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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
KERR GROUP, INC.
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(Name of Subject Company)
KERR GROUP, INC.
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(Name of Person(s) Filing Statement)
Common Stock, Par Value $.50 Per Share (and Preferred Stock Purchase Rights)
and $1.70 Class B Cumulative Convertible Preferred Stock, Series D,
Par Value $.50 Per Share
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(Title of Class of Securities)
492376108 and
492376207
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(CUSIP Number of Class of Securities)
D. Gordon Strickland
President and Chief Executive Officer
KERR GROUP, INC.
500 New Holland Avenue
Lancaster, Pennsylvania 17602
(717) 299-6511
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(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person(s) Filing Statement)
Copies to:
Steven J. Gartner, Esq.
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Kerr Group, Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 500 New Holland Avenue, Lancaster, Pennsylvania 17602. The titles of
the classes of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Statement") relates are the $1.70 Class B
Cumulative Convertible Preferred Stock, Series D, par value $.50 per share (the
"Preferred Stock"), and the common stock, par value $.50 per share (the "Common
Stock"), of the Company and the associated Preferred Stock Purchase Rights (the
"Rights") to purchase shares of Series B Preferred Stock, Series E, par value
$.50 per share, of the Company, issued pursuant to the Rights Agreement, dated
as of July 25, 1995, as amended (the "Rights Agreement"), between the Company
and BankBoston, N.A. (formerly the First National Bank of Boston), as Rights
Agent (the "Rights Agent"). Unless the context otherwise requires, all
references herein to the Common Stock shall include the associated Rights.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated July 8, 1997 (the "Schedule 14D-1") of Fremont
Acquisition Company, LLC, a Delaware limited liability company ("Fremont"), and
its wholly owned subsidiary, Kerr Acquisition Corporation, a Delaware
corporation (the "Purchaser"), to purchase all of the outstanding shares of
Common Stock and Preferred Stock (collectively, the "Shares") at a price of
$5.40 per share of Common Stock and $12.50 per Share of Preferred Stock, 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") and the related
Letters of Transmittal and any supplement thereto (which together constitute the
"Offer"). The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of July 1, 1997 (the "Merger Agreement") among the Company, Fremont and
the Purchaser.
According to the Schedule 14D-1, the address of the principal executive
offices of Fremont and the Purchaser is 50 Fremont Street, Suite 3700, San
Francisco, California 94105.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) (i) Certain contracts, agreements, arrangements or understandings
between the Company or its affiliates and certain of its directors and executive
officers are described in Schedule II hereto and are incorporated herein by
reference. Except as described herein (including in Schedule II hereto), to the
knowledge of the Company, as of the date hereof there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) the Company's
executive officers, directors or affiliates, or (ii) the Purchaser or the
Purchaser's executive officers, directors or affiliates.
(ii) THE MERGER AGREEMENT.
The following is a summary of certain portions of the Merger Agreement. The
summary is qualified in its entirety by reference to the Merger Agreement which
has been incorporated by reference and a copy of which has been filed with the
Securities and Exchange Commission (the "Commission") as Exhibit 1 to this
Statement. Capitalized terms not otherwise defined below shall have the meaning
set forth in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The 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,
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(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 Preferred Stock, 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 caused to be made, the Offer and shall have
purchased the Shares pursuant to the Offer, unless such failure to purchase is a
result of a breach of Fremont's or 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 Company's 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 Company's 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 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
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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. In the event that Fremont'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 the Merger Agreement on behalf of the Company, (ii) exercise or
waive any of the Company's rights or remedies under the Merger Agreement, (iii)
extend the time for performance of the Purchaser's obligations under the Merger
Agreement or (iv) take any other action by the Company in connection with the
Merger Agreement required to be taken by the Company's Board of Directors.
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 caused 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 Fremont or the Purchaser
acquires at least 90% of outstanding shares of Common Stock and Preferred Stock,
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 the holder 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
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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.
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
Preferred Stock; (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 Preferred Stock; (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; or 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 delay 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 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 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 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 Company's Board of Directors,
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 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
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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, pays or causes 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, fiduciaries, agents or otherwise entitled to
indemnification under the Certificate of Incorporation, By-Laws or
indemnification agreements (the "Indemnified Parties"). The Merger Agreement
provides that the Company shall, to the fullest extent permitted under Delaware
law and regardless of whether the Merger becomes effective, indemnify, defend
and hold harmless, and after the Effective Time, Fremont, the Purchaser and the
Surviving Corporation shall jointly and severally, to the fullest extent
permitted under Delaware law, indemnify and hold harmless, each Indemnified
Party against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit proceeding or
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.
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
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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 be or has not been cured within 10 days
of the written 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 transactions
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)(1) 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 Exhibit 2 to this Statement.
As a condition and inducement to Fremont's and the Purchaser's entering into
the Merger Agreement, concurrently with the execution and delivery of the Merger
Agreement, Fremont and the Company entered into an Option Agreement, dated as of
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
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exercised by Fremont (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 becomes 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).
The Option Agreement expires, 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 heretofore been given by Fremont, six months after termination of the
Merger Agreement.
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GUARANTEE.
The following is a summary of certain provisions of the Guarantee. The
summary is qualified in its entirety by reference to the Guarantee which is
incorporated herein by reference and a copy of which has been filed with the
Commission as Exhibit 3 to this Statement.
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, L.P. ("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.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Since July 1995, the Company has explored various alternatives in order
to further the best interests of the Company and its stockholders, including
remaining independent, recapitalizing or restructuring the Company, and engaging
financial advisors to conduct discussions with interested parties (including
Fremont Partners), concerning possible business combinations and strategic
transactions involving the disposition of a significant portion of the Company.
The Company began exploring the alternatives in September 1995 following
defaults in covenants contained in loan agreements governing its senior
unsecured debt (the "Debt"). In October 1995, the Company engaged Lehman
Brothers Inc. ("Lehman Brothers") to explore a possible sale of the Company.
These efforts proved unsuccessful, although as a result of this process the
Company sold the manufacturing assets of its consumer products division in March
1996. The proceeds from this sale enabled the Company to reduce the Debt and to
finance an operational restructuring designed to result in substantial annual
cost savings for the Company.
In June 1996, the Company began negotiations with the holders of the Debt to
restructure the Debt and in October 1996, the Company reached an agreement in
principle with the holders to restructure the Debt. The restructuring involved
the exchange of the existing indebtedness for a combination of cash, new
subordinated debt and a new series of preferred stock. The cash was to have been
obtained through a new senior secured loan facility for which the Company had
obtained a commitment. Shortly after this agreement was reached and publicly
announced by the Company, the holders of the Debt sold the Debt to a group of
investors. These investors (the "Investors") advised the Company that the
proposed restructuring was not acceptable. The Investors agreed to extend the
waiver of the covenant defaults through December 31, 1996 to permit the Company
to retain the services of a financial advisor to advise the Company regarding
refinancing alternatives. The Company retained CIBC Wood Gundy Securities Corp.
("CIBC") as its financial advisor. During December 1996 and early January 1997,
the Company and its legal and financial advisors met with representatives of the
Investors to discuss a possible restructuring. The Investors proposed an
exchange of the Debt for substantially all of the equity of the Company, with
existing holders of Preferred Stock to receive a small percentage of the Common
Stock and existing holders of Common Stock to receive warrants exerciseable for
a small percentage of the Common Stock. The Company retained bankruptcy counsel
and began preparations for a possible bankruptcy filing in the event the
discussions did not result in an acceptable restructuring. In early January
1997, the Investors agreed to further extend the waiver of the defaulted
covenants.
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Thereafter, the Company's Board of Directors, after receiving advice from
CIBC, concluded that the Investors' proposal to refinance the Debt in exchange
for substantially all of the Common Stock was not in the best interest of the
Company and its stockholders. The Company then obtained financing commitments
from institutional lenders that would provide funds to purchase the Debt and
provide requisite working capital.
After the Company announced that it was seeking secured financing to
purchase the Debt, the Pension Benefit Guaranty Corporation (the "PBGC")
requested the Company to provide the PBGC with the terms of the proposed
refinancing. After receiving the information, the PBGC advised the Company that
unless the terms of the proposed secured refinancing were modified
substantially, the PBGC would not consent to the refinancing. The Company
thereafter entered into extended discussions with the PBGC to obtain the PBGC's
consent for the refinancing, which included discussions with the proposed
lenders in order to reach an agreement which the Company believed would be
acceptable to the PBGC.
On March 7, 1997, the covenant default waiver from the Investors expired and
the Investors indicated that they were not prepared to grant a further waiver.
Absent an extension of the waiver, the Company was unable to continue selling
its accounts receivables under the terms of its existing credit facility to
provide necessary working capital. In April 1997, the Company obtained a
revolving credit agreement from Madeleine L.L.C. ("Madeleine"), secured by its
receivables, in order to provide the requisite working capital while the Company
continued its efforts to obtain the financing required to purchase the Debt. The
revolving credit agreement (including the granting of the liens) constituted
additional defaults under the terms of the Debt. The Investors threatened legal
proceedings against the Company, its officers, directors and advisors, asserting
various causes of action based on, among other things, breach of contract and
breach of fiduciary duty, and demanded liens equal and ratable to the liens
granted to Madeleine. The Company refused to grant the Investors any liens. On
May 22, 1997, the Investors notified the Company that the indebtedness would be
accelerated on June 4, 1997. In late May 1997, the Company advised the Investors
that it was engaged in discussions with various parties concerning a possible
business combination. The Investors agreed not to accelerate the Debt until July
3, 1997 in consideration of the payment of $500,000, of which $150,000 was
credited against the "make-whole" payment due under the Debt, and the payment by
the Company of interest on the Debt on a monthly basis at the default rate.
Since December 1996, CIBC has discussed possible business combinations with
a number of companies interested in consummating a transaction with the Company.
In the spring of 1997, CIBC renewed discussions with a number of companies that
it had contacted in early 1997 as well as a number of companies that Lehman
Brothers had contacted during its engagement in connection with the Company's
decision to explore the possibility of selling the Company in 1995. The Company
received proposals or indications of interest from several of these companies
and engaged in simultaneous substantive discussions with these companies
concerning various business combination transactions. Fremont Partners was one
of a number of companies contacted during the spring of 1997 by representatives
of the Company.
In October 1995, a representative of Lehman Brothers contacted
representatives of Fremont Group, L.L.C. (including predecessor entities, "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.
On November 6, 1995, The Fremont Group entered into a confidentiality
agreement with 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 Company's Board of
Directors. 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
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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 1991 to carry on the direct investment activities of The Freemont Group
and suggested the Company's Board of Directors 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 whereby 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, 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.
On April 4, 1996, Mr. Strickland provided The Fremont Group with a package
of updated financial information that detailed the Company's planned
restructuring. The Fremont Group 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 The Fremont Group in The Fremont Group's offices
in San Francisco. In this meeting, representatives of The Fremont Group outlined
a number of recapitalization alternatives that generally involved a capital
infusion by The Fremont Group 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
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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 Company's Board of Directors 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 The Fremont Group 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 The Fremont Group concerning
a possible investment in the Company. The Fremont Group 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 The Fremont Group, 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, 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
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 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 contacted Fremont Partners and
indicated that CIBC 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, 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 indicated that
it expected this transaction would be completed within two to three weeks.
On March 12, 1997, a representative of Fremont Partners contacted CIBC and
inquired regarding the apparent delay in completing the refinancing previously
discussed. CIBC responded that it still expected the refinancing transaction to
be completed shortly. Fremont Partners submitted another proposal letter to CIBC
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
responded that the Company's Board of Directors remained unwilling to consider
Fremont Partners' proposal and would continue to pursue the refinancing
alternative.
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On May 23, 1997, a representative of CIBC 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 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 an acquisition by Fremont Partners 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 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, in accordance with
CIBC's instructions, on June 16, 1997. The proposal provided for, among other
things, a tender offer for all outstanding shares of Common Stock and Preferred
Stock 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, 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 Preferred Stock. 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 HELD ON JUNE 30, 1997, THE COMPANY'S BOARD OF DIRECTORS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER AND
DETERMINED THAT TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF BOTH THE COMMON STOCK AND PREFERRED STOCK, AND
UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
(b) In reaching its conclusions and the recommendation described above, the
Company's Board of Directors considered a number of factors, including without
limitation the following:
(i) The Company's business, financial condition, results of operations,
assets, liabilities, business strategy and prospects, and the uncertainties
associated with reaching agreements with the Investors, the PBGC and the
proposed new lenders regarding a refinancing of the Debt.
(ii) The opinion of CIBC, the Company's financial advisor, that based on
the assumptions, limited procedures and matters set forth therein, the
consideration to be received in the Offer and the Merger by the holders of
the Common Stock and the Preferred Stock is fair to the holders of the
Common Stock, on one hand, and the Preferred Stock, on the other hand (other
than Fremont or any subsidiary of Fremont), from a financial point of view.
The opinion was not intended 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 and
related transactions. The opinion of CIBC, dated June 30, 1997, is attached
as Schedule I hereto and is
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incorporated herein by reference. Holders of Shares are encouraged to read
the opinion of CIBC in its entirety.
(iii) The terms and conditions of the Merger Agreement, including (A)
that under certain circumstances the Merger Agreement may be terminated if
the Company receives a Superior Proposal, (B) that if the Merger Agreement
is terminated for certain reasons, Fremont is entitled to receive a fee in
the amount of $2,000,000 plus certain expenses, (C) that Fremont was granted
an option to acquire 782,685 shares of Common Stock under certain
circumstances, (D) the structure of the transaction, which involves a
first-step cash tender offer and a second-step cash merger, (E) that nothing
precludes the Company from not permitting the Rights to expire or taking any
other action with respect to the Rights Agreement if the Merger Agreement is
terminated in accordance with its terms, and (F) the conditions to the Offer
and the Merger.
(iv) The fact that the Offer would not be subject to a financing
condition, that Fremont, the Purchaser and Fremont Partners have represented
that the funds necessary to consummate the Offer and the Merger will be
provided, and that Fremont has agreed to guarantee the obligations of
Fremont and the Purchaser under the Merger Agreement.
(v) A consideration of alternatives to the sale of the Company including
(A) continuing to maintain the Company as a public corporation and not
engaging in any extraordinary transaction other than a refinancing of the
Debt, (B) the sale of a significant portion of the Company's business to a
strategic buyer in a merger in which the Company's stockholders would remain
holders of a minority of the shares of the surviving corporation or (C) in
the absence of items (A) or (B) or a transaction similar to the Offer and
Merger, filing of a bankruptcy petition.
(vi) The market price of the Shares during the period since September
1995.
The foregoing discussion of the information and factors considered and given
weight by the Company's Board of Directors is not intended to be exhaustive. The
Company's Board of Directors did not quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained CIBC to render financial advisory services to the
Company with respect to the Offer and the Company's restructuring efforts.
Pursuant to an engagement letter, dated December 3, 1996, as amended on June 30,
1997, the Company agreed to (a) pay CIBC an initial fee of $100,000, (b) pay
CIBC $100,000 upon completion of a valuation analysis of the Company, (c) pay
CIBC $85,000 per month (through June 1997), (d) pay CIBC $650,000 upon closing
of a change of control transaction, and (e) pay CIBC an additional $250,000 upon
delivery of a fairness opinion by CIBC to the Company with respect to the Offer,
equal to an aggregate payment of $1,750,000. The Company also has agreed to
reimburse CIBC's reasonable out-of-pocket expenses including the fees and
expenses of CIBC's counsel, and indemnify and defend CIBC and certain related
persons against certain liabilities in connection with the engagement.
The Company also retained Lehman Brothers in October 1995 to render
financial advisory services. Pursuant to an engagement letter, dated October 27,
1995, the Company agreed to (a) pay Lehman Brothers a retainer of $100,000 and
(b) pay Lehman Brothers a fee of 1% of the Consideration (as therein defined)
involved in the sale of the Company, if the Company is sold during the term of
the agreement or within 24 months thereafter if sold to a buyer identified by
Lehman Brothers, plus an additional 3% of the Consideration under certain
circumstances (not applicable to the Offer or the Merger). The Company has also
agreed to reimburse Lehman Brothers' reasonable out-of-pocket expenses
(including the fees and expenses of Lehman Brothers' counsel), and indemnify and
defend Lehman Brothers and certain related persons against certain liabilities
in connection with the engagement.
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Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) The Common Stock Purchase Plan for Directors adopted in 1992 allows
non-employee directors to defer receipt of their fees and have the amounts
contributed to a trust which then purchases Common Stock on behalf of the
participating directors. From June 9 through 12, the trust acquired 1,377, 421,
1,000, 300 and 1,000 shares on behalf of Herbert Elish, John D. Kyle, James R.
Mellor, Robert M. O'Hara and Harvey L. Sperry, respectively, pursuant to this
plan. Except as set forth herein, no transactions in Shares have been effected
during the past 60 days by the Company or, to the best of the Company's
knowledge, by an executive officer, director, subsidiary or affiliate of the
Company.
(b) To the best of the Company's knowledge, each executive officer, director
and affiliate of the Company currently intends to tender all Shares to the
Purchaser over which he or she has sole dispositive power as of the expiration
date of the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein or in Item 3(b) or 4(b), no negotiation is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in: (1) an extraordinary transaction such as a merger
or reorganization involving the Company; (2) a purchase, sale or transfer of a
material amount of assets by the Company; (3) a tender offer for or other
acquisition of securities by or of the Company; or (4) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as described herein or in Item 3(b) or 4(b), there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) The Information Statement attached as Schedule II hereto and
incorporated herein by reference is being furnished in connection with the
possible designation by the Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders as described in Item 3.
(b) Rights Agreement and Rights Amendment
The Company has entered into a Rights Agreement (the "Rights Agreement"),
dated as of July 25, 1995, between the Company and BankBoston, N.A. (formerly
the First National Bank of Boston), as Rights Agent. Pursuant to the terms of
the Rights Agreement, the Rights are attached to all certificates representing
shares of Common Stock. Each Right, when it becomes exercisable, entitles the
registered holder to purchase from the Company a unit consisting initially of
one one-thousandth of a share (a "Unit") of Class B Preferred Stock, Series E,
par value $.50 per share, of the Company, at a Purchase Price of $40 per Unit,
subject to adjustment ("Purchase Price"). The Rights separate from the Common
Stock and a "Distribution Date" occurs upon the earlier of (i) ten (10) days (or
such later date as the Company's Board of Directors shall determine) following
public disclosure that a person or group of affiliated or associated persons has
become an "Acquiring Person", or (ii) ten (10) business days (or such later date
as the Board shall determine) following the commencement of a tender offer or
exchange offer that would result in a person or group becoming an "Acquiring
Person". An "Acquiring Person" generally is a person or group of affiliated or
associated persons who has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock. The Gabelli Funds, Inc. and its affiliates
and associates will become
15
<PAGE>
an Acquiring Person only if their level of beneficial ownership exceeds 32%. The
Rights are not exercisable until the occurrence of the Distribution Date and
until the Rights no longer are redeemable.
In the event that, at any time following the Distribution Date, a person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise of the Right, Common Stock having a value equal
to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of such event, all Rights that are, or were,
beneficially owned by any Acquiring Person will be null and void and
nontransferable and any holder of any such Right (including any purported
transferee or subsequent holder) will be unable to exercise or transfer any such
Right. In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired in
a merger or other business combination transaction in which the Company is not
the surviving corporation, or (ii) 50% or more of the Company's assets or
earning power is sold, mortgaged or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors (provided that following a Stock
Acquisition Date such resolution is approved by a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
directors then in office) prior to the Distribution Date. A "Continuing
Director" is a member of the Company's Board of Directors who is not an
Acquiring Person, an affiliate or associate of an Acquiring Person or a
representative or nominee of an Acquiring Person.
In accordance with the Merger Agreement, the Company and the Rights Agent
entered into Amendment No. 1 to the Rights Agreement, dated as of July 1, 1997
(the "Rights Amendment"). The Rights Amendment provides that (i) neither Fremont
nor the Purchaser shall be deemed to be an "Acquiring Person" solely by virtue
of (a) the announcement or making of the Offer, (b) the acquisition of the
Shares, (c) the execution of the Merger Agreement, or (d) the consummation of
the other transactions contemplated by the Merger Agreement (including the
issuance of Shares to Fremont pursuant to the Option), (ii) a "Distribution
Date" (as defined in the Rights Agreement) will not be deemed to have occurred
solely as a result of: (a) the announcement or making of the Offer, (b) the
acquisition of the Shares pursuant to the Offer or the Merger, (c) the execution
of the Merger Agreement or (d) the consummation of the other transactions
contemplated by the Merger Agreement (including the issuance of Shares to
Fremont pursuant to the Option), (iii) a "Triggering Event" shall not be deemed
to have occurred as a result of (a) the announcement or making of the Offer, (b)
the acquisition of the Shares pursuant to the Offer or the Merger, (c) the
execution of the Merger Agreement or (d) the consummation of the other
transactions contemplated by the Merger Agreement (including the issuance of
Shares to Fremont pursuant to the Option), (iv) the Rights shall not be adjusted
or become exercisable, nor shall a Section 11(a)(ii) Event (as defined in the
Rights Agreement), nor a Section 13 Event (as defined in the Rights Agreement)
occur as a result of: (a) the announcement or making of the Offer, (b) the
acquisition of the Shares pursuant to the Offer or the Merger, (c) the execution
of the Merger Agreement or (d) the consummation of the other transactions
contemplated by the Merger Agreement (including the issuance of Shares to
Fremont pursuant to the Option), and (v) the Rights shall automatically expire
upon the acceptance of Shares for payment pursuant to the Offer in accordance
with the Merger Agreement and that the Rights shall cease to be exercisable upon
the earlier of (a) the close of business on August 4, 2005, (b) the time at
which the Rights are redeemed as provided in the Rights Agreement, or (c) the
acceptance of Shares for payment pursuant to the Offer in accordance with the
Merger Agreement, if such acceptance occurs.
16
<PAGE>
The foregoing descriptions of the Rights Agreement and the Rights Amendment
are qualified in their entirety by reference to the Rights Agreement and the
Rights Amendment, respectively, copies of which have been filed with the
Commission as Exhibit 4 and Exhibit 5, respectively, to this Statement.
(c) Section 203 of the Delaware General Corporation Law
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware General Corporation Law. Under Section 203, certain
"Business Combinations" (defined generally to include (i) mergers or
consolidations between a Delaware corporation and an Interested Stockholder (as
defined below), (ii) transactions with an Interested Stockholder involving the
assets or stock of the corporation or its majority-owned subsidiaries, and (iii)
transactions which increase an Interested Stockholder's percentage ownership of
stock) between a Delaware corporation whose stock is publicly traded or has more
than 2,000 stockholders of record, and an "Interested Stockholder" (defined
generally as a person that is the beneficial owner of 15% or more of a
corporation's outstanding voting stock) are prohibited for a three-year period
following the date that such a stockholder became an Interested Stockholder,
unless (i) the corporation has elected in its original certificate of
incorporation not to be governed by Section 203 (the Company did not make such
an election), (ii) the transaction in which the stockholder became an Interested
Stockholder or the Business Combination was approved by the Company's Board of
Directors of the corporation before the other party to the Business Combination
became an Interested Stockholder, (iii) upon consummation of the transaction
that made it an Interested Stockholder, the Interested Stockholder owned at
least 85% of the voting stock of the corporation outstanding at the commencement
of the transaction (excluding voting stock owned by directors who are also
officers or held in employee benefit plans in which the employees do not have a
confidential right to tender or vote stock held by the plan) or (iv) the
Business Combination was approved by the Company's Board of Directors of the
corporation and ratified by 66 2/3% of the voting stock which the Interested
Stockholder did not own.
In accordance with the Merger Agreement and Section 203, the Company's Board
of Directors approved the Offer, the Merger, the Option Agreement and the other
transactions contemplated by the Merger Agreement and, therefore, the
restrictions of Section 203 are inapplicable to the Offer, the Merger, the
exercise by Fremont of the Option and the related transactions.
17
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of July 1, 1997, among Kerr Group, Inc.,
Fremont Acquisition Company, LLC and Kerr Acquisition Corporation.
Exhibit 2 Company Option Agreement, dated as of July 1, 1997, among Kerr Group, Inc. and
Fremont Acquisition Company, LLC.
Exhibit 3 Guarantee, dated as of July 1, 1997, between Kerr Group, Inc. and Fremont
Partners, L.P.
Exhibit 4 Rights Agreement, dated as of July 25, 1995, between the Company and BankBoston,
N.A. (formerly the First National Bank of Boston).
Exhibit 5 Amendment No. 1 to the Rights Agreement, dated as of July 1, 1997, between the
Company and BankBoston, N.A. (formerly the First National Bank of Boston).
Exhibit 6 Amendment, dated as of January 2, 1997, to the Amended and Restated Employment
Agreement, originally dated as of June 16, 1986, and amended and restated as of
March 15, 1996, between Kerr Group, Inc. and D. Gordon Strickland.
Exhibit 7 Letter to Stockholders of the Company, dated July 8, 1997.*
Exhibit 8 Joint Press Release of the Company and Fremont Partners L.P., dated July 1,
1997.
Exhibit 9 Opinion of CIBC Wood Gundy Securities Corp.*
</TABLE>
- ------------------------
* Included in copies mailed to stockholders.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
-----------------------------------
Name: D. Gordon Strickland
Title: President and Chief Executive
Officer
Dated: July 8, 1997
19
<PAGE>
SCHEDULE I
[CIBC Wood Gundy 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 be 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 Consideration" 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;
Page 1
<PAGE>
(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;
(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 of 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, has 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
Page 2
<PAGE>
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 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.
Page 3
<PAGE>
SCHEDULE II
KERR GROUP, INC.
500 NEW HOLLAND AVENUE
LANCASTER, PENNSYLVANIA 17602
INFORMATION PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
The following information is being furnished to holders of the common stock,
par value $.50 per share ("Common Stock"), and the $1.70 Class B Cumulative
Convertible Preferred Stock, Series D, par value $.50 ("Preferred Stock" and,
together with the Common Stock, the "Shares"), of Kerr Group, Inc., a Delaware
corporation (the "Company"), in connection with the possible designation by
Fremont Acquisition Company, LLC, a Delaware limited liability company
("Fremont"), of at least a majority of the board of directors of the Company
pursuant to the terms of an Agreement and Plan of Merger, dated as of July 1,
1997 (the "Merger Agreement"), by and among the Company, Fremont and Kerr
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Fremont (the "Purchaser"). THIS INFORMATION IS BEING PROVIDED SOLELY FOR
INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH A VOTE OF THE COMPANY'S
STOCKHOLDERS.
The Merger Agreement provides that promptly following the purchase by
Purchaser of any Shares pursuant to the Offer, Fremont may request that the
Company take all actions necessary to cause persons designated by Fremont to
become directors of the Company (the "Fremont Designees") so that the total
number of directorships held by such persons is proportionate to the percentage
calculated by dividing (i) the number of Shares accepted for payment pursuant to
the Offer plus Shares beneficially owned by Purchaser by (ii) the total number
of Shares outstanding at the time of acceptance of the Shares for payment
pursuant to the Offer; provided that prior to the consummation of the Merger,
the board of directors of the Company (the "Company's Board of Directors") shall
always have at least one member who is neither an officer, designee, shareholder
or affiliate of Fremont. The Company has also agreed to increase the size of the
Company's Board of Directors or exercise its best efforts to secure the
resignation of existing directors to ensure that it has complied with this
provision of the Merger Agreement.
The information contained in this Schedule II concerning the Purchaser has
been furnished to the Company by the Purchaser, and the Company assumes no
responsibility for the accuracy or completeness of any such information.
VOTING SECURITIES OF THE COMPANY
As of July 7, 1997, there were issued and outstanding 3,933,095 shares of
Common Stock, each of which entitles the holder to one vote. The Company's
Preferred Stock is a non-voting security.
BOARD OF DIRECTORS, ACQUISITION DESIGNEES
AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
The persons named below are the current members of the Board. The following
sets forth as to each director (as of July 7, 1997), his age, and principal
occupation and business experience, the period during which each has served as a
director, any family relationship with any other director or executive officer
of
<PAGE>
the Company and the directorships currently held by him in corporations whose
shares are publicly registered.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
Herbert Elish, Age 63(1)(2) Chairman of the Board since 1996; previously Chairman and 1996
Chief Executive Officer of Weirton Steel Corporation from
1987 through December 1995; Director of Hampshire Group,
Limited.
Gordon C. Hurlbert, Age 73(3) Chairman of the Board of Directors, CSC Industries, Inc. 1985
(Copperweld Steel); Director of Carolina Power & Light
Company.
Michael C. Jackson, Age 57(1) Advisory Director, Lehman Brothers, Inc., investment 1985
bankers; Director of Hampshire Group, Limited.
John D. Kyle, Age 62(2)(3) Retired Senior Vice President, Chemical Bank. 1973
James R. Mellor, Age 67 (1) Director of General Dynamics Corporation, a defense, 1980
aerospace, and shipbuilding company, Retired Chairman and
Chief Executive Officer; Director of Bergen Brunswig
Corporation and Computer Sciences Corporation.
Robert M. O'Hara, Age 71(3) Chairman and Chief Executive Officer of Falcon Management 1980
(formerly OMS Company), investments and management services;
Director of TBC Corp.
Harvey L. Sperry, Age 67 (2) Partner, Willkie Farr & Gallagher, attorneys; Director of 1973
Hampshire Group, Limited.
D. Gordon Strickland, Age 50(2) President and Chief Executive Officer of the Company; 1996
previously Senior Vice President, Finance and Chief
Financial Officer of the Company since 1986.
</TABLE>
- ------------------------
(1) Member of the Stock Option and Compensation Committee.
(2) Member of the Executive Committee.
(3) Member of the Audit Committee.
RIGHT TO DESIGNATE DIRECTORS; FREMONT DESIGNEES
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
Company's 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 Company's Board of Directors or use its best efforts to secure
the resignations of such number of its incumbent directors as is necessary to
enable the Fremont Designees to be elected to the Company's Board of Directors,
provided that prior to the consummation of the Merger, the Company's Board of
Directors shall always have at least one independent director as discussed in
the Schedule 14D-9 and incorporated herein by reference.
2
<PAGE>
Fremont has informed the Company that it will choose the initial Fremont
Designees from among certain persons set forth below. With respect to the
Fremont Designees, the following table, prepared from information furnished to
the Company by Fremont, sets forth the name, occupation and age of each such
Fremont Designee. Fremont has informed the Company that each of such individuals
has consented to act as a director, if so designated. If necessary, Fremont may
choose additional or other Fremont Designees, subject to the requirements of
Rule 14f-1.
None of the Fremont Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any directors
or executive officers of the Company or (iii) to the best knowledge of Fremont,
beneficially owns any securities (or rights to acquire such securities) of the
Company. The Company has been advised by Fremont that, to the best of Fremont's
knowledge, none of the Fremont Designees has been involved in any transactions
with the Company or any of its directors, executive officers or affiliates which
are required to be disclosed pursuant to the rules and regulations of the
Commission, except as may be disclosed herein or in the Schedule 14D-9.
It is expected that the Fremont Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding Shares
pursuant to the Offer, which purchase cannot be earlier than August 4, 1997, and
that, upon assuming office, the Fremont Designees will thereafter constitute at
least a majority of the Company's Board of Directors. The Purchaser has informed
the Company that it will choose the Purchaser Designees from the individuals
shown in the table below to serve on the Board of Directors.
3
<PAGE>
The following table, prepared from information furnished to the Company by
the Purchaser, sets forth the name, occupation and age of each of the Purchaser
Designees.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS
<S> <C>
Robert Jaunich II, Age 57 Managing Director and Director of The Fremont Group, Fremont
Investors and Sequoia Ventures, Inc. ("Sequoia"); Director of
CNF Transportation, Inc.; Chairman of the Board of Coldwell
Banker Corporation from 1992 to 1996; Chairman of the Board of
Crown Pacific, Ltd. since 1992; member of the Board of Control
of Petro Stopping Centers, L.P. from 1992 to 1997.
Gilbert H. Lamphere, Age 45 Director of the Purchaser and President of the Purchaser and
Fremont; Managing Director and Director of The Fremont Group,
Fremont Investors and Sequoia since 1994; Director and Chairman
of Illinois Central Corporation; Co-Chairman and Chief
Executive Officer of the Noel Group prior to 1994; Chairman and
Chief Executive Officer of the Prospect Group (1990-1994);
Director of Recognition International, Inc. (1990-1995);
Cleveland-Cliffs, Inc. (1991-1994), R.P. Scherer Corporation
(1991-1995); Global Natural Resources Corporation (resigned
1994); Belding Heminway Company, 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).
Richard S. Kopf, Age 52 Director of the Purchaser and Vice President and Secretary of
the Purchaser and Fremont; 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.
James A. Bondoux, Age 57 Managing Principal of The Fremont Group; Director of Crown
Pacific Partners, L.P.; member of the Board of Control of Petro
Stopping Centers, L.P. from 1992 to 1997.
James T. Farrell, Age 32 Principal of The Fremont Group since 1992; Director Coldwell
Banker Corporation from 1992 to 1996; Director of the nonprofit
Pacific Research Institute.
Mark N. Williamson, Age 34 Principal of The Fremont Group since 1996; prior to 1996,
Managing Director at the Harvard Private Capital Group, Inc;
Director of Risk Capital Holdings, Inc.; Director of Tarquin
PLC from 1994 to 1996; Director of Atlantic Auto Finance
Corporation from 1994 to 1996.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME DURING THE PAST FIVE YEARS
<S> <C>
Gregory P. Spivy, Age 28 Director of the Purchaser and Vice President and Treasurer of
the Purchaser and Fremont; Principal of The Fremont Group since
1995; Director and Associate of The Bridgeford Group from 1992
through 1995.
Suzanne K. Gagan, Age 32 Principal of The Fremont Group; Manager of Special Financial
Services at The Fremont Group from 1993 to 1995; Financial
Analyst at The Fremont Group from 1989 to 1992.
David P. Lorsch, Age 27 Associate of The Fremont Group since 1996; Financial Analyst
with James D. Wolfensohn Incorporated from graduation from
university to 1996.
</TABLE>
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors held 12 meetings during 1996 and the
Executive Committee of the Board of Directors held two meetings during 1996.
Each Director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all Committees of the Board on which such Director served.
The Audit Committee is composed of three directors who are not officers or
employees of the Company. The Audit Committee held one meeting during 1996. The
Company's independent public accountants have been informed that they may refer
to and discuss with the Audit Committee (with or without previous consultation
with officers of the Company) any matters which may develop or arise in
connection with any audit or the maintenance of internal accounting controls or
any other matter relating to the Company's financial affairs. The Company's
internal audit department has also been granted direct access to the Audit
Committee. The Audit Committee reviews, at least annually, the services
performed and to be performed by the Company's independent public accountants
and the fees charged therefor, and, in connection therewith, considers the
effect of any nonaudit services on the independence of such accountants. The
Audit Committee also reviews with the Company's independent public accountants
and its internal audit department the general scope of their respective audit
coverages, the procedures and internal accounting controls adopted by the
Company and any significant problems encountered by either group.
The Stock Option and Compensation Committee (the "Compensation Committee")
is composed of three directors who are not officers or employees of the Company.
The Compensation Committee reviews and approves compensation programs generally
and, specifically, salaries, bonuses and stock options for officers and certain
other salaried employees of the Company. The Compensation Committee held two
meetings during 1996.
The Company does not have a nominating committee.
After the consummation of the Merger, it is expected that the Company's
Board of Directors will act to appoint new members to the Executive, Audit and
Compensation committees. To the Company's knowledge, no decision has been made
by the Purchaser Designees regarding the membership of any such committees of
the Board.
COMPENSATION OF DIRECTORS
The directors who are not employees of the Company are currently compensated
for services as directors at the rate of $22,500 per year and $500 for each
meeting of the Board of Directors attended. Mr. Elish, for serving as Chairman
of the Board, also receives an annual fee of $50,000. In recognition of the
large amount of time Mr. Elish has devoted to the Company's restructuring
efforts, the Board voted to
5
<PAGE>
pay Mr. Elish an additional $75,000 fee for 1997. In addition, the Company has
established an unfunded retirement plan for directors of the Company who serve
in such capacity for ten years or more, retire after February 1, 1985, and do
not receive any other retirement benefits from the Company. Pursuant to such
plan, the Company will pay $1,000 per month for not more than ten years to a
qualifying director. In 1993, the six directors who were not employees of the
Company each received options to purchase 10,000 shares of Common Stock at a
price of $8.19 per share pursuant to the Company's Stock Option Plan For Non-
Employee Directors. Except in the case of a change in control of the Company,
these options are not exercisable unless and until the closing price of the
Common Stock on the New York Stock Exchange reaches $12.50 per share and remains
at or above that level for at least 10 consecutive trading days. Upon his
election to the Board in 1996, Mr. Elish received options to purchase 10,000
shares of Common Stock at a price of $3.9375 per share pursuant to the Company's
Stock Option Plan for Non-Employee Directors. Except in the case of a change in
control of the Company, these options are not exercisable unless and until the
closing price of the Common Stock on the New York Stock Exchange reaches $10.00
per share and remains at or above that level for at least 10 consecutive trading
days. In 1992, the Company's Board of Directors adopted the Common Stock
Purchase Plan for Directors pursuant to which non-employee directors may elect
to defer the receipt of all or a portion of their fees. The amounts deferred are
contributed to a trust which will then purchase Common Stock using such amounts
on behalf of the participating directors. The Common Stock Purchase Plan for
Directors became effective on October 1, 1992.
EXECUTIVE OFFICERS
Executive officers serve at the discretion of the Company's Board of
Directors. The following table sets forth certain information concerning the
executive officers of the Company (as of July 7, 1997) who are expected to serve
in such capacity until the consummation of the Merger (none of whom has a family
relationship with another executive officer):
<TABLE>
<CAPTION>
NAME POSITION AGE
- ------------------------------------------ --------------------------------------------------------------- ---
<S> <C> <C>
D. Gordon Strickland...................... President, Chief Executive Officer and Director, since March 50
15, 1996.
Robert S. Reeves.......................... Senior Vice President, Sales, since June 1, 1994. 67
Geoffrey A. Whynot........................ Vice President, Finance, and Chief Financial Officer, since 38
March 15, 1996.
</TABLE>
BUSINESS EXPERIENCE
D. Gordon Strickland has served in an executive capacity with the Registrant
for more than the past five years. Mr. Strickland previously served as Senior
Vice President, Finance and Chief Financial Officer of the Company since 1986.
Mr. Strickland also served concurrently as President, Consumer Products Division
from 1995 to 1996.
Robert S. Reeves has served in an executive capacity with the Registrant for
more than the past five years. Mr. Reeves had served as Senior Vice President,
Sales and Marketing, Plastic Products since 1992.
Geoffrey A. Whynot has served as Vice President from 1994 through 1996 and
as Treasurer of the Registrant from 1991 through 1996.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock (as of July 7, 1997) by (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock; (ii) each director of the Company; (iii) each
Named Executive Officer (as defined below); and (iv) all directors and executive
officers as a group. Unless otherwise indicated, all shares of Common Stock are
owned directly and of record and the person owning such shares has sole voting
and investment power with respect thereto.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL SHARES
BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- ----------------------------------------------------------------- ------------- ---------------
<S> <C> <C>
The Gabelli Funds, Inc........................................... 719,932(1) 17.7%
655 Third Avenue
New York, New York
Wynnefield Partners.............................................. 392,500(2) 10.0%
Small Cap Value, L.P.
One Penn Plaza, Suite 4720
New York, New York
U.S. Trust Company of California, N.A............................ 368,200(3) 9.4%
Kerr Retirement Income Plan Trust
515 S. Flower Street, Suite 2800
Los Angeles, California
Dimensional Fund Advisors, Inc................................... 282,700(4) 7.1%
1299 Ocean Avenue, Suite 650
Santa Monica, California
Harvey L. Sperry................................................. 22,696(5) *
D. Gordon Strickland............................................. 22,410(6) *
Robert S. Reeves................................................. 19,023(6) *
James R. Mellor.................................................. 23,197(5) *
Gordon C. Hurlbert............................................... 14,455(5) *
Geoffrey A. Whynot............................................... 12,806(6) *
Herbert Elish.................................................... 20,685(5) *
Michael C. Jackson............................................... 10,938(5)(7) *
Robert M. O'Hara................................................. 12,069(5) *
John D. Kyle..................................................... 9,363(5) *
All Directors and Executive
Officers as a Group (10 in number)............................. 204,717(8) 5.2%
</TABLE>
- ------------------------
*Less than one percent.
(1) According to Amendment No. 45 to the Schedule 13D filed jointly by Gabelli
Funds, Inc., GAMCO Investors, Inc., Gabelli Performance Partnership, Gabelli
International Limited and Gabelli Asset Management Company International
Advisory Services, Ltd. (collectively, the "Gabelli Entities") with
7
<PAGE>
the Commission on July 7, 1997 (as amended, the "Gabelli Schedule 13D"), the
Gabelli Entities beneficially owned 586,800 shares of Common Stock. Under
applicable Commission rules, the Gabelli Entities are also deemed to own
beneficially an additional 133,132 shares of Common Stock which the Gabelli
Entities have the right to acquire at any time upon conversion of the 91,531
shares of Preferred Stock beneficially owned by the Gabelli Entities.
The additional shares of Common Stock which may be acquired by the Gabelli
Entities upon such conversion, together with the 586,800 shares of Common
Stock indicated as beneficially owned by the Gabelli Entities in the table
above, represent an aggregate of 719,932 shares, or approximately 17.7% of
the total shares of Common Stock outstanding as of July 7, 1997, including,
for this calculation only, the number of shares of Common Stock that the
Gabelli Entities have the right to acquire upon conversion of the Preferred
Stock reported as beneficially owned by them. The Gabelli Schedule 13D
states that the Gabelli Entities have not acquired the shares of Common
Stock for the purpose of changing or influencing the control of the Company.
(2) According to Amendment No. 3 to the Schedule 13D filed by Wynnefield
Partners Small Cap Value, L.P. and Wynnefield Small Cap Value Offshore Fund,
Ltd. (collectively, "Wynnefield Partners") with the Commission on February
25, 1997 (as amended, the "Wynnefield Schedule 13D"), Wynnefield Partners
beneficially owned 392,500 shares or 10.0% of the Common Stock. The
Wynnefield Schedule 13D states that Wynnefield Partners purchased the shares
for investment and to enhance the partnership's ability to monitor and
evaluate the Company's efforts to restructure its existing debt and to
carefully evaluate any proposed related recapitalization which would affect
shareholder value.
(3) U.S. Trust Company of California, N.A., Kerr Retirement Income Plan Trust
(the "Trust") filed a Schedule 13G with the Commission on February 9, 1996
stating that it held 368,200 shares or 9.4% of the Common Stock. The Trust
holds these shares for the benefit of the participants in the Company's
Retirement Income Plan. The Schedule 13G states that the Trust has not
acquired the shares of Common Stock for the purpose of changing or
influencing the control of the Company.
(4) According to Amendment No. 9 to the Schedule 13G filed by Dimensional Fund
Advisors, Inc. ("Dimensional") with the Commission on February 5, 1997 (as
amended, the "Dimensional Schedule 13G"), Dimensional, a registered
investment adviser, is deemed to have beneficial ownership of 282,700 shares
or 7.1% of the Common Stock as of December 31, 1996. Dimensional reported
that it had the power to make investment decisions regarding all shares of
Common Stock owned beneficially by it on behalf of its clients, which are
unrelated and no one of whom owns beneficially more than 5% of the
outstanding shares of Common Stock. The Dimensional Schedule 13G states that
Dimensional has not acquired the shares of Common Stock for the purpose of
changing or influencing the control of the Company. Dimensional reported
that it had sole voting power with respect to 173,700 shares of the Common
Stock. Persons who are officers of Dimensional also serve as officers of DFA
Investment Dimensions Group Inc. ("Dimensional Fund") and DFA Investment
Trust Company ("Dimensional Trust"), each a registered open-end investment
company. Dimensional reported that in their capacities as officers of
Dimensional Fund and Dimensional Trust these persons vote 35,400 additional
shares which are owned by Dimensional Fund and 73,600 shares which are owned
by Dimensional Trust.
(5) Includes 12,455, 7,850, 20,685, 9,263, 19,727, 16,469 and 10,244 shares of
Common Stock purchased for the accounts of Messrs. Hurlbert, Jackson, Elish,
Kyle, Sperry, Mellor and O'Hara, respectively, by the trustee under the
Common Stock Purchase Plan for Directors. Currently, the participating
directors have voting and dispositive power with respect to such shares only
upon termination of their services as a director of the Company. Excludes
10,000 shares issuable under stock options granted to each non-employee
director pursuant to the Company's 1993 and 1988 Stock Option Plans for Non-
Employee Directors. Except in the case of a change in control of the
Company, these options are not exercisable unless and until the closing
price of the Common Stock on the New York Stock Exchange
8
<PAGE>
reaches $12.50 per share, or $10.00 per share for stock options issued to
Mr. Elish in 1996, and remains at or above that level for at least 10
consecutive trading days. Includes 10,000 shares of Common Stock held by Mr.
Sperry in a self-directed Keogh Plan.
(6) Includes, respectively, for Messrs. Strickland, Reeves and Whynot, 10,000,
5,000 and 7,000 shares issuable under presently exercisable stock options
held by such person. Also includes, respectively, for Messrs. Strickland,
Reeves and Whynot, 4,306, 5,937 and 2,072 shares which have been allocated
for voting and all other purposes under ESOP I, and 5,369, 5,731 and 2,649
shares which have been allocated for voting and all other purposes under
ESOP II.
(7) Includes 1,088 shares issuable upon conversion of 748 shares of Preferred
Stock held by Mr. Jackson, of which 658 shares are held pursuant to a
self-directed Keogh Plan and 90 shares are held directly.
(8) Includes 96,693 shares of Common Stock purchased for the accounts of the
Company's non-employee directors by the trustee under the Company's Common
Stock Purchase Plan for Non-Employee Directors and 22,000 shares (including
shares designated in Note 6 above) issuable upon exercise of stock options.
Also includes 12,315 shares (including shares designated in Note 6 above)
which have been allocated for voting and all other purposes under ESOP I and
13,749 shares (including shares designated in Note 6 above) which have been
allocated for voting and all other purposes under ESOP II, for the Company's
present officers included in the group, who have the power to vote such
shares, but may not obtain or dispose of such shares except under limited
circumstances.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the compensation of the
Company's Chief Executive Officer and the two other most highly compensated
executive officers (the "Executive Group") for each of the last three fiscal
years. Information is also provided for Mr. Roger W. Norian, who served as the
Company's Chief Executive Officer from June 6, 1980 until March 15, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION AWARDS
----------------------------------- --------------------------
<CAPTION>
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(4) ($)(1) ($)(4) (#) ($)(2)
- ----------------------------------- --------- --------- --------- ------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
D. Gordon Strickland,.............. 1996 300,000 25,000 520,000(3) -- 100,000 --
President and Chief 1995 289,000 -- -- -- 20,000 --
Executive Officer 1994 267,000 9,000 -- 10,302 -- --
Robert S. Reeves,.................. 1996 224,000 10,000 -- -- 30,000 1,500
Senior Vice President, 1995 224,000 -- -- -- 12,000 1,500
Sales 1994 224,000 6,200 -- 7,097 -- 1,500
Geoffrey A. Whynot,................ 1996 133,013 10,000 175,130(3) -- 16,000 --
Vice President, 1995 131,693 -- -- -- 75,000 1,257
Finance, Chief 1994 127,700 5,000 -- 5,545 8,000 2,339
Financial Officer
Roger W. Norian.................... 1996 118,750 -- 1,203,432(5) -- -- --
1995 570,000 -- -- -- 75,000 1,500
1994 570,000 15,000 -- 17,178 -- 1,500
</TABLE>
- ------------------------
(1) Except as otherwise noted, perquisites and other personal benefits received
by each named executive officer (including, for certain of the named
executive officers, payments of premiums on life insurance policies, tax
preparation fees and car use allowances) in each instance aggregated less
than the lesser of $50,000 or 10% of such officer's annual salary and bonus.
(2) Includes for Messrs. Strickland, Reeves, Whynot and Norian, respectively,
$0, $1,500, $0 and $0 for 1996 contributions by the Company pursuant to the
Company's Employees' Savings Plan.
(3) Includes reimbursements to Messrs. Strickland and Whynot of $230,000 and
$69,000, respectively, which was equal to the loss on the sale of their
residences in Los Angeles plus $217,438 and $56,911, respectively, grossed
up for federal and state taxes resulting from the reimbursements. In both
cases the reimbursements were part of the 1996 restructuring of the Company,
which included moving the Company headquarters from Los Angeles, California
to Lancaster, Pennsylvania.
(4) Pursuant to the Kerr Group, Inc. Key Executive Incentive Bonus Plan (the
"Bonus Plan"), Messrs. Strickland, Reeves, Whynot and Norian received 50% of
their total bonus ($18,000, $12,400, $10,000 and $30,000, respectively) for
1994 in cash on or about March 1, 1995. These amounts are reflected in the
respective bonus columns for 1994. The remaining 50% is reflected as an
award of restricted stock received by them on March 1, 1997 except in the
case of Mr. Norian, who was not eligible under the Plan to receive the
restricted stock. No dividends have been paid on the restricted stock. The
number of shares of restricted stock awarded to Messrs. Strickland, Reeves
and Whynot was 1,212, 835 and
10
<PAGE>
673, respectively. The number of shares of restricted stock awarded was
calculated by dividing the dollar equivalent of the remaining portion of
their respective bonuses ($9,000, $6,200 and $5,000, respectively) by a
number equal to 90% of the average closing price of the Common Stock during
the month of December 1994. The average closing price of the Common Stock
during December 1994 was $8.24. The aggregate restricted stock holdings for
Messrs. Strickland, Reeves and Whynot as of December 31, 1996 was 1,212, 835
and 673, respectively. The dollar value of such restricted stock holdings
for Messrs. Strickland, Reeves and Whynot as of December 31, 1996 was
$2,878, $1,983 and $1,598, respectively, which was calculated using the
closing price of the Common Stock on December 31, 1996, which was $2.375 per
share.
(5) Includes a $1,140,000 severance payment in accordance with Mr. Norian's
employment agreement and a $60,932 payment for unused and pro-rata vacation.
OPTION GRANT TABLE
The following table sets forth information regarding grants of stock options
made to the Executive Group and Mr. Norian during the last fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM(2)
-------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR(3) ($/SH) DATE 5% 10%
- --------------------------------------- --------------- ------------------- ----------- ----------- --------- ----------
D. Gordon Strickland................... 65,000 86.7 $ 3.9375(4) 6/20/01 $ 70,688 $ 156,163
Robert S. Reeves....................... -- -- -- -- -- --
Geoffrey A. Whynot..................... -- -- -- -- -- --
Roger W. Norian(1)..................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Mr. Norian served as the Company's Chief Executive Officer from June 6, 1980
until March 15, 1996.
(2) The Potential Realizable Value is calculated based on an assumption that the
fair market value of the Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant until the end of
the option term. The 5% and 10% assumed rates are mandated by the Commission
for the purposes of calculating realizable value and do not represent the
Company's estimate or projection of future stock prices.
(3) Based on 75,000 options granted to employees in 1996.
(4) Except in the case of a change in control of the Company, none of these
options granted in 1996 is exercisable unless and until the stock price
reaches $10.00 per share and remains at or above that level for at least 10
consecutive trading days.
11
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information regarding the exercise of options
during the Company's last fiscal year and the number and value of unexercised
options held at year end by each of the named executive officers and Mr. Norian.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SATRS AT
AT FY-END(#) FY-END($)
-------------------------- -----------------
<S> <C> <C> <C> <C> <C>
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------ --------------------- ----------------- ----------- ------------- -----------------
D. Gordon Strickland................ 0 0 10,000 90,000 0
Robert S. Reeves.................... 0 0 5,500 17,000 0
Geoffrey A. Whynot.................. 0 0 7,000 9,000 0
Roger W. Norian (1)................. 0 0 0 0 0
<CAPTION>
<S> <C>
NAME UNEXERCISED(2)
- ------------------------------------ -------------------
D. Gordon Strickland................ 0
Robert S. Reeves.................... 0
Geoffrey A. Whynot.................. 0
Roger W. Norian (1)................. 0
</TABLE>
- ------------------------
(1) Mr. Norian served as the Company's Chief Executive Officer from June 6, 1980
until March 15, 1996.
(2) In 1996, Mr. Strickland was granted options to purchase 65,000 shares of
Common Stock at an exercise price of $3.9375 per share. In 1995, Messrs.
Strickland, Reeves and Whynot were granted options to purchase 20,000,
12,000 and 8,000 shares of Common Stock, respectively, at an exercise price
of $7.56 per share. In 1993, Messrs. Strickland and Reeves were each granted
options to purchase 5,000 shares of Common Stock at an exercise price of
$8.3125 per share. The amounts set forth in this column were calculated
using the difference in the fiscal year-end closing price of the Common
Stock, $2.375 per share, from the exercise price per share. Except in the
case of a change in control of the Company, options granted in 1996 are not
exercisable unless and until the stock price reaches $10.00 per share and
remains at or above that level for at least 10 consecutive trading days.
Except in the case of a change in control of the Company, none of the
options granted in 1993 or 1995 is exercisable unless and until the stock
price reaches $12.50 per share and remains at or above that level until the
stock price reached $10.00 per share and remained at or above that level for
at least ten consecutive trading days, which occurred in 1994.
PENSION PLANS
The Company maintains a funded Retirement Income Plan which provides
eligible employees with retirement benefits equal to 28% of final five-year
average remuneration up to social security covered compensation, plus 43% of
final five-year average remuneration in excess of social security covered
compensation for 30 years of service, with a proportionate reduction for less
than 30 years of service. Five years of service are required in order to vest
under the Retirement Income Plan. The Company also maintains a Pension
Restoration Plan which is an unfunded plan providing benefits to participants
not payable by the Company's Retirement Income Plan because of the limitations
on benefits imposed by the Internal Revenue Code of 1986, as amended. The
aggregate annual accrued benefit under the Retirement Income Plan and the
Pension Restoration Plan when expressed as a single-life annuity on the life of
the participant is limited to $200,000.
The following table sets forth estimated annual retirement benefits payable
on a straight life annuity basis upon retirement at age 65 under the Company's
Retirement Income Plan and Pension Restoration Plan (without regard to lower
accruals on earnings below social security covered compensation) for covered
employees based on their average remuneration and years of service. Remuneration
covered by
12
<PAGE>
the Retirement Income Plan primarily includes salary and bonus (including such
bonus amounts paid in the form of stock), as set forth in the Summary
Compensation Table. Messrs. Strickland, Reeves and Whynot have, as of December
31, 1996, 10, 13 and 9 years, respectively, of credited service under the
pension plans.
<TABLE>
<CAPTION>
FINAL 5 YEAR YEARS OF SERVICE
AVERAGE ---------------------------------
REMUNERATION 10 20 30 OR MORE
- ---------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
$100,000........................................................ $ 14,333 $ 28,667 $ 43,000
150,000......................................................... 21,500 43,000 64,500
200,000......................................................... 28,667 57,333 86,000
250,000......................................................... 35,833 71,667 107,500
300,000......................................................... 43,000 86,000 129,000
</TABLE>
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
Each member of the Executive Group currently has an employment agreement
with the Company.
Mr. Strickland has an employment agreement with the Company for an
indefinite term until terminated by either Mr. Strickland or the Company as set
forth in the agreement. Mr. Strickland's employment agreement provides for a
salary of $300,000 annually. Mr. Strickland's employment agreement also provides
for the continued payment of his salary and certain insurance benefits for a
period of two years following his termination of employment by the Company for
reasons other than "just cause" or permanent disability, or in the event that
Mr. Strickland elects to terminate his employment following his reassignment or
relocation. On January 2, 1997, Mr. Strickland's employment agreement was
amended to provide that Mr. Strickland may elect to terminate his employment
agreement within 180 days after a change in control, in which case he would
receive a lump sum payment equal to 24 times his monthly salary and all
outstanding amounts on his promissory notes would be forgiven and he would be
paid the amount of federal and state taxes, grossed up, resulting from the
termination of his obligations under the notes. In addition, the amendment added
a non-competition provision whereby if pursuant to a change of control, Mr.
Strickland's employment with the Company ended at the election of the Company or
himself, he would be prohibited from engaging in any business that competes
directly or indirectly with the Company's existing business for a period of two
years.
The Company entered into an employment agreement with Mr. Reeves as of
February 17, 1983 for an indefinite term until terminated by either Mr. Reeves
or the Company as set forth in the agreement. Mr. Reeves' employment agreement
provides for a salary of $224,000 annually. Mr. Reeves' employment agreement
also provides for the continued payment of his salary and certain insurance
benefits for a period of eighteen months following his termination of employment
by the Company without cause.
The Company entered into an employment agreement with Mr. Whynot as of
November 16, 1989 for an indefinite term until terminated by either Mr. Whynot
or the Company as set forth in the agreement. Mr. Whynot's employment agreement
provides for a salary of $145,000 annually. Mr. Whynot's employment agreement
also provides for the continued payment of his salary and certain insurance
benefits for a period of 12 months following his termination of employment by
the Company without cause.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In establishing and monitoring the executive compensation program for the
Company, the Compensation Committee looks at both the total compensation program
and each component thereof to assure that it is both competitive and sensitive
to individual and Company performance. In addition, the compensation
13
<PAGE>
determined by the Compensation Committee is subject to the terms of existing
employment agreements with each member of the Executive Group. The Company
utilizes a consultant in the field of executive compensation matters to assist
the Compensation Committee in establishing and implementing compensation
programs that are consistent with these objectives and reflective of the
Company's financial performance.
In 1993, the Compensation Committee established and implemented the Bonus
Plan. Under the Bonus Plan, each participating executive, including Mr.
Strickland, the Company's Chief Executive Officer, is eligible to receive
incentive compensation which is determined both qualitatively and
quantitatively. The qualitative portion is based on the achievement of specific
objectives for each participant and the quantitative portion is based on the
achievement of financial objectives established by the Compensation Committee
for the particular year. For 1996, each participant received a qualitative
portion of the incentive compensation. However, in early 1996, the Compensation
Committee determined that it was not reasonable or appropriate to establish
quantitative bonus targets in view of the Company's anticipated financial
results.
COMPENSATION COMMITTEE
Herbert Elish
Michael C. Jackson
James R. Mellor
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, Messrs. Elish, Jackson and Mellor
served as members of the Compensation Committee. None of such members of the
Compensation Committee are or have been officers or employees of the Company.
Mr. Jackson is an Advisory Director of Lehman Brothers, Inc., which performs
investment banking services for the Company from time to time.
Messrs. Elish, Sperry and Jackson currently serve as directors of Hampshire
Group, Limited.
Mr. Sperry is a partner at the law firm of Willkie Farr & Gallagher, outside
counsel for the Company.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below charts the yearly percentage change in the
Company's cumulative total stockholder return against each of the Standard &
Poor's 500 Index and the Manufacturing-Diversified Industries Index, in each
case assuming an investment of $100 on December 31, 1991 and the cumulation and
reinvestment of dividends paid thereafter through December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KERR GROUP, INC. S & P 500 INDEX MFG-DIVFD INDUSTRIALS
<S> <C> <C> <C>
Dec. 1991 100.00 100.00 100.00
Dec. 1992 104.00 107.72 108.38
Dec. 1993 134.00 118.48 131.55
Dec. 1994 134.00 120.04 136.20
Dec. 1995 160.00 165.05 191.72
Dec. 1996 38.00 203.23 264.17
</TABLE>
<TABLE>
<CAPTION>
DEC. 1991 DEC. 1992 DEC. 1993 DEC. 1994 DEC. 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Kerr Group, Inc........................................ 100.00 104.00 134.00 134.00 160.00
S&P 500 Index.......................................... 100.00 107.72 118.48 120.04 165.05
MFG-DIVFD Industrials.................................. 100.00 108.38 131.55 136.20 191.72
<CAPTION>
DEC. 1996
-----------
<S> <C>
Kerr Group, Inc........................................ 38.00
S&P 500 Index.......................................... 203.23
MFG-DIVFD Industrials.................................. 264.17
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Mr. Sperry is a partner in the law firm of Willkie Farr & Gallagher, outside
counsel for the Company.
Mr. Jackson is an Advisory Director of Lehman Brothers Inc., which performs
investment banking services for the Company from time to time.
In 1991, Mr. Strickland received a loan from the Company in the principal
amount of $100,000. The loan has $92,000 of principal outstanding, bears
interest at 7.76% per annum, and is due in installments payable in 1998 through
2001. Interest accrues on the loan and is due in 2001 when the final installment
of principal is due. If Mr. Strickland terminates employment with the Company,
the principal and accrued interest becomes due. However, Mr. Strickland's
employment agreement provides that in the event either the Company or Mr.
Strickland elects to terminate their respective obligations under the employment
agreement within 180 days following a change in control, Mr. Strickland's
obligation to repay the remaining principal and accrued interest is terminated.
In that event, Mr. Strickland would be paid by the Company the amount of federal
and state taxes, grossed up, resulting from the termination of Mr. Strickland's
obligation to repay the loan.
15
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COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers, directors and ten percent stockholders are
required under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the SEC and the New York Stock Exchange. Copies of these
reports must also be furnished to the Company. Based solely upon its review of
copies of such reports furnished to the Company through the date hereof, or
written representations that no reports were required to be filed, the Company
believes that during the fiscal year ended December 31, 1996, all filing
requirements applicable to its officers, directors and ten percent stockholders
were complied with in a timely manner.
16
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Exhibit 1
EXECUTION COPY
================================================================================
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KERR GROUP, INC.,
FREMONT ACQUISITION COMPANY, LLC
and
KERR ACQUISITION CORPORATION
==================================================
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AGREEMENT AND PLAN OF MERGER
==================================================
==================================================
Dated as of July 1, 1997
==================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. THE TENDER OFFER
SECTION 1.1. The Offer.....................................................2
SECTION 1.2. Company Action................................................4
SECTION 1.3. Directors.....................................................5
ARTICLE II. THE MERGER
SECTION 2.1. The Merger....................................................7
SECTION 2.2. Effective Time................................................7
SECTION 2.3. Closing.......................................................7
SECTION 2.4. Effect of the Merger..........................................7
SECTION 2.5. Subsequent Actions............................................8
SECTION 2.6. Certificate of Incorporation; By-Laws; Directors
and Officers.........................................................8
SECTION 2.7. Stockholders' Meeting.........................................8
SECTION 2.8. Merger Without Meeting of Stockholders........................9
SECTION 2.9. Conversion of Securities......................................9
SECTION 2.10. Dissenting Shares...........................................10
SECTION 2.11. Surrender of Shares; Stock Transfer Books...................11
SECTION 2.12. Stock Plans.................................................13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
SECTION 3.1. Corporate Organization.......................................14
SECTION 3.2. Authority Relative to this Agreement.........................14
SECTION 3.3. No Conflict; Required Filings and Consents...................14
SECTION 3.4. Financing Arrangements.......................................15
SECTION 3.5. No Prior Activities..........................................15
SECTION 3.6. Brokers......................................................15
SECTION 3.7. Proxy Statement..............................................16
SECTION 3.8. Employee Benefit Plans.......................................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1. Organization and Qualification; Subsidiaries.................17
SECTION 4.2. Capitalization...............................................17
SECTION 4.3. Authority Relative to this Agreement.........................18
SECTION 4.4. No Conflict; Required Filings and Consents...................18
SECTION 4.5. SEC Filings; Financial Statements............................19
SECTION 4.6. Undisclosed Liabilities......................................20
SECTION 4.7. Absence of Certain Changes or Events.........................20
SECTION 4.8. Litigation...................................................20
SECTION 4.9. Employee Benefit Plans.......................................21
SECTION 4.10. Proxy Statement.............................................22
(i)
<PAGE>
SECTION 4.11. Brokers.....................................................22
SECTION 4.12. Control Share Acquisition...................................23
SECTION 4.13. Conduct of Business.........................................23
SECTION 4.14. Taxes.......................................................23
SECTION 4.15. Intellectual Property.......................................25
SECTION 4.16. Employment Matters..........................................26
SECTION 4.17. Vote Required...............................................27
SECTION 4.18. Environmental Matters.......................................27
SECTION 4.19. Real Property...............................................28
SECTION 4.20. Title and Condition of Properties...........................29
SECTION 4.21. Contracts...................................................29
SECTION 4.22. Potential Conflicts of Interest.............................29
SECTION 4.23. Suppliers and Customers.....................................30
SECTION 4.24. Insurance...................................................30
SECTION 4.25. Accounts Receivable; Inventory..............................30
SECTION 4.26. Opinion of Financial Advisor................................31
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. Acquisition Proposals........................................31
SECTION 5.2. Conduct of Business by the Company Pending the Merger........31
SECTION 5.3. No Shopping..................................................34
ARTICLE VI. ADDITIONAL AGREEMENTS
SECTION 6.1. Proxy Statement..............................................35
SECTION 6.2. Meeting of Stockholders of the Company.......................35
SECTION 6.3. Additional Agreements........................................36
SECTION 6.4. Notification of Certain Matters..............................36
SECTION 6.5. Access to Information........................................36
SECTION 6.6. Public Announcements.........................................37
SECTION 6.7. Best Efforts; Cooperation....................................37
SECTION 6.8. Agreement to Defend and Indemnify............................37
SECTION 6.9. Employee Benefits............................................39
SECTION 6.10. Pending Litigation..........................................39
ARTICLE VII. CONDITIONS OF MERGER
SECTION 7.1. Offer........................................................40
SECTION 7.2. Stockholder Approval.........................................40
SECTION 7.3. No Challenge.................................................40
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination..................................................40
SECTION 8.2. Effect of Termination........................................42
(ii)
<PAGE>
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.1. Non-Survival of Representations, Warranties and Agreements...43
SECTION 9.2. Notices......................................................43
SECTION 9.3. Expenses.....................................................44
SECTION 9.4. Certain Definitions..........................................44
SECTION 9.5. Headings.....................................................45
SECTION 9.6. Severability.................................................45
SECTION 9.7. Entire Agreement; No Third-Party Beneficiaries...............45
SECTION 9.8. Assignment...................................................45
SECTION 9.9. Governing Law................................................45
SECTION 9.10. Amendment...................................................45
SECTION 9.11. Waiver......................................................45
SECTION 9.12. Counterparts................................................46
ANNEX I Conditions to the Offer
(iii)
<PAGE>
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 hares 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
<PAGE>
WHEREAS, as a condition and inducement to Parent's and the
Purchaser's entering into this Agreement and incurring the obligations set
forth herein, 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;
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
2
<PAGE>
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 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,
3
<PAGE>
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
4
<PAGE>
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 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
5
<PAGE>
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.
(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
6
<PAGE>
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.
7
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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 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:
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(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.
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
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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
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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 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
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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 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
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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
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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 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.
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(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
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commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or the Purchaser.
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:
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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.
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
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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
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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 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.
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(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
(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,
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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
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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 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
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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.
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
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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
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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 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.
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(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 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
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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
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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 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
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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 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,
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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.
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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").
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"):
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(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 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;
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(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
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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.
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
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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 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.
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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.
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(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 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
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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 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
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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
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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.
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
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(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 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
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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.
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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
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(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
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.
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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 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
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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.
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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.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
-------------------------------
Name: D. Gordon Strickland
Title: President & CEO
FREMONT ACQUISITION COMPANY, LLC
By: /s/ Gilbert H. Lamphere
-------------------------------
Name: Gilbert H. Lamphere
Title: Managing Director
KERR ACQUISITION CORPORATION
By: /s/ Gregory Spivy
-------------------------------
Name: Gregory Spivy
Title: Vice President
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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
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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 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
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(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.
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TABLE OF DEFINITIONS
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)
Options......................................2.11(b)
Other Stock Plan.............................2.12(a)
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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)
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Exhibit 2
EXECUTION COPY
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
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(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 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
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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,
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as applicable, and such Company Common Stock had elected to the fullest extent
it would have been permitted to elect, to receive such securities, cash or other
property.
(b) In the event that the Company shall enter into an agreement
(i) to consolidate with or 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
4
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duly and validly authorized by the Board of Directors of the Company, and no
other corporate proceeding on the part of the Company is necessary to authorize
this Agreement or for the Company to consummate such transactions. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding obligation of Parent,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
SECTION 2.2 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the certificate of incorporation or by-laws of the Company,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or by which the Company is bound or affected,
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance of any kind on any of the Shares
pursuant to, any agreement, contract, indenture, notice or instrument to which
the Company is a party or by which the Company is bound or affected, or
(iv) except for applicable requirements, if any, of the HSR Act, the Exchange
Act and the Securities Act of 1933, as amended (the "Securities Act"), require
any filing by the Company with, or any permit, authorization, consent or
approval of, any governmental or regulatory authority, domestic or foreign.
SECTION 2.3 OPTION SHARES. The Company has taken all necessary
corporate action to authorize and 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.
5
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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,
6
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addressed to Parent and reasonably satisfactory in form and substance to counsel
for Parent, such registration is not required for the sale and distribution of
such Shares in the manner contemplated by Parent. The registration effected
under this paragraph shall be effected at the Company's expense except for any
underwriting commissions. If Shares are offered in a firm commitment
underwriting, the Company will provide reasonable and customary indemnification
to the 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).
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(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:
"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
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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.
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
9
<PAGE>
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.
10
<PAGE>
IN WITNESS WHEREOF, each of the Company and Parent have caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
KERR GROUP, INC.
By: /s/ D. Gordon Strickland
-----------------------------
Name: D. Gordon Strickland
Title: President & CEO
FREMONT ACQUISITION
COMPANY, LLC
By: /s/ Gilbert H. Lamphere
-----------------------------
Name: Gilbert H. Lamphere
Title: Managing Director
11
<PAGE>
EXHIBIT 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: /s/ Gil Lamphere
-----------------------------------
Name: Gil Lamphere
Title: Managing Director
2
<PAGE>
Exhibit 4
================================================================================
RIGHTS AGREEMENT
Kerr Group, Inc.
and
The First National Bank of Boston
Rights Agent
Dated as of July 25, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent. 7
Section 3. Issue of Rights Certificates 7
Section 4. Form of Rights Certificates 9
Section 5. Countersignature and Registration 10
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates 10
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights 12
Section 8. Cancellation and Destruction of Rights Certificates 14
Section 9. Reservation and Availability of Capital Stock 15
Section 10. Preferred Stock Record Date 16
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights 17
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares 27
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power 27
(i)
<PAGE>
Section 14. Fractional Rights and Fractional Shares 30
Section 15. Rights of Action 31
Section 16. Agreement of Rights Holders 32
Section 17. Rights Certificate Holder Not Deemed a
Stockholder 32
Section 18. Concerning the Rights Agent 33
Section 19. Merger or Consolidation or Change of Name of
Rights Agent 33
Section 20. Duties of Rights Agent 35
Section 21. Change of Rights Agent 36
Section 22. Issuance of New Rights Certificates 37
Section 23. Redemption and Termination 38
Section 24. Notice of Certain Events 39
Section 25. Notices 40
Section 26. Supplements and Amendments 40
Section 27. Successors 41
Section 28. Determinations and Actions by the Board of
Directors, etc 41
Section 29. Benefits of this Agreement 42
(ii)
<PAGE>
Section 30. Severability 42
Section 31. Governing Law 42
Section 32. Counterparts 43
Section 33. Descriptive Headings 43
Exhibit A -- Form of Certificate of Designation, Preferences and Rights
Exhibit B -- Form of Rights Certificate
Exhibit C -- Summary of Rights
(iii)
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 25, 1995 between Kerr Group, Inc.,
a Delaware corporation (the "COMPANY"), and The First National Bank of Boston, a
national banking association (the "RIGHTS AGENT").
W I T N E S S E T H
WHEREAS, on July 24, 1995 (the "RIGHTS DIVIDEND DECLARATION DATE"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock of the Company
outstanding at the close of business on August 4, 1995 (the "RECORD DATE"), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date, each
Right initially representing the right to purchase one unit (a "UNIT") with each
such unit consisting initially of one one-thousandth of a share of Class B
Preferred Stock, Series E of the Company having the rights, powers and
preferences set forth in the form of Certificate of Designation, Preferences and
Rights attached hereto as EXHIBIT A, upon the terms and subject to the
conditions hereinafter set forth ("RIGHTS");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding or, in the case of
The Gabelli Funds, Inc. ("GABELLI") and its Affiliates and Associates, shall be
the Beneficial Owner of 32% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan of the Company or of any Subsidiary of
the Company, or (iv) any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan (each of (i) through
(iv), an "EXEMPTED PERSON"). Notwithstanding the foregoing, (i) no Person shall
become an "Acquiring Person" as a result of an acquisition of Common Stock by
the Company which, by reducing the number of such shares then outstanding,
increases the proportionate number of shares beneficially owned by such Person
<PAGE>
to 15% (or, in the case of Gabelli, 32%) or more of the outstanding Common
Stock, except that if such Person, after such share purchases by the Company,
becomes the Beneficial Owner of any additional shares of Common Stock, such
Person shall be deemed to be an "Acquiring Person;" and (ii) if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person" has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of Common Stock so
that such Person would no longer be an Acquiring Person then such Person shall
not be deemed to be an "Acquiring Person." The term "OUTSTANDING," when used
with reference to a Person's Beneficial Ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then issued and outstanding which such
Person would be deemed to beneficially own hereunder.
(b) "ACT" shall mean the Securities Act of 1933, as amended.
(c) "ADJUSTMENT SHARES" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
(d) "AFFILIATE" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(e) "ASSOCIATE" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(f) A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be
deemed to "BENEFICIALLY OWN," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering
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<PAGE>
Event which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("ORIGINAL RIGHTS") or pursuant to
Section 11(i) hereof in connection with an adjustment made with respect to
any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (f)) or
disposing of any voting securities of the Company;
PROVIDED, HOWEVER, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition. Notwithstanding
anything in this definition of Beneficial Owner to the contrary, a Person who is
a Continuing Director or officer of the Company or who is an Affiliate or
Associate of a Continuing Director or officer of the Company (each, an "EXCLUDED
PERSON") shall not be deemed to "beneficially own" shares of Common Stock held
by another Excluded Person solely by reason of any agreement, arrangement or
understanding, written or otherwise, entered into in opposition to a transaction
that, at the time such agreement,
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<PAGE>
arrangement or understanding was entered into, has not been approved or
recommended by the Board of Directors to the stockholders of the Company (which
approval or recommendation, if adopted following a Stock Acquisition Date,
includes the concurrence of a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the number of directors then
in office).
(g) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York or the state in which
the principal office of the Rights Agent is located are authorized or obligated
by law or executive order to close.
(h) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., New York
City time, on such date; PROVIDED, HOWEVER, that if such date is not a Business
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(i) "COMMON STOCK" shall mean the common stock, par value $.50 per share,
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.
(j) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(k) "COMPANY" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(l) "CONTINUING DIRECTOR" shall mean a member of the Board of Directors
who is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person
or a representative or nominee of an Acquiring Person.
(m) "CURRENT MARKET PRICE" shall have the meaning set forth in Section
11(d)(i).
(n) "CURRENT VALUE" shall have the meaning set forth in Section 11(a)(iii)
of this Agreement.
(o) "DISTRIBUTION DATE" shall have the meaning set forth in Section 3(a)
of this Agreement.
(p) "EQUIVALENT PREFERRED STOCK" shall have the meaning set forth in
Section 11(b) of this Agreement.
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<PAGE>
(q) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934.
(r) "EXCLUDED PERSON" shall have the meaning set forth in Section
1(f)(iii) of this Agreement.
(s) "EXEMPTED PERSON" shall have meaning set forth in Section 1(a) of this
Agreement.
(t) "EXPIRATION DATE" shall have the meaning set forth in Section 7(a) of
this Agreement.
(u) "FINAL EXPIRATION DATE" shall have the meaning set forth in Section
7(a) of this Agreement.
(v) "ORIGINAL RIGHTS" shall have the meaning set forth in Section 1(f)(i)
of this Agreement.
(w) "PERSON" shall mean any individual, firm, corporation, partnership or
other entity.
(x) "PREFERRED STOCK" shall mean shares of Class B Preferred Stock, Series
E, par value $.50 per share, of the Company, and, to the extent that there are
not a sufficient number of shares of Class B Preferred Stock, Series E
authorized to permit the full exercise of the Rights, any other series of
Preferred Stock, par value $.50 per share, of the Company designated for such
purpose containing terms substantially similar to the terms of the Class B
Preferred Stock, Series E.
(y) "PRINCIPAL PARTY" shall have the meaning set forth in Section 13(b) of
this Agreement.
(z) "PURCHASE PRICE" shall have the meaning set forth in Section 4(a) of
this Agreement.
(aa) "RECORD DATE" shall have the meaning set forth in the "Whereas" clause
of this Agreement.
(bb) "REDEMPTION PRICE" shall have the meaning set forth in Section 23 of
this Agreement.
(cc) "RIGHTS" shall have the meaning set forth in the "Whereas" clause of
this Agreement.
(dd) "RIGHTS AGENT" shall have the meaning set forth in the introductory
paragraph of this Agreement.
(ee) "RIGHTS CERTIFICATES" shall have the meaning set forth in Section 3(a)
of this Agreement.
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<PAGE>
(ff) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set forth in
the "Whereas" clause of this Agreement.
(gg) "SECTION 11(A)(II) EVENT" shall mean any event described in Section
11(a)(ii) of this Agreement.
(hh) "SECTION 11(A)(II) TRIGGER DATE" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(ii) "SECTION 13 EVENT" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) of this Agreement.
(jj) "SPREAD" shall have the meaning set forth in Section 11(a)(iii) of
this Agreement.
(kk) "STOCK ACQUISITION DATE" shall mean the earlier of the date of (i) the
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such or (ii) the public disclosure of facts by the Company or an Acquiring
Person indicating that an Acquiring Person has become an Acquiring Person.
(ll) "SUBSIDIARY" shall mean, with reference to any Person, any corporation
of which an amount of voting securities sufficient to elect at least a majority
of the directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(mm) "SUBSTITUTION PERIOD" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(nn) "SUMMARY OF RIGHTS" shall have the meaning set forth in Section 3(b)
of this Agreement.
(oo) "TRADING DAY" shall have the meaning set forth in Section 11(d)(i) of
this Agreement.
(pp) "TRANSACTION" shall mean any merger, consolidation or sale of assets
or earning power described in Section 13(a) hereof or any acquisition of Common
Stock of the Company which, without regard to any required approval of the
Company, would result in a Person becoming an Acquiring Person.
(qq) "TRIGGERING EVENT" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
-6-
<PAGE>
(rr) "UNIT" shall have the meaning set forth in the "Whereas" clause of
this Agreement.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on the tenth day after
the Stock Acquisition Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business on the Record Date),
(ii) the close of business on the tenth Business Day (or such later date as the
Board shall determine) after the date that a tender or exchange offer by any
Person is first published or sent or given within the meaning of Rule 14d-2(a)
of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person or (iii) the
Expiration Date (the earlier of (i) and (ii) being herein referred to as the
"DISTRIBUTION DATE"), (x) the Rights will be evidenced by the certificates for
the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). The Board of Directors of
the Company may defer the date set forth in clause (ii) of the preceding
sentence to a specified later date or to an unspecified later date, each to be
determined, (with the concurrence of a majority of the Continuing Directors
following a Stock Acquisition Date and only if the Continuing Directors
constitute a majority of the number of directors then in office) by action of
the Board of Directors of the Company. As soon as practicable after the
Distribution Date, the Rights Agent will, at the Company's expense, send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of EXHIBIT B hereto (the "RIGHTS
CERTIFICATES"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that
-7-
<PAGE>
Rights Certificates representing only whole numbers of Rights are distributed
and cash is paid in lieu of any fractional Rights. As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable, the Company will send a copy of a Summary
of Rights, in substantially the form attached hereto as EXHIBIT C (the "SUMMARY
OF RIGHTS"), by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Record Date, at the address of
such holder shown on the records of the Company.
(c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be
deemed to be certificates for Rights and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Kerr Group, Inc. (the
"Company") and The First National Bank of Boston (the "Rights Agent") dated
as of July 25, 1995 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge, promptly
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, registered holders of
Common Stock shall also be the registered holders of the associated Rights, and
the transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
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<PAGE>
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date and on their face shall entitle the holders thereof to purchase such
number of one one-thousandths of a share of Preferred Stock as shall be set
forth therein at the price set forth therein (such exercise price per one
one-thousandth of a share, the "PURCHASE PRICE"), but the amount and the type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Affiliate or Associate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Affiliate or Associate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Continuing Directors has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in
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the Rights Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of such Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by an authorized signatory of the
Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by an authorized
signatory of the Rights Agent and issued and delivered by the Company with the
same force and effect as though the person who signed such Rights Certificates
had not ceased to be such officer of the Company; and any Rights Certificates
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the execution
of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its office or offices designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for another
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Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment by the holder of a Rights Certificate of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate, if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
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SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose, along
with a signature guarantee and such other and further documentation as the
Rights Agent may reasonably request, together with payment of the aggregate
Purchase Price with respect to the total number of one one-thousandths of a
share (or other securities, cash or other assets, as the case may be) as to
which such surrendered Rights are then exercisable, at or prior to the earlier
of (i) the close of business on August 4, 2005 (the "FINAL EXPIRATION DATE"), or
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof
(the earlier of (i) and (ii) being herein referred to as the "EXPIRATION DATE").
(b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $40, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-thousandths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of
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Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
check or bank draft payable to the order of the Company. In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the
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transferred Rights or (B) a transfer which a majority of the Continuing
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of this Section 7(e), shall
become null and void without any further action, and no holder of such Rights
shall have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
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SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, or (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement, and shall give simultaneous written notice to the Rights Agent
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is
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no longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued, and fully paid and
non-assessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of the Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE. Each person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented
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thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes) was made; PROVIDED, HOWEVER,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and
Section 7(e) hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have
owned upon such
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exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration Date,
become an Acquiring Person, then, proper provision shall be promptly made
so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of
this Agreement, in lieu of a number of one one-thousandths of a share of
Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "PURCHASE PRICE" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares being referred to as the
"ADJUSTMENT SHARES").
(iii) In the event that the number of shares of Common Stock which are
authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company, acting by resolution of its Board of Directors (which
resolution shall be effective only with the concurrence of a majority of
the Continuing Directors), shall (A) determine the value of the Adjustment
Shares issuable upon the exercise of a Right (the "CURRENT VALUE"), and (B)
with respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units
of shares, of preferred stock, such as the Preferred Stock, which the Board
has deemed to
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have essentially the same value or economic rights as shares of Common
Stock (such shares of preferred stock being referred to as "COMMON STOCK
EQUIVALENTS")), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board; PROVIDED, HOWEVER, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30)
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "SECTION 11(A)(II) TRIGGER DATE"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "SPREAD" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board determines in
good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval for
the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "SUBSTITUTION PERIOD"). To the
extent that action is to be taken pursuant to the first and/or third
sentences of this Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such shareholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of each
Adjustment Share shall be the Current Market Price (as determined pursuant
to Section 11(d)(i) hereof) per share of the Common Stock on
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the Section 11(a)(ii) Trigger Date and the per share or per unit value of
any Common Stock Equivalent shall be deemed to equal the Current Market
Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("EQUIVALENT
PREFERRED STOCK")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
In case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or
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merger in which the Company is the continuing corporation), of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price (as determined pursuant to Section 11(d)(i)
hereof) per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "CURRENT
MARKET PRICE" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; PROVIDED, HOWEVER, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each such case, the Current
Market Price
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shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such
other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board shall be used.
The term "TRADING DAY" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, Current Market Price per share
shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the Current Market
Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1000 (as such number may be appropriately adjusted
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for such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock occurring after the date of this Agreement)
multiplied by the Current Market Price per share of the Common Stock. If
neither the Common Stock nor the Preferred Stock is publicly held or so
listed or traded, Current Market Price per share of the Preferred Stock
shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of a Unit shall be equal to the
Current Market Price of one share of Preferred Stock divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest hundred-thousandth of a share of Common
Stock or other share or one-ten-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
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(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one-ten-millionth)
obtained by (i) multiplying (x) the number of one one-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of
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the Company, the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable such number of one one-thousandths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price thereof, (iii) issuance
wholly for cash of shares of Preferred Stock or securities which by their
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terms are convertible into or exchangeable for shares of Preferred Stock, (iv)
stock dividends, or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter
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associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, the adjusted Purchase Price and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent, and
with each transfer agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell, mortgage or otherwise transfer (or one
or more of its Subsidiaries shall sell, mortgage or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case, proper
provision shall be made so
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that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one
one-thousandths of a share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "PURCHASE PRICE" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "COMPANY" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "PRINCIPAL PARTY" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation; and
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(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "PRINCIPAL PARTY" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "PRINCIPAL PARTY" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time
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after the occurrence of a Section 11(a)(ii) Event, the Rights which have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one
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one-thousandth of a share of Preferred Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-thousandth of a share of Preferred Stock. For purposes
of this Section 14(b), the current market value of one one-thousandth of a share
of Preferred Stock shall be one one-thousandth of the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Current
Market Value of one (1) share of Common Stock. For purposes of this Section
14(c), the Current Market Value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief
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against actual or threatened violations of the obligations hereunder of any
Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by accepting
the same consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligations; PROVIDED, HOWEVER, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of any Rights Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the number of one one-thousandths of a
share of Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented
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thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent such compensation as
shall be agreed to in writing between the Company and the Rights Agent for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including, without limitation, the costs and expenses of defending
against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed and executed, and where necessary,
verified or acknowledged, by the proper Person or Persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights
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Agent shall be a party, or any corporation succeeding to the corporate trust or
shareholder services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; PROVIDED, HOWEVER, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations expressly imposed by this Agreement, and no implied duties or
obligations shall be read into this Agreement against the Rights Agent, upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or
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matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof); nor shall it be
responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
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<PAGE>
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; PROVIDED, HOWEVER, reasonable care was exercised in the
selection thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in
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writing mailed to the Company. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the Company shall become
the Rights Agent until a successor Rights Agent has been appointed, and any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or shareholder services powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, subject to Section 4 hereof, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the
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number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement.
SECTION 23. REDEMPTION AND TERMINATION.
(a) The Company may, by a resolution of its Board of Directors (which
resolution shall, if adopted following the Stock Acquisition Date, be effective
only with the concurrence of a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the number of directors then
in office), at its option, at any time prior to the earlier of (i) the close of
business on the tenth day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "REDEMPTION PRICE"). Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the Company's
right of redemption hereunder has expired. The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
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<PAGE>
SECTION 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate and to the Rights Agent, to the extent feasible
and in accordance with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
shares of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Preferred Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur, then (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the
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preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
SECTION 25. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Kerr Group, Inc.
1840 Century Park East
Los Angeles, California 90067
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
The First National Bank of Boston
150 Royall Street; Mail Stop 45-02-62
Canton, MA 02021
Attention: Shareholders Services Division
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company may by
resolution of its Board of Directors (which resolution, if adopted following the
Stock Acquisition Date, shall be effective only with the concurrence of a
majority of the Continuing Directors and only if the Continuing Directors
constitute a majority of the number of directors then in office) and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date and subject to the
penultimate sentence of this Section 26, the Company may by resolution of its
Board of Directors (which resolution, if adopted following the Stock Acquisition
Date, shall be effective
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only with the concurrence of a majority of the Continuing Directors and only if
the Continuing Directors constitute a majority of the number of directors then
in office) and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder, or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which, in the case of this clause
(iv), shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); PROVIDED, HOWEVER, that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
SECTION 27. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
SECTION 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company (with, where specifically
provided for herein, the concurrence of a majority of the Continuing Directors
and only if the Continuing Directors constitute a majority of the number of
directors then in office) shall have
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the exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors (with, where specifically provided
for herein, the concurrence of a majority of the Continuing Directors and only
if the Continuing Directors constitute a majority of the number of directors
then in office) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board or the Continuing Directors to any liability to the
holders of the Rights.
SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
SECTION 30. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; PROVIDED,
HOWEVER, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the close of business on the tenth day following the date
of such determination by the Board of Directors.
SECTION 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a
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contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.
SECTION 32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
KERR GROUP, INC.
By: /s/ Geoffrey A. Whynot
-------------------------------
Name: Geoffrey A. Whynot
Title: Treasurer
THE FIRST NATIONAL BANK OF BOSTON
as Rights Agent
By: /s/ Lori L. Chamoun
-------------------------------
Name: Lori L. Chamoun
Title: Administration Manager
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Exhibit A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF CLASS B PREFERRED STOCK, SERIES E
OF
KERR GROUP, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Larry R. Knipple, Secretary of Kerr Group, Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation, as amended, of this Corporation, the Board
of Directors on July 24, 1995, adopted the following resolution creating a
series of 5,000 shares of Preferred Stock designated as Class B Preferred Stock,
Series E:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Class B Preferred Stock, Series E" and the number of shares
constituting such series shall be 5,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Class B Preferred Stock, Series E with respect to dividends, the holders of
shares of Class B Preferred Stock, Series E shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of January,
April, July and October in each
<PAGE>
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Class B Preferred Stock, Series E,
in an amount per share (rounded to the nearest cent), subject to the provision
for adjustment hereinafter set forth, equal to 1000 times the aggregate per
share amount of all cash dividends, and 1000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.50 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Class B Preferred Stock, Series
E. In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Class B Preferred Stock, Series E were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Class B Preferred Stock, Series E as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Class B Preferred Stock, Series E from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Class B Preferred Stock,
Series E, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Class B
A-2
<PAGE>
Preferred Stock, Series E entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Class B Preferred Stock, Series E in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Class B Preferred Stock, Series E entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than thirty (30) days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. The holders of shares of Class B Preferred
Stock, Series E shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Class B Preferred Stock, Series E shall entitle the holder thereof
to 1000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Class B Preferred Stock, Series E were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Class B Preferred Stock, Series E and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Class B Preferred Stock,
Series E shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a period
(herein called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods and for
the current quarterly dividend period on all shares of Class B Preferred Stock,
Series E then outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of Preferred Stock (including
holders of the Class B Preferred Stock, Series E) with dividends in arrears in
an amount equal to six (6) quarterly
A-3
<PAGE>
dividends thereon, voting as a class, irrespective of series, shall have the
right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Class B Preferred Stock, Series E may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Class B Preferred Stock,
Series E.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than twenty
(20) days and not later than sixty (60) days after such order or
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<PAGE>
request or in default of the calling of such meeting within sixty (60) days
after such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within sixty (60) days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular class of stock
shall include Directors elected by such Directors to fill vacancies as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or by-laws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or by-laws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors.
(D) Except as set forth herein, holders of Class B Preferred Stock,
Series E shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
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<PAGE>
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Class B Preferred Stock, Series E as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Class B Preferred Stock,
Series E outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Class B Preferred Stock, Series E;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Class B Preferred Stock,
Series E, except dividends paid ratably on the Class B Preferred Stock,
Series E and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Class B Preferred Stock,
Series E, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Class B Preferred Stock,
Series E;
(iv) purchase or otherwise acquire for consideration any shares
of Class B Preferred Stock, Series E, or any shares of stock ranking on a
parity with the Class B Preferred Stock, Series E, except in accordance
with a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
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<PAGE>
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Class B Preferred Stock,
Series E purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Class B Preferred Stock, Series E unless, prior thereto, the
holders of shares of Class B Preferred Stock, Series E shall have received
$10.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment.
Thereafter, the holders of the Class B Preferred Stock, Series E shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock. Following the
payment of the foregoing, holders of Class B Preferred Stock, Series E and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class B Preferred Stock, Series E
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Class B Preferred
Stock, Series E, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock (by reclassification or otherwise), or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
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<PAGE>
case the aggregate amount to which holders of shares of the Class B Preferred
Stock, Series E were entitled immediately prior to such event shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Class B Preferred Stock, Series E shall at the same time be similarly exchanged
or changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock (by reclassification or otherwise), or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Class B Preferred Stock, Series E shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Class B Preferred Stock,
Series E shall not be redeemable.
Section 9. RANKING. The Class B Preferred Stock, Series E shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. AMENDMENT. The Certificate of Incorporation, as amended,
of the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Class B Preferred Stock, Series E so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Class B Preferred Stock, Series E voting separately as a class.
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<PAGE>
Section 11. FRACTIONAL SHARES. Class B Preferred Stock, Series E may
be issued in fractions of a share which shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Class B Preferred Stock, Series E.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 25th day
of July, 1995.
/s/ Larry R. Knipple
---------------------------
Larry R. Knipple
Secretary
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<PAGE>
Exhibit B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- Rights
NOT EXERCISABLE AFTER August 4, 2005 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
RIGHTS CERTIFICATE
KERR GROUP, INC.
This certifies that , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of July 25, 1995 (the "Rights Agreement"),
between Kerr Group, Inc., a Delaware corporation (the "Company"), and The First
National Bank of Boston, a national banking association (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and at any time prior to 5:00 P.M. (New York
City time) on August 4, 2005 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
one-thousandth of a fully paid, nonassessable share of Class B Preferred Stock,
Series E (the "Preferred Stock") of the Company, at a purchase price of $40 per
one one-thousandth of a share (the "Purchase Price"), upon
- -------------------------
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certification duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one one-thousandths of a
share of Preferred Stock which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are the number and
Purchase Price as of July 25, 1995, based on the Preferred Stock as constituted
at such date. As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Affiliate or
Associate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate
B-2
<PAGE>
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right. No fractional shares of Preferred Stock
will be issued upon the exercise of any Right or Rights evidenced hereby (other
than fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment will be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of July 25, 1995
KERR GROUP, INC.
By_____________________
Name:
Title:
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
By______________________________
Authorized Representative
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<PAGE>
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED______________________________________________________________
________________________________________________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ______________, 199
________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
B-5
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
CERTIFICATION
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 199 _____________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
NOTICE
The signature to the foregoing Assignment and Certification must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Assignment
will not be honored.
B-6
<PAGE>
Form of Reverse Side of Rights Certificate (continued)
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: Kerr Group, Inc.:
The undersigned hereby irrevocably elects to exercise
________________ Rights represented by this Rights Certificate to purchase the
shares of Preferred Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person which may be issuable
upon the exercise of the Rights) and requests that certificates for such shares
be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ___________, 199_
___________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
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<PAGE>
Form of Reverse Side of Rights Certificate (continued)
CERTIFICATION
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ___________, 199 ____________________________
Signature
Signature Guaranteed:
Signature must be guaranteed by a commercial bank or trust company, broker,
dealer, or other eligible institution which is a member in good standing of a
medallion guaranty program approved by the Securities Transfer Association, Inc.
NOTICE
The signature to the foregoing Election to Purchase and Certification
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Certificate) and such Election to
Purchase will not be honored.
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<PAGE>
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On July 24, 1995, the Board of Directors of Kerr Group, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's common stock, par value $.50 per share (the "Common
Stock"), payable to stockholders of record at the close of business on August 4,
1995 (the "Record Date") and with respect to the Common Stock issued thereafter
until the Distribution Date (defined below) and, in certain circumstances, with
respect to the Common Stock issued after the Distribution Date. Except as set
forth below, each Right, when it becomes exercisable, entitles the registered
holder to purchase from the Company a unit consisting initially of one
one-thousandth of a share (a "Unit") of Class B Preferred Stock, Series E, par
value $.50 per share (the "Preferred Stock"), of the Company, at a Purchase
Price of $40 per Unit, subject to adjustment (the "Purchase Price"). The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement"), dated as of July 25, 1995, between the Company and The
First National Bank of Boston, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates evidencing
the Rights ("Rights Certificates") will be distributed. The Rights will
separate from the Common Stock and a Distribution Date will occur upon the
earlier of (i) ten (10) days (or such later date as the Board of Directors shall
determine) following public disclosure that a person or group of affiliated or
associated persons has become an "Acquiring Person" (as defined below), or (ii)
ten (10) business days (or such later date as the Board shall determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an "Acquiring Person". Except as set forth below,
an "Acquiring Person" is a person or group of affiliated or associated persons
who has acquired beneficial ownership of 15% or more of the outstanding shares
of Common Stock. The term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company, and (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan. The
Gabelli Funds, Inc. and its affiliates and associates ("Gabelli"), whose current
level of beneficial ownership is known to exceed 15%, will become an Acquiring
Person only if its level of beneficial ownership exceeds 32%.
Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the
<PAGE>
Record Date will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.
As soon as practicable after the occurrence of the Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date and, thereafter, the separate
Rights Certificates alone will represent the Rights. Except in certain
circumstances specified in the Rights Agreement or as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Distribution
Date and until the Rights no longer are redeemable. The Rights will expire at
the close of business on August 4, 2005, unless extended or earlier redeemed by
the Company as described below.
In the event that, at any time following the Distribution Date, a person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise of the Right, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void and nontransferable and any holder of any such right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of $40 per Right,
each Right not owned by an Acquiring Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $80 worth of Common Stock (or other consideration, as noted above)
for $40. Assuming that the Common Stock had a per share value of $10 at such
time, the holder of each valid Right would be entitled to purchase 8 (eight)
shares of Common Stock for $40.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock
2
<PAGE>
Acquisition Date"), (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation,
or (ii) 50% or more of the Company's assets or earning power is sold, mortgaged
or transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock. Shares of Preferred Stock purchasable upon
exercise of the Rights will not be redeemable. Each share of Preferred Stock
will be entitled to a quarterly dividend payment of 1000 times the dividend
declared per share of Common Stock. In the event of liquidation, each share of
Preferred Stock will be entitled to a $10.00 preference, and thereafter the
holders of the shares of Preferred Stock will be entitled to an aggregate
payment of 1000 times the aggregate payment made per share of Common Stock.
Each share of Preferred Stock will have 1000 votes, voting together with the
shares of Common Stock. These rights are protected by customary antidilution
provisions.
3
<PAGE>
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price (the
"Redemption Price") of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors) by resolution of the
Board of Directors (provided that following a Stock Acquisition Date such
resolution is approved by a majority of the Continuing Directors and only if the
Continuing Directors constitute a majority of the directors then in office). A
"Continuing Director" is a member of the Board of Directors who is not an
Acquiring Person, an affiliate or associate of an Acquiring Person or a
representative or nominee of an Acquiring Person. The redemption of the Rights
may be made effective at such time on such basis with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon such
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors (provided that following a Stock
Acquisition Date such resolution is approved by a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
directors then in office) prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by
resolution of the Company's Board of Directors (provided that following a Stock
Acquisition Date such resolution is approved by a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
directors then in office) in order to cure any ambiguity, to make changes which
do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person or its affiliates or associates), or to
shorten or lengthen any time period under the Rights Agreement; PROVIDED,
HOWEVER, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
4
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
August 1, 1995. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
August 10, 1995
5
<PAGE>
<PAGE>
Exhibit 5
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1 TO RIGHTS AGREEMENT, dated as of July 1, 1997 (the
"Amendment"), by and between Kerr Group, Inc., a Delaware corporation (the
"Company"), and BankBoston, N.A. (formerly the First National Bank of Boston), a
national banking association (the "Rights Agent").
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement dated as of July 25, 1995 (the "Rights Agreement");
WHEREAS, Fremont Acquisition Company LLC, a Delaware limited liability
company (the "Parent"), Kerr Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent (the "Purchaser"), and the Company have
entered into an Agreement and Plan of Merger, dated as of July 1, 1997 (the
"Agreement and Plan of Merger"), pursuant to which Purchaser will commence a
tender offer (the "Offer") for all outstanding shares of the Company's common
stock, and for all outstanding shares of the Company's $1.70 Class B Cumulative
Convertible Preferred Stock, Series D, and, following consummation of the Offer,
Purchaser will merge with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company (including a majority
of the Continuing Directors (as defined in the Rights Agreement)) has approved
the Agreement and Plan of Merger, the Offer and the Merger; and
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Board of Directors
of the Company has determined that an amendment to the Rights Agreement as set
forth herein is necessary and desirable to reflect the foregoing and the Company
and the Rights Agent desire to evidence such amendment in writing.
Accordingly, the parties agree as follows:
1. AMENDMENT OF SECTION 1(A). Section 1(a) of the Rights Agreement
is hereby amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Parent nor Purchaser shall be deemed to be an "Acquiring Person"
solely by virtue of (i) the announcement or making of the Offer (as defined
in the Agreement and Plan of Merger), (ii) the acquisition of the Shares
(as defined in the Agreement and Plan of Merger) pursuant to the Offer or
the Merger (as defined in the Agreement and Plan of Merger), (iii) the
execution of the Agreement and Plan of Merger, or (iv) the consummation of
<PAGE>
the other transactions contemplated by the Agreement and Plan of Merger."
2. AMENDMENT OF SECTION 1(O). Section 1(o) of the Rights Agreement
is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a result
of: (i) the announcement or making of the Offer, (ii) the acquisition of
the Shares pursuant to the Offer or the Merger, (iii) the execution of the
Agreement and Plan of Merger, or (iv) the consummation of the other
transactions contemplated in the Agreement and Plan of Merger."
3. SECTIONS 1(QQ). Section 1(qq) of the Rights Agreement is hereby
amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Triggering Event shall not be deemed to have occurred as a result of: (i)
the announcement or making of the Offer, (ii) the acquisition of the Shares
pursuant to the Offer or the Merger, (iii) the execution of the Agreement
and Plan of Merger, or (iv) the consummation of the other transactions
contemplated in the Agreement and Plan of Merger."
4. SECTIONS 1(SS), (TT) AND (UU). The following subsections are
hereby added after Section 1(rr) of the Rights Agreement:
"(ss) "Agreement and Plan of Merger" shall mean the Agreement and Plan
of Merger dated as of July 1, 1997 by and among Parent, Purchaser and the
Company, as it may be amended from time to time.
(tt) "Parent" shall mean Fremont Acquisition Company, LLC, a Delaware
limited liability company.
(uu) "Purchaser" shall mean Kerr Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent."
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<PAGE>
5. AMENDMENT OF SECTION 1(GG). Section 1(gg) of the Rights
Agreement is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Offer, (ii) the acquisition of the
Shares by Parent or Purchaser pursuant to the Offer or the Merger, (iii)
the execution of the Agreement and Plan of Merger, or (iv) the consummation
of the other transactions contemplated in the Agreement and Plan of Merger,
shall not be deemed to be a Section 11(a)(ii) Event and shall not cause the
Rights to be adjusted or exercisable under this Agreement."
6. AMENDMENT OF SECTION 1(II). Section 1(ii) of the Rights
Agreement is hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
(i) the announcement or making of the Offer, (ii) the acquisition of the
Shares by Parent or Purchaser pursuant to the Offer or the Merger, (iii)
the execution of the Agreement and Plan of Merger, or (iv) the consummation
of the other transactions contemplated in the Agreement and Plan of Merger,
shall not be deemed to be a Section 13 Event and shall not cause the Rights
to be adjusted or exercisable under this Agreement."
7. AMENDMENT OF SECTION 7(A). Section 7(a) of the Rights Agreement is
hereby amended by adding the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
the Rights shall automatically expire upon the acceptence of Shares for
payment pursuant to the Offer in accordance with the Agreement and Plan of
Merger and that the rights shall cease to be exercisable upon the earlier
of (i) the close of business on August 4, 2005 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 of this Rights Agreement, or (iii) the acceptance of Shares for
payment pursuant to the Offer in accordance with the Agreement and Plan of
Merger, if such acceptance occurs (the earlier of (i), (ii) and (iii) being
herein referred to as the "Expiration Date")."
8. EFFECTIVENESS. This Amendment shall be deemed effective as of
the date hereof. Except as amended hereby, the Rights Agreement shall remain in
full force and effect and shall be otherwise unaffected by this Amendment.
9. MISCELLANEOUS. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance
-3-
<PAGE>
with the laws of such state applicable to contracts to be made and performed
entirely within such state. This Amendment may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute but one and the
same instrument. If any provision, covenant or restriction of this Amendment is
held by a court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be effected, impaired or invalidated.
-4-
<PAGE>
EXECUTED as of the date set forth above.
KERR GROUP, INC.
/s/ D. Gordon Strickland
------------------------------
Name: D. Gordon Strickland
Title: President & CEO
BANKBOSTON, N.A.
/s/ Michael J. Lapolla
------------------------------
Name Michael J. Lapolla
Title: Administration Manager
-5-
<PAGE>
Exhibit 6
AMENDMENT TO AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDMENT AGREEMENT dated as of January 2, 1997 between Kerr Group,
Inc., a Delaware corporation (the "Company"), and D. Gordon Strickland (the
"Employee").
WHEREAS, the Company and the Employee are parties to an Amended and
Restated Employment Agreement dated as of March 15, 1996; and
WHEREAS, the Company and the Employee desire to amend the Amended and
Restated Employment Agreement as follows:
1. Amendment of Paragraph 2(b)(3).
-------------------------------
Paragraph 2(b)(3) of the Amended and Restated Employment Agreement
is hereby amended to read in its entirety as follows:
"(3) Without cause upon notice to the Employee provided that, for a
period of two years after such termination, the Company shall (i) pay to
Employee an amount each month equal to the Salary which Employee is being paid
each month at the date of the notice of termination and (ii) provide for
Employee the same fringe benefits, consisting of medical, dental, life and
disability insurance, which were provided to Employee at the date of the notice
of termination. If the Company may elect, in accordance with paragraph 2(b)(1)
hereof, to terminate this Agreement then such election shall be deemed to have
been made under paragraph 2(b)(1) and not in accordance with this paragraph
<PAGE>
2(b)(3). If the Company elects to terminate the obligations of the Company in
accordance with this paragraph 2(b)(3) within 180 days after the occurrence of
the events described in paragraph 2(d)(i), (ii) or (iii), then, in lieu of
paying any amounts to the Employee in accordance with this paragraph 2(b)(3)
except providing the fringe benefits, the Company shall pay to the Employee the
amounts provided in paragraph 2(d) when required by paragraph 2(d), terminate
the obligations under the promissory notes and pay to the Employee the amount,
including the gross up, all as described in paragraph 2(d). The Company shall
be deemed to have elected to terminate this Agreement in accordance with this
paragraph 2(b)(3) if the title or duties of the Employee are, without the
written approval of the Employee, changed from that of Chief Executive Officer
or the Employee is, without the written approval of the Employee, required to
reside other than in the area of Lancaster, Pennsylvania in order to perform his
duties for the Company; provided that the Employee, within 30 days after the
occurrence of such an event, shall notify the Company that the Company is so
deemed to have elected to terminate this Agreement. The Employee shall have no
further obligation under this Agreement from and after such termination except
as provided in paragraphs 6, 7, 7A and 8 hereof."
2. Amendment of Paragraph 2(d).
----------------------------
Paragraph 2(d) is hereby amended to read in its entirety as follows:
"(d) Within 180 days after the occurrence of any of the following events,
the Employee may elect to terminate the
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<PAGE>
obligations of the Employee under this Agreement, except as hereinafter
provided, and the Company shall pay to the Employee, upon such termination, by
delivery of a certified or bank check, an amount determined by multiplying by 24
the Salary then being paid to the Employee in accordance with paragraph 3(a),
provide to Employee for 24 months the fringe benefits described in paragraph
2(b)(3), terminate the obligations of the Employee then existing under
promissory notes, dated September 3, 1986 and June 11, 1991, delivered by the
Employee to the Company and pay to the Employee the amount of federal and state
taxes, grossed up, resulting from the termination of the obligations under the
promissory notes:
(i) 50% or more of the shares of the Company's Common Stock
are acquired, directly or indirectly, by an individual, partnership,
corporation, trust or unincorporated organization (collectively "Person")
or by Persons acting with a common design, either formally or informally;
(ii) The Company merges with or into another Person and is not
the survivor of such merger or because of such merger the Company becomes a
wholly-owned subsidiary or the Company sells all of its fixed assets to
another Person or Persons; or
(iii) The majority of the Board of Directors of the Company
consists of directors who were not selected by
-3-
<PAGE>
or nominated with the approval of a majority of the directors of the
Company in office on the date hereof (the "Present Directors") or who were
not selected by or nominated with the approval of a majority of directors
selected or nominated by a majority of the Present Directors.
The Employee shall have no further obligation under this Employment Agreement
from and after such termination except as provided in paragraphs 6, 7, 7A and 8
hereof."
3. New Paragraph 7A.
-----------------
A new paragraph to be entitled, "7A. Noncompetition" is hereby added
to the Amended and Restated Employment Agreement and shall read in its
entirety as follows:
"7A. Noncompetition.
---------------
If the Employee shall terminate this Agreement in accordance with
paragraphs 2(c) or 2(d) or if the Company shall terminate this Agreement in
accordance with paragraph 2(b)(3) and the Company shall have performed, and
continues to perform, all of its obligations under this Agreement, then for a
period of 2 years after the date of termination the Employee shall not (i)
engage in any business which competes directly or indirectly with the
business conducted by the Company at the date of such termination in any area
where the Company is conducting the business on such date and (ii) shall not
induce any employee, customer or lessee or lessor to terminate his, her or
its relationship with the Company."
-4-
<PAGE>
4. Amendment of Paragraph 8.
-------------------------
Paragraph 8 is hereby amended to read in its entirety as follows:
"8. Injunctive Relief.
------------------
If there is a breach or threatened breach of the provisions of
paragraphs 6, 7 or 7A of this Agreement, the Company shall be entitled to an
injunction restraining the Employee from such breach. Nothing herein shall
be construed as prohibiting the Company from pursuing any other remedies for
such breach or threatened breach."
5. Ratification.
-------------
Except as hereby amended, the Amended and Restated Agreement is
hereby ratified, confirmed and approved in all respects.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Amendment to the Amended and Restated Employment Agreement as of the date first
above written.
KERR GROUP, INC.
By: /s/ Herbert Elish
------------------------
Herbert Elish
/s/ D. Gordon Strickland
-----------------------------
D. Gordon Strickland
<PAGE>
EXHIBIT 7
July 8, 1997
[KERR LOGO]
Kerr Group, Inc.
500 New Holland Avenue
Lancaster, PA 17602
To Our Stockholders:
We are pleased to inform you that on July 1, 1997, Kerr Group, Inc. (the
"Company") entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Fremont Acquisition Company, LLC ("Fremont") and Kerr Acquisition
Corporation, a wholly owned subsidiary of Fremont (the "Purchaser"), pursuant to
which the Purchaser has commenced a tender offer (the "Offer") to purchase all
of the outstanding shares of the Company's common stock, par value $0.50 per
share ("Common Stock"), and all of the outstanding $1.70 Class B Cumulative
Convertible Preferred Stock, Series D, par value $0.50 per share ("Preferred
Stock" and, together with the Common Stock, the "Shares"), for a cash price of
$5.40 per Share of Common Stock and $12.50 per Share of Preferred Stock. The
Offer is conditioned upon, among other things, the tender of at least 51% of the
Common Stock outstanding on a fully diluted basis. The Merger Agreement provides
that following consummation of the Offer, the Purchaser will be merged (the
"Merger") with and into the Company and those Shares that are not acquired in
the Offer will be converted into the right to receive $5.40 per share of Common
Stock in cash and $12.50 per share of Preferred Stock in cash.
The Board of Directors 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 Company and the holders of both
the Common Stock and the Preferred Stock, and unanimously recommends that the
Company's stockholders accept the Offer and tender their Shares pursuant to the
Offer. In arriving at its recommendation, the Board of Directors considered the
factors described in the accompanying Schedule 14D-9, including the opinion of
the Company's financial advisor, CIBC Wood Gundy Securities Corp. ("CIBC"), to
the effect that the consideration to be received by the holders of the Common
Stock, on one hand, and the Preferred Stock, on the other hand, is fair from a
financial point of view. A copy of CIBC's written opinion, which sets forth the
assumptions made, limited procedures followed and matters considered in, and the
limitations on, the review by CIBC in rendering its opinion is attached to the
Schedule 14D-9 as Schedule I.
The accompanying Offer to Purchase sets forth all of the terms of the Offer.
Additionally, the enclosed Schedule 14D-9 sets forth additional information
regarding the Offer and the Merger relevant to making an informed decision. We
urge you to read these materials carefully and in their entirety.
Very truly yours,
/s/ D. Gordon Strickland
D. Gordon Strickland
President and Chief Executive Officer
<PAGE>
Exhibit 8
FOR IMMEDIATE RELEASE
FREMONT PARTNERS, L.P. 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,
SeriesD. Kerr currently has 3,933,000 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: Geoffrey A. Whynot
Vice President, Finance and
Chief Financial Officer
(717) 390-8439
Fremont Contact: Gregory P. Spivy
Principal
(415) 284-8793
<PAGE>
EXHIBIT 9
CIBC Wood Gundy 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 be 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 Consideration" 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;
(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;
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<PAGE>
(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 of 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, has 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 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.
Page 2
<PAGE>
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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