreement,
duly amended the Rights Agreement to provide that (1) neither this Agreement nor
any of the transactions contemplated hereby, including the Offer and the Merger,
will result in the occurrence of a "Distribution Date" (as such term is defined
in the Rights Agreement) or otherwise cause the Rights to become exercisable by
the holders thereof and (2) the Rights shall automatically on and as of the
Effective Time (as hereinafter defined) be void and of no further force or
effect.
(b) The Company shall file with the SEC, as promptly as practicable after the
filing by the Purchaser of the Schedule 14D-1 with respect to the Offer, a
Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together
with any and all amendments or supplements thereto, and including the exhibits
thereto, the "Schedule 14D-9"). The Schedule 14D-9 will comply in all material
respects with the provisions of all applicable Federal securities law and, on
the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information furnished by Parent or the
Purchaser 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 and 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. The Schedule 14D-9 and the Offer
Documents shall contain the recommendations of the Board of Directors
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described in Section 1.2(a) hereof. The Company agrees promptly to correct the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect (and each of the Parent and the Purchaser,
with respect to written information supplied by it specifically for use in the
Schedule 14D-9, shall promptly notify the Company of any required corrections of
such information and cooperate with the Company with respect to correcting such
information) and to supplement the information contained in the Schedule 14D-9
to include any information that shall become necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the Company's stockholders in each case as and to the extent
required by applicable Federal securities laws. The Purchaser and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 before it is filed with the SEC. In addition, the Company agrees to
provide the Purchaser and its counsel with any comments, whether written or
oral, that the Company or its counsel may receive from time to time from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments or communications.
(c) In connection with the Offer, the Company, promptly upon execution of
this Agreement, shall furnish or cause to be furnished to the Purchaser
mailing labels containing the names and addresses of all record holders of
Shares and security position listings of Shares held in stock depositories,
each as of a recent date, and shall promptly furnish the Purchaser with such
additional information (including, but not limited to, updated lists of
stockholders and their addresses, mailing labels and security position
listings) and such other information and assistance as the Purchaser or its
agents may reasonably request for the purpose of communicating the Offer to
the record and beneficial holders of Shares.
SECTION 1.3. DIRECTORS.
(a) Promptly upon the purchase by the Purchaser of any Shares pursuant to the
Offer, and from time to time thereafter as Shares are acquired by the Purchaser,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors as will give Parent, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors equal to at least that number of directors which equals the product
of the total number of directors on the Board of Directors (giving effect to the
directors appointed or elected pursuant to this sentence and including current
directors serving as officers of the Company) multiplied by the percentage that
the aggregate number of Shares beneficially owned by the Purchaser or any
affiliate of the Purchaser (including for purposes of this Section 1.3 such
Shares as are accepted for payment pursuant to the Offer, but excluding Shares
held by the Company) bears to the number of Shares outstanding. At such times,
the Company will also cause (i) each committee of the Board of Directors and
(ii) if requested by the Purchaser, each committee of such board to include
persons designated by the Purchaser constituting the same percentage of each
such committee or board as Parent's designees are of the Board of Directors. The
Company shall, upon request by the Purchaser, promptly increase the size of the
Board of Directors or exercise its best efforts to secure the resignations of
such number of incumbent directors as is necessary to enable Parent's designees
to be elected to the Board of Directors in accordance with the terms of this
Section 1.3 and shall cause Parent's designees to be so elected; PROVIDED,
HOWEVER, that, in the event that Parent's designees are appointed or elected to
the Board of Directors, until the Effective Time (as defined in Section 2.2
hereof) the Board of Directors shall have at least one director who is a
director on the date hereof and who 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 FURTHER, that if no Independent Directors remain, the
other directors shall designate one person to fill one of the vacancies who
shall not be either an officer of the Company or a designee, shareholder,
affiliate or associate of the Purchaser, and such person shall be deemed to be
an Independent Director for purposes of this Agreement.
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(b) Subject to applicable law, the Company shall promptly take all action
necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this Section
1.3 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 this Section 1.3. Parent will supply
the Company and be solely responsible for any information with respect to itself
and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1. Notwithstanding anything in this Agreement to the contrary, in
the event that Parent's designees are elected to the Company's Board of
Directors, after the acceptance of payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required to (i) amend or terminate this Agreement
on behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies hereunder, (iii) extend the time for performance of the Purchaser's
obligations hereunder or (iv) take any other action by the Company in connection
with this Agreement required to be taken by the Board of Directors.
ARTICLE II.
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time (as defined in Section 2.2,
hereof) and subject to and upon the terms and conditions of this Agreement and
Delaware Law, the Purchaser shall be merged with and into the Company the
separate corporate existence of the Purchaser shall cease, (b) and the Company
shall continue as the surviving corporation. The Company as the surviving
corporation after the Merger hereinafter sometimes is referred to as the
"Surviving Corporation".
SECTION 2.2. EFFECTIVE TIME. The parties hereto shall cause a
Certificate of Merger to be executed and filed on the Closing Date (as
defined in Section 2.3) (or on such other date as the Purchaser and the
Company may agree) with the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with the relevant
provisions of, the Delaware Law. The Merger shall become effective on the
date on which the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware 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 2.3. 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 third 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 2.4. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
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 Company and the Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5. 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
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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 right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 2.6. CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS.
(a) Unless otherwise determined by the Purchaser before the Effective
Time, at the Effective Time the Certificate of Incorporation of the Company,
as in effect immediately before the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation.
(b) The By-Laws of the Purchaser, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
(c) The directors of the Purchaser immediately before the Effective Time will
be the initial directors of the Surviving Corporation, and the officers of the
Company immediately before the Effective Time will be the initial officers of
the Surviving Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law.
SECTION 2.7. 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 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 that
stockholders of the Company vote in favor of the approval of the Merger and
the adoption of this Agreement.
(b) 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 adoption of this Agreement.
SECTION 2.8. MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding
Section 2.7 hereof, in the event that Parent, the Purchaser or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
each class of capital stock of the Company, pursuant to the Offer or
otherwise, the parties hereto 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 Delaware Law.
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SECTION 2.9. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, the Purchaser,
the Company or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding immediately
before the Effective Time (other than any Shares to be cancelled pursuant to
Section 2.9(b) and any Dissenting Shares (as defined in Section 2.10(a)) shall
be cancelled and extinguished and be converted into the right to receive the
Common Per Share Amount in cash payable to the holder thereof, without interest
(the "Common Stock Merger Consideration"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.11 hereof.
All such Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Common Stock Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.11 hereof, without interest.
(b) Each share of Company Common Stock held in the treasury of the Company
and each Share owned by the Purchaser or any direct or indirect wholly owned
subsidiary of the Purchaser immediately before the Effective Time shall be
cancelled and extinguished and no payment or other consideration shall be
made with respect thereto.
(c) Each Series D Share issued and outstanding immediately before the
Effective Time (other than any Dissenting Shares) shall be cancelled and
extinguished and be converted into the right to receive the Series D Per Share
Amount in cash payable to the holder thereof, without interest (the "Series D
Merger Consideration and together with the Common Stock Merger Consideration,
the "Merger Consideration"), upon surrender of the certificate formerly
representing such Share in the manner provided in Section 2.11 hereof. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Series D Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.11 hereof, without interest.
(d) Each share of common stock, par value $.01 per share, of the Purchaser
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 2.10. DISSENTING SHARES.
(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 Delaware Law (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 2.9,
but the holder thereof shall be entitled to only such rights as are granted by
Delaware Law.
(b) Notwithstanding the provisions of Section 2.7(a), if any holder of Shares
who demands appraisal of his Shares under Delaware Law shall effectively
withdraw or lose (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 Common Stock Merger
Consideration or the Series D Merger Consideration as provided in Section 2.9(a)
or (c), as the case may be, without interest thereon, upon surrender of the
certificate or certificates representing such Shares pursuant to Section 2.11
hereof.
(c) The Company shall give the Purchaser (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
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pursuant to Delaware Law received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under Delaware Law. 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 the Purchaser, settle or offer to settle any such demands.
SECTION 2.11. 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 "Exchange Agent") to receive the funds
necessary to make the payments contemplated by Section 2.9. At the Effective
Time, the Purchaser shall deposit, or cause to be deposited, in trust with the
Exchange Agent for the benefit of holders of Shares the aggregate consideration
to which such holders shall be entitled at the Effective Time pursuant to
Section 2.9.
(b) Each holder representing any Shares cancelled upon the Merger, which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") whose Shares were converted pursuant to Section 2.9(a) or (c)
may thereafter surrender such Certificate or Certificates to the Exchange Agent,
as agent for such holder, to effect the surrender of such Certificate or
Certificates on such holder's behalf for a period ending six months after the
Effective Time. The Purchaser agrees that promptly after the Effective Time it
shall cause the distribution to holders of record of Shares as of the Effective
Time of appropriate materials to facilitate such surrender. Upon the surrender
of Certificates, the Purchaser shall cause the Exchange Agent to pay the holder
of such certificates in exchange therefor cash in an amount equal to the Common
Stock Merger Consideration or Series D Merger Consideration, as the case may be,
multiplied by the number of Shares represented by such Certificate. Until so
surrendered, each Certificate (other than Certificates representing Dissenting
Shares and Certificates representing Shares held by the Purchaser or in the
treasury of the Company) shall represent solely the right to receive the
aggregate Common Stock Merger Consideration or Series D Merger Consideration, as
the case may be, relating thereto.
(c) If payment of the Merger Consideration in respect of cancelled Shares is
to be made to a Person other than the Person in whose name a surrendered
Certificate or instrument is registered, it shall be a condition to such payment
that the Certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
Certificate or instrument surrendered or shall have established to the
satisfaction of the Purchaser or the Exchange Agent that such tax either has
been paid or is not applicable.
(d) 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 shares 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.
(e) Promptly following the date which is six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange 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 Exchange 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
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thereon. Notwithstanding the foregoing neither the Surviving Corporation nor the
Exchange 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 backup
withholding or, as set forth in Section 2.8(c), stock transfer taxes payable by
such holder.
SECTION 2.12. STOCK PLANS.
(a) The Company shall use reasonable efforts (without incurring any liability
in connection therewith) to provide that, at the Effective Time, (i) each then
outstanding option to purchase shares of Company Common Stock (the "Options")
granted under any of the Company's stock option plans referred to in Section 4.2
hereof, each as amended (collectively, the "Option Plans"), whether or not then
exercisable or vested, shall be cancelled and (ii) in consideration of such
cancellation, such holders of Options shall receive for each Share subject to
such Option an amount (subject to any applicable withholding tax) in cash equal
to the product of (A) the excess, if any, of the Common Per Share Amount over
the per share exercise price of such Option and (B) the number of Shares subject
to such Option (such amount being herein referred to as, the "Option Price");
PROVIDED that the Company shall obtain all necessary consents or releases from
holders of Options to effect the foregoing. Upon receipt of the Option Price,
the Option shall be cancelled. The surrender of an Option to the Company shall
be deemed a release of any and all rights the holder had or may have had in
respect of such Option. As promptly as practicable following the consummation of
the Merger, the Purchaser shall provide the Company with the funds necessary to
satisfy its obligations under this Section 2.12(a).
(b) Except as provided herein or as otherwise agreed to by the parties and to
the extent permitted by the Option Plans, (i) the Company shall cause the Option
Plans to terminate as of the Effective Time and provide for the payment of the
Option Price pursuant to Section 2.12(a) hereof, and (ii) the Company shall take
all action necessary to ensure that following the Effective Time no holder of
Options or any participant in the Option Plans shall have any right thereunder
to acquire any equity securities of the Company, the Surviving Corporation or
any subsidiary thereof.
(c) None of the parties to this Agreement shall take any action to deprive
any employee or director of the Company of the benefits of (i) the
consideration payable with respect to Options in accordance with Section
2.12(a) or (ii) the consideration that would have been payable with respect
to any other equity-based compensation in accordance with the terms and
conditions of the applicable Other Stock Plan, but for the amendment set
forth in Section 2.12(b) above, such consideration to be determined by
valuing any right to equity-based compensation by reference to the Common Per
Share Amount. Without limiting the generality of the foregoing, if any of the
transactions contemplated hereby would cause any individual subject to
Section 16 of the Exchange Act to become subject to the profit recovery
provisions thereof, to the extent permitted by applicable law neither the
Surviving Corporation nor the Purchaser (nor any affiliate of the Purchaser)
shall assert any claims against any such individual arising out of the
foregoing or relating thereto, based directly or indirectly, on Section 16.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
SECTION 3.1. CORPORATE ORGANIZATION. Each of Parent and the Purchaser is,
respectively, a limited liability company and a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority and any necessary
governmental approvals to own, operate or lease the properties that it purports
to own, operate or lease and to carry
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on its business as it is 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 have, individually or in the aggregate, a
material adverse effect on the Parent or on the ability of Parent or the
Purchaser to consummate any transactions contemplated by this Agreement or to
perform either of their respective obligations under this Agreement.
SECTION 3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. The execution and
delivery of this Agreement by Parent and the Purchaser and the consummation by
Parent and the Purchaser of the Merger and the transactions hereby and thereby
have been duly authorized by all necessary corporate action on the part of each
of Parent and the Purchaser and no other corporate proceeding is necessary for
the execution and delivery of this Agreement by Parent and the Purchaser, the
performance by Parent or the Purchaser or of their respective obligations
hereunder and the consummation by each of Parent or the Purchaser or of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Purchaser and, assuming due and valid
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of each such corporation, enforceable
against each of them in accordance with its terms.
SECTION 3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and the
Purchaser do not, and the performance of this Agreement by Parent and the
Purchaser will not, (i) conflict with or violate any law, regulation, court
order, judgment or decree applicable to Parent or the Purchaser or by which
any of their respective property is bound or affected, (ii) violate or
conflict with either the Certificate of Formation of Parent or the
Certificate of Incorporation or By-Laws of the Purchaser, or (iii) result in
a violation or breach of or constitute a default under (with or without due
notice or lapse of time, or both), or give to 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 contract, instrument, permit, license or franchise to which
Parent or the Purchaser is a party or by which Parent or the Purchaser or any
of their respective property is bound or affected.
(b) Except for applicable requirements, if any, of the Exchange Act, the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), filing and recordation of
appropriate merger documents as required by Delaware Law, neither Parent nor the
Purchaser is required to submit any notice, report or other filing with any
court, arbitrable tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic or foreign (a
"Governmental Authority"), in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. 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 3.4. 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 Schedule
3.4 of the Disclosure Schedule.
SECTION 3.5. 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
or entity.
SECTION 3.6. 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.
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SECTION 3.7. PROXY STATEMENT. None of the information supplied by the
Purchaser, its officers, directors, representatives, agents or employees (the
"Purchaser Information"), for inclusion in the Proxy Statement, or in any
amendments thereof or supplements thereto, will, on the date the Proxy Statement
is 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 material
fact or contain 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. Notwithstanding the
foregoing, Parent and the Purchaser do not make any representation or warranty
with respect to any information that has been supplied by the Company or its
accountants, counsel or other authorized representatives for use in any of the
foregoing documents.
SECTION 3.8. EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.8 of
the Disclosure Schedule, (i) neither the Purchaser nor any person or entity
which is treated as part of Purchaser's "controlled group" for purposes of
Section 4001(a)(14) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (each an "ERISA Affiliate), maintains or contributes to any
employee benefit plan which is subject to the requirements of Title IV of ERISA
(other than a multiemployer plan within the meaning of Section 3(37) of ERISA),
and (ii) if any plans are listed on such Schedule, the unfunded accrued
liability for each such plan, determined on the basis of the latest actuarial
valuation for such plan and on the actuarial methods and assumptions employed
for that valuation, is also set forth on such schedule for each such plan and
copies of such valuations have been provided to the Company. No such employee
benefit plan has incurred any "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither the Purchaser nor any of its ERISA
Affiliates contributes, or has within the six-year period ending on the date
hereof contributed or been obligated to contribute, to any pension or retirement
plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered to Parent prior
to the execution of this Agreement (the "Disclosure Schedule"), the Company
hereby represents and warrants to Parent and the Purchaser as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority and any necessary governmental approvals to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned, operated or leased or the nature
of its activities makes such qualification necessary, except for such failure
which, when taken together with all other such failures, would not have a
Material Adverse Effect (as defined below in this Section 4.1). The Company
does not own any Subsidiaries. The Company does not have an equity interest
in any other Person. The term "Subsidiary" means any corporation or other
legal entity of which the Company (either alone or through or together with
any other Subsidiary) owns, directly or indirectly, more than 50% of the
capital stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity. The term "Material
Adverse Effect" means any change in or effect on the business of the Company
that is or could reasonably be expected to be materially adverse to the
business, operations, properties (including intangible properties), condition
(financial or otherwise), results of operations, assets, liabilities,
regulatory status or prospects of the Company or (y) the ability of the
Company to consummate any transactions contemplated by this Agreement or the
Option Agreement or to perform its obligations under this Agreement.
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SECTION 4.2. CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 1,302,300 shares of
Class B Preferred Stock, par value $.50 per share ("Company Preferred Stock").
As of June 23, 1997, (i) 3,933,095 shares of Company Common Stock were issued
and outstanding, (ii) 293,450 shares of Company Common Stock were held in the
treasury of the Company, (iii) 487,400 Series D Shares were issued and
outstanding, (iv) 708,923 shares of Company Common Stock were reserved for
issuance upon conversion of the Series D Shares, (v) 70,000 shares of Company
Common Stock were reserved for issuance upon exercise of outstanding options
under the Company's 1988 and 1993 Stock Option Plans for Non-Employee Directors,
(vi) 284,500 shares of Company Common Stock were reserved for issuance under the
Company's employee stock option plans listed on Schedule 4.2(a) of the
Disclosure Schedule in the amounts stated in such schedule and (vii) 94,735
shares of Company Common Stock were reserved for issuance upon the exercise of
currently outstanding warrants. All of the issued and outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Options will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable. 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 issued and outstanding. There are no voting
trusts in other agreements or understandings to which the Company is a party
with respect to the voting of the capital stock of the Company. Except as
disclosed on Schedule 4.2 of the Disclosure Schedule, there are no other
options, warrants, calls, preemptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company obligating the Company to issue or sell
any shares of capital stock or Voting Debt of, or other equity interests, in the
Company.
SECTION 4.3. AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has the necessary corporate power and authority to enter
into this Agreement and the Option Agreement and, subject to obtaining any
necessary stockholder approval of the Merger, to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby by
the 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
Delaware Law. 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 the other parties hereto and
thereto, constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms.
(b) The Company has taken all action which may be necessary under the Rights
Agreement, so that (x) the execution of this Agreement and the Option Agreement
and any amendments thereto by the parties hereto and thereto and the
consummation of the transactions contemplated hereby and thereby shall not cause
(i) the Parent and/or the Purchaser to become an Acquiring Person (as defined in
the Rights Agreement) or (ii) a Distribution Date, a Stock Acquisition Date or a
Trigger 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 (y) the Rights (as defined
in the Rights Agreement) shall expire upon the acceptance of Shares for payment
pursuant to the Offer.
SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) 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 any law, order, writ, injunction, decree, statute, rule or
regulation, court order or judgment applicable to the Company or by which its
property is bound or affected, (ii) violate or conflict with the Certificate
of Incorporation or By-Laws of the Company, or (iii) result in a violation or
breach of or constitute a default under (with or without due notice or lapse
of time or both) or give to others any rights of termination or cancellation
of, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company pursuant to, any contract, instrument,
permit, license or franchise to which the Company is a party or by which the
Company or its property is bound or affected, excluding
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from the foregoing clauses (i) and (iii) such violations, breaches or defaults
which, in the aggregate, would not have a Material Adverse Effect.
(b) Except for applicable requirements of the Exchange Act, the pre-merger
notification requirements of the HSR Act, and the filing and recordation of
appropriate merger or other documents as required by Delaware Law, or "blue sky"
laws of various states, the Company is not required to submit any notice,
report, permit, authorization or other filing with any Governmental Authority,
in connection with the execution, delivery or performance of this Agreement. No
waiver, consent, approval or authorization of any Governmental Authority, is
required to be obtained or made by the Company in connection with its execution,
delivery or performance of this Agreement.
SECTION 4.5. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required to be
filed with the SEC since January 1, 1994, and has heretofore delivered to the
Purchaser, in the form filed with the SEC, its (i) Annual Reports on Form
10-K for the fiscal years ended December 31, 1995 and 1996 (including all
amendments prior to the date hereof), (ii) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 1994 and (iv) all other forms, reports, registrations, schedules,
statements and other documents required to be (other than Reports on Form
10-Q not referred to in clause (ii) above) filed by the Company since January
1, 1994 with the SEC pursuant to the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act") (as such documents referred to herein
have been amended since the time of their filing, collectively, the "SEC
Reports"). As of their respective dates, or, if amended, as of the date of
the last such amendment, the SEC Reports, including without limitation, any
financial statements or schedules included therein (i) 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 promulgated thereunder, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements of the Company contained in the SEC
Reports (the "Financial Statements") have been prepared from, and are in
accordance with the books and records of the Company, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly presented the consolidated financial
position of the Company and the consolidated results of operation, cash flows
and changes in financial position of the Company as of and for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring yearend adjustments.
SECTION 4.6. UNDISCLOSED LIABILITIES.
(a) 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 March 31, 1997, (ii) pursuant to the
terms of this Agreement, or (iii) as set forth in Schedule 4.6 of the
Disclosure Schedule, the Company has no liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected in, reserved against or otherwise described
in the balance sheet of the Company (including the notes thereto) or which
would have a Material Adverse Effect.
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
except as disclosed in Schedule 4.7 of the Disclosure Schedule or in the SEC
Reports filed prior to the date hereof, the Company has conducted its business
only in the ordinary and usual course, and:
(a) there have not occurred any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) having, individually or in the aggregate, a Material
Adverse Effect; and
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(b) the Company has not taken any action which would have been prohibited
under Section 5.2 hereof.
SECTION 4.8. LITIGATION. Except as disclosed in the SEC Reports filed
prior to the date hereof, there are no claims, actions, suits, proceedings,
(including, without limitation, arbitration proceedings) or other alternative
dispute resolution proceedings, or investigations pending or, to the
knowledge of the Company, threatened against the Company, or any properties
or rights of the Company, before any Governmental Authority that, either
individually or in the aggregate would be reasonably likely to have a
Material Adverse Effect. As of the date hereof, the Company is not subject to
any outstanding order, judgment, injunction or decree.
SECTION 4.9. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.9(a) of the Disclosure Schedule sets forth a list of all
material employee welfare benefit plans (as defined in Section 3(l) of ERISA,
employee pension benefit plans (as defined in Section 3(2) of ERISA),
employment agreements and all other bonus, stock option, stock purchase,
benefit, profit sharing, savings, retirement, disability, insurance,
incentive, deferred compensation and other similar fringe or employee benefit
plans, programs or arrangements for the benefit of, or relating to, any
employee of, or independent contractor or consultant to, the Company
(together, the "Employee Plans"). The Company has delivered to the Purchaser
true and complete copies of all Employee Plans, as in effect, and will make
available all other employee plans, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letters obtained with respect to any Employee
Plan intended to be qualified under Section 401(a) or 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). True and complete copies of
the (i) three (3) most recent annual actuarial valuation report, if any, (ii)
last filed Form 5500 together with Schedule A and/or B thereto, if any, (iii)
summary plan description (as defined in ERISA), if any, and all modifications
thereto communicated to employees, and (iv) most recent annual and periodic
accounting of related plan assets, if any, in each case, relating to the
Employee Plans, have been, or will be, delivered to the Purchaser and are, or
will be, correct in all material respects. Neither the Company nor any of its
directors, officers, employees or agents has, with respect to any Employee
Plan, engaged in or been a party to any "prohibited transaction", as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, which
could result in the imposition of either a material penalty assessed pursuant
to Section 502(i) of ERISA or a material tax imposed by Section 4975 of the
Code, in each case applicable to the Company or any Employee Plan. All
Employee Plans are in compliance in all material respects with the currently
applicable requirements prescribed by all statutes, orders, or governmental
rules or regulations currently in effect with respect to such Employee Plans,
including, but not limited to, ERISA and the Code (except for such
requirements that are not required to be adopted as of the effective date of
the applicable requirement) and, to the knowledge of the Company, there are
no pending or threatened claims, lawsuits or arbitrations (other than routine
claims for benefits), relating to any of the Employee Plans, which have been
asserted or instituted against the Company, any Employee Plan or the assets
of any trust for any Employee Plan. Each Employee Plan intended to qualify
under Section 401(a) of the Code, and the trusts created thereunder intended
to be exempt from tax under the provisions of Section 501(a) of the Code,
either (i) has received a favorable determination letter from the Internal
Revenue Service to such effect or (ii) is still within the "remedial
amendment period," as described in Section 401(b) of the Code and the
regulations thereunder. Each Employee Plan that has been terminated by the
Company which was intended to qualify under Section 401(a) of the Code has
received a determination from the Internal Revenue Service that such
termination did not adversely affect its qualified status. No Employee Plan
subject to Section 412 of the Code has incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived. The Company does
not contribute and has not within the six-year period ending on the date
hereof contributed or been obligated to contribute, to any pension or
retirement plan which is a "multiemployer plan" (as defined in Section 3(37)
of ERISA).
(b) Except as set forth on Schedule 4.9 of the Disclosure Schedule, and as
provided in Sections 2.12 and 6.9(i) no amounts payable under the Employee Plans
will fail to be deductible for Federal income tax purposes by virtue of section
280G of the Code (ii) (b) (i) the consummation of the transactions
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contemplated by this Agreement will not either alone or in combination with
another event (A) entitle any current or former employee or officer of the
Company or any ERISA affiliate to severance pay, unemployment compensation or
any other payment, (B) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer or (C) result in any
liability under Title IV of ERISA and (ii) no unfunded liability exists with
respect to the Employee Plans, as of the date of and determined in the manner
set forth in the consolidated financial statements contained in the SEC Reports,
which is not set forth on such statements.
SECTION 4.10. PROXY STATEMENT. The Proxy Statement, if any (or any
amendment thereof or supplement thereto, to be sent to the stockholders of
the Company in connection with the Special Meeting or the information
statement, if any, to be sent to such stockholders, as appropriate, will
comply in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder. The Proxy Statement
will not, at the time the Proxy Statement at the date mailed to stockholders
and at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is being made by the Company with respect to any
information supplied to the Company by Parent or the Purchaser specifically
for inclusion in the Proxy Statement.
SECTION 4.11. BROKERS. Except as disclosed on Schedule 4.11 of the
Disclosure Schedule, 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 the Company. The Company has heretofore furnished to the
Purchaser true and complete information concerning the financial arrangements
between the Company and the financial advisors set forth on such schedule
pursuant to which such firms may be entitled to any payment as a result of
the transactions contemplated hereunder.
SECTION 4.12. CONTROL SHARE ACQUISITION. The provisions of Section 203 of
Delaware Law are not applicable to any of the transactions contemplated by
this 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.
SECTION 4.13. CONDUCT OF BUSINESS. Except as disclosed in the SEC Reports
filed prior to the date hereof, the business of the Company is not being
conducted in default or violation of (with or without due notice and lapse of
time or both) any term, condition or provision of (i) its Certificate of
Incorporation or By-Laws, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement of any kind to which the
Company is a party or by which the Company or any of its properties or assets
may be bound (each, a "Company Agreement"), or (iii) any Federal, state, local
or foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to the Company, and no notice, charge,
claim, action or assertion has been received by the Company or has been filed
commenced or, to the Company's knowledge, threatened against the Company
alleging any such violation except, with respect to the foregoing clauses (ii)
and (iii), defaults or violations that would not, individually or in the
aggregate, have a 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, individually
or in the aggregate, have a Material Adverse Effect.
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SECTION 4.14. TAXES.
(a) Except as would not, either individually or in the aggregate, have a
Material Adverse Effect, (i) the Company has timely filed with the appropriate
Tax Authority (as hereinafter defined) all Tax Returns (as hereinafter defined)
required to be filed by or with respect to the Company, and such Tax Returns are
true, correct and complete in all material respects, (ii) all Taxes (as
hereinafter defined) due and payable by the Company, with respect to the taxable
years or other taxable periods ending on or prior to the Effective Time have
been or on or prior to the Effective Time will be, paid or adequately disclosed
and fully provided for, (iii) no Audits (as hereinafter defined) are pending or
threatened with regard to any Taxes or Tax Returns of the Company and there are
no outstanding deficiencies or assessments asserted or proposed, (iv) no issue
has been raised by any Taxing Authority in any Audit of the Company that if
raised with respect to any other period not so audited could be expected to
result in a proposed deficiency of any period not so audited, (v) there are no
outstanding agreements, consents or waivers extending the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies against
the Company, and the Company is not a party to any agreement providing for the
allocation or sharing of Taxes and (vi) no powers of attorney with respect to
Taxes of the Company have been executed that will be outstanding as of the
Effective Time.
(b) The Company has not filed a consent to the application of Section 341(f)
of the Code.
(c) The Company is not and has not been a United States real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(ii) of the Code.
(d) No indebtedness of the Company is "corporate acquisition indebtedness"
within the meaning of Section 279(b) of the Code.
(e) Except as would not, either individually or in the aggregate, have a
Material Adverse Effect, the Company has not entered into any agreements that
would result in the disallowance of any tax deductions pursuant to section 280G
of the Code.
(f) Except as would not, either individually or in the aggregate, have a
Material Adverse Effect, there are no Liens (as hereinafter defined) for Taxes
upon any of the assets of the Company, except for Liens for Taxes not yet due
and payable for which adequate reserves have been established on the Company's
balance sheet at March 31, 1997 included in the Company's Quarterly Report on
Form 10-Q filed with the SEC prior to the date hereof (the "Balance Sheet") in
accordance with GAAP.
(g) The Company has disclosed all material Tax elections to the Purchaser.
(h) For purposes of this Agreement, "Taxes" means any 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 (as hereinafter
defined); "Tax Authority" means the Internal Revenue Service and any other
domestic or foreign governmental authority responsible for the administration of
any Taxes; and "Audit" means any audit, assessment or other examination relating
to Taxes by any Tax Authority or any judicial or administrative proceedings
relating to Taxes.
(i) For purposes of this Agreement, "Tax Return" means any return, report,
information return or other document (including any related or supporting
information and, where applicable, profit and loss accounts and balance sheets)
with respect to Taxes.
SECTION 4.15. INTELLECTUAL PROPERTY.
(a) Schedule 4.15 of the Disclosure Schedule contains 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 (as hereinafter defined)(excluding
Computer
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Software generally available for purchase by the public), (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, together with all licenses
related to the foregoing.
(b) The term "Computer Software" shall mean (i) any and all computer
programs and applications consisting of sets of statements and instructions
to be used directly or indirectly 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, flowcharts 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 Internet
domain names and content contained on all World Wide Web sites of the Company
or any Subsidiary.
(c) The Company owns or has the valid right to use all of the material
Intellectual Property used by it or held for use by it in connection with its
business. The Company is the sole and exclusive owners of 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, registrations for and applications for
registration of trademarks, service marks and copyrights, technology and
know-how, Computer Software other than off-the-shelf applications 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 or held for use anywhere in the world in connection with the
businesses of the Company as currently conducted (collectively, the
"Intellectual Property"), free and clear of all material Liens, except where
the failure to own such Intellectual Property would not have a Material
Adverse Effect.
(d) All grants, registrations and applications for Intellectual Property
that are used in and are material to the conduct of the businesses of the
Company 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 abandoned, and no application or registration therefor is the
subject of any legal or governmental proceeding before any governmental,
registration or other authority in any jurisdiction, except to the extent
where the absence of such Intellectual Property would not have a Material
Adverse Effect.
(e) To the knowledge of the Company, there are no conflicts with or
infringements of any Intellectual Property by any third party, except for
conflicts or infringements which would not have a Material Adverse Effect.
The conduct of the businesses of the Company 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 Material Adverse Effect.
There is no claim, suit, action or proceeding pending or, to the knowledge of
the Company, threatened against the Company (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,
except for claims, suits, actions or proceedings which would not have a
Material Adverse Effect.
(f) 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, except where the failure to have obtained such
consents, filings or authorizations would not have a Material Adverse Effect.
(g) The Company 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
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agreement relating to the Intellectual Property, except for breaches which would
not have a Material Adverse Effect.
(h) No former or present employees, officers or directors of the Company hold
any right, title or interest directly or indirectly, in whole or in part, in or
to any Intellectual Property.
SECTION 4.16. EMPLOYMENT MATTERS. The Company has not experienced any
strikes, collective labor grievances, other collective bargaining disputes or
claims of unfair labor practices in the last five years, except for such
strikes, grievances, disputes or claims which have not and would not have a
Material Adverse Effect. To the Company's knowledge, there is no organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
SECTION 4.17. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company 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 this Agreement and the transactions contemplated hereby,
including the Merger.
SECTION 4.18. ENVIRONMENTAL MATTERS.
(a) Except for matters disclosed in the SEC Reports or matters that would
not, individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect, to the Company's knowledge: (i) the Company is in
compliance with all applicable laws, rules, regulations, ordinances, decrees,
orders or other legal or regulatory requirements relating to pollution of the
environment or the impact of the environment on human health or preservation
of the environment (including without limitation the treatment, storage and
disposal of wastes and the remediation of releases and threatened releases of
hazardous or toxic substances, wastes, pollutants, contaminants or similar
materials) (collectively "Environmental Laws"), and the Company has not
received written notice of any outstanding allegations by any person or
entity that the Company is not or has not been in compliance (unless such
non-compliance has been cured) with any Environmental Laws, and (ii) the
Company currently holds all permits, licenses, registrations and other
governmental authorizations and financial assurance required under any
Environmental Laws for the Company to operate its business.
(b) Except for matters disclosed in the SEC Reports or matters that would
not individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect, (i) there is no asbestos or asbestos-containing
materials in or on any real property, buildings, structures or components
thereof currently owned, leased or operated by the Company, and (ii) there
are and have been no underground or aboveground storage tanks (whether or not
required to be registered under any applicable law), dumps, landfills,
lagoons, surface impoundments, sumps, injection wells or other disposal or
storage sites or locations in or on any property currently owned, leased or
operated by the Company.
(c) Except for matters disclosed in the SEC Reports or matters that
would not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect, (i) the Company has not received (x) any
communication from any person stating or alleging that it is or may be a
potentially responsible party under any Environmental Law (including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any state analog thereto) with respect
to any actual or alleged environmental contamination or (y) any request for
information under any Environmental Law from any governmental agency or
authority or any other person or entity with respect to any active or alleged
environmental contamination or violation, (ii) the Company is not party to
any pending judicial or administrative proceedings alleging that it is a
potentially responsible party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and any state analog
thereto) or otherwise liable or responsible with respect to any actual or
alleged environmental contamination, or (iii) the Company, any governmental
agency or authority, or any other person or entity
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is not conducting and has not conducted (nor is proposing or threatening to
conduct) any environmental remediation or investigation.
(d) This Section 4.18 contains the sole and exclusive representations of
the Company with respect to Environmental Laws.
SECTION 4.19. REAL PROPERTY.
(a) Schedule 4.19 of the Disclosure Schedule sets forth a complete list of
all real property owned by the Company (the "Real Property"). Copies of (i)
all deeds, title insurance policies and surveys of the Real Property and (ii)
all documents evidencing all Liens upon the Real Property have been furnished
to Parent. Except for matters disclosed in the SEC Reports or matters that
would not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect, there are no proceedings, claims, disputes or
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 Schedule 4.20 hereto, 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) As of the date hereof, to the knowledge of the Company, the Company
has not, within the past two years, received any written 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 except for any requirements or recommendations that would not
individually or in the aggregate have a Material Adverse Effect. 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 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 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 Material Adverse Effect.
SECTION 4.20. TITLE AND CONDITION OF PROPERTIES. The Company owns good and
marketable title, free and clear of all Liens, to all of the personal property
and assets shown on Balance Sheet or acquired after March 31, 1997, except for
(A) assets which have been disposed of to nonaffiliated third parties since
March 31, 1997 in the ordinary course of business, (B) Liens reflected in the
Balance Sheet, (C) Liens 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) Liens 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 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 Material Adverse Effect.
SECTION 4.21. CONTRACTS. Each Company Agreement is legally valid and
binding and in full force and effect, except where failure to be legally
valid and binding and in full force and effect would not have a Material
Adverse Effect. Schedule 4.21 of the Disclosure Schedule sets forth a true
and complete list of (i) all material Company Agreements entered into by the
Company since December 31, 1996 and all
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amendments to any Company Agreements included as an exhibit to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and (ii) all
non-competition agreements imposing restrictions on the ability of the Company
to conduct business in any jurisdiction or territory.
SECTION 4.22. POTENTIAL CONFLICTS OF INTEREST. Except as set forth in
Schedule 4.22 of the Disclosure Schedule or in the SEC Reports filed prior to
the date hereof, since December 31, 1996, there have been no transactions,
agreements, arrangements or understandings between the Company and its
affiliates that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
SECTION 4.23. SUPPLIERS AND CUSTOMERS. Since December 31, 1996, no
material licensor, vendor, supplier, licensee or customer of the Company has
cancelled or otherwise modified its relationship with the Company and, to the
knowledge of the Company (i) no such person has given the Company notice of
any intention to do so and (ii) the consummation of the transactions
contemplated hereby will not adversely affect the Company's relationship with
any such person.
SECTION 4.24. INSURANCE. There is no material claim pending under any of
the Company'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 is 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 4.25. ACCOUNTS RECEIVABLE; INVENTORY. Subject to any reserves set
forth in the Balance Sheet, the accounts receivable shown in the Balance
Sheet arose in the ordinary course of business; were not, as of the date of
the Balance Sheet, subject to any material discount, contingency, claim of
offset or recoupment or counterclaim; and represented, as of the date of the
Balance Sheet, bona fide claims against debtors for sales, leases, licenses
and other charges. All accounts receivable of the Company arising after the
date of the 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
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 Balance Sheet. As of the date of the
Balance Sheet, the inventories shown on the 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
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 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 4.26. OPINION OF FINANCIAL ADVISOR. The Company has received an
opinion from CIBC Wood Gundy Securities Corp. ("CIBC"), financial advisor to
the Company, to the effect that the consideration to be received in the Offer
and the Merger by the holders of the Company Common Stock and the Series D
Shares is fair to both the holders of the Company Common Stock and the
holders of the Series D Shares from a financial point of view, a draft copy
of which opinion has been delivered to Parent (the "Draft Opinion").
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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 representatives, in each case in connection
with any Takeover Proposal (as defined below) or the possibility or
consideration of making a Takeover Proposal ("Takeover Proposal Interest")
indicating, in connection with such notice, the name of the Person indicating
such Takeover 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 Takeover Proposal Interest.
The Company agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Takeover Proposal Interest. As used in this
Agreement, "Takeover 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), 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 to the transactions
to be effected pursuant to this Agreement.
SECTION 5.2. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, (i) except as expressly contemplated by
this Agreement or the Option Agreement, or (ii) as set forth in Schedule 5.2
of the Disclosure Schedule, or (iii) agreed in writing by Parent, after the
date hereof, and prior to the time the directors of the Purchaser have been
elected to, and shall constitute a majority of the Board of Directors of the
Company pursuant to Section 1.3 (the "Appointment Date"):
(a) the business of the Company shall be conducted only in the ordinary
and usual course and, to the extent consistent therewith, the Company shall
use its best reasonable efforts to preserve its business organization intact
and maintain its existing relations with customers, suppliers, employees,
creditors and business partners;
(b) the Company will not, directly or indirectly, (i) except upon exercise
of stock options or other rights to purchase shares of Company Common Stock
pursuant to the Option Plans outstanding on the date hereof or upon exercise
of outstanding warrants or conversion of outstanding Series D Shares, issue,
sell, transfer or pledge or agree to sell, transfer or pledge any treasury
stock of the Company beneficially owned by it, (ii) amend its Certificate of
Incorporation or By-Laws or similar organizational documents; or (iii) split,
combine or reclassify the outstanding Shares;
(c) 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, other than Shares
reserved for issuance on the date hereof pursuant to the exercise of Options
or warrants outstanding on the date hereof or upon the conversion of the
Series D Shares; (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;
(d) the Company shall not: (i) grant any increase in the compensation
payable or to become payable by the Company to any of its executive officers
or (ii)(A) adopt any new, or (B) amend or otherwise increase, or accelerate
the payment or vesting of the amounts payable or to become payable under any
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existing bonus, incentive compensation, deferred compensation, severance, profit
sharing, stock option, stock purchase, insurance, pension, retirement or other
employee benefit plan, agreement or arrangement; or (iii) enter into 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;
(e) the Company shall not 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;
(f) the Company shall (i) not 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; the Company shall not 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 except for
borrowings under the Company's existing credit facility with Madeleine LLC in
the ordinary course of business and 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 (other than travel and expense advances to
employees in the ordinary course of business and consistent with past
practice) or capital contributions to, or investments in, any other person;
or (iv) enter into any material commitment or transaction (including, but not
limited to, any borrowing, or purchase, sale or lease of assets or real
estate);
(g) the Company shall not (i) change any of the accounting methods used by
it unless required by GAAP or (ii) 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; and
(h) the Company shall not pay, discharge or satisfy any claims,
liabilities 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;
(i) the Company shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company (other than the Merger);
(j) the Company shall not 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 not being satisfied, or would make many
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;
(k) the Company shall not redeem the Rights or terminate, amend or
otherwise modify the Rights Plan prior to the consummation of the Offer
unless required to do so by order of a court of competent jurisdiction; and
(l) except as expressly provided herein, the Company shall not enter into
an agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of the
foregoing.
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SECTION 5.3. NO SHOPPING.
(a) The Company will not, and 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 Takeover Proposal, (ii) enter into any agreement with respect to any
Takeover Proposal, or (iii) in the event of an unsolicited written Takeover
Proposal for the Company 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 Takeover
Proposal; PROVIDED HOWEVER, that nothing contained in this Section 5.3 or any
other provision hereof shall prohibit the Company or the Company's Board from
(i) taking and disclosing to the Company's stockholders or position with
respect to tender or exchange offer by a third party pursuant to Rules 14D-9
and 14e2 promulgated under the Exchange Act or (ii) making such disclosure to
the Company's stockholders as, in the good faith judgment of the Board after
receiving advice from outside counsel, is required 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, and may negotiate and participate in discussions
and negotiations with such Person concerning a Takeover 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 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 additional financing
and (y) in the opinion of the Board of Directors of the Company, 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 would create a reasonable possibility of a breach of the
fiduciary duties of the Board of Directors to the Company's shareholders
under applicable law (a Takeover Proposal which satisfies clauses (x) and (y)
being referred to herein as a "Superior Proposal"). The Company shall within
two business days following receipt of a Superior Proposal notify Parent of
the receipt of the same. The Company shall promptly provide to Parent any
material nonpublic information regarding the Company provided to any other
party which was not previously provided to Parent. At any time after two
business days following notification to Parent of the Company's intent to do
so (which notification shall include the identity of the bidder and the
material terms and conditions of the proposal) and if the Company has
otherwise complied with the terms of this Section 5.3(b), the Board of
Directors may terminate this Agreement pursuant to clause (ii) of Section
8.1(f) and enter into an agreement with respect to a Superior Proposal,
PROVIDED that the Company 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) hereof), plus any amount payable at the time for
reimbursement of expenses pursuant to Section 8.2(b) hereof.
(c) Except as set forth in Section 5.3(b), 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 Takeover Proposal.
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
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Proxy Statement. The 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 Delaware
Law 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 condition is
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 contemplated hereby. 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 nonoccurrence of any event whose
occurrence, or nonoccurrence would be likely to cause either (A) 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 (B) any condition set forth in Annex I to be 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 TO INFORMATION.
(a) From the date hereof to the Effective Time, the Company shall, and
shall cause its officers, directors, employees, auditors and agents to,
afford the officers, employees and agents of Parent and the Purchaser
reasonable access at all reasonable times to its officers, employees, agents,
properties, offices and other facilities and to all books and records, and
shall furnish Parent and the Purchaser with all financial, operating and
other data and information as Parent and the Purchaser, through its officers,
employees or agents, may reasonably request.
(b) Unless otherwise required by law and until the Appointment Date, the
Purchaser agrees that it shall, and shall cause its affiliates and each of
their respective officers, directors, employees, financial advisors 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 Representatives or public disclosure of such information is
required by law in the opinion of counsel to the Purchaser) and shall insure
that the Purchaser Representatives do not disclose such information to others
without the prior written consent of the Company. Notwithstanding
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anything herein to the contrary, the terms of the Confidentiality Agreement,
dated November 6, 1995 (the "Confidentiality Agreement"), executed by the
Purchaser shall remain in full force and effect.
(c) 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 contemplated hereby and any copies thereof which may
have been made, and shall cause the Purchaser Representatives to whom such
documents were furnished promptly to return such documents and any copies
thereof any of them may have made, other than documents filed with the SEC or
otherwise publicly available.
SECTION 6.6. PUBLIC ANNOUNCEMENTS. The Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer or the Merger and shall not issue
any such press release or make any such public statement before such
consultation, except as may be required by law.
SECTION 6.7. BEST EFFORTS; COOPERATION. 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.
SECTION 6.8. 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 five 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, By-Laws 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 this transaction, 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 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 6.8 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
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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 6.8 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 6.8 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 6.8. Notwithstanding Section 9.7 hereof, this Section 6.8 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 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 6.8.
SECTION 6.9. EMPLOYEE BENEFITS.
(a) At the Effective Time, the Surviving Corporation shall continue as the
Plan Sponsor of each Employee Plan. Subject to Section 6.9(b) hereof, each of
the parties hereto agrees that participants' rights to the employer-provided
benefits for nonunion employees under the Employee Plans as in effect as of
the Effective Time shall be continued under the same or an equivalent plan
and shall not be reduced for at least one year following the Effective Time,
except (i) to the extent provided in Section 2.12 hereof, or (ii) as required
by applicable law (including as required to preserve any favorable tax
treatment afforded such benefits as of the Effective Time). Thereafter, such
participants shall in any event be credited with their service with the
Company in determining their right to participate and vesting under any
successor Employee Plans.
(b) The Company's 1985 and 1987 Employee Stock Ownership Plans (the
"ESOPs") shall be terminated effective as of the Effective Time. As soon as
practicable following the receipt of favorable determination letters from the
Internal Revenue Service confirming that the termination of the ESOPs and
elimination of the right to receive distributions in the form of employer
securities does not adversely affect their prior qualified and tax-exempt
status, the assets held in the trusts related thereto (consisting of the
proceeds of the sale of Company Common Stock held therein in the Offer or the
Merger) shall be either (i) to the extent allowable under applicable law,
distributed to participants in single lump sums, or (ii) to the extent not
allowable under applicable law (particularly Treasury regulation
1.411(a)11(e)(1)), transferred to another qualified defined contribution plan
maintained by the Company, the Purchaser or an affiliate of either of them.
SECTION 6.10. PENDING LITIGATION. Promptly following the consummation of
the Offer, the Purchaser shall join with the defendants in the action
entitled KUPFERBERG V. NORIAN, ET AL. (Del. Ch. Civ. Act. No. 12709) in a
motion to dismiss or withdraw such action with prejudice, and will not assert
or permit the Company to assert any claim against the defendants thereunder
relating to the subject matter thereof.
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ARTICLE VII.
CONDITIONS OF MERGER
The respective obligations of each party to effect the Merger shall be
subject to the following conditions:
SECTION 7.1. 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.
SECTION 7.2. STOCKHOLDER APPROVAL. The Merger and this Agreement shall
have been approved and adopted by the requisite vote of the stockholders of
the Company, if required by Delaware Law.
SECTION 7.3. NO CHALLENGE. No statute, rule, regulation, judgment, writ,
decree, order or injunction shall have been promulgated, enacted, entered or
enforced, and no other action shall have been taken, by any government or
governmental, administrative or regulatory authority or by any court of
competent jurisdiction, that in any of the foregoing cases has the effect of
making illegal or directly or indirectly restraining, prohibiting or
restricting the consummation of the Merger.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after stockholder approval:
(a) By mutual written consent of the Boards of Directors of Parent and the
Company; or
(b) By Parent (i) 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 (ii) if the
Company shall have failed to deliver to Parent by July 3, 1997 an executed
copy of the fairness opinion of CIBC referred to in Section 4.26,
substantially in the form of the Draft Opinion; 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 the date hereof; 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 the date hereof; or
(f) By the Company (i) if there shall be a material breach of any of
Parent 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(b) with respect to a Superior
Proposal which the Board of Directors has determined is more favorable to the
stockholders of the Company than the transactions contemplated hereby;
PROVIDED that it has complied with all provisions thereof, including the
notice
27
<PAGE>
provision therein, and that it makes simultaneous payment of the Termination
Fee, plus any amounts then due as a reimbursement of expenses; or
(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 (d) or (e) 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 Board of Directors of the Company 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 Board of
Directors of the Company shall have recommended any proposal other than by
Parent or the Purchaser in respect of a Takeover Proposal, (iii) the Company
shall have exercised a right with respect to Takeover Proposal referenced in
Section 5.3(b) and shall, directly or through its representatives, continue
discussions with any third party concerning a Takeover Proposal for more than
twenty (20) business days after the date of receipt of such Takeover
Proposal, (iv) a Takeover 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 twenty (20) 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% (or in the
case of the Gabelli Funds, Inc. and its affiliates and associates, 32%) 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.
SECTION 8.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in Section
8.1 hereof, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
terminations 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 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)(i) or 8.1(h)(ii), (ii) (A) the Parent shall have terminated this
Agreement pursuant to Section 8.1(g) or pursuant to Section 8.1(h)(iii),
8.1(h)(iv) or 8.1(h)(v) and (B) within eighteen (18) months of any such
termination the Company shall have entered into a definitive agreement with
respect to a Takeover Proposal or a Takeover Proposal with respect to the
Company shall have been consummated with such Person, 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 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 the Purchaser may designate in writing to the Company. No fee or
expense reimbursement shall be paid pursuant to this Section 8.2(b) if the
Purchaser shall be in material breach of its obligations hereunder.
28
<PAGE>
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
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, as the case may be, except that the agreements set
forth in Article II and Section 6.8 shall survive the Effective Time
indefinitely and those set forth in Sections 6.4(b), 6.4(c), 8.2 and 9.3
shall survive termination indefinitely.
SECTION 9.2. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit
in the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) if to Parent or the Purchaser
Fremont Acquisition Company, LLC
c/o Fremont Partners, L.L.C.
50 Fremont Street, Suite 3700
San Francisco, California 94105
Attention: Robert Jaunich II
Facsimile: (415) 284-8191
With a copy to:
Fremont Partners, L.L.C.
50 Fremont Street, Suite 3700
San Francisco, California 94105
Attention: General Counsel
Facsimile: (415) 512-7121
And a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111
Attention: Kenton J. King, Esq.
Facsimile: (415) 984-2698
(b) if to the Company:
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, PA 176022104
Attention: D. Gordon Strickland
Facsimile: (717) 394-6398
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Harvey L. Sperry, Esq.
Facsimile: (212) 821-8111
29
<PAGE>
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. CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" of a Person means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract
or credit arrangement or otherwise; and
(c) "Lien" means any mortgage, pledge, hypothecation, assignment for
security purposes, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including without limitation any conditional sale or other title
retention agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing); PROVIDED, HOWEVER, that liens for
Taxes not yet due and payable but for which adequate reserves have been
established and other statutory liens shall not be Liens for the purposes of
this Agreement.
(d) "Person" means an individual, corporation, partnership, limited
liability company, association, trust or any unincorporated organization.
SECTION 9.5. HEADINGS. 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.
SECTION 9.6. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall 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. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
maximum extent possible.
SECTION 9.7. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
and the Confidentiality Agreement constitute the entire agreement and supersede
any and all other prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
and, except as otherwise expressly provided herein, this Agreement is not
intended to confer upon any other Person any rights or remedies hereunder.
SECTION 9.8. ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent and the Purchaser may assign all or any
of their rights hereunder to any affiliate of Parent provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State.
SECTION 9.10. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by Parent and the Purchaser, and by action taken by or
on behalf of the Company's Board of Directors at any time before the
Effective Time; PROVIDED, HOWEVER, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each Share or Series D
Share will be converted upon consummation of the
30
<PAGE>
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 9.11. WAIVER. At any time before the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only as against such party and
only if set forth in an instrument in writing signed by such party.
SECTION 9.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
Very truly yours,
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
-----------------------------------------
Name: D. Gordon Strickland
Title: President and CEO
FREMONT ACQUISITION COMPANY, LLC
By: /s/ Gil Lamphere
-----------------------------------------
Name: Gil Lamphere
Title: President
KERR ACQUISITION CORPORATION
By: /s/ Gregory P. Spivy
-----------------------------------------
Name: Gregory P. Spivy
Title: Vice President
31
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer,
the Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated
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 any such rules or regulations) may delay the acceptance
for payment of any tendered Shares and (except as provided in this Agreement)
amend or terminate the Offer as to any Shares not then paid for if (i) the
condition that there shall be validly tendered and not withdrawn prior to the
expiration of the Offer a number of shares of Company Common Stock and Series D
Shares (assuming the conversion of all such Series D Shares into shares of the
Company Common Stock) which represents at least 51% of the number of shares of
Company Common Stock then outstanding on a fully diluted basis (after giving
effect to the conversion or exercise of all outstanding Series D Shares,
options, warrants and other rights and securities exercisable or convertible
into shares of Company Common Stock) shall not have been satisfied (the "Minimum
Condition") or (ii) any applicable waiting period under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer or (iii) at
any time after the date of this Merger Agreement and before the time of
acceptance of payment for any such Shares (whether or not any Shares have
theretofore been accepted for payment or paid for pursuant to the Offer,) any of
the following conditions exists:
(a) there shall be pending in effect an injunction or other order,
decree, judgment or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission of competent
jurisdiction or a statute, rule, regulation, executive order or other action
shall have been promulgated, enacted, taken or threatened by a governmental
authority or a governmental, regulatory or administrative agency or
commission of competent jurisdiction which in any such case (i) restrains or
prohibits the making or consummation of the Offer or the consummation of the
Merger, (ii) prohibits or restricts the ownership or operation by the
Purchaser (or any of its affiliates or subsidiaries) of any portion of its
or the Company's business or assets which is material to the business of all
such entities taken as a whole, or compels the Purchaser (or any of its
affiliates or subsidiaries) to dispose of or hold separate any portion of
its or the Company's business or assets which is material to the business of
all such entities taken as a whole, (iii) imposes material limitations on
the ability of the Purchaser effectively to acquire or to hold or to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by the Purchaser on all
matters properly presented to the stockholders of the Company, (iv) imposes
any material limitations on the ability of the Purchaser or any of their
respective affiliates or subsidiaries effectively to control in any material
respect the business and operations of the Company; or
(b) this Agreement shall have been terminated by the Company or the
Purchaser in accordance with its terms; or
(c) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or the over-the-counter 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 this Agreement, a material acceleration or worsening thereof;
or
(d) the representations and warranties of the Company set forth in this
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
<PAGE>
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 representations and
warranties); or
(e) 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 effect to any
materiality qualification or standard contained in any such agreements or
covenants); or
(f) 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 (d) and (e) of this Annex I have not occurred; or
(g) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, reasonably likely to result in any
change) that constitutes a Material Adverse Effect; or
(h) person (other than the Gabelli Funds, Inc. and its affiliates and
associates) acquires beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act), of at least 15% of the outstanding
Company Common Stock.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances (including any
action or inaction by the Purchaser) giving rise to any such conditions and may
be waived by the Purchaser in whole or in part at any time and from time to
time, in each case, in the exercise of the good faith judgment of the Purchaser
and subject to the terms of this Agreement. The failure by 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.
2
<PAGE>
TABLE OF DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Affiliate................................................................. 9.4(a)
Agreement................................................................. Recitals
Appointment Date.......................................................... 5.2
Audit..................................................................... 4.14(h)
Balance Sheet............................................................. 4.14(b)
Blue Sky.................................................................. 4.4(b)
Board of Directors........................................................ Recitals
Certificates.............................................................. 2.11(b)
CIBC...................................................................... 4.26
Closing................................................................... 2.3
Closing Date.............................................................. 2.3
Code...................................................................... 4.9(a)
Common Per Share Amount................................................... Recitals
Common Stock Merger Consideration......................................... 2.9(a)
Company................................................................... Recitals
Company Agreement......................................................... 4.13
Company Common Stock...................................................... Recitals
Company Preferred Stock................................................... 4.2
Computer Software......................................................... 4.15(a)
Confidentiality Agreement................................................. 6.5(b)
Control................................................................... 9.4(b)
Delaware Law.............................................................. Recitals
Disclosure Schedule....................................................... 3.7
Dissenting Shares......................................................... 2.10(a)
Distribution Date......................................................... 1.2(a)
Draft Opinion............................................................. 4.26
Effective Time............................................................ 2.2
Employee Plans............................................................ 4.9(a)
Environmental Laws........................................................ 4.19(a)
ERISA..................................................................... 4.9(a)
ESOPs..................................................................... 6.9(b)
Exchange Act.............................................................. 1.1(a)
Exchange Agent............................................................ 2.11(a)
Financial Statements...................................................... 4.5(b)
GAAP...................................................................... 4.5(b)
Governmental Authority.................................................... 3.3(b)
HSR Act................................................................... 3.3(b)
Indemnified Parties....................................................... 6.8(a)
Independent Directors..................................................... 1.3(a)
Intellectual Property..................................................... 4.15(b)
Lien...................................................................... 9.4(c)
Material Adverse Effect................................................... 4.1
Merger.................................................................... Recitals
Merger Consideration...................................................... 2.9(c)
Offer..................................................................... Recitals
Offer Documents........................................................... 1.1(c)
Offer to Purchase......................................................... 1.1(c)
Option Agreement.......................................................... Recitals
Option Plans.............................................................. 2.12(a)
Option Price.............................................................. 2.12(a)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Options................................................................... 2.11(b)
Other Stock Plan.......................................................... 2.12(a)
Person.................................................................... 9.4(d)
Proxy Statement........................................................... 2.7(a)(ii)
Proxy Statement........................................................... 4.10
Purchaser Information..................................................... 3.3(b)
Purchaser Representatives................................................. 6.5(b)
Real Property............................................................. 4.20(a)
Rights.................................................................... Recitals
Rights Agreement.......................................................... Recitals
Schedule 14D-1............................................................ 1.1(c)
Schedule 14D-9............................................................ 1.2(b)
SEC....................................................................... 1.1(c)
SEC Reports............................................................... 4.5(a)
Securities Act............................................................ 4.5(a)
Series D Per Share Amount................................................. Recitals
Series D Shares........................................................... Recitals
Shares.................................................................... Recitals
Special Meeting........................................................... 2.7(a)(i)
Stockholders' Meeting..................................................... 4.10
Subsidiary................................................................ 4
Superior Proposal......................................................... 5.3(b)
Surviving Corporation..................................................... 2.1
Takeover Proposal......................................................... 5.1
Takeover Proposal Interest................................................ 5.1
Tax Authority............................................................. 4.14(h)
Tax Return................................................................ 4.14(i)
Taxes..................................................................... 4.14(h)
Termination Fee........................................................... 8.2(b)
Voting Debt............................................................... 4.4(b)
</TABLE>
2
<PAGE>
EXHIBIT A
COMPANY OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 1, 1997 (this "Agreement"), between
Fremont Acquisition Company, LLC, a Delaware limited liability company
("Parent"), and Kerr Group, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Kerr 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 782,685 newly-issued shares
(the "Shares") of the Common Stock, par value $.50 per share ("Company Common
Stock"), of the Company at a purchase price per share of $5.40 (the "Exercise
Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement;
PROVIDED, HOWEVER, that in no event shall the number of Shares for which the
Option is exercisable exceed 19.9% of the Company's issued and outstanding
shares of Company Common Stock. 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
expire, on the earliest of (i) the Effective Time (as defined in the Merger
Agreement) and (ii) to the extent that no Option Notice (as defined below) has
theretofore been given by Parent, six (6) months after any termination of the
Merger Agreement pursuant to Article VIII thereof.
SECTION 1.2 EXERCISE OF OPTION. At any time or from time to time prior to
the termination of the option granted hereunder 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 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, in the case of The Gabelli Funds, Inc. and its affiliates and
associates, 32%), or more of the then
<PAGE>
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, other
entity or group which beneficially owns more than 15% of the outstanding
voting equity of the Company (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, executed any written consent 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 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 in 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
2
<PAGE>
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 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 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 in respect of 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:
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.
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SECTION 2.3 OPTION SHARES. The Company has taken all necessary corporate
action to authorize and reserve for issuance upon exercise of the Option a total
of 782,685 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 limited
liability company 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
formation 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) 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
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underwriting commissions. If Shares are offered in a firm commitment
underwriting, the Company will provide reasonable and customary indemnification
to the 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 LIMITATION ON PROFIT. (a) Notwithstanding any other provision
of this Agreement, in no event shall Parent's Total Profit (as hereinafter
defined) exceed $1,000,000 and, if it otherwise would exceed such amount,
Parent, at its sole election, shall either (a) reduce the number of shares of
Company Common Stock subject to the Company Option, (b) deliver to Company for
cancellation Company Shares previously purchased by Parent, (c) pay cash to
Company, or (d) any combination thereof, so that Parent's actually realized
Total Profit shall not exceed $1,000,000 after taking into account the foregoing
actions.
(b) As used herein, the term "TOTAL PROFIT" shall mean the aggregate amount
(before taxes) of the following: (i) (x) the net cash amounts received by Parent
pursuant to the sale of Company Shares (or any other securities into which such
Company Shares are converted or exchanged) to any unaffiliated party, less (y)
Parent's purchase price of such Company Shares, and (ii) any Notional Total
Profit (as defined below).
(c) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Parent may propose to exercise the Company Option
shall be the Total Profit determined as of the date of such proposal assuming
that the Company Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Company Shares held by
Parent and its affiliates as of such date, were sold for cash at the closing
market price for the Company Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
SECTION 4.3 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:
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"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."
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 4.4 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 4.5 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 4.6 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 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.
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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 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 9.2(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.
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.
KERR GROUP, INC.
By:
-----------------------------------------
Name: D. Gordon Strickland
Title: President and CEO
FREMONT ACQUISITION COMPANY, LLC
By:
-----------------------------------------
Name: Gil Lamphere
Title: President
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EXHIBIT (c)(2)
COMPANY OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 1, 1997 (this "Agreement"), between
Fremont Acquisition Company, LLC, a Delaware limited liability company
("Parent"), and Kerr Group, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Kerr 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 782,685 newly-issued shares
(the "Shares") of the Common Stock, par value $.50 per share ("Company Common
Stock"), of the Company at a purchase price per share of $5.40 (the "Exercise
Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement;
PROVIDED, HOWEVER, that in no event shall the number of Shares for which the
Option is exercisable exceed 19.9% of the Company's issued and outstanding
shares of Company Common Stock. 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
expire, on the earliest of (i) the Effective Time (as defined in the Merger
Agreement) and (ii) to the extent that no Option Notice (as defined below) has
theretofore been given by Parent, six (6) months after any termination of the
Merger Agreement pursuant to Article VIII thereof.
SECTION 1.2 EXERCISE OF OPTION. At any time or from time to time prior to
the termination of the option granted hereunder 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 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, in the case of The Gabelli Funds, Inc. and its affiliates and
associates, 32%), or more of the then
<PAGE>
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, other
entity or group which beneficially owns more than 15% of the outstanding
voting equity of the Company (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, executed any written consent 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 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 in 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
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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 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 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 in respect of 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:
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.
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SECTION 2.3 OPTION SHARES. The Company has taken all necessary corporate
action to authorize and reserve for issuance upon exercise of the Option a total
of 782,685 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 limited
liability company 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
formation 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) 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
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underwriting commissions. If Shares are offered in a firm commitment
underwriting, the Company will provide reasonable and customary indemnification
to the 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 LIMITATION ON PROFIT. (a) Notwithstanding any other provision
of this Agreement, in no event shall Parent's Total Profit (as hereinafter
defined) exceed $1,000,000 and, if it otherwise would exceed such amount,
Parent, at its sole election, shall either (a) reduce the number of shares of
Company Common Stock subject to the Company Option, (b) deliver to Company for
cancellation Company Shares previously purchased by Parent, (c) pay cash to
Company, or (d) any combination thereof, so that Parent's actually realized
Total Profit shall not exceed $1,000,000 after taking into account the foregoing
actions.
(b) As used herein, the term "TOTAL PROFIT" shall mean the aggregate amount
(before taxes) of the following: (i) (x) the net cash amounts received by Parent
pursuant to the sale of Company Shares (or any other securities into which such
Company Shares are converted or exchanged) to any unaffiliated party, less (y)
Parent's purchase price of such Company Shares, and (ii) any Notional Total
Profit (as defined below).
(c) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Parent may propose to exercise the Company Option
shall be the Total Profit determined as of the date of such proposal assuming
that the Company Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Company Shares held by
Parent and its affiliates as of such date, were sold for cash at the closing
market price for the Company Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
SECTION 4.3 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:
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"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."
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 4.4 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 4.5 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 4.6 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 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.
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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 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 9.2(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.
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.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
-----------------------------------------
Name: D. Gordon Strickland
Title: President and CEO
FREMONT ACQUISITION COMPANY, LLC
By: /s/ Gil Lamphere
-----------------------------------------
Name: Gil Lamphere
Title: President
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EXHIBIT (c)(3)
GUARANTEE
Guarantee, dated as of July 1, 1997, by and between Kerr Group, Inc., a
Delaware corporation (the "Company") and Fremont Partners, L.P., a Delaware
limited partnership ("Guarantor").
WHEREAS, each of Fremont Acquisition Company, LLC, a Delaware limited
liability company ("Parent"), and Kerr Acquisition Corporation, a Delaware
corporation (the "Purchaser"), is a direct or indirect, wholly-owned 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 "Offer") to
acquire all shares of the issued and outstanding common stock, $.50 par value,
of the Company (the "Company Common Stock"), including the associated Common
Stock Purchase Rights issued pursuant to the Rights Agreement dated as of July
25, 1995, between the Company and The First National Bank of Boston, and all
shares of the issued and outstanding Class B Preferred Stock, par value $.50 per
share, Series D (the "Series D Shares"; the Company Common Stock and the Series
D Shares being collectively referred to herein as the "Shares"), for $5.40 per
share of Company Common Stock and $12.50 per Series D Shares or such higher
price as may be paid in the Offer, in each case 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
Guarantee 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.
<PAGE>
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 attached as Schedule 3.4 to
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.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
------------------------
Name: D. Gordon Strickland
Title: President and CEO
FREMONT PARTNERS, L.P.
By: FREMONT 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 Principal, General Counsel
and Secretary
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EXHIBIT (c)(4)
[letterhead]
November 6, 1995
Fremont Group, Inc.
50 Fremont Street, Suite 3700
San Francisco, CA 94105
Attention: Mr. Gregory P. Spivy
Principal
In connection with your consideration of a possible transaction with Kerr
Group, Inc. and/or its subsidiaries or affiliates (collectively, with such
subsidiaries or affiliates, 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 finished 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 otherwise and irrespective of the form of
communication) which has been or will be furnished to you or to your
Representatives 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" 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 in violation hereof, (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 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.
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible transaction between the
Company and you, that the Evaluation Material will be kept confidential and that
you and your Representatives will not disclose 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
<PAGE>
consent and (ii) any of such information may be disclosed to your
Representatives who execute a copy of this Agreement and deliver it to Lehman
Brothers and who need to know such information for the sole purpose of
evaluating a possible transaction with the Company. In any event, you shall
be responsible for any breach of this letter agreement by any of your
officers, directors and employees and you agree, at your sole expense, to
take all reasonable measures to restrain your officers, directors and
employees from prohibited or unauthorized disclosure or use of the Evaluation
Material.
In addition, you agree that, without the prior written consent of the
Company except as required by law, 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 stratus thereof), unless in the
opinion or your counsel such disclosure is required by law and then only with as
much prior written notice to the Company as is practical under the
circumstances. 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,
with any other person regarding a possible transaction involving a purchase of
the Company's stock or a significant portion of its assets. 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.
You further agree that, without the prior consent of Lehman Brothers, all
communications regarding the proposed transaction, requests for additional
information, and discussions or questions regarding procedures, will be
submitted or directed only to Lehman Brothers and not to the Company or any of
its affiliates or any of their respective directors, officers or employees.
In the event that you or any of your Representatives are requested or
required (by deposition, interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or other 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 opinion of your counsel,
legally compelled to disclose Evaluation Material or else stand liable for
contempt or suffer other censure or penalty, you or your Representative may,
without liability hereunder, disclose only that portion of the Evaluation
Material which such counsel advises you is legally required to be disclosed,
provided that you cooperate with the Company 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, but you shall not be required to incur significant cost or expense to
do so.
If you decide that you do not with to proceed with a transaction with the
Company, you will promptly inform the Company of that decision at the Company's
request. At any time upon the written request of
<PAGE>
the Company for any reason, you will promptly deliver to the Company all
documents (and all copies thereof) furnished to you or your Representatives by
or on behalf of the Company pursuant hereto (except for one (1) achival copy).
In the event of such a decision or request, all other Evaluation Material
prepared by you or your Representatives shall be destroyed or retained at your
election. Notwithstanding the return, retention 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 Lehman Brothers Inc.) 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 Lehman Brothers Inc.)
shall have any liability to you or to any of your Representatives relating to or
resulting from the use of the Evaluation Material. Only those representations or
warranties which are made in a final definitive agreement regarding the
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, without the prior written consent of the Board of Directors
of the Company, for a period of two years from the date hereof, neither you nor
any of your affiliates to whom you have disclosed the Evaluation Material as
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934
(the "Exchange Act")) will:
(a) acting alone or as part of a group, acquire or offer or agree to
acquire, directly or indirectly, by purchase or otherwise, any voting
securities (or direct or indirect rights or options to acquire any
voting securities) of the Company;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the
rules under the Exchange Act) or seek to advise or influence any
person or entity with respect to the voting of any voting securities
of the Company;
(c) make any public announcement with respect to any transaction or
proposed or contemplated transaction between the Company or any of its
security holders and you or any of your affiliates, including, without
limitation, any tender or exchange offer, merger or other business
combinations or acquisition of a material portion of the assets of the
Company;
(d) disclose any intention, plan or arrangement regarding any of the
matters referred to in clauses (a), (b) or (c); or
(e) solicit for employment any current officer or management level
employee of the Company with whom you first had contact during your
investigation of the Company, but his prohibition shall not apply to
general solicitation in the ordinary course of your business.
The above (a) through (d) shall not apply to ordinary brokerage or trading
transactions by a securities dealer or a transaction entered into on your behalf
by a third party without your specific consent (e.g. by investment advisors with
investment discretion).
You hereby acknowledge that you are aware, and that you will advise your
Representatives, that the United States securities laws prohibit any person who
has received material, non-public
<PAGE>
information concerning certain matters which are the subject of this letter
agreement from purchasing or selling securities of the Company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
You agree that 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 obligation 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. Without limiting the generality of the
foregoing, you further agree that (i) the Company shall be free to conduct the
process for a possible transaction as the Company in its sole discretion shall
determine (including, without limitation, negotiating with any other person and
entering into a definitive agreement without prior notice to you or any other
person); (ii) any of the procedures, if any, relating to a possible transaction
may be changed at any time without notice to you or any other person; (iii) the
Company shall have the right to reject or accept any potential proposal, offer
or participant therein, for any reason whatsoever, in its sole discretion; and
(iv) neither you nor any of your Representatives shall have any claim whatsoever
against the Company or its Representatives arising out of or relating to a
possible transaction (other than those as against the parties to a definitive
agreement with you in accordance with the terms thereof).
The Company reserves the right to assign all of its rights, powers and
privileges under this letter agreement (including, without limitation, the right
to enforce all of the terms of this letter agreement) to any person who enters
into the transactions contemplated by this letter agreement.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any 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. You further agree to waive, any requirement for the securing or
posting of any bond in connection with such remedy. 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, the non-prevailing party shall be liable and pay to the
prevailing party the reasonable legal fees incurred by the prevailing party
in connection with such litigation, including any appeal therefrom.
<PAGE>
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York and shall automatically expire two (2) years
after the date hereof.
All modifications of, waivers of and amendments to this letter agreement
must be in writing and signed on behalf of you and the Company.
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,
/S/ (illegible)
------------------------------------------
Lehman Brothers Inc.
as financial advisor to, and on behalf of,
Kerr Group, Inc.
Accepted and agreed as modified herein as of
the date first written above:
FREMONT GROUP, INC.
By: /S/Gregory P. Spivy
-------------------
Name: Gregory P. Spivy
Title: Principal
