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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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LEARONAL, INC.
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(NAME OF SUBJECT COMPANY)
LEARONAL, INC.
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(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
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(TITLE OF CLASS OF SECURITIES)
52201610
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(CUSIP NUMBER OF CLASS OF SECURITIES)
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RONALD F. OSTROW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LEARONAL, INC.
272 BUFFALO AVENUE
FREEPORT, NEW YORK 11520
(212) 868-8800
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING)
WITH A COPY TO:
ROBERT F. QUAINTANCE, JR., ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
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This Amendment No. 1 to Schedule 14D-9 amends and restates in its entirety
the Solicitation/Recommendation Statement on Schedule 14D-9 dated December 23,
1998 filed by LeaRonal, Inc., in order to include certain pages inadvertently
omitted from the electronically filed version of the Schedule 14D-9.
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is LeaRonal, Inc., a New York corporation
("LeaRonal" or the "Company"). The address of the principal executive offices
of the Company is 272 Buffalo Avenue, Freeport, New York 11520. The title of
the class of equity securities to which this Statement relates is the common
stock, par value $1.00 per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by Rohm and Haas Company, a
Delaware corporation ("Parent"), and Lightning Acquisition Corp., a New York
corporation and a wholly owned subsidiary of Parent ("Purchaser" and, together
with Parent, the "Bidder"), disclosed in a Tender Offer Statement on
Schedule 14D-1 filed with the Securities and Exchange Commission on December
23, 1998 (as the same may be amended from time to time, the "Schedule 14D-1"),
to purchase all of the outstanding Shares at a price of $34.00 per Share, net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 23, 1998 (the
"Offer to Purchase"), and the related Letter of Transmittal (which
collectively constitute the "Offer").
The Offer is being made by the Bidder pursuant to an Agreement and Plan of
Merger, dated as of December 20, 1998, among Parent, Purchaser and the Company
(the "Merger Agreement"). The Offer is subject to the conditions set forth in
the Merger Agreement, including the condition that the number of Shares
validly tendered and not withdrawn prior to the expiration date of the Offer
together with all Shares owned by Parent and its subsidiaries shall not be
less than two-thirds of the Shares then outstanding, calculated on a fully
diluted basis (the "Minimum Condition"). The Bidder may waive any of the
conditions of the Offer in its sole discretion, except that it may not waive
the Minimum Condition without the prior written consent of LeaRonal; provided,
that Purchaser may reduce the Minimum Condition to an amount of Shares which
is not less than a majority of the fully diluted Shares under the
circumstances described in Section 1 of the Offer to Purchase.
Pursuant to the Merger Agreement, following the consummation of the Offer
and subject to the satisfaction or waiver of certain conditions, Purchaser
will merge with and into LeaRonal (the "Merger"), with LeaRonal as the
surviving corporation (the "Surviving Corporation"). Upon effectiveness of the
Merger, each Share (other than Shares purchased in the Offer or otherwise
owned by Purchaser or by the Company or any of its subsidiaries) will be
converted into the right to receive $34.00 per Share in cash (the "Merger
Consideration"). The terms of the Merger Agreement, a copy of which is filed
as Exhibit 3 hereto and is incorporated herein by reference, are summarized
below under Item 3(b)(2)(ii) of this Schedule 14D-9.
Parent and Purchaser have also entered into a Tender and Option Agreement,
dated as of December 20, 1998 (the "Tender and Option Agreement"), with
certain stockholders of the Company (the "Certain Stockholders") together
owning approximately 29% of the outstanding Shares, pursuant to which such
stockholders have agreed to tender their Shares into the Offer and have
granted to Parent an irrevocable option to purchase such Shares upon the terms
and subject to the conditions set forth therein. The terms of the Tender and
Option Agreement, a copy of which is filed as Exhibit 4 hereto and is
incorporated herein by reference, are summarized below under Item 3(b)(2)(iii)
of this Schedule 14D-9.
All information contained in this Schedule 14D-9 or incorporated herein by
reference concerning Parent, Purchaser or their affiliates, or actions or
events with respect to any of them, was provided by Parent, and the Company
takes no responsibility for the accuracy or completeness of such information
or for any failure by such entities to disclose events or circumstances that
may have occurred and may affect the significance, completeness or accuracy of
any such information.
According to the Schedule 14D-1, the address of the principal executive
offices of Parent is 100 Independence Mall West, Philadelphia, Pennsylvania
19106, and of Purchaser is Rodney Building, Suite 104, 3411 Silverside Road,
Wilmington, Delaware 19810.
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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, which information is
incorporated herein by reference.
(b) (1) Consummation of the transactions contemplated by the Merger
Agreement and related documents will have certain effects under certain
compensation and incentive plans and arrangements in which officers and
directors of the Company are participants, as summarized below.
Except as otherwise expressly provided below, all LeaRonal stock options
("Options") outstanding at the effective time of the Merger (the "Effective
Time"), regardless of whether then exercisable, shall be canceled in exchange
for a cash payment equal to the excess of the price per share paid in the
Offer or the Merger, as the case may be, over the per share exercise price of
the underlying Option shares. Such payment will generally be made as of the
Effective Time, except that with respect to certain officers of the Company,
including each of the persons named in the Summary Compensation Table below,
Purchaser may request that such payments be made on the 78th day following the
Effective Time. If payments with respect to outstanding Options are made on a
delayed basis, the amount payable shall be increased by multiplying such
number by 1.018. Notwithstanding the foregoing, if Purchaser and an optionee
agree, some or all of the Options held by the optionee will be exchanged for
options with respect to the common stock of Purchaser.
(b) (2) The following describes material contracts, agreements, arrangements
or understandings or actual or potential conflicts of interest between the
Company or its affiliates and Parent and/or Purchaser and their respective
executive officers, directors or affiliates:
(i) Employment Agreements. In connection with the negotiation of the Merger
Agreement, Parent requested that certain executives of the Company amend their
existing employment agreements, including elimination of certain benefits
potentially available to such executives as a result of a "change of control"
such as the Offer or the Merger, and an extension of the terms of such
employment agreements. On December 20, 1998, the Board of Directors of the
Company approved amended and restated employment agreements (each, an "Amended
Employment Agreement" and together, the "Amended Employment Agreements")
between the Company and the following executives of the Company: Ronald F.
Ostrow, President and Chief Executive Officer; Richard Kessler, Executive Vice
President and Chief Operating Officer; Donald Thomson, Vice President--
Technology and Secretary; David Rosenthal, Vice President--Finance and
Treasurer; James Martin, Vice President and Director, Research & Quality;
David Schram, Vice President and Director of Marketing; Carl Fiore, Assistant
Treasurer; Michael Toben, Assistant Vice President--Research; and Tzoong-Chyn
Lee, Director, Imaging Chemicals and Assistant to the President for Far East
Operations (together, the "Executives"). Except to the extent of differences
in base salary, position and other specified aspects of compensation, the
Amended Employment Agreements are substantially identical. A form of Amended
Employment Agreement is filed as Exhibit 5 hereto and is incorporated herein
by reference.
The Amended Employment Agreements provide that each of the Executives shall
be employed by the Company for a period ending on the third anniversary of the
Effective Time. These agreements will continue in effect each Executive's
current level of base salary, provide the Executive with an annual bonus
opportunity consistent with past practices, continue executive perquisites at
the same level and amount currently in effect and provide the Executive with
employee benefits which are, in the aggregate, at least comparable in value to
those currently provided to the Executive. In addition, in order to
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encourage the Executives to remain in the Company's employ and to provide them
fair compensation for their services following the Merger, each of the
Executives will receive a special one-time non-recurring retention bonus equal
to 60% of his annual base salary if he remains in the Company's employ through
the first anniversary of the Effective Time.
In the event that an Executive's employment is terminated by the Executive
other than for Cause (as defined in the Amended Employment Agreement) or by
the Executive for Good Reason (as defined in the Amended Employment
Agreement), the Executive shall receive the compensation and benefits that
would have been payable to him over the remainder of the term of the Amended
Employment Agreement and, if such termination occurs prior to the first
anniversary of the Effective Time, a pro-rata portion of the retention bonus
described above.
The foregoing is a summary of certain provisions of the Amended Employment
Agreements and is qualified in its entirety by reference to Exhibit 5 hereto.
(ii) Merger Agreement. The following is a summary of certain provisions of
the Merger Agreement, a copy of which is filed as Exhibit 3 hereto and is
incorporated herein by reference. Such summary is not intended to be complete
and is qualified in its entirety by reference to the text of the Merger
Agreement. Capitalized terms not otherwise defined below shall have the
meanings set forth in the Merger Agreement.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that upon the terms and subject to prior satisfaction or waiver (to
the extent permitted to be waived) of the conditions of the Offer (which are
set forth in Section 15 of the Offer to Purchase), Purchaser will purchase all
Shares validly tendered pursuant to the Offer. The Merger Agreement provides
that Purchaser has the right, in its sole discretion, to modify and make
certain changes to the terms and conditions of the Offer as described in
Section 1 of the Offer to Purchase.
The Company's Board of Directors. The Merger Agreement provides that
immediately upon the acceptance for payment of and payment for any Shares by
Purchaser or any of its affiliates pursuant to the Offer, Purchaser will be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company (the "Company Board") as will
give Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Company Board equal to the product of (i) the total
number of directors on the Company Board (giving effect to the increase in the
size of the Company Board pursuant to this paragraph) and (ii) the percentage
that the number of votes represented by Shares beneficially owned by Purchaser
and its affiliates (including Shares so accepted for payment and purchased)
bears to the number of votes represented by Shares then outstanding. In
furtherance thereof, concurrently with such acceptance for payment and payment
for such Shares the Company will, upon request of Parent and compliance with
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, use
its best efforts promptly either to increase the size of the Company Board or
to secure the resignations of such number of its incumbent directors, or both,
as is necessary to enable such designees of Parent to be so elected or
appointed to the Company Board, and the Company will take all actions
available to the Company to cause such designees of Parent to be so elected or
appointed. The Merger Agreement provides that at such time, the Company will,
if requested by Parent, also use its reasonable best efforts to cause persons
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) as is on the Company Board of (i) each committee of the
Company Board, (ii) each board of directors (or similar body) of each
subsidiary of the Company and (iii) each committee (or similar body) of each
such board. Notwithstanding the foregoing, the Company will use its reasonable
best efforts to ensure that, in the event that Purchaser's designees are
elected to the Company Board, the Company Board will have, at all times prior
to the Effective Time, at least three directors who are directors on the date
of the Merger Agreement and who are not officers of the Company, Parent or any
of their respective subsidiaries (the "Independent Directors"); and provided
further, that, in such event,
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if the number of Independent Directors shall be reduced below three for any
reason whatsoever any remaining Independent Directors (or Independent
Director, if there shall be only one remaining) may designate persons to fill
such vacancies who will be deemed to be Independent Directors for purposes of
the Merger Agreement or, if no Independent Directors then remain, the other
directors may designate three persons to fill such vacancies who will not be
officers or affiliates of the Company, Parent or any of their respective
subsidiaries, and such persons will be deemed to be Independent Directors for
purposes of the Merger Agreement. Subject to applicable law, the Company will
promptly take all action requested by Parent necessary to effect any such
election, including mailing to its shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder (or,
at Parent's request, furnishing such information to Parent for inclusion in
the offer documents initially filed with the Commission and distributed to the
stockholders of the Company) as is necessary to enable Parent's designees to
be elected to the Company Board. From and after the time, if any, that
Parent's designees constitute a majority of the Company Board, any amendment
of the Merger Agreement, any termination of the Merger Agreement by the
Company, any extension of time for performance of any of the obligations of
Parent or Purchaser thereunder, any waiver of any condition to the Company's
obligations thereunder or any of the Company's rights thereunder or other
action by the Company thereunder may be effected only by the action of a
majority of the Independent Directors of the Company, which action will be
deemed to constitute the action of any committee specifically designated by
the Company Board to approve the actions contemplated thereby and the full
Company Board; provided, that, if there shall be no Independent Directors,
such actions may be effected by majority vote of the entire Company Board,
except that no such action will amend the terms of the Merger Agreement or
modify the terms of the Offer or the Merger in a manner materially adverse to
the holders of Shares.
The Merger. Pursuant to the Merger Agreement and the New York Business
Corporation Law (the "NYBCL"), as promptly as practicable after the completion
of the Offer and satisfaction or waiver, if permissible, of all conditions,
including the purchase of Shares pursuant to the Offer and the approval and
adoption of the Merger Agreement by the stockholders of the Company (if
required by applicable law), Purchaser will be merged with and into the
Company and the Company will be the Surviving Corporation and a wholly owned
subsidiary of Parent. At the Effective Time, each Share then outstanding,
other than Shares held by (i) the Company or any of its subsidiaries, (ii)
Parent or any of its subsidiaries, including Purchaser and (iii) stockholders
who properly perfect their dissenters' rights under the NYBCL, will be
converted into the right to receive the Merger Consideration, without
interest. Purchaser's Certificate of Incorporation will become the Certificate
of Incorporation of the Surviving Corporation, and Purchaser's By-laws will be
the By-laws of the Surviving Corporation.
Options. The Merger Agreement provides that prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
will adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding Option granted under the Company's 1990
Nonqualified Stock Option Plan, dated June 1, 1990 (the "1990 Plan") and the
Company's 1996 Long-Term Incentive Plan (the "1996 Plan," and together with
the 1990 Plan, the "Company Stock Option Plans"), whether or not then vested
or exercisable, will, at the Effective Time, be cancelled, and each holder
thereof will be entitled to receive a payment in cash from the Company
(subject to any applicable withholding taxes, the "Cash Payment"), upon
cancellation, equal to the product of (x) the total number of Shares subject
or related to such Option, whether or not then vested or exercisable, and (y)
the excess, if any, of the Merger Consideration over the exercise price or
purchase price, as the case may be, per Share subject or related to such
Option, each such Cash Payment to be paid to each holder of an outstanding
Option upon cancellation. Notwithstanding the foregoing, if requested by
Purchaser, the Company Board (or, if appropriate, any committee thereof) will
adopt appropriate resolutions providing for such cancellation and a cash
payment equal to 101.8% of the Cash Payment to occur, in respect of any or all
Options held by certain employees of the Company who have entered into
employment agreements with the Company, on the 78th day after the date on
which the Effective Time occurs. The executives that have executed the Amended
Employment Agreements have agreed to receive the payments referred to in the
preceding sentence. If Parent or Purchaser and an Option holder mutually
agree, such Option holder may receive in lieu of
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such Cash Payment an option to acquire shares of common stock of Parent on
terms providing such Option holder with value substantially equivalent to the
value of such Cash Payment. In the Merger Agreement, the Company agreed that
upon the exercise of any Option it will issue such Shares as such Option
holder may be entitled to receive upon such exercise and will not exercise any
rights it may have under the Company Stock Option Plans or otherwise to settle
such Option with a cash payment without the written consent of Parent. Subject
to the contractual rights of participants therein, the Company Stock Option
Plans and any benefit plan (or other plan, program or arrangement) providing
for the issuance or grant of any other interest in respect of the capital
stock of the Company or any subsidiary will terminate as of the Effective
Time. The Company will take all steps necessary to ensure that none of the
Company or any of its subsidiaries is or will be bound by any Options, other
options, warrants, rights or agreements which would entitle any person, other
than the current shareholders of Purchaser or its affiliates, to acquire any
capital stock of the Surviving Corporation or any of its subsidiaries or,
except as otherwise provided in this paragraph, to receive any payment in
respect thereof and to cause such Options to be cancelled or cause the holders
of the Options to agree to such cancellation thereof.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, corporate organization, subsidiaries,
capitalization, authority to enter into the Merger Agreement, the absence of
certain changes, required consents, no conflicts between the Merger Agreement
and applicable laws and certain agreements to which the Company or its assets
may be subject, financial statements, filings with the Commission, disclosures
in proxy statements and tender offer documents, litigation, insurance, labor
and employment matters, employee benefit plans, tax matters, compliance with
applicable laws, Year 2000 compliance, brokers' and finders' fees,
environmental matters, material contracts, intellectual property,
applicability of state takeover statutes, undisclosed liabilities, the vote
required to approve the Merger Agreement and its receipt of the opinion of its
financial adviser.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, corporate organization, authority to enter into the Merger Agreement,
required consents, no conflicts between the Merger Agreement and applicable
laws and certain agreements to which Parent or Purchaser or their assets may
be subject, financing, disclosures in proxy statements and tender offer
documents, brokers' and finders' fees, operations of Purchaser and ownership
of Shares by Parent and its affiliates.
Interim Operations. Pursuant to the Merger Agreement, the Company has agreed
that, prior to the Effective Time, unless otherwise expressly contemplated by
the Merger Agreement or consented to in writing by Parent, it will and will
cause each of its subsidiaries to (i) operate its business in the usual and
ordinary course substantially consistent with past practices; (ii) use its
commercially reasonable efforts to preserve intact its business organization,
maintain its rights and franchises, retain the services of its respective key
employees and maintain its relationships with its respective customers and
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business will be unimpaired at the Effective Time; and
(iii) use its commercially reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
Except as set forth in the disclosure schedules to the Merger Agreement, the
Company has agreed that, except as expressly contemplated by the Merger
Agreement or otherwise consented to in writing by Parent, from the date of the
Merger Agreement until the Effective Time, it will not do, and will not permit
any of its subsidiaries to (a) (i) increase the compensation (or benefits)
payable to or to become payable to any director or employee, except for
increases in salary or wages of employees in the ordinary course of business
and consistent with past practice; (ii) grant any severance or termination pay
(other than pursuant to the normal severance policy or practice of the Company
or its subsidiaries as disclosed in the disclosure schedules to the Merger
Agreement) to, or enter into or amend in any material respect any employment
or severance agreement with, any employee; (iii) establish, adopt, enter into
or amend any collective bargaining agreement or benefit plan of the Company or
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any subsidiary; or (iv) take any action to accelerate any rights or benefits,
or make any determinations not in the ordinary course of business consistent
with past practice, under any collective bargaining agreement or benefit plan
of the Company or any subsidiary; (b) declare, set aside or pay any dividend
on, or make any other distribution in respect of (whether in cash, stock or
property), outstanding shares of capital stock, except for (i) dividends by a
wholly owned subsidiary of the Company to the Company or another wholly owned
subsidiary of the Company and (ii) regular quarterly cash dividends by the
Company consistent with past practices (including as to declaration, record
and payment dates) in no event to exceed $0.14 per Share per fiscal quarter;
provided that the Company may declare and pay the regular quarterly cash
dividend of $0.14 per Share declared on December 20, 1998 and scheduled to be
paid on January 15, 1999 to stockholders of record on January 4, 1999; (c)
redeem, purchase or otherwise acquire, or offer or propose to redeem, purchase
or otherwise acquire, any outstanding shares of capital stock of, or other
equity interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity interests in,
or any outstanding options, warrants or rights of any kind to acquire any
shares of capital stock of, or other equity interests in, the Company or any
of its subsidiaries (other than (i) any such acquisition by the Company or any
of its wholly owned subsidiaries directly from any wholly owned subsidiary of
the Company in exchange for capital contributions or loans to such subsidiary,
or (ii) any purchase, forfeiture or retirement of Shares or the Options
occurring pursuant to the terms (as in effect on the date of the Merger
Agreement) of any existing benefit plan of the Company or any of its
subsidiaries, in a manner otherwise consistent with the terms of the Merger
Agreement; (d) effect any reorganization or recapitalization; or split,
combine or reclassify any of the capital stock of, or other equity interests
in, the Company or any of its subsidiaries or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of such capital stock or such equity interests; (e)
offer, sell, issue or grant, or authorize or propose the offering, sale,
issuance or grant of, any shares of capital stock of, or other equity
interests in, any securities convertible into or exchangeable for (or
accelerate any right to convert or exchange securities for) any shares of
capital stock of, or other equity interest in, or any options, warrants or
rights of any kind to acquire any shares of capital stock of, or other equity
interests in, or any voting company debt or other voting securities of, the
Company or any of its subsidiaries, or any "phantom" stock, "phantom" stock
rights, stock appreciation rights or stock-based performance units, other than
issuances of Shares upon the exercise of the Options outstanding at the date
of the Merger Agreement in accordance with the terms thereof (as in effect on
the date of the Merger Agreement); (f) acquire or agree to acquire, by merging
or consolidating with, by purchasing an equity interest in or a portion of the
assets of, or in any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets of any other person if the aggregate
consideration is in excess of $500,000 for any individual transaction, and
$5,000,000 for all such transactions (other than the purchase of assets from
suppliers or vendors in the ordinary course of business); (g) sell, lease,
exchange or otherwise dispose of, or grant any lien with respect to, any of
the properties or assets of the Company or any of its subsidiaries that are,
individually or in the aggregate, material to the business of the Company and
its subsidiaries, except for (i) dispositions of excess or obsolete assets and
sales of inventories in the ordinary course of business, and (ii) dispositions
of properties or assets with a value not in excess of $500,000 for any
individual transaction and $5,000,000 for all such transactions; (h) propose
or adopt any amendments to its certificate of incorporation or bylaws or other
organizational documents; (i) effect any change in any accounting methods,
principles or practices in effect as of February 28, 1998 affecting the
reported consolidated assets, liabilities or results of operations of the
Company, except as may be required by a change in generally accepted
accounting principles; (j) incur any indebtedness for borrowed money in excess
of an aggregate of $5,000,000, issue or sell any debt securities or warrants
or other rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any such indebtedness or debt securities of another
person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, or make any loans,
advances (other than to employees of the Company and its subsidiaries in the
ordinary course of business) or capital contributions to, or investments in,
any other person, other than to or in the Company or any subsidiary of the
Company; (k) enter into certain contracts described in the Merger Agreement;
(l) pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge, settlement or satisfaction, in the ordinary
course of business or in accordance with their terms, of liabilities reflected
or reserved against in the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company's
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public filings with the Commission or incurred since the date of such
financial statements in the ordinary course of business; (m) take certain
other actions set forth in the Merger Agreement; (n) settle the terms of any
material litigation affecting the Company or any of its subsidiaries; (o) make
any material tax election (unless required by law or unless consistent with
prior practice) or settle or compromise any material tax liability except, in
each case, if Parent is given reasonable prior notice thereof; or (p) make or
agree to make any new capital expenditures except for capital expenditures
which are consistent with the capital expenditure budget previously provided
to Parent and which do not individually exceed $500,000 and do not, in the
aggregate, exceed $5,000,000.
No Solicitation. In the Merger Agreement, the Company has agreed that from
and after the date of the Merger Agreement until the Effective Time or the
termination of the Merger Agreement, neither the Company or any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates will directly or indirectly initiate,
solicit or encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate, any inquiries or the
making or submission of any Acquisition Proposal (as hereinafter defined), or
enter into or maintain or continue discussions or negotiate with any person or
group in furtherance of such inquiries or to obtain or induce any person or
group to make or submit an Acquisition Proposal or agree to or endorse any
Acquisition Proposal or assist or participate in, facilitate or encourage, any
effort or attempt by any other person or group to do or seek any of the
foregoing or authorize or permit any of its officers, directors or employees
or any of its subsidiaries or affiliates or any investment banker, financial
advisor, attorney, accountant or other representative or agent retained by it
or any of its subsidiaries to take any such action; provided, however, that
nothing contained in the Merger Agreement will prohibit the Company Board
from, prior to the earlier to occur of acceptance for payment of Shares
pursuant to the Offer or adoption of the Merger Agreement by the requisite
vote of the stockholders of the Company, furnishing information to or entering
into discussions or negotiations with any person or entity that makes an
unsolicited written, bona fide Acquisition Proposal that constitutes, or may
reasonably be expected to lead to, any Superior Proposal (as hereinafter
defined) if, and only to the extent that (i) the Company Board after
consultation with independent legal counsel, reasonably determines in good
faith that the failure to do so would be reasonably likely to result in a
breach of the fiduciary duty of the Company Board under applicable law and
(ii) prior to taking such action the Company (x) delivers to Parent and
Purchaser the notice required pursuant to the Merger Agreement stating that it
is taking such action and (y) receives from such person or group an executed
confidentiality agreement that contains customary confidentiality and
standstill restrictions.
Except as expressly permitted by the Merger Agreement, neither the Board of
Directors of the Company nor any committee thereof will (i) withdraw, modify
or fail to make, or propose to withdraw, modify or fail to make its approval
or recommendation of the Offer or the Merger or of the Tender and Option
Agreement and the other Transactions, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal, (iii) take any action to
render the provisions of any anti-takeover statute, rule or regulation
(including Section 912 of the NYBCL) inapplicable to any person (other than
Parent, Purchaser or their affiliates) or group or to any Acquisition Proposal
or (iv) cause the Company or any of its subsidiaries to accept such
Acquisition Proposal and/or enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Acquisition Proposal; provided
however, that prior to the earlier to occur of acceptance for payment of
Shares pursuant to the Offer or adoption of the Merger Agreement by the
requisite vote of the stockholders of the Company, the Board of Directors of
the Company may terminate the Merger Agreement if, and only to the extent that
(A) such Acquisition Proposal is a Superior Proposal, (B) the Board of
Directors of the Company, after consultation with independent legal counsel,
reasonably determines in good faith that the failure to do so would be
reasonably likely to result in a breach of the fiduciary duty of the Board of
Directors of the Company under applicable law, (C) the Company will, prior to
or simultaneously with the taking of such action, have paid or pay to Parent
or Purchaser or their designee the Termination Fee and the Expenses, (D) the
Company is not in breach of any provision of the Merger Agreement relating to
the solicitation and negotiation of Acquisition Proposals, (E) the Company
will have complied with its obligations relating to termination of the Merger
Agreement in this situation and (F) concurrently with such termination, the
Company enters into an Acquisition Agreement with respect to such Superior
Proposal.
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In addition to the obligations of the Company set forth in the two preceding
paragraphs above, the Company will promptly (and in any event, within 24
hours) advise Parent orally and in writing of any request for information or
the submission or receipt of any Acquisition Proposal, the material terms and
conditions of such Acquisition Proposal, and the identity of the person making
any such Acquisition Proposal. The Company will keep Parent fully informed of
the material developments with respect to any such Acquisition Proposal. The
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to
the Merger Agreement with respect to any of the foregoing.
"Acquisition Proposal" means an inquiry, offer or proposal regarding any of
the following (other than the Transactions contemplated by the Merger
Agreement) involving the Company: (i) any merger, consolidation, share
exchange, recapitalization, liquidation, dissolution, business combination or
other similar transaction; (ii) any sale, lease, exchange, or other
disposition of 20% or more of the assets of the Company and its subsidiaries,
taken as a whole, or of any Material Business (as hereinafter defined) or of
any subsidiary or subsidiaries responsible for a Material Business in a single
transaction or series of related transactions; (iii) any tender offer
(including a self tender offer) or exchange offer that, if consummated, would
result in any person or group beneficially owning more than 20% of the
outstanding shares of any class of equity securities of the Company; (iv) any
acquisition of 20% or more of the outstanding shares of capital stock of the
Company; or (v) any public announcement by the Company or any third party of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. "Superior Proposal" means any proposal made by
a third party to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction, all the Shares then outstanding or all or substantially all of
the assets of the Company and its subsidiaries which the Board of Directors of
the Company reasonably determines in good faith (after consultation with its
independent financial adviser and after taking into account any changes to the
terms of the Merger Agreement and the Offer that have been proposed by Parent
in response to such proposal) to be more favorable to the Company and the
Company's stockholders. "Material Business" means any business (or the assets
needed to carry out such business) that contributed or represented 20% or more
of the net sales, the net income or the assets (including equity securities)
of the Company and its subsidiaries taken as a whole.
The Merger Agreement provides that nothing contained therein will prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act (dealing with
responses to a tender offer) or from making any disclosure to the Company's
stockholders if the Board of Directors of the Company, after consultation with
independent legal counsel, reasonably determines in good faith that the
failure to take such action would be reasonably likely to result in a breach
of the fiduciary duty of the Board of Directors under applicable law; provided
that neither the Board of Directors of the Company nor any committee thereof
withdraws or modifies, or proposes to withdraw or modify, the approval or
recommendation of the Board of Directors of the Company of the Offer or the
Merger or approves or recommends, or publicly proposes to approve or
recommend, an Acquisition Proposal unless the Company and the Board of
Directors of the Company have complied with all the provisions of the Merger
Agreement relating to the solicitation and negotiation of Acquisition
Proposals.
Indemnification. In the Merger Agreement, Purchaser has agreed that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time existing as of the date of the Merger Agreement in favor of the
current or former directors or officers of the Company and its subsidiaries as
provided in their respective certificates of incorporation or bylaws will
survive the Merger and will continue in full force and effect in accordance
with their terms for a period of six years from the Effective Time. Parent
will cause to be maintained, if available, for a period of six years from the
Effective Time the Company's current directors' and officers' insurance and
indemnification policy (the "D&O Insurance") (provided that Parent may
substitute therefor policies or financial guarantees with the same carriers or
other obligors as insure Parent's directors and officers of at least the same
coverage and amounts containing terms and conditions which are substantially
similar to the existing D&O Insurance) to the extent that such insurance
policies provide coverage for events occurring prior to the Effective Time for
all persons who were directors and officers of the Company on December 20,
1998, so
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long as the annual premium to be paid by the Company after the date of the
Merger Agreement for such D&O Insurance during such six-year period would not
exceed 200% of the current annual premium therefor. If, during such six-year
period, such insurance coverage cannot be obtained at all or can only be
obtained for an amount in excess of 200% of the current annual premium
therefor, Parent will use all reasonable efforts to cause to be obtained as
much D&O Insurance as can be obtained for an amount equal to 200% of the
current annual premium therefor, on terms and conditions substantially similar
to the existing D&O Insurance.
Employee Plans and Benefits and Agreements. In the Merger Agreement, the
Surviving Corporation agreed, from and after the Effective Time, to honor in
accordance with their terms all existing employment, severance, consulting or
other compensation agreements or benefit contracts between the Company or any
of its subsidiaries and any officer, director or employee of the Company or
any of its subsidiaries, as the same may be modified by the Employment
Agreements, and all benefits or other amounts earned or accrued through the
Effective Time under the benefit plans disclosed in Company's disclosure
schedules to the Merger Agreement.
The Merger Agreement provides that for a period of not less than two years
from the Effective Time, Parent will, or will cause the Surviving Corporation
to, maintain employee benefit plans, programs and arrangements for former
employees of the Company and its subsidiaries who remain employees of the
Surviving Corporation after the Effective Time that are, in the aggregate, no
less favorable than those provided by the Company and any of its subsidiaries
immediately prior to the Effective Time. From and after the Effective Time,
for purposes of determining eligibility and vesting (but not for purposes of
benefit accrual) under any severance, compensation, welfare, pension, or other
benefit plan or arrangement of Parent or any of its subsidiaries which, at the
election of Parent, employees of the Company or any of its subsidiaries become
eligible to participate in, service with the Company or any of its
subsidiaries (whether before or after the Effective Time) will be credited as
if such services had been rendered to Parent or such subsidiary; provided that
Parent and Purchaser shall have no obligation to (i) employ any individual,
(ii) include any individual in any stock option or other equity based
compensation or benefit plan or arrangement or (iii) include any such
employees of the Company and its subsidiaries in any benefit plan of Parent or
its subsidiaries.
Reasonable Best Efforts. In the Merger Agreement, subject to the terms and
conditions thereof, each of the parties has agreed to use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as soon as reasonably
practicable the transactions contemplated by the Merger Agreement and the
Tender and Option Agreement (the "Transactions"). In the case that at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of the Merger Agreement, the proper officers and directors of
each party to the Merger Agreement will take all such necessary action. Such
reasonable best efforts include (i) the obtaining of all necessary consents,
approvals or waivers from third parties and governmental authorities necessary
to the consummation of the Transactions and (ii) opposing vigorously any
litigation or administrative proceeding relating to the Merger Agreement or
the Transactions, including promptly appealing any adverse court or agency
order. Notwithstanding the foregoing or any other provisions contained in the
Merger Agreement to the contrary, neither Parent or the Company nor any of
their respective affiliates will be under any obligation of any kind to (i)
litigate against any Federal, state or local government or any court,
administrator or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), including
but not limited to any governmental or regulatory authority with jurisdiction
over the enforcement of any applicable Federal, state, local and foreign
antitrust, competition or other similar laws or (ii) otherwise agree with any
Governmental Entity or any other party to sell or otherwise dispose of, agree
to any material limitations on the ownership or control of, or hold separate
(through the establishment of a trust or otherwise) a material portion of the
assets or businesses of any of the Company, its subsidiaries, Parent or any of
Parent's affiliates.
Pursuant to the Merger Agreement, the Company and its Board of Directors
will (i) take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Offer, the
Merger, the Merger Agreement, the Tender and Option Agreement or any of the
other Transactions and (ii) if
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any state takeover statute or similar statute or regulation becomes applicable
to the Transactions take all action necessary to ensure that the Transactions
may be consummated as promptly as practicable on the terms contemplated by the
Merger Agreement and the Tender and Option Agreement and otherwise to minimize
the effect of such statute or regulation on the Transactions.
Standstill Agreements. During the period from the date of the Merger
Agreement through the Effective Time, the Merger Agreement provides that the
Company will not terminate, amend, modify or waive any provision of any
confidentiality or standstill or similar agreement to which the Company or any
or its subsidiaries is a party (other than any involving Parent). Subject to
the foregoing, during such period, the Company has agreed to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreements, including obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court or other tribunal having jurisdiction.
Stockholder Meeting. The Merger Agreement provides that to the extent
required by applicable law, the Company will promptly take all action
necessary in accordance with the NYBCL and its Certificate of Incorporation
and By-laws to convene a meeting of the stockholders of the Company to
consider and vote on the Merger and the Merger Agreement. At such stockholder
meeting, all of the Shares then owned by Parent, Purchaser or any other
subsidiary of Parent will be voted to approve the Merger and the Merger
Agreement. The Board of Directors of the Company will recommend that the
Company's stockholders vote to approve the Merger and the Merger Agreement if
such vote is sought, will use its best efforts to solicit from shareholders of
the Company proxies in favor of the Merger and will take all other action in
its judgment necessary and appropriate to secure the vote of stockholders
required by the NYBCL to effect the Merger.
Notwithstanding the foregoing, in the event that Purchaser acquires at least
90% of the then outstanding Shares, at the request of Purchaser, the parties
to the Merger Agreement will take all necessary and appropriate action to
effect the Merger as a "short-form" merger without shareholder approval.
The Merger Agreement also provides that in the event that Purchaser reduces
the Minimum Condition (as described in Section 1 of the Offer to Purchase) and
accepts for payment the Shares tendered pursuant to the Offer, which Shares
are less than two-thirds of the Fully Diluted Shares, the Company will convene
a meeting of its stockholders, or take or permit Purchaser to take such action
as may be necessary or desirable, to amend the Certificate of Incorporation to
provide that the requisite vote of the Company's stockholders on any merger or
consolidation (including the Merger) will be a majority of the Shares
outstanding. At such meeting, all of the Shares then owned by Parent,
Purchaser or any other subsidiary of Parent shall be voted to approve such
amendment.
Conditions to the Merger. The respective obligations of each party to effect
the Merger are subject to the satisfaction or waiver, where permissible, prior
to the Effective Time, of the following conditions: (i) if required by the
NYBCL, the Merger Agreement shall have been approved by the affirmative vote
of the stockholders of the Company by the requisite vote in accordance with
applicable law; (ii) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated, or enforced by any
court or Governmental Entity which is in effect and has the effect of
prohibiting the consummation of the Merger; and (iii) the waiting period (and
any extension thereof) applicable to the consummation of the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if any, shall have expired or been terminated.
The obligations of Parent and Purchaser to effect the Merger are further
subject to the satisfaction or waiver, prior to the Effective Time, of the
conditions that Purchaser shall have accepted for payment and paid for Shares
tendered pursuant to the Offer; provided, however, that neither Parent nor
Purchaser will be entitled to assert the failure of this condition if the
failure of such condition results from a breach by Parent or Purchaser of any
of their obligations under the Merger Agreement.
The obligation of the Company to effect the Merger is further subject to the
satisfaction or waiver, prior to the Effective Time, of the conditions that
Purchaser shall have accepted for payment and paid for Shares tendered
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<PAGE>
pursuant to the Offer; provided, however, that the Company will not be
entitled to assert the failure of this condition if the failure of such
condition results from a breach by the Company of any of its obligations under
the Merger Agreement.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time (notwithstanding approval
thereof by the shareholders of the Company) prior to the Effective Time:
(i) by mutual written consent duly authorized by the Boards of Directors
of the Company, Parent and Purchaser;
(ii) by Parent, Purchaser or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the consummation of the Offer or the Merger and such
order, decree or ruling or other action is or shall have become
nonappealable;
(iii) by Parent or Purchaser if due to an occurrence or circumstance
which would result in the occurrence and continued existence of any of the
conditions to the Offer, Purchaser shall have (A) failed to commence the
Offer within the time required by Regulation 14D under the Exchange Act,
(B) terminated the Offer without purchasing any Shares pursuant to the
Offer or (C) failed to accept for payment Shares pursuant to the Offer
prior to April 30, 1999; provided, however, that the right to terminate the
Merger Agreement under this provision will not be available to Parent or
Purchaser if the occurrence and continued existence of any of the
conditions to the Offer results from the breach by Parent or Purchaser of
any of their respective obligations under the Merger Agreement;
(iv) by the Company (A) if Purchaser shall have (1) failed to commence
the Offer within the time required by Regulation 14D under the Exchange
Act, (2) terminated the Offer without purchasing any Shares pursuant to the
Offer or (3) failed to accept for payment Shares pursuant to the Offer
prior to April 30, 1999; provided, however, that the right to terminate the
Merger Agreement under this provision will not be available to the Company
if such failure results from the breach by the Company of any of its
obligations under the Merger Agreement or if the Company Board or any
committee thereof shall have (i) withdrawn, or modified, amended or changed
(including by amendment of the Schedule 14D-9), in a manner adverse to
Parent or Purchaser, its approval or recommendation of the Offer, the
Merger Agreement and the Merger or any of the other Transactions, (ii)
approved or recommended to the Company's stockholders an Acquisition
Proposal or any other acquisition of Shares other than the Offer and the
Merger or (iii) adopted any resolution to effect any of the foregoing; and
the right to terminate this Agreement under this provision also will not be
available to the Company prior to April 30, 1999 if any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than Parent, Purchaser, any of their affiliates, or any
group of which any of them is a member, shall have acquired beneficial
ownership of more than 20 percent of the Shares or shall have consummated
or entered into a definitive agreement or an agreement in principle to
consummate an Acquisition Proposal; or (B) prior to the purchase of Shares
pursuant to the Offer, concurrently with the execution of an Acquisition
Agreement under the circumstances permitted by the provisions of the Merger
Agreement relating to the solicitation and negotiation of Acquisition
Proposals, provided that such termination under this clause (B) will not be
effective unless (x) the Company and its Board of Directors shall have also
complied with all their obligations under the provisions relating to
solicitation of Acquisition Proposals and shall have paid the Termination
Fee and the Expenses and (y) the Company provides Purchaser with at least
five business days' prior written notice prior to terminating the Merger
Agreement, which notice will be accompanied by (1) a copy of the proposed
Acquisition Agreement with respect to the Superior Proposal that the
Company proposes to accept and (2) the Company's written certification that
it has made the determinations with respect to such Superior Proposal
required pursuant to the Merger Agreement and representation that the
Company will, in the absence of any other superior Acquisition Proposal,
execute such Acquisition Agreement unless Parent or Purchaser modify the
Offer or the Merger Agreement such that the Company's Board of Directors
reasonably believes in good faith after consultation with its independent
legal counsel and financial advisers that the Offer and the Merger (as so
modified) are at least as favorable as such Superior Proposal; or
(v) by the Company prior to the purchase of Shares pursuant to the Offer
if (A) there shall have been a material breach of any representation or
warranty in the Merger Agreement on the part of Parent or Purchaser which
materially adversely affects (or materially delays) the consummation of the
Offer or (B) Parent or Purchaser shall not have performed or complied with,
in all material respects (without reference
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to any materiality qualifications therein), each covenant or agreement
contained in the Merger Agreement and required to be performed or complied
with by them, and such breach materially adversely affects (or materially
delays) the consummation of the Offer, and which breach, in the case of
clause (A) and clause (B) above, shall not have been cured prior to the
earlier of 10 days following notice of such breach and two business days
prior to the Expiration Date; provided, however, that Parent and Purchaser
will have no right to cure such breach and the Company may immediately
terminate the Merger Agreement in the event that such breach by Parent or
Purchaser was willful or intentional.
In the event of the termination and abandonment of the Merger Agreement
pursuant to the above provisions, the Merger Agreement, except for certain
enumerated provisions, will become void and have no effect, without any
liability on the part of any party or its affiliates, directors, officers or
stockholders. Nothing in this provision will relieve any party to the Merger
Agreement of liability for breach of the Merger Agreement.
Termination Fee. Except as provided in the following paragraph below, the
Merger Agreement provides that all fees and expenses incurred by the parties
to the Merger Agreement will be borne solely and entirely by the party which
has incurred such fees and expenses.
If:
(i) Parent or Purchaser terminate the Merger Agreement pursuant to
paragraph (iii) under "--Termination" above (in circumstances other than
those described in paragraph (ii) below) or the Company terminates the
Merger Agreement pursuant to paragraph (iv)(A) under "--Termination" above,
in either case, in circumstances when, prior to such termination any third
party shall have acquired beneficial ownership of 20% or more of the
outstanding Shares or shall have consummated an Acquisition Proposal (or
with respect to any proposal that may be existing on December 20, 1998 and
which becomes publicly known prior to such termination, not withdrawn such
Acquisition Proposal) or such third party has publicly made or announced an
intention to make or consummate an Acquisition Proposal (or the making of
such Acquisition Proposal or such intention has otherwise become publicly
known), and, in any such case, within 12 months of such termination
thereafter (x) the Company or any of its subsidiaries enters into an
Acquisition Agreement with respect to an Acquisition Proposal with such
party, or (y) such party or any other party otherwise consummates an
Acquisition Proposal;
(ii) Parent or Purchaser terminates the Merger Agreement pursuant to
paragraph (iii) under "--Termination" above and (x) the Company shall have
willfully and intentionally breached its obligations under the provisions
described under "--No Solicitation" above, or (y) there shall have occurred
any of the events set forth in paragraph (g) of Section 15 of this Offer to
Purchase; or
(iii) the Company terminates the Merger Agreement pursuant to paragraph
(iv)(B) under "--Termination"
then, in each case, the Company (A) will pay to Parent, within one business
day following the execution and delivery of such agreement or such occurrence,
as the case may be, or simultaneously with such termination pursuant to clause
(iv)(B) under "--Termination," a fee, in cash, of $11 million (the
"Termination Fee"); provided, that the Company in no event will be obligated
to pay more than one such Termination Fee with respect to all such agreements
and occurrences and such termination and (B) will reimburse Parent and
Purchaser for all their out-of-pocket fees and expenses actually incurred by
Parent, Purchaser or their respective affiliates in connection with the Merger
Agreement, the Offer, the Merger, the Tender and Option Agreement and the
other transactions contemplated by the Merger Agreement, including all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to each of Parent or Purchaser and their respective affiliates and
the expenses of the preparation, printing, filing and mailing of the Offer
Documents, such fees and expenses not to exceed $2 million (the "Expenses").
Any payment required to be made pursuant to this paragraph will be made to
Parent by wire transfer of immediately available funds to an account
designated by Parent. These provisions will not derogate from any other rights
or remedies which Parent or Purchaser may possess under the Merger Agreement
or under applicable law.
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(iii) Tender and Option Agreement. The following is a summary of certain
provisions of the Tender and Option Agreement, a copy of which is filed as
Exhibit 4 hereto and is incorporated herein by reference. Such summary is not
intended to be complete and is qualified in its entirety by reference to the
text of the Tender and Option Agreement. Capitalized terms not otherwise
defined below shall have the meanings set forth in the Tender and Option
Agreement.
Pursuant to the Tender and Option Agreement, each Certain Stockholder agreed
to validly tender (or cause the record owner of such shares to validly tender)
and sell (and not withdraw, except in the event the Purchase Option (as
hereinafter defined) is exercised, in which case such withdrawal will be for
the limited purpose of consummating the Purchase Option) pursuant to and in
accordance with the terms of the Offer not later than the fifth business day
after commencement of the Offer (or the earlier of the expiration date of the
Offer and the fifth business day after such Shares are acquired by such
Certain Stockholder if the Certain Stockholder acquires Shares after December
20, 1998), or, if the Certain Stockholder has not received the Offer to
Purchase and the related Letter of Transmittal by such time, within two
business days following receipt of such documents, all of the then outstanding
Shares beneficially owned by such Certain Stockholder.
Each Certain Stockholder (other than Mr. Ronald Ostrow's three children)
agreed (a) to appear (or not appear, if requested by Parent or Purchaser) at
any annual, special, postponed or adjourned meeting of the stockholders of the
Company or otherwise cause the Shares such Certain Stockholder beneficially
owns to be counted as present (or absent, if requested by Parent or Purchaser)
thereat for purposes of establishing a quorum and to vote or consent, and (b)
to constitute and appoint Parent and Purchaser, or any nominee thereof, with
full power of substitution, during and for the term of the Tender and Option
Agreement, as his true and lawful attorney and proxy for and in his name,
place and stead, to vote all the Shares such Certain Stockholder beneficially
owns at the time of such vote, at any annual, special, postponed or adjourned
meeting of the stockholders of the Company (and this appointment will include
the right to sign his name (as stockholder) to any consent, certificate or
other document relating to the Company that laws of the State of New York may
require or permit), in the case of both (a) and (b) above, (x) in favor of
approval and adoption of the Merger Agreement and approval and adoption of the
Merger and the other transactions contemplated thereby and (y) against (1) any
Acquisition Proposal, (2) any action or agreement that would result in a
breach in any respect of any covenant, agreement, representation or warranty
of the Company under the Merger Agreement and (3) the following actions (other
than the Merger and the other transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of
its subsidiaries; (ii) a sale, lease or transfer of a material amount of
assets of the Company or any of its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
subsidiaries; (iii) (A) any change in a majority of the persons who constitute
the Board of Directors of the Company or any of its subsidiaries as of the
date hereof; (B) any change in the present capitalization of the Company or
any amendment of the Company's or any of its subsidiaries' certificate of
incorporation or bylaws, as amended to date; (C) any other material change in
the Company's or any of its subsidiaries' corporate structure or business; or
(D) any other action that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or adversely affect the Offer, the
Merger and the other transactions contemplated by the Tender and Option
Agreement and the Merger Agreement.
Each Certain Stockholder granted to Parent and Purchaser an irrevocable
option (the "Purchase Option") to purchase for cash, in a manner set forth
below, any or all of the Shares (and including Shares acquired after the date
hereof by such Certain Stockholder) beneficially owned by the Certain
Stockholder at a price (the "Exercise Price") per Share equal to $34.00. In
the event of any stock dividends, stock splits, recapitalizations,
combinations, exchanges of shares or the like, the Exercise Price will be
appropriately adjusted for this purpose.
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The Tender and Option Agreement provides that subject to the conditions set
forth below, the Purchase Option may be exercised by Parent or Purchaser, in
whole or in part, at any time or from time to time after the occurrence of any
Trigger Event (as defined below). A "Trigger Event" means any one of the
following: (i) the Merger Agreement becomes terminable under circumstances
that entitle Parent or Purchaser to receive the Termination Fee or the
Expenses under the Merger Agreement (regardless of whether the Merger
Agreement is actually terminated and whether such Termination Fee or Expenses
are then actually paid), (ii) the Offer is consummated but, due to the failure
of the Certain Stockholder to validly tender and not withdraw all of the then
outstanding Shares beneficially owned by such Certain Stockholder, the
Purchaser has not accepted for payment or paid for all of such Shares, (iii) a
tender or exchange offer for at least 20% of the Shares shall have been
publicly proposed to be made or shall have been made by another person, or
(iv) it shall have been publicly disclosed or Parent or Purchaser shall have
otherwise learned that (A) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) (other than Parent or Purchaser) shall have
acquired or proposed to acquire beneficial ownership of more than 20% of any
class or series of capital stock of the Company (including Shares), through
the acquisition of stock, the formation of a group or otherwise, or shall have
been granted any option, right or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 20% of any class or series of
capital stock of the Company or any of its subsidiaries, or (B) any person or
group (other than Parent and Purchaser) shall have entered into or publicly
offered to enter into a definitive agreement or an agreement in principle with
respect to a merger, consolidation or other business combination with the
Company or any of its subsidiaries.
Pursuant to the Tender and Option Agreement, if requested by Parent and
Purchaser in the Exercise Notice, such Certain Stockholder will exercise all
Options (to the extent exercisable) and other rights (including conversion or
exchange rights) beneficially owned by such Certain Stockholder and will sell
or, if directed by Parent and Purchaser, tender the Shares acquired pursuant
to such exercise to Parent or Purchaser as provided in the Tender and Option
Agreement.
The Purchase Option will terminate (a) as it relates to a Certain
Stockholder, upon purchase by Parent or Purchaser of the Shares owned by such
Certain Stockholder pursuant to the Offer or (b) upon the earliest of: (i) the
Effective Time; (ii) termination of the Merger Agreement other than upon,
during the continuance of or after a Trigger Event; or (iii) 90 days following
any termination of the Merger Agreement upon, during the continuance of or
after a Trigger Event (or if, at the expiration of such 90 day period the
Purchase Option cannot be exercised by reason of any applicable judgment,
decree, order, injunction, law or regulation, 10 business days after such
impediment to exercise has been removed or has become final and not subject to
appeal).
The Tender and Option Agreement provides that in the event (i) Parent or
Purchaser exercises the Purchase Option and purchases Shares representing at
least 20% of the then outstanding Shares on a fully diluted basis (the
"Purchase Event"), (ii) no Acquisition Proposal shall have been consummated
and (iii) the Merger Agreement shall have terminated and the Company shall not
have been in material breach of the Merger Agreement at the time of such
termination, upon the written request of the Company made within five business
days after the Purchase Event, Parent will cause Purchaser or another
subsidiary of Parent to commence, as soon as reasonably practicable, a tender
offer for all Shares at a cash price equal to the Exercise Price, on terms and
subject to conditions substantially similar to those contained in the Merger
Agreement.
The Tender and Option Agreement provides that if, within twelve months
following the exercise of the Purchase Option by Parent or Purchaser, Parent
or Purchaser sells any or all of the Shares acquired upon exercise of the
Purchase Option to an unaffiliated third party (a "Subsequent Sale") at a per
Share price in excess of the Exercise Price (the "Subsequent Sale Price"),
then Parent or Purchaser will pay to each Certain Stockholder, within five
days of receipt of payment by Parent or Purchaser, an amount equal to such
Certain Stockholder's pro rata share of 50% of the excess of the Subsequent
Sale Price over the Exercise Price multiplied by the number of shares sold in
the Subsequent Sale.
15
<PAGE>
In the Tender and Option Agreement, the obligation of each Certain
Stockholder to sell such Certain Stockholder's Shares to Parent or Purchaser
hereunder is subject to the conditions that (i) all waiting periods, if any,
under the HSR Act, applicable to the sale of the Shares or the acquisition of
the Shares by Parent or Purchaser, as the case may be, hereunder have expired
or have been terminated; (ii) all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any court,
administrative agency or other Governmental Entity, if any, required in
connection with sale of the Shares or the acquisition of the Shares by Parent
or Purchaser hereunder have been obtained or made; and (iii) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such sale or acquisition is in effect.
Under the Tender and Option Agreement, the Company has agreed to provide
Parent and Purchaser certain registration rights with respect to the Shares
purchased pursuant to the Purchase Option.
The Tender and Option Agreement will terminate (a) as to any Certain
Stockholder upon the purchase of all the Shares beneficially owned by such
Certain Stockholder pursuant to the Offer, (b) except as specifically provided
for in certain sections of the Tender and Option Agreement relating to the
Puchase Option, which will only terminate as and when provided therein, on the
earlier to occur of (i) the Effective Time or (ii) the date the Merger
Agreement is terminated in accordance with its terms, or (c) by the mutual
consent of each Certain Stockholder as to its rights and obligations
hereunder, the Board of Directors of the Company and the Board of Directors of
Parent.
(iv) Confidentiality Agreement. The Company and Parent have entered into an
agreement (the "Confidentiality Agreement"), dated October 21, 1998, a copy of
which is filed as Exhibit 6 hereto and is incorporated herein by reference,
providing for the exchange of certain information concerning the Company in
connection with a possible transaction between the two companies. Pursuant to
the Confidentiality Agreement, each of Parent and the Company agreed to treat
the information furnished by the other party pursuant to the Confidentiality
Agreement as confidential; and the Company agreed for a limited period not to
negotiate with or provide information to other parties concerning an
acquisition transaction. The Confidentiality Agreement also contained mutual
"standstill" provisions which terminated upon the execution and delivery of
the Merger Agreement. In accordance with the Confidentiality Agreement, the
Company furnished to Parent detailed confidential information concerning the
business and future prospects of the Company.
The foregoing summary of the Confidentiality Agreement is not intended to be
complete and is qualified in its entirety by reference to the text of the
Confidentiality Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Board of Directors of the Company has unanimously approved the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and determined that the Offer and the Merger are fair
to, and in the best interests of, the Company's shareholders and unanimously
recommends that shareholders accept the Offer and tender their Shares pursuant
to the Offer.
(b)(1) Background.
On June 4, 1998, Michael S. Foster, Vice President of Shipley Company
("Shipley"), a wholly owned subsidiary of Parent, raised with Richard Kessler,
Executive Vice President and Chief Operating Officer of the Company, the
possibility of exploring a business combination or other opportunity for
cooperation between the Company and Parent.
On June 17 and 18, Mr. Foster and Mr. Kessler further discussed the
potential benefits of a possible transaction between Parent and the Company.
On July 22, 1998, Mr. Kessler called Mr. Foster to advise him that the Board
of Directors of the Company had authorized informal discussions regarding the
possible acquisition of the Company by Parent.
16
<PAGE>
On July 29, 1998, Mr. Foster and Pierre R. Brondeau, President of Shipley,
met for lunch in New York City with Mr. Kessler and David Rosenthal, Vice
President -- Finance and Treasurer of the Company, to follow up on the June
17-18 conversations. Messrs. Foster and Brondeau stated that Parent was
interested in exploring on a preliminary basis the potential merits of a
business combination.
On August 25, 1998, Ronald F. Ostrow, President and Chief Executive Officer
of the Company, and Messrs. Kessler and Rosenthal visited the Shipley facility
in Marlboro, Massachusetts. During that visit and at a lunch, discussions were
held with Messrs. Brondeau and Foster relating to a possible acquisition of
the Company by Parent. Mr. Ostrow stated that any transaction should involve a
price representing a premium above the recent stock market high for the Shares
($32 per Share).
On September 16, 1998, Messrs. Brondeau and Foster visited the Company's
facilities in Freeport, New York. A tour of the facilities was held, followed
by a private meeting between Messrs. Ostrow and Brondeau during which the
Company's valuation and strategic expectations were reviewed.
On October 19, 1998, Messrs. Ostrow and Rosenthal met with Mr. Brondeau and
with Rajiv L. Gupta, Vice Chairman-elect of Parent, and continued discussions
concerning a possible acquisition of the Company by Parent.
On October 21, 1998, the Company and Parent entered into the Confidentiality
Agreement. Thereafter, Parent began its due diligence investigation of the
Company, and the Company furnished to Parent detailed information concerning
the Company's business and future prospects.
On November 16-17, 1998, meetings were held between representatives of the
Company and Parent, including representatives of The Beacon Group Capital
Services, LLC ("Beacon"), financial adviser to the Company, and Deutsche Bank
Securities Inc. ("Deutsche Bank Securities"), financial adviser to Parent.
Over the course of the two-day period, the Company's business was discussed in
detail, including its product line, facilities, sales projections and
financial results.
On November 20, 1998, representatives of Beacon and Deutsche Bank Securities
discussed the Company's valuation expectations and the background of recent
contacts between the Company and another company that had expressed interest
in the Company, most recently in September 1998, but on a basis that failed to
meet the Company's valuation expectations.
On December 3, 1998, Mr. Brondeau indicated in a telephone conversation with
Mr. Ostrow that certain analyses performed by Parent suggested that an
appropriate valuation for the Company was $28 per Share. Mr. Ostrow said that
did not meet the Company's valuation expectations. Between December 3-6,
representatives of Beacon and of Deutsche Bank Securities held further
discussions concerning valuation issues.
On December 7, 1998, Parent's Board of Directors authorized Deutsche Bank
Securities to present, on Parent's behalf, a proposal for a potential
acquisition of the Company. The following day, Deutsche Bank Securities
presented a term sheet containing proposed terms for a potential acquisition
of the Company by Parent for $33.50 per Share in cash. Parent's proposal was
conditioned upon certain stockholders of the Company entering into the Tender
and Option Agreement and upon the Company's entering into employment
agreements with certain key executives of the Company.
On December 10, 1998, Mr. Ostrow and other senior executives of the Company
met in Tokyo with Mr. Brondeau to discuss the terms of a possible acquisition
of the Company, as well as the terms of the Amended Employment Agreements.
On December 12, 1998, Parent's counsel furnished drafts of the Merger
Agreement and the Tender and Option Agreement to counsel for the Company.
Thereafter, the parties negotiated the terms of the Merger Agreement, the
Tender and Option Agreement and the Amended Employment Agreements.
Between December 14-18, 1998, the terms of the transaction agreements were
negotiated by representatives of Parent and of the Company.
17
<PAGE>
On December 15, 1998, Mr. Ostrow met with Mr. Gupta. Also present were
representatives of Beacon and of Deutsche Bank Securities. At this meeting,
Mr. Gupta indicated that Parent would be willing to increase its offer to
$34.00 per Share in cash, subject to the negotiation of satisfactory terms and
conditions in the transaction agreements.
On December 18, 1998, the Company's Board of Directors held a meeting at the
Company's headquarters to consider the proposed transaction. Present were
representatives of Beacon and of counsel for the Company. The terms and
conditions of the proposed Merger Agreement, Tender and Option Agreement and
Amended Employment Agreements were discussed in detail. Other topics discussed
included the Company's prospects as a stand-alone company, changes in the
Company's markets, possible alternatives to the Offer and the Merger, and the
effects of the Offer and the Merger on the Company's growth prospects,
employees, customers, creditors and the communities in which the Company
operates. Beacon presented its financial analysis of the Offer and the Merger
and stated that it was prepared to render its opinion that the proposed
purchase price was fair from a financial point of view to the holders of the
Shares.
On December 20, 1998, the Company's Board of Directors met again to consider
the proposed transaction. Beacon delivered its opinion to the effect that the
proposed purchase price of $34.00 per Share in cash in the Offer and the
Merger is fair from a financial point of view to the holders of the Shares. At
the meeting, the Company's Board of Directors approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
determined that the Offer and the Merger are fair to, and in the best
interests of, the Company's shareholders and recommended that shareholders
accept the Offer and tender their Shares pursuant to the Offer.
Later on December 20, 1998, the Company, Parent and Purchaser executed the
Merger Agreement; Parent, the Company and the Certain Stockholders executed
the Tender and Option Agreement; and the Company and certain executives of the
Company entered into the Amended Employment Agreements.
On December 21, 1998, Parent and the Company issued a joint press release
announcing the transactions contemplated by the Merger Agreement.
(b)(2) Reasons for the recommendation.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that the Company's stockholders tender their Shares pursuant
to the Offer, the Board of Directors of the Company considered a number of
factors, including:
(i) The familiarity of the Board with the financial condition, results of
operations, competitive position, business and prospects of the Company (as
reflected in the Company's historical and projected financial information),
current economic and market conditions and the nature of the industry in
which the Company operates.
(ii) The historical market prices of, and recent trading activity in, the
Shares, particularly the fact that the $34.00 per Share in cash to be paid
in the Offer represents a premium of approximately 27% over the closing
price of the Shares on December 18, 1998, the last trading day prior to the
public announcement on December 21, 1998 of the Merger Agreement, and a
premium of approximately 35% over the average closing price for the 10
trading days ending on December 18, 1998.
(iii) The presentation of Beacon, the Company's financial adviser, at the
December 18, 1998 meeting of the Board of Directors and the written opinion
of Beacon, dated December 20, 1998, to the effect that, as of such date and
based upon and subject to certain matters in such opinion, the purchase
price of $34.00 per Share in cash in the Offer and the Merger is fair from
a financial point of view to the holders of the Shares. The full text of
the written opinion of Beacon, dated December 20, 1998, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken in connection with such opinion, is filed as Exhibit 2 hereto.
Stockholders are urged to read such opinion carefully in its entirety. The
opinion of Beacon was presented for the information of the Board in
connection with its consideration of the Merger
18
<PAGE>
Agreement and is directed only to the fairness of the consideration to be
received by the holders of the Shares in the Offer and the Merger. The
opinion does not constitute a recommendation to any stockholder as to
whether to tender Shares in the Offer.
(iv) The fact that the proposed structure of the Transactions involves an
immediate cash tender offer for all outstanding Shares to be followed by a
merger for the same consideration, thereby enabling stockholders to obtain
cash for their Shares at the earliest possible time.
(v) The other terms and conditions of the Offer, the Merger and the
Merger Agreement, including the fact that the terms of the Merger Agreement
permit the Company to accept a superior offer if failure to do so would be
reasonably likely to result in a breach of the Board's fiduciary duties
under applicable law, subject to paying an $11 million termination fee and
certain expenses of Bidder not to exceed $2 million.
(vi) The strategic fit between the companies, and the expected impact on
the Company's employees and other constituencies.
(vii) The likelihood that the Offer and the Merger will be consummated,
including the fact that the obligations of the Bidder to consummate the
Offer and the Merger are not conditioned upon obtaining any financing.
The foregoing discussion of factors considered by the Board of Directors is
not meant to be exhaustive but includes the material factors considered by the
Board of Directors in approving the Merger Agreement and the transactions
contemplated thereby and in recommending that stockholders tender their Shares
pursuant to the Offer. The Board of Directors did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered. In addition, individual members of the Board of Directors
may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to an engagement letter, dated September 24, 1998, the Company has
retained Beacon to render financial advisory services to the Company. The
Company has agreed to pay Beacon a fee of $750,000 upon execution of the
Merger Agreement, creditable against a fee equal to 0.8 of 1% of the total
consideration involved in the sale of the Company; Beacon has agreed to pay
30% of such payments to Eugene Nadel as compensation for his advisory services
rendered to the Company in conjunction with Beacon's services.
The Company has also agreed to reimburse Beacon for its reasonable out-of-
pocket expenses, including reasonable fees and expenses of counsel, and to
indemnify Beacon and certain related persons against certain liabilities in
connection with their engagement including liabilities under the federal
securities laws.
Except as described above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any other person to make
solicitations or recommendations to security holders on its behalf with
respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) There have been no transactions in the Shares during the past 60 days by
the Company or, to the best knowledge of the Company, by any executive
officer, director, affiliate or subsidiary of the Company, except that on
November 27, 1998, James Martin, Vice President and Director, Research &
Quality of the Company, exercised options to purchase 1,500 Shares at an
exercise price of $6.167 per Share and 705 Shares at an exercise price of
$7.083 per Share.
(b) Each of Barnet D. Ostrow, Fred I. Nobel, Ronald F. Ostrow and Sol Berg,
each of whom is a director of the Company (Ronald F. Ostrow is also President
and Chief Executive Officer of the Company), and each of Richard Kessler,
Donald Thomson and David Rosenthal, each of whom is an officer of the Company,
is a party to the Tender and Option Agreement, pursuant to which each such
person has agreed to tender all of his Shares into the Offer upon the terms
and subject to the conditions set forth in the Tender and Option Agreement.
See Item 3(b)(2)(iii) of this Schedule 14D-9, which is incorporated by
reference into this Item 6(b).
19
<PAGE>
As of the date of this Statement, to the best of the Company's knowledge,
each of the Company's other executive officers and directors intends to tender
such person's Shares pursuant to the Offer. The foregoing statement does not
include any Shares over which, or with respect to which, any such executive
officer, director or affiliate acts in a fiduciary or representative capacity
or is subject to the instructions of a third party with respect to such
decision to tender.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 3(b) and Item 4 of this Schedule 14D-9,
which Items are hereby incorporated by reference into this Item 7(b), there
are no transactions, board resolutions, agreements in principle or signed
contracts in response to the Offer which relate to or would result in one or
more of the matters referred to in paragraph (a) of this Item 7, except that
the Board of Directors of the Company has adopted resolutions (i) approving
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, determining that the Offer and the Merger are fair to,
and in the best interests of, the Company's shareholders and recommending that
shareholders accept the Offer and tender their Shares pursuant to the Offer;
and (ii) exempting Parent and Purchaser from the operation of Section 912 of
the Business Corporation Law of the State of New York as a result of their
entering into the Merger Agreement and the Tender and Option Agreement.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Reference is made to the Information Statement Pursuant to Section 14(f) of
the Securities Exchange Act of 1934 and Rule 14f-1 thereunder, which is
attached as Annex A hereto and filed as Exhibit 8 hereto and is incorporated
herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit 1............... Letter to Stockholders, dated December 23, 1998.*
Exhibit 2............... Opinion of Beacon, dated December 20, 1998.*
Exhibit 3............... Agreement and Plan of Merger, dated as of
December 20, 1998, among Parent, Purchaser and
the Company.
Exhibit 4............... Tender and Option Agreement, dated as of December
20, 1998, among Parent, Purchaser, the Company
and certain stockholders of the Company.
Exhibit 5............... Form of Amended Employment Agreement, dated as of
December 20, between the Company and certain
executives of the Company.
Exhibit 6............... Confidentiality Agreement, dated October 21,
1998, between Parent and the Company.
Exhibit 7............... Joint Press Release, dated December 21, 1998.
Exhibit 8............... Information Statement Pursuant to Section 14(f)
of the Securities Exchange Act of 1934 and Rule
14f-1 Thereunder (Annex A to the Schedule 14D-
9).*
</TABLE>
- --------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
20
<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.
Dated: December 23, 1998
LEARONAL, INC.
/s/ Ronald F. Ostrow
By: _________________________________
Name: Ronald F. Ostrow
Title: President and Chief
Executive Officer
21
<PAGE>
ANNEX A
LEARONAL, INC.
272 BUFFALO AVENUE
FREEPORT, NEW YORK 11520
----------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
----------------
GENERAL
This Information Statement is being mailed on or about December 23, 1998 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (as
amended from time to time, the "Schedule 14D-9") of LeaRonal, Inc. (the
"Company"). Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of persons
designated by Lightning Acquisition Corp. (the "Purchaser Designees") to the
Company's Board of Directors (the "Board"). The Merger Agreement requires the
Company, upon the acceptance for payment of and payment for any Shares by
Purchaser or any of its affiliates pursuant to the Offer and upon request of
Purchaser, to take certain action to cause the Purchaser Designees to be
elected to the Company's Board. The Offer commenced on December 23, 1998 and
is scheduled to expire at 12:00 midnight, New York City time, on January 22,
1999 unless extended upon the terms set forth in the Offer to Purchase. The
information contained in this Information Statement concerning Parent and
Purchaser has been furnished to the Company by Parent. The Company assumes no
responsibility for the accuracy or completeness of such information.
THIS INFORMATION STATEMENT IS REQUIRED BY SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER. YOU ARE URGED TO
READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER, REQUIRED TO
TAKE ANY ACTION.
INFORMATION REGARDING THE SHARES
The Shares constitute the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 20, 1998, there were
12,544,682 Shares outstanding.
DESIGNATION OF DIRECTORS
The Merger Agreement provides that, immediately upon the acceptance for
payment of and payment for any Shares by Purchaser or any of its affiliates
pursuant to the Offer, Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company's Board equal
to the product of (i) the total number of directors on the Board (after giving
effect to the election of such directors designated by Purchaser) and (ii) the
percentage that the number of vote represented by Shares beneficially owned by
Purchaser and its affiliates bears to the total number of votes represented by
Shares then outstanding. The Company has agreed, upon the request of Parent,
to use its best efforts promptly either to increase the size of the Board or
to secure the resignations of such number of directors, or both, as is
necessary to enable the Purchaser Designees to be elected to the Board and
shall cause the Purchaser Designees to be so elected. The Company has also
agreed, if requested by Parent, to cause persons designated by Parent to
constitute at least the same percentage (rounded up to the next whole number)
as is on the Board of (a) each committee (or similar body) of the Board, (b)
each board of directors (or similar body) of each subsidiary of the Company
and (c) each committee (or similar body) of each such board. From and after
the time that the Purchaser Designees constitute a majority of the Board, any
amendment or termination of the Merger Agreement by the Company, and any
extension or waiver by the Company of the time for the performance of any of
the obligations or other acts of
A-1
<PAGE>
Parent or Purchaser or waiver of any of the Company's rights thereunder, may
be effected only by the action of a majority of those directors of the Company
then in office who were directors on the date of the Merger Agreement and who
are not officers of the Company, Parent or any of their respective
subsidiaries.
It is expected that the Purchaser Designees will assume office promptly
following the purchase by Purchaser of two-thirds of the outstanding Shares on
a fully diluted basis pursuant to the terms of the Offer, which purchase
cannot be earlier than January 22, 1999, and that, upon assuming office, the
Purchaser Designees together with the continuing directors of the Company will
thereafter constitute the entire Board.
THE PURCHASER DESIGNEES
As of the date of this Information Statement, Parent has not determined who
will be the Purchaser Designees. However, the Purchaser Designees will be
selected from among the following persons. Unless otherwise indicated, each
person identified below has been employed by Parent for the last five years,
and each such person's business address is c/o Rohm and Haas Company, 100
Independence Mall West, Philadelphia, Pennsylvania 19106. All persons listed
below are citizens of the United States.
NAME AND CURRENT BUSINESS AGE, PRESENT PRINCIPAL OCCUPATION OR
ADDRESS EMPLOYMENT; FIVE-YEAR EMPLOYMENT HISTORY
William C. Andrews........... Mr. Andrews, 52, vice president since 1997;
business director of monomers since 1998;
previously corporate controller from 1995 to
1998; assistant controller from 1992 to 1995
and director of finance and customer service
for the European region from 1989 to 1994.
Bradley J. Bell.............. Mr. Bell, 46, vice president and chief
financial officer since 1997; treasurer from
1997 to 1998; previously vice president and
treasurer of Whirlpool Corporation from 1987 to
1997. Mr. Bell will become a senior vice
president effective January 1, 1999.
Pierre Brondeau.............. Dr. Brondeau, 41, vice president since 1998;
president of Shipley Company since 1998;
previously vice president, chief operating
officer of Shipley Company from 1997 to 1998;
director of sales, marketing and research of
Shipley Company from 1995 to 1996; research
director of plastic additives from 1993 to
1995.
J. Michael Fitzpatrick....... Dr. Fitzpatrick, 52, vice president since 1993;
chief technology officer from 1996 through
1998; previously director of research from 1993
to 1995 and general manager of Rohm and Haas
(UK) Limited and European regional business
director for polymers and resins from 1990 to
1993. Dr. Fitzpatrick will join the Board of
Directors and become president and chief
operating officer effective January 1, 1999.
Rajiv L. Gupta............... Mr. Gupta, 53, vice president and regional
director of Asia-Pacific from 1993 through
1998; previously director of plastics additives
from 1989 to 1993. Mr. Gupta will become a
director of Rohm and Haas Company and vice
chairman effective January 1, 1999.
Richard C. Shipley...........
Mr. Shipley, 53, vice president since 1996;
Chairman and CEO of Shipley Company since 1998;
previously president of Shipley Company from
1985 to 1998.
A-2
<PAGE>
Charles M. Tatum............. Dr. Tatum, 51, vice president since 1990;
director of plastics additives from 1994
through 1998; previously director of research
from 1989 to 1994. Dr. Tatum will become a
senior vice president and the chief technology
officer effective January 1, 1999.
Robert P. Vogel.............. Mr. Vogel, 54, vice president since 1994;
general counsel responsible for legal, tax and
regulatory matters since 1994; previously
associate general counsel, regulatory counsel
and director of safety, health and environment
and product integrity from 1991 to 1993.
J. Lawrence Wilson........... Mr. Wilson, 62, director since 1977, chairman
and chief executive officer since 1988;
director of Mead Corporation, The Vanguard
Group of Investment Companies and Cummings
Engine Company, Inc.
Parent has advised the Company that no Purchaser Designee nor any associate
thereof is a party adverse to the Company or any of its subsidiaries, or has a
material interest adverse to the Company or any of its subsidiaries, in any
material pending legal proceedings.
Parent has advised the Company that to the best of Parent's knowledge (i)
since March 1, 1995, no Purchaser Designee, nor any member of the immediate
family thereof, nor Parent, has had or will have a direct or indirect material
interest in any transaction, series of similar transactions or currently
proposed transactions to which the Company or any of its subsidiaries is a
party, in which the amount involved exceeds $60,000, except for the Merger
Agreement and the transactions contemplated thereby and except for
transactions between Parent and the Company in the ordinary course of
business; (ii) since March 1, 1995, no Purchaser Designee, nor any member of
the immediate family thereof, has been indebted to the Company or any of its
subsidiaries in an amount in excess of $60,000; (iii) no relationship
regarding the Purchaser Designees exists or has existed since March 1, 1995
that is required to be disclosed pursuant to Item 404(b) under Regulation S-K;
and (iv) there is no information regarding the Purchaser Designees that is
required to be disclosed pursuant to Item 402 under Regulation S-K.
A-3
<PAGE>
CURRENT DIRECTORS OF THE COMPANY
The names of the current directors of the Company, their ages, and certain
other information about them are set forth below:
AGE BUSINESS EXPERIENCE
NAME OF DIRECTOR
Barnet D. Ostrow............. 84 Mr. Ostrow has served as a director
of the Company since 1953. He is
presently Chairman of the Board of
Directors and formerly served as
President and Chief Executive Officer
of the Company.
Fred I. Nobel................ 80 Mr. Nobel has served as a director of
the Company since 1953. He is
presently Vice Chairman of the Board
of Directors and formerly served as
Executive Vice President and
Secretary of the Company.
Ronald F. Ostrow............. 54 Mr. Ostrow has served as a director
of the Company since 1975. He is
presently President and Chief
Executive Officer of the Company. Mr.
Ronald F. Ostrow is the son of Mr.
Barnet D. Ostrow.
Richard Kessler.............. 59 Mr. Kessler has served as a director
of the Company since 1987. He is
presently Executive Vice President
and Chief Operating Officer of the
Company.
Sol Berg..................... 73 Mr. Berg has served as a director of
the Company since 1972. Mr. Berg is a
private investor.
Carl N. Graf................. 71 Mr. Graf has served as a director of
the Company since 1992. He was the
President and Chief Operating Officer
of W.R. Grace & Co. from 1981 through
January, 1987 and a member of the
Board of Directors of Spire Corp.
from 1987 through 1997.
Irwin Lieber................. 59 Mr. Lieber has served as a director
of the Company since 1980. He was the
founder and has been the Chief
Investment Officer of GeoCapitalCorp.
from October 1979 to the present.
Arthur N. Winston............ 54 Mr. Winston has served as a director
of the Company since 1980. He has
served as an Investment Manager for
Glickenhaus & Co. from April 1991 to
the present, as Vice President,
Goldman, Sachs & Co. from October
1989 to April 1991, and as General
Partner, Glickenhaus & Co. from
October 1988 to April 1989. Mr.
Winston has served on the Board of
Directors of Hi-Shear Industries,
Inc. from 1991 to the present.
Kenneth L. Stein............. 60 Mr. Stein has served as a director of
the Company since 1987. Mr. Stein is
a partner of Greenfield Stein &
Senior, LLP, which serves as general
counsel to the Company.
A-4
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The names, ages, principal occupations and positions for the past five years
of each Executive Officer of the Company who is not also a Director of the
Company are as follows:
Donald Thomson, age 59, has served as Vice President-Technology of the
Company during the past five years and has served as Secretary since 1995.
David L. Rosenthal, age 48, has served as Vice President-Finance and
Treasurer of the Company during the past five years.
David Schram, age 45, has served as Vice President and Director of Marketing
of the Company during the past five years.
James Martin, age 49, has served as Vice President and Director, Research &
Quality of the Company during the past five years.
Carl Fiore, age 55, has served as Assistant Treasurer of the Company during
the past five years.
Michael Toben, age 40, has served as Assistant Vice President-Research of
the Company since 1995. Prior to that time, Mr. Toben served as Research
Manager of the Company.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Shares held, as of December 20, 1998, by each current Director
and Executive Officer and by all Directors and Executive Officers as a group.
No Director or Executive Officer owns more than one percent of the outstanding
Shares, except for Mr. Barnet D. Ostrow who owns beneficially approximately
6.6 percent of the Shares outstanding, Mr. Nobel who owns beneficially
approximately 9.9 percent of the Shares outstanding, Mr. Ronald F. Ostrow who
owns beneficially approximately 4.6 percent of the Shares outstanding, and Mr.
Berg who owns beneficially approximately 6.0 percent of the Shares
outstanding. Unless indicated otherwise, all Shares are held directly, with
each person having sole voting and dispositive power with respect to the
Shares owned beneficially by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
------------------------ ----------------- -----------
<S> <C> <C>
Barnet D. Ostrow................................. 827,282(3) 6.6%
Fred I. Nobel.................................... 1,237,639(4) 9.9%
Ronald F. Ostrow................................. 578,111(5) 4.6%
Richard Kessler.................................. 105,340(6) *
Donald Thomson................................... 66,987 *
David L. Rosenthal............................... 38,561 *
David Schram..................................... 24,929 *
James Martin..................................... 21,817 *
Carl Fiore....................................... 14,187 *
Michael Toben.................................... 13,739 *
Sol Berg......................................... 754,519 6.0%
Carl N. Graf..................................... 2,625 *
Irwin Lieber..................................... 4,335 *
Arthur L. Winston................................ 14,519(7) *
Kenneth L. Stein................................. 2,437(8) *
All Directors and Executive Officers as a group
(15 persons).................................... 3,707,027 29.6%
</TABLE>
A-5
<PAGE>
- --------
* Less than 1%.
(1) Includes the following Shares subject to options exercisable within 60
days of December 20, 1998: Ronald F. Ostrow: 21.940; Mr. Kessler: 28,625;
Mr. Thomson: 13,045; Mr. Rosenthal: 19,190; Mr. Schram: 12,875; Mr. Martin:
13,750; Mr. Fiore: 11,000; Mr. Toben: 11,800; Mr. Graf: 1,875; Mr. Lieber:
3,750; and Mr. Winston: 3,750.
(2) Based on 12,544,682 Shares outstanding.
(3) Includes 391,354 Shares held in trust for the benefit of Barnet D.
Ostrow's wife and 15,000 Shares beneficially owned by Barnet D. Ostrow and
his wife as partners of Ostrow Properties Limited Partnerships #1 and #2.
(4) Includes 5,917 Shares beneficially owned by Mr. Nobel and his wife as
partners of Nobel Limited Partnership; does not include 14,062 Shares owned
by Mr. Nobel's wife, as to which Shares Mr. Nobel disclaims beneficial
ownership.
(5) Includes (a) 263,317 Shares held in trust for the benefit of Ronald F.
Ostrow, as to which Kenneth L. Stein and Ronald F. Ostrow are trustees and
share voting and investment power (as to which Mr. Stein has no beneficial
interest), (b) 50,000 Shares held in trust for the benefit of Ronald F.
Ostrow and (c) 242,500 Shares beneficially owned by Ronald F. Ostrow as a
limited partner of Ostrow Properties Limited Partnership #1. Does not
include an aggregate of 147,727 Shares owned by Ronald F. Ostrow's children;
Ronald F. Ostrow disclaims beneficial ownership of such Shares.
(6) Does not include an aggregate of 5,678 Shares owned by Mr. Kessler's
children; Mr. Kessler disclaims beneficial ownership of such Shares.
(7) Includes an aggregate of 3,901 Shares held for Mr. Winston's children; Mr.
Winston is custodian of such Shares.
(8) Includes (a) 1,500 Shares held by Vanguard Discount Brokerage Services for
Mr. Stein's benefit under his firm's retirement plan and (b) 937 Shares
owned by Mr. Stein's wife; Mr. Stein disclaims beneficial ownership of the
Shares owned by his wife.
PRINCIPAL STOCKHOLDERS
As of September 30, 1998, based upon filings made with the Commission or
information provided to the Company, the only persons known by the Company to
be the beneficial owner of more than five percent of the outstanding Shares
were Mr. Barnet D. Ostrow, Mr. Fred I. Nobel and Mr. Sol Berg, as described
above under "Security Ownership of Management." In addition, Parent and
Purchaser may be deemed to own beneficially the Shares covered by the Tender
and Option Agreement, which represent approximately 29% of the outstanding
Shares.
MEETINGS OF THE BOARD OF DIRECTORS AND ATTENDANCE
During the fiscal year ended February 28, 1998, the Board of Directors held
five meetings. Each director attended at least 75 percent of these meetings,
as well as the meetings of the Committees of which he was a member.
DIRECTORS' COMPENSATION AND CONSULTING ARRANGEMENTS
Non-employee directors, except Mr. Stein, received annual fees of $11,000
each, paid in equal quarterly installments, plus $2,750 each for attendance at
a special meeting of the Board of Directors held in February, 1998. Directors
receive no additional compensation for participation on committees of the
Board. Mr. Stein is a partner of Greenfield Stein & Senior, LLP, which serves
as general counsel to the Company. Directors who are employees of the Company
receive no fees for attending Board or committee meetings. Messrs. Barnet D.
Ostrow and Fred I. Nobel have consulting agreements with the Company pursuant
to which they earned fees of $135,000 and $130,000 respectively, in the
Company's last fiscal year. Additionally, they are provided with
A-6
<PAGE>
medical insurance. The current term of each agreement ends February 28, 1999
and may be renewed for successive additional periods of one year each. Non-
employee directors are eligible to participate in the 1990 Nonqualified Stock
Option Plan. During the Company's last fiscal year, no options were granted to
non-employee directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee consists of Messrs. Lieber and Winston. The Committee
meets annually to review the auditor's reports to the Board of Directors,
financial statements and internal accounting controls. It also monitors the
independence and fees of the independent auditors and recommends further
appointments thereof. The Executive Compensation Committee consists of Messrs.
Berg, Lieber and Graf. The Committee recommends compensation for officers of
the Company and administers the 1996 Long-Term Incentive Plan. The Stock
Option Committee is composed of Messrs. Lieber and Winston, who are
independent non-employee directors, and Ronald F. Ostrow, the Company's chief
executive officer. The Company does not have a standing nominating committee.
However, Messrs. Berg, Nobel and Barnet D. Ostrow recommend new directors and
changes in the composition of the Board of Directors.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Company's Board of Directors approves all compensation of the Company's
officers, including the chief executive officer, based on the recommendations
of the Compensation Committee, except that all grants of stock options under
the Company's stock incentive plan are approved solely by the Stock Option
Committee. The Compensation Committee is composed exclusively of independent,
non-employee directors who are not eligible to participate in any executive
compensation program, except the 1990 Nonqualified Stock Option Plan
previously approved by the stockholders of the Company. The Company's
compensation program is intended to enable the Company to compete effectively
with other firms in attracting, retaining and motivating executives of the
caliber needed for the future success of the Company's business. This program
contains three components: (i) contractually based compensation; (ii) annual
incentive compensation; and (iii) longer-term incentives in the form of
nonqualified stock options and contributions to the 401(k) Employees Savings
Plan. The annual incentive compensation and nonqualified stock options are
primarily dependent on the Company's earnings and profitability as well as the
returns realized by the Company's stockholders.
A. Base Compensation
An officer's base compensation is contractually determined, subject to
increases based on a number of factors including, but not limited to: (i) an
assessment of performance over time; (ii) competence; and (iii) potential.
Adjustments to each officer's base compensation are made annually in
connection with annual performance reviews.
B. Annual Incentive Compensation--Bonus
The Company's annual incentive compensation program provides for the payment
of bonuses to the officers and certain other employees on an individual basis.
Such awards are based upon the Company's overall earnings growth, a comparison
of the Company's earnings in the last fiscal year with those of the
immediately preceding fiscal year, as well as individual performance. The
intent is to motivate and reward performance. A specified bonus for each
officer is first approved by the Compensation Committee and then submitted for
approval to the Board of Directors. In contrast, the total available bonus
pool for other employees is approved by the Compensation Committee and the
Board of Directors and distributed at the discretion of the Company's
President in consultation with the other officers.
A-7
<PAGE>
C. Longer-Term Incentives--Nonqualified Stock Options/401K Plan
These incentives are designed to coordinate the longer-term interests of the
Company and its stockholders with those of the Company's key employees,
officers and directors. The Stock Option Committee meets periodically to
consider the granting of nonqualified stock options to key employees, officers
and directors pursuant to the 1990 Nonqualified Stock Option Plan and the 1996
Long-Term Incentive Plan. The plan is intended to provide such individuals
with additional incentive to advance the interests of the Company as stock
options only produce value to such individuals if the price of the Company's
common stock appreciates.
D. Chief Executive Officer Compensation
Mr. Ronald F. Ostrow's compensation results from his participation in the
same compensation program as the other executives of the Company. The bonus
paid to Mr. Ostrow for the fiscal year ended February 28, 1998 was greater
than the amount paid for the prior fiscal year, reflecting the improved
performance of the Company in that year.
Executive Compensation Committee
Sol Berg
Irwin Lieber
Carl Graf
A-8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and the other five highest paid
officers, as well as the total compensation paid to each for the Company's
most recent three fiscal years:
LEARONAL, INC.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS LONG-TERM COMPENSATION
---------------------------------- -----------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION ENDED ($) ($) ($) (6) (#) ($) (7)
- ------------------ ----- ------- ------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald F. Ostrow 2/98 444,015 134,000 193,209(1) 0
President and Chief 2/97 429,000 103,000 84,517(1) 225,000(8) 0
Executive Officer 2/96 385,000 100,000 142,446(1) 0
Richard Kessler 2/98 301,703 94,000 151,297(2) 3,200
Executive Vice 2/97 291,500 72,000 141,294(2) 150,000(8) 4,831
President and Chief 2/96 264,000 70,000 57,461(2) 5,022
Operating Officer
Donald Thomson 2/98 193,545 62,300 79,393(3) 3,200
Vice President- 2/97 187,000 47,925 40,083(3) 75,000(8) 4,831
Technology and Secretary 2/96 170,000 47,500 34,134(3) 5,022
David L. Rosenthal 2/98 227,700 68,000 85,452(4) 3,200
Vice President- 2/97 220,000 52,000 21,018(4) 112,500(8) 4,831
Finance and Treasurer 2/96 198,000 50,000 25,516(4) 5,022
James Martin 2/98 179,314 30,000 34,725(5) 3,200
Vice President 2/97 165,330 21,000 52,500(8) 4,831
2/96 145,200 20,000 5,022
David Schram 2/98 190,699 31,000 34,725(5) 4,831
Vice President 2/97 176,550 23,500 5,022
2/96 154,000 22,500
</TABLE>
- --------
(1) Includes $164,581, $65,625 and $121,250, for 1998, 1997 and 1996,
respectively, representing the difference between the price paid on
exercise of common stock options and the market price on the date of
exercise.
(2) Includes $128,218, $119,789 and $44,438, for 1998, 1997 and 1996,
respectively, representing the difference between the price paid on
exercise of common stock options and the market price on the date of
exercise.
(3) Includes $71,930, $32,654 and $27,188, for 1998, 1997 and 1996,
respectively, representing the difference between the price paid on
exercise of common stock options and the market price on the date of
exercise.
(4) Includes $79,512, $13,500 and $20,438, for 1998, 1997 and 1996,
respectively, representing the difference between the price paid on
exercise of common stock options and the market price on the date of
exercise.
(5) Includes $30,312 for 1998 representing the difference between the price
paid on exercise of common stock options and the market price on the date
of exercise.
(6) The only Other Annual Compensation for each of the named officers was in
the form of perquisites and was less than the level required for reporting
purposes.
(7) Consists of contributions by the Company to a 401(k) Employees Savings
Plan equal to 50% of the first 4% of the employee's contribution and a pro
rated share of any discretionary contributions made by the Company.
(8) Adjusted to reflect 3 for 2 stock split effective August 19, 1997.
OPTION GRANTS DURING LAST FISCAL YEAR
No stock options were granted during the Company's last fiscal year to the
Company's Chief Executive Officer or to the other five highest paid officers.
A-9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning stock options
exercised in the fiscal year ended February 28, 1998, including the "value
realized" upon exercise (the difference between the exercise price of the
shares acquired and the market value at the date of exercise), and the value
of the unexercised "in-the-money" options held at February 28, 1998 (the
difference between the exercise price of all such options held and the market
value of the shares covered by such options at February 28, 1998).
AGGREGATE OPTION EXERCISES IN
LAST FISCAL YEAR-END OPTIONS
<TABLE>
<CAPTION>
SHARES SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ON VALUE AT FEB. 28, 1998 AT FEB. 28, 1998
EXERCISE REALIZED ------------------------- -------------------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald F. Ostrow(1)..... 14,250 164,581 18,984 262,079 $365,266 $3,375,339
Richard Kessler(2)...... 9,150 128,218 21,890 188,757 439,336 2,516,407
Donald Thomson.......... 3,982 71,930 6,795 93,051 127,577 1,227,328
David L. Rosenthal(3)... 5,100 79,512 15,190 149,210 299,770 2,045,901
James Martin............ 1,500 30,312 5,955 68,858 115,234 938,219
David Schram(4)......... 1,350 16,587 6,330 69,608 123,515 954,781
</TABLE>
- --------
(1) On April 14, 1998, Mr. Ostrow exercised stock options on 6,110 shares at
$9.25 per share and 935 shares at $11.417 per share which resulted in
gains of $121,054 and $16,499, respectively, representing the difference
between the prices paid for such common stock and the market price on the
date of exercise.
(2) On May 26, 1998, Mr. Kessler exercised stock options on 1,865 shares at
$7.083 per share and on 1,400 shares at $9.25 per share which resulted in
gains of $39,476 and $26,600, respectively, representing the difference
between the prices paid for such common stock and the market price on the
date of exercise.
(3) On March 13, 1998, Mr. Rosenthal exercised options on 1,465 shares at
$7.083 per share and on 1,535 shares at $9.25 per share which resulted in
gains of $29,911 and $28,014, respectively, representing the difference
between the price paid for such common stock and the market price on the
date of exercise.
(4) On May 6, 1998, Mr. Schram exercised options on 705 shares at $7.083 per
share which resulted in a gain of $15,187, representing the difference
between the price paid for such common stock and the market price on the
date of exercise.
PENSION ARRANGEMENTS
On May 11, 1990, the Board of Directors of the Company ratified the adoption
of a 401(k) Employees Savings Plan (the "401(k) Plan"). The 401(k) Plan is a
Company-sponsored savings plan. The purpose of the 401(k) Plan is to enable
employees of the Company to accumulate savings on a tax-deferred basis. All
employees of the Company are eligible to participate in the 401(k) Plan,
provided they are 21 years of age and have completed one (1) year of service.
Under the 401(k) Plan, eligible employees may contribute from 1% to 15% of
their gross taxable income and the Company presently makes a matching
contribution equal to 50% of the first 4% of the employees' contribution.
EMPLOYMENT AGREEMENTS
On December 20, 1998, the Board of Directors of the Company approved amended
and restated employment agreements (each, an "Amended Employment Agreement"
and together, the "Amended Employment Agreements") between the Company and
each of Mr. Ostrow and each of the other executives listed in the Summary
Compensation Table (together, the "Executives").
The Amended Employment Agreements provide that each of the Executives shall
be employed by the Company for a period ending on the third anniversary of the
Effective Time (as defined in the Merger Agreement). These agreements will
continue in effect each Executive's current level of base salary, provide the
A-10
<PAGE>
Executive with an annual bonus opportunity consistent with past practices,
continue executive perquisites at the same level and amount currently in
effect and provide the Executive with employee benefits which are, in the
aggregate, at least comparable in value to those currently provided to the
Executive. In addition, in order to encourage the Executives to remain in the
Company's employ and to provide them fair compensation for their services
following the Merger, each of the Executives will receive a special one-time
non-recurring retention bonus equal to 60% of his annual base salary if he
remains in the Company's employ through the first anniversary of the Effective
Time.
In the event that an Executive's employment is terminated by the Executive
other than for Cause (as defined in the Amended Employment Agreement) or by
the Executive for Good Reason (as defined in the Amended Employment
Agreement), the Executive shall receive the compensation and benefits that
would have been payable to him over the remainder of the term of the Amended
Employment Agreement, and if such termination occurs prior to the first
anniversary of the Effective Time, a pro-rata portion of the retention bonus
described above.
The foregoing is a summary of certain provisions of the Amended Employment
Agreements and is qualified in its entirety by reference to Exhibit 5 to the
Schedule 14D-9.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities file reports of
ownership and changes in ownership with the SEC. Officers, directors, and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based on a review of
the reports, during the fiscal year ended February 28, 1998, all Section 16(a)
filing requirements applicable to its officers, directors, and greater than
10% beneficial owners were complied with.
A-11
<PAGE>
Exhibit 1
Letter to Stockholders, dated December 23, 1998.*
<PAGE>
December 23, 1998
Dear Shareholders:
I am pleased to inform you that on December 20, 1998, LeaRonal, Inc.
("LeaRonal" or the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Rohm and Haas Company ("Parent") and Lightning
Acquisition Corp. ("Purchaser"), a wholly owned subsidiary of Parent, pursuant
to which Purchaser is commencing a tender offer to purchase all of the issued
and outstanding shares of Common Stock of LeaRonal at a purchase price of
$34.00 per share in cash (the "Offer"). Following the successful completion of
the Offer, Purchaser will merge with and into LeaRonal (the "Merger") and
LeaRonal will become a wholly owned subsidiary of Parent. Each share of
LeaRonal Common Stock not purchased in the Offer or otherwise owned by Parent
will be converted in the Merger into the right to receive $34.00 per share in
cash.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the attached
Schedule 14D-9, including, among other things, the opinion of The Beacon Group
Capital Services, LLC, the Company's financial adviser, to the effect that the
purchase price of $34.00 per share in cash in the Offer and the Merger is fair
from a financial point of view to the holders of the Company's shares.
In addition to the attached Schedule 14D-9, enclosed is an Offer to Purchase,
dated December 23, 1998, of Purchaser, together with related materials,
including a Letter of Transmittal to be used for tendering your shares. These
documents set forth the terms and conditions of the Offer and the Merger and
provide instructions as to how to tender your shares. I urge you to read the
enclosed materials carefully.
On behalf of your Board of Directors, I thank you for your support.
Sincerely yours,
Ronald F. Ostrow
President and Chief Executive Officer
<PAGE>
Exhibit 2
Opinion of Beacon, dated December 20, 1998.*
<PAGE>
[LETTERHEAD OF THE BEACON GROUP CAPITAL SERVICES, LLC APPEARS HERE]
December 20, 1998
Board of Directors
LeaRonal, Inc.
272 Buffalo Avenue
Freeport, NY 11520
Gentlemen:
You have engaged us as your financial advisor to assist in your evaluation,
and you have requested our opinion as to the fairness from a financial point of
view, of the $34.00 per share cash consideration to be received by the
stockholders of LeaRonal, Inc. (the "Company") for all of the outstanding
shares of common stock, par value $1.00 per share, of the Company (the
"Shares") in the Offer and the Merger (the "Offer and Merger") provided for in
the Agreement and Plan of Merger, dated December 20, 1998 (the "Merger
Agreement"), by and among Rohm and Haas Company ("Rohm and Haas"), Lightning
Acquisition Corp. and the Company.
Consummation of the Offer and Merger is subject to the execution of the
Merger Agreement by Rohm and Haas, Lightning Acquisition Corp. and the Company,
execution of Tender and Option Agreements by Rohm and Haas, Lightning
Acquisition Corp., the Company and certain LeaRonal stockholders, approval by
the Company's Board of Directors and other terms and conditions in the Merger
Agreement.
The Beacon Group Capital Services, LLC, as part of its strategic advisory
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, private placements,
financings, principal investments and valuations for estate, corporate and
other purposes. We are familiar with the Company, having served as financial
advisor to the Company and having participated in certain of the negotiations
leading to the Offer and Merger.
Pursuant to our engagement, we have informed ourselves concerning those
aspects of the Offer and Merger and the Company's business, operations,
financial condition, prospects and management which we have deemed appropriate
and material. In that regard, we have reviewed, among other things, the Merger
Agreement; Annual Reports to stockholders and Annual Reports on Form 10-K of
the Company for each of the five years ended February 28, 1998; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q; various other
communications from the Company to its shareholders; and certain internal
financial analyses and financial forecasts for the Company prepared by its
management. We have also discussed the Company's business and prospects with
the Company's senior management; reviewed the reported price and trading
activity for the Company's common stock; compared financial and stock market
information for the Company with similar information for selected other
companies whose securities are publicly traded and which we deemed to be
comparable to the Company in material respects; reviewed the financial terms of
certain recent business combinations in industries and markets in which the
Company participates; and performed such other studies and analyses as we
considered appropriate. We have, consistent with your instructions and the
terms of the Confidentiality Agreement, dated October 21, 1998, between the
Company and Rohm and Haas, not contacted third parties to ascertain their
interest in a combination with the Company or in making a proposal which is
competitive with the Offer and Merger.
<PAGE>
We have assumed and relied without independent verification on the accuracy
and completeness of all of the financial and other information reviewed by us
for purposes of the opinion which you have requested. With respect to the
financial projections furnished to us by the Company, we have assumed, with
your consent, that they have been reasonably prepared on a basis which
reflects the best current estimates and judgments of the management of the
Company as to the future operating and financial performance of the Company
and relevant economic conditions. We have not made an independent evaluation
or appraisal of the assets and liabilities of the Company or of any of its
subsidiaries, and we have not been furnished with any such evaluation or
appraisal.
The financial advisory services which we have provided to you and our
opinion expressed below have been and are provided solely for your information
and assistance in connection with your consideration of the Offer and Merger
and do not constitute a recommendation to any stockholder. Our opinion is
necessarily based on economic, market, financial and other conditions as they
existed on, and could be evaluated as of, the date hereof. Although subsequent
developments may affect our opinion, we do not have an obligation to update,
revise or reaffirm our opinion.
Based on and subject to the foregoing and such other matters as we
considered relevant, it is our opinion that as of the date hereof the $34.00
per Share cash consideration to be received in the Offer and Merger by the
stockholders of the Company is fair to those stockholders from a financial
point of view.
Very truly yours,
/s/ THE BEACON GROUP CAPITAL SERVICES, LLC,
THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
Exhibit 3
Agreement and Plan of Merger, dated as of December 20, 1998, among Parent,
Purchaser and the Company.
<PAGE>
EXECUTION COPY
=====================================
AGREEMENT AND PLAN OF MERGER
AMONG
ROHM AND HAAS COMPANY,
LIGHTNING ACQUISITION CORP.
AND
LEARONAL, INC.
Dated as of December 20, 1998
=======================================
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE OFFER.............................................................................. 2
Section 1.1 The Offer............................................................ 2
Section 1.2 Company Actions...................................................... 3
Section 1.3 Stockholder Lists.................................................... 4
Section 1.4 Directors; Section 14(f)............................................. 5
ARTICLE II THE MERGER............................................................................. 6
Section 2.1 The Merger........................................................... 6
Section 2.2 Effective Time....................................................... 6
Section 2.3 Effects of the Merger................................................ 6
Section 2.4 Certificate of Incorporation; By-Laws................................ 7
Section 2.5 Directors and Officers............................................... 7
Section 2.6 Conversion of Securities............................................. 7
Section 2.7 Dissenting Shares.................................................... 7
Section 2.8 Surrender of Shares.................................................. 8
Section 2.9 No Further Transfer or Ownership Rights.............................. 9
Section 2.10 Treatment of Options................................................. 9
Section 2.11 Closing.............................................................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... 11
Section 3.1 Organization and Qualification....................................... 11
Section 3.2 Capitalization....................................................... 12
Section 3.3 Authority Relative to this Agreement................................. 13
Section 3.4 Absence of Certain Changes........................................... 13
Section 3.5 Reports.............................................................. 14
Section 3.6 Proxy Statement...................................................... 15
Section 3.7 Consents and Approvals; No Violation................................. 15
Section 3.8 Brokerage Fees and Commissions....................................... 16
Section 3.9 Schedule 14D-9; Offer Documents...................................... 16
Section 3.10 Litigation........................................................... 17
Section 3.11 Insurance............................................................ 17
Section 3.12 ERISA Compliance..................................................... 17
Section 3.13 Taxes................................................................ 19
Section 3.14 Year 2000............................................................ 20
Section 3.15 Compliance with Applicable Laws...................................... 20
Section 3.16 State Takeover Statutes.............................................. 22
Section 3.17 Contracts............................................................ 23
Section 3.18 Labor Matters........................................................ 24
Section 3.19 Undisclosed Liabilities.............................................. 24
</TABLE>
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Section 3.20 Opinion of Company Financial Advisor..................................... 24
Section 3.21 Intellectual Property.................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER..................................... 25
Section 4.1 Organization and Qualification........................................... 25
Section 4.2 Authority Relative to this Agreement..................................... 25
Section 4.3 Proxy Statement.......................................................... 26
Section 4.4 Consents and Approvals; No Violation..................................... 26
Section 4.5 Financing................................................................ 27
Section 4.6 Brokerage Fees and Commissions........................................... 27
Section 4.7 Schedule 14D-1; Offer Documents.......................................... 27
Section 4.8 Operations of Purchaser.................................................. 27
Section 4.9 Ownership of Shares by Parent and Purchaser.............................. 27
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER..................................................... 28
Section 5.1 Conduct of Business of the Company Pending the Merger.................... 28
Section 5.2 Prohibited Actions by the Company........................................ 28
ARTICLE VI COVENANTS.................................................................................. 31
Section 6.1 No Solicitation.......................................................... 31
Section 6.2 Access to Information.................................................... 33
Section 6.3 Confidentiality Agreement................................................ 33
Section 6.4 Reasonable Best Efforts.................................................. 34
Section 6.5 Indemnification of Directors and Officers................................ 35
Section 6.6 Event Notices and Other Actions.......................................... 36
Section 6.7 Third Party Standstill Agreements........................................ 36
Section 6.8 Employee Stock Options; Employee Plans and Benefits and
Employment Contracts..................................................... 37
Section 6.9 Meeting of the Company's Shareholders.................................... 38
Section 6.10 Proxy Statement.......................................................... 39
Section 6.11 Public Announcements..................................................... 39
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER................................................... 39
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger................................................................... 39
Section 7.2 Conditions to Obligations of Parent and Purchaser to
Effect the Merger........................................................ 40
Section 7.3 Conditions to Obligations of the Company to Effect the
Merger................................................................... 40
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER............................................................. 40
Section 8.1 Termination.............................................................. 40
Section 8.2 Effect of Termination.................................................... 41
</TABLE>
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Section 8.3 Termination Fee and Expense Fee.......................................... 42
Section 8.4 Amendment................................................................ 43
Section 8.5 Extension; Waiver........................................................ 43
ARTICLE IX MISCELLANEOUS.............................................................................. 43
Section 9.1 Non-Survival of Representations and Warranties........................... 43
Section 9.2 Entire Agreement; Assignment............................................. 43
Section 9.3 Enforcement of the Agreement............................................. 44
Section 9.4 Severability............................................................. 44
Section 9.5 Notices.................................................................. 44
Section 9.6 Failure or Indulgence Not Waiver; Remedies Cumulative.................... 45
Section 9.7 Governing Law............................................................ 46
Section 9.8 Descriptive Headings..................................................... 46
Section 9.9 Parties in Interest...................................................... 46
Section 9.10 Counterparts............................................................. 46
Section 9.11 Certain Definitions...................................................... 46
Section 9.12 Interpretation........................................................... 48
</TABLE>
ANNEX A
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<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS IS AN AGREEMENT AND PLAN MERGER (this "Agreement"), dated as of
December 20, 1998, among Rohm and Haas Company, a Delaware corporation
("Parent"), Lighting Acquisition Corp., a New York corporation and wholly owned
subsidiary of Parent ("Purchaser"), and LeaRonal, Inc., a New York corporation
(the "Company").
Background
----------
WHEREAS, the Board of Directors of the Company has determined that it
is fair to, advisable and in the best interests of the Company and the
shareholders of the Company to enter into and consummate this Agreement with
Purchaser, providing for the merger (the "Merger") of Purchaser with and into
the Company, with the Company as the Surviving Corporation, in accordance with
the New York Business Corporation Law (the "NYBCL") and the other transactions
contemplated hereby, upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of Purchaser has approved the Merger
of Purchaser with and into the Company and such other transactions in accordance
with the NYBCL upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company and Purchaser have agreed that, upon the terms
and subject to the conditions contained herein, Purchaser shall commence an
offer (as amended or supplemented in accordance with this Agreement, the
"Offer") to purchase for cash all of the issued and outstanding shares of common
stock, par value $1.00 per share (referred to herein as either the "Shares" or
"Company Common Stock"), of the Company at a price per Share of $34.00, net to
the seller in cash (the "Offer Price").
WHEREAS, the Board of Directors of the Company has determined that the
consideration to be paid for each Share in the Offer and the Merger is fair to
the holders of such Shares and has resolved to recommend that the holders of
such Shares tender their Shares pursuant to the Offer and approve and adopt this
Agreement and the Merger upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger;
WHEREAS, simultaneously with the execution and delivery of this
Agreement and in order to induce Parent and Purchaser to enter into this
Agreement, certain stockholders of the Company (the "Certain Stockholders") have
executed and delivered to Parent and Purchaser an agreement (the "Tender and
Option Agreement") pursuant to which the Certain Stockholders have agreed to
take specified actions in furtherance of the transactions contemplated by this
Agreement, including tendering their Shares into the Offer and granting Parent
and Purchaser the
<PAGE>
Purchase Option (as defined in the Tender and Option Agreement) with respect to
such Shares; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement and in order to induce Parent and Purchaser to enter into this
Agreement, certain employees of the Company have entered into employment
agreements with the Company and certain stockholders of the Company's
subsidiaries have entered into shareholders agreements with the Company (the
"Other Agreements").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
intending to be legally bound hereby, Parent, Purchaser and the Company hereby
agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer.
---------
(a) Subject to the provisions of this Agreement, and provided that
this Agreement shall not have been terminated in accordance with Section 8.1 and
so long as none of the events or circumstances set forth in Annex A hereto shall
have occurred and be existing, not later than the fifth business day from the
date of public announcement of the execution of this Agreement, Purchaser shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), the Offer at a price of $34.00 per Share
net to the seller in cash. The obligation of Purchaser to consummate the Offer,
to accept for payment and to pay for any Shares tendered pursuant to the Offer
shall be subject only to those conditions set forth in Annex A. Purchaser
expressly reserves the right, in its sole discretion, to waive any such
condition, provided that, without the consent of the Company, Purchaser shall
-------- ----
not waive the Minimum Condition (as defined in Annex A), subject to Section
1.1(b). The initial expiration date of the Offer shall be the 20th business day
following the commencement of the Offer (determined using Rule 14d-1(c)(6) under
the Exchange Act).
(b) Purchaser expressly reserves the right, in its sole discretion,
to modify and make changes to the terms and conditions of the Offer, provided
--------
that without the prior consent of the Company, no modification or change may be
- ----
made which (i) decreases the consideration payable in the Offer, (ii) changes
the form of consideration payable in the Offer (other than by adding
consideration), (iii) changes the Minimum Condition, provided that Purchaser may
-------- ----
reduce the Minimum Condition to an amount of Shares which is not less than a
majority of the Fully Diluted Shares so long as the affirmative vote of such
amount of Shares would provide the requisite shareholder approval for an
amendment to the Company's Certificate of Incorporation reducing the vote
required to approve a merger to a majority of the outstanding Shares, (iv)
decreases the maximum number of Shares sought pursuant to the Offer, (v)
adversely changes any
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<PAGE>
conditions to the Offer, or (vi) imposes additional conditions to the Offer.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer on one or more occasions for such period as may be
determined by Purchaser in its sole discretion (each such extension period not
to exceed 10 business days at a time), if at the then scheduled expiration date
of the Offer any of the conditions to Purchaser's obligations to accept for
payment and pay for Shares shall not be satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer, and (iii) extend the Offer on one occasion for
a period of not more than 10 business days if the Minimum Condition has been
satisfied but less than 90% of the Fully Diluted Shares have been validly
tendered and not properly withdrawn. Notwithstanding the foregoing, Purchaser
may not, without the Company's prior written consent, extend the Offer pursuant
to clause (i) of the preceding sentence if the events or circumstances set forth
in Annex A hereto shall have occurred as a result of Parent or Purchaser's
breach of this Agreement. It is agreed that the conditions to the Offer set
forth on Annex A are for the benefit of Purchaser and, except with respect to
the Minimum Condition as set forth in Section 1.1(a), may be waived by
Purchaser, in whole or in part at any time and from time to time, in its sole
discretion. On the terms and subject to the conditions of the Offer, Purchaser
shall pay for, and Parent shall cause Purchaser to pay for, all Shares validly
tendered and not withdrawn pursuant to the Offer promptly after the expiration
of the Offer.
(C) On the date of commencement of the Offer, Parent and Purchaser
shall file with 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") with respect to the Offer which will comply in all
material respects with the provisions of applicable federal securities laws, and
will contain the offer to purchase relating to the Offer (the "Offer to
Purchase") and forms of related letters of transmittal and summary advertisement
(which documents, together with any supplements or amendments thereto and
including the exhibits thereto, are referred to herein collectively as the
"Offer Documents"). Parent shall deliver copies of the proposed forms of the
Schedule 14D-1 and the Offer Documents to the Company within a reasonable time
prior to the commencement of the Offer for review and comment by the Company and
its counsel. Parent agrees to provide the Company and its counsel in writing any
comments that Purchaser, Parent or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt thereof.
The Company, Parent and Purchaser shall promptly correct any information
provided by it for use in the Schedule 14D-1 or the Offer Documents that shall
have become false or misleading in any material respect and Parent and Purchaser
further agree to take all steps necessary to cause such Schedule 14D-1 or Offer
Documents as so corrected to be filed with the SEC and disseminated to the
shareholders of the Company, as and to the extent required by applicable federal
securities laws.
Section 1.2 Company Actions.
---------------
(a) The Company hereby consents to the Offer and represents that its
Board of Directors, at a meeting duly called and held on December 20, 1998, has
duly and by unanimous
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<PAGE>
vote adopted resolutions approving the Offer, the Merger, this Agreement, the
Tender and Option Agreement and the Other Agreements and the other transactions
contemplated hereby and thereby (the "Transactions"), determining that the terms
of the Offer and the Merger are fair to, and in the best interests of, the
Company's shareholders and recommending acceptance of the Offer and adoption of
the Merger and this Agreement by the shareholders of the Company. The Company
hereby consents, subject to Section 6.1, to the inclusion in the Offer Documents
of the recommendations of the Company's Board of Directors described in this
Section 1.2. The Company has been advised that all of its directors and
executive officers intend either to tender their Shares pursuant to the Offer or
(solely in the case of directors and executive officers who would as a result of
the tender incur liability under Section 16(b) of the Exchange Act) to vote in
favor of the Merger.
(b) The Company shall file with the SEC on the date of the
commencement of the Offer a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall comply in all material
respects with the provisions of applicable federal securities laws, and will
contain such recommendations of the Board in favor of the Offer and the Merger,
and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated
under the Exchange Act and shall mail such Schedule 14D-9 together with the
Offer Documents. The Company shall deliver the proposed forms of the Schedule
14D-9 and the exhibits thereto to Parent within a reasonable time prior to the
commencement of the Offer for review and comment by Parent and its counsel.
Parent and its counsel shall be given a reasonable opportunity to review any
amendments and supplements to the Schedule 14D-9 prior to their filing with the
SEC or dissemination to shareholders of the Company. The Company agrees to
provide Parent and its counsel in writing any comments that the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after receipt thereof. Each of the Company, Parent and Purchaser shall
promptly correct any information provided by it for use in the Schedule 14D-9
that shall have become false or misleading in any material respect and the
Company further agrees to take all steps necessary to cause such Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to the shareholders of
the Company, as and to the extent required by applicable federal securities
laws.
Section 1.3 Stockholder Lists. In connection with the Offer, the Company
-----------------
shall promptly furnish to, or cause to be furnished to, Parent and Purchaser
mailing labels, security position listings, any non-objecting beneficial owner
lists and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of a recent date and of those
Persons becoming record holders subsequent to such date (to the extent
available), together with all other information in the Company's possession or
control regarding the beneficial owners of Shares and shall furnish Parent and
Purchaser with such information and assistance as Parent, Purchaser or their
respective agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares. Subject to the requirements of law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Merger, Parent and Purchaser
shall, and shall cause each of their affiliates to,
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<PAGE>
hold the information contained in any of such labels and lists in confidence,
use such information only in connection with the Offer and the Merger, and, if
this Agreement is terminated, deliver to the Company all copies of such
information or extracts therefrom then in their possession or under their
control.
Section 1.4 Directors; Section 14(f). Immediately upon the acceptance
------------------------
for payment of and payment for any Shares by Purchaser or any of its affiliates
pursuant to the Offer, Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as will give Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors of the Company equal to
the product of (i) the total number of directors on the Board of Directors of
the Company (giving effect to the increase in the size of such Board pursuant to
this Section 1.4) and (ii) the percentage that the number of votes represented
by Shares beneficially owned by Purchaser and its affiliates (including Shares
so accepted for payment and purchased) bears to the number of votes represented
by Shares then outstanding. In furtherance thereof, concurrently with such
acceptance for payment and payment for such Shares the Company shall, upon
request of Parent and compliance with Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder, use its best efforts promptly either to increase
the size of its Board of Directors or to secure the resignations of such number
of its incumbent directors, or both, as is necessary to enable such designees of
Parent to be so elected or appointed to the Company's Board of Directors, and
the Company shall take all actions available to the Company to cause such
designees of Parent to be so elected or appointed. At such time, the Company
shall, if requested by Parent, also use its reasonable best efforts to cause
persons designated by Parent to constitute at least the same percentage (rounded
up to the next whole number) as is on the Company's Board of Directors of (i)
each committee of the Company's Board of Directors, (ii) each board of directors
(or similar body) of each subsidiary of the Company and (iii) each committee (or
similar body) of each such board. Notwithstanding the foregoing, the Company
shall use its reasonable best efforts to ensure that, in the event that
Purchaser's designees are elected to the Board of Directors of the Company, such
Board of Directors shall have, at all times prior to the Effective Time, at
least three directors who are directors on the date of this Agreement and who
are not officers of the Company, Parent or any of their respective subsidiaries
(the "Independent Directors"); and provided further, that, in such event, if the
-------- -------
number of Independent Directors shall be reduced below three for any reason
whatsoever any remaining Independent Directors (or Independent Director, if
there shall be only one remaining) may designate persons to fill such vacancies
who shall be deemed to be Independent Directors for purposes of this Agreement
or, if no Independent Directors then remain, the other directors may designate
three persons to fill such vacancies who shall not be officers or affiliates of
the Company, Parent or any of their respective subsidiaries, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall promptly take all action requested
by Parent necessary to effect any such election, including mailing to its
shareholders the information required by Section 14(f) of the Exchange Act and
Rule 14(f)-1 promulgated thereunder (or, at Parent's request, furnishing such
information to Parent for inclusion in the Offer Documents initially filed with
the SEC and distributed to the stockholders of the Company) as is necessary to
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<PAGE>
enable Parent's designees to be elected to the Company's Board of Directors.
From and after the time, if any, that Parent's designees constitute a majority
of the Company's Board of Directors, any amendment of this Agreement, any
termination of this Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or Purchaser hereunder, any
waiver of any condition to the Company's obligations hereunder or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the Independent Directors of the
Company, which action shall be deemed to constitute the action of any committee
specifically designated by the Board of Directors of the Company to approve the
actions contemplated hereby and the full Board of Directors of the Company;
provided, that, if there shall be no Independent Directors, such actions may be
- -------- ----
effected by majority vote of the entire Board of Directors of the Company,
except that no such action shall amend the terms of this Agreement or modify the
terms of the Offer or the Merger in a manner materially adverse to the holders
of Shares.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions
----------
hereof, and in accordance with the relevant provisions of the NYBCL, Purchaser
shall be merged with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VII. Following the
Merger, the Company shall continue as the surviving corporation (the "Surviving
Corporation") under the name "LeaRonal, Inc." and shall continue its existence
under the laws of the State of New York, and the separate corporate existence of
Purchaser shall cease. At the election of Parent, any direct or indirect wholly
owned subsidiary of Parent may be substituted for Purchaser as a constituent
corporation in the Merger.
Section 2.2 Effective Time. As soon as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Department of State of the State
of New York (the "New York Department"), in such form as required by and
executed in accordance with the relevant provisions of the NYBCL (the date and
time of the filing of the Certificate of Merger with the New York Department (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
Section 2.3 Effects of the Merger. The Merger shall have the effects set
---------------------
forth in the applicable provisions of the NYBCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Purchaser shall become the debts, liabilities and
duties of the Surviving Corporation.
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<PAGE>
Section 2.4 Certificate of Incorporation; By-Laws. (a) At the Effective
-------------------------------------
Time and without any further action on the part of the Company and Purchaser,
the Certificate of Incorporation of the Purchaser (the "Certificate of
Incorporation"), as in effect immediately prior to the Effective Time until
thereafter further amended as provided therein and under the NYBCL, shall be the
certificate of incorporation of the Surviving Corporation following the Merger.
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the Bylaws of the Purchaser shall be the Bylaws of
the Surviving Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
Section 2.5 Directors and Officers. The directors of Purchaser
----------------------
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
Section 2.6 Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Purchaser, the Company or
the holders of any of the following securities:
(i) Each share of common stock of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
(ii) Each Share held in the treasury of the Company and each
Share owned by Purchaser or any direct or indirect subsidiary of the
Company, in each case immediately prior to the Effective Time, shall be
cancelled and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(iii) Each issued and outstanding Share (other than Shares
cancelled pursuant to Section 2.6(ii) and any Dissenting Shares (as defined
in Section 2.7(a)) shall be converted into the right to receive $34.00 in
cash or any higher price that may be paid pursuant to the Offer (the
"Merger Consideration") payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such share in the
manner provided in Section 2.8, less any required withholding taxes.
Section 2.7 Dissenting Shares. (a) Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by shareholders who have not
voted such Shares in favor of the Merger (or consented thereto in writing), who
shall have delivered a written objection to the Merger and a demand for
appraisal of such Shares in accordance with Sections 623 and 910 of the NYBCL
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<PAGE>
(insofar as such Sections are applicable to the Merger), and who shall not have
failed to perfect or shall not have effectively withdrawn or lost their rights
to appraisal and payment under the NYBCL (the "Dissenting Shares"), shall not be
converted into the right to receive the Merger Consideration, but shall instead
entitle the holder thereof to receive that consideration determined pursuant to
Sections 623 and 910 of the NYBCL; provided, however, that if such holder shall
have failed to perfect or shall have effectively withdrawn or lost such holder's
right to appraisal and payment under the NYBCL, such holder's Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration, without any interest thereon.
(b) The Company shall give Purchaser (i) prompt notice of any demands
for appraisal pursuant to the applicable provisions of the NYBCL received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the NYBCL and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
the NYBCL. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any such demands for appraisal or
offer to settle or settle any such demands.
Section 2.8 Surrender of Shares. (a) Prior to the mailing of the Proxy
-------------------
Statement, Purchaser shall appoint a bank or trust company which is reasonably
satisfactory to the Company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration. At the Effective Time, the Surviving
Corporation will deposit with the Paying Agent in separate trust for the benefit
of former holders of Shares sufficient funds to make all payments pursuant to
this Section 2.8. Such funds shall be invested by the Paying Agent as directed
by the Surviving Corporation. Any net profit resulting from, or interest or
income produced by, such investments will be payable to the Surviving
Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates"), a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon surrender to
the Paying Agent of a Certificate, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor the
aggregate amount of Merger Consideration into which the number of Shares
previously represented by such Certificate or Certificates surrendered shall
have been converted pursuant to this Agreement. If any Merger Consideration is
to be remitted to a person whose name is other than that in which the
Certificate for Shares surrendered for exchange is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed, with signature guaranteed, or otherwise in proper form for transfer,
and that the person requesting such
-8-
<PAGE>
exchange shall have paid any transfer and/or other taxes required by reason of
the remittance of Merger Consideration to a person whose name is other than that
of the registered holder of the Certificate surrendered, or the person
requesting such exchange shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
No interest shall be paid or accrued, upon the surrender of the Certificates,
for the benefit of holders of the Certificates on any Merger Consideration.
(c) At any time following twelve months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been deposited with the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) and only as general creditors thereof for payment of their
claim for Merger Consideration to which such holders may be entitled.
(d) Notwithstanding the provisions of Section 2.8(c), neither the
Surviving Corporation nor the Paying Agent shall be liable to any person in
respect of any Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(e) Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any former holder
of Shares such amounts as Parent (or any affiliate thereof) is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of any applicable state, local or foreign law, rule or
regulation. To the extent that amounts are so withheld by Parent and paid by
Parent to the applicable taxing authority, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the former
holder of Shares in respect of which such deduction and withholding was made by
Parent.
Section 2.9 No Further Transfer or Ownership Rights. After the Effective
---------------------------------------
Time, there shall be no further transfer on the records of the Company or its
transfer agent of certificates representing Shares which have been converted
pursuant to this Agreement into the right to receive Merger Consideration, and
if such certificates are presented to the Company for transfer, they shall be
cancelled against delivery of Merger Consideration. From and after the Effective
Time, the holders of Certificates evidencing ownership of 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. All Merger Consideration paid upon the surrender for exchange of
Certificates representing Shares in accordance with the terms of this Article II
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
Section 2.10 Treatment of Options. Prior to the Effective Time, the
--------------------
Board of Directors of the Company (or, if appropriate, any committee thereof)
shall adopt appropriate
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<PAGE>
resolutions and take all other actions necessary to provide that each
outstanding stock option (each "Option") heretofore granted under the Company's
1990 Nonqualified Stock Option Plan, dated June 1, 1990 (the "1990 Plan") and
the Company's 1996 Long-Term Incentive Plan (the "1996 Plan", and together with
the 1990 Plan, the "Company Stock Option Plans"), whether or not then vested or
exercisable, shall, at the Effective Time, be cancelled, and each holder thereof
shall be entitled to receive a payment in cash from the Company (subject to any
applicable withholding taxes, the "Cash Payment"), upon cancellation, equal to
the product of (x) the total number of Shares subject or related to such Option,
whether or not then vested or exercisable, and (y) the excess, if any, of the
Merger Consideration over the exercise price or purchase price, as the case may
be, per Share subject or related to such Option, each such Cash Payment to be
paid to each holder of an outstanding Option upon cancellation. Notwithstanding
the foregoing, if requested by Purchaser, the Board of Directors of the Company
(or, if appropriate, any committee thereof) shall adopt appropriate resolutions
providing for such cancellation and a cash payment equal to 101.8% of the Cash
Payment to occur, in respect of any or all Options held by certain employees of
the Company who have entered into employment agreements with the Company, on the
78th day after the date on which the Effective Time occurs. If Parent or
Purchaser and an Option holder mutually agree, such Option holder may receive in
lieu of such Cash Payment an option to acquire shares of common stock of Parent
on terms providing such Option holder with value substantially equivalent to the
value of such Cash Payment. The Company agrees that upon the exercise of any
Option it shall issue such Shares as such Option holder may be entitled to
receive upon such exercise and shall not exercise any rights it may have under
the Company Stock Option Plans or otherwise to settle such Option with a cash
payment without the written consent of Parent. As provided herein and subject to
the contractual rights of participants therein, the Company Stock Option Plans
and any Benefit Plan (or other plan, program or arrangement) providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary shall terminate as of the Effective Time. The Company
will take all steps necessary to ensure that none of the Company or any of its
subsidiaries is or will be bound by any Options, other options, warrants, rights
or agreements which would entitle any person, other than the current
shareholders of Purchaser or its affiliates, to acquire any capital stock of the
Surviving Corporation or any of its subsidiaries or, except as otherwise
provided in this Section 2.10, to receive any payment in respect thereof and to
cause such Options to be cancelled or cause the holders of the Options to agree
to such cancellation thereof as provided herein.
Section 2.11 Closing. Upon the terms and subject to the conditions
-------
hereof, as soon as practicable after consummation of the Offer, and to the
extent required by the NYBCL after the vote of the shareholders of the Company
in favor of the approval of the Merger and this Agreement has been obtained, the
Company and Purchaser (or Parent if appropriate) shall execute and file with the
New York Department of State the Certificate of Merger, and the parties shall
take all such other and further actions as may be required by law to make the
Merger effective. Prior to the filing referred to in this Section 2.11, a
closing (the "Closing") will be held at the offices of Dechert Price & Rhoads,
4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA
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19103-2793 (or such other place as the parties may agree) for the purpose of
confirming all of the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule where the
relevance of such disclosure to the applicable representation and warranty is
readily apparent from such disclosure, the Company hereby represents and
warrants to Parent and Purchaser as follows:
Section 3.1 Organization and Qualification.
------------------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and has the requisite
corporate power and authority necessary to enable it to own, lease and operate
its properties and assets and to carry on its business as it is now being
conducted. The Company is duly qualified as a foreign corporation or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or leased or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company.
(b) The only subsidiaries of the Company are those named in Exhibit
21 to the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1998 or set forth on Section 3.1(b) of the Company Disclosure
Schedule. Each Significant Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority necessary to enable it to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted. Each other
subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority necessary to enable it to own, lease and operate
its property and assets and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power and authority would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. Each subsidiary of the Company is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed or in good standing, individually or
in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company. As used in this Agreement, "Significant
Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X of
the SEC.
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(c) All of the outstanding shares of capital stock of each such
subsidiary have been validly issued and are fully paid and non-assessable and,
except as set forth in Section 3.1(b) of the Company Disclosure Schedule, are
owned by the Company, by another wholly owned subsidiary of the Company or by
the Company and another such wholly owned subsidiary, free and clear of all
pledges, claims, equities, options, liens, charges, rights of first refusal,
"tag" or "drag" along rights, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"). Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, limited
liability company, joint venture or other entity. The Company has delivered to
Parent complete and correct copies of its Certificate of Incorporation and
Bylaws and the comparable charters and bylaws or other organizational documents
of its subsidiaries, in each case as amended to the date of this Agreement.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
35,000,000 Shares. All of the issued and outstanding Shares have been duly
authorized and validly issued and are fully paid and nonassessable and are not
subject to preemptive rights. As of the date hereof, 12,544,682 Shares were
issued and outstanding, 1,313,364 Shares were reserved for issuance pursuant to
outstanding Options of a like number issued under the Company Stock Option
Plans. Such Shares reserved for issuance under the Company Stock Option Plans
have not been issued and will not be issued prior to the Effective Time, and no
commitment has been or will be made for their issuance, other than under the
Options described in the preceding sentence and issued and outstanding under the
Company Stock Option Plans as of the date of this Agreement.
(b) Except as otherwise provided in Section 2.10 of this Agreement,
at the Effective Time, each Option shall be cancelled and the holder thereof
shall not be entitled to receive any consideration therefor other than the cash
payments provided by Section 2.10 of this Agreement. Section 3.2(b) of the
Company Disclosure Schedule sets forth the exercise prices and number of Shares
in respect of outstanding Options under the Company Stock Option Plans. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of the Company may vote
("Voting Company Debt"). Except as set forth above, there are no outstanding
securities, options, warrants, calls, rights, convertible or exchangeable
securities, "phantom" stock rights, stock appreciation rights, stock-based
performance units, commitments, agreements, arrangements or undertakings of any
kind to which the Company or any of its subsidiaries is a party or by which any
of them is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
unit, commitment, agreement, arrangement or undertaking. There are not any
outstanding contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire, or providing preemptive or registration
-12-
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rights with respect to, any shares of, or any outstanding options, warrants or
rights of any kind to acquire any shares of, or any outstanding securities that
are convertible into or exchangeable for any shares of, capital stock of the
Company or any of its subsidiaries. The Company and its subsidiaries do not have
outstanding any loans to any person in respect of the purchase of securities
issued by the Company and its subsidiaries.
(c) There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound with respect to the voting of any shares of capital stock of the
Company or any of its subsidiaries or with respect to the registration of the
offering, sale or delivery of any shares of capital stock of the Company or any
of its subsidiaries under the Securities Act of 1933, as amended (the
"Securities Act").
Section 3.3 Authority Relative to this Agreement. (a) The Company has
------------------------------------
all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, and to consummate the
Transactions (subject to the Company Shareholder Approval (as hereinafter
defined) with respect to the Merger). The execution and delivery of this
Agreement and the performance of its obligations hereunder and the consummation
by the Company of the Transactions have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than the Company Shareholder Approval and the filing and
recordation of appropriate merger documents as required by the NYBCL). 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 and
Purchaser, this Agreement constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(b) The only vote of holders of any class or series of capital stock
of the Company or any of its subsidiaries necessary to adopt or approve this
Agreement and the Merger is the adoption of this Agreement by the holders of
two-thirds of the outstanding Shares (the "Company Shareholder Approval"),
subject to Section 6.9(d). The affirmative vote of the holders of any capital
stock of the Company or any of its subsidiaries, or any of them, is not
necessary to consummate the Offer or any transaction contemplated by this
Agreement other than as set forth in the preceding sentence.
Section 3.4 Absence of Certain Changes. Except as disclosed in the
--------------------------
Company's filings and reports under the Exchange Act filed and publicly
available prior to the date of this Agreement (the "Filed Company SEC
Documents") or as set forth in Section 3.4 of the Company Disclosure Schedule,
since August 31, 1998, the Company and its subsidiaries have conducted their
business only in the ordinary course in all material respects, and during such
period there has not been any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company. Except as disclosed in the Filed
Company SEC Documents or as set forth in Section 3.4 of the Company
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<PAGE>
Disclosure Schedule, since August 31, 1998 there has not been (a) any
declaration, setting aside or payment of any dividend (other than the
declaration and payment of regular quarterly cash dividends in an amount not in
excess of $0.14 per Share) or other distribution in respect of the capital stock
of the Company or any redemption or other acquisition by the Company of any
capital stock of the Company; (b) any entry into any agreement, commitment or
transaction by the Company or any of its subsidiaries which is material to the
Company and its subsidiaries taken as a whole, except agreements, commitments or
transactions in the ordinary course of business; (c) any split, combination or
reclassification of the Company's capital stock or of any other equity interests
in the Company, or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or of any other equity interests in the Company; (d)(i) any
granting by the Company or any of its subsidiaries to any officer, director or
key employee of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents, (ii) any
granting by the Company or any of its subsidiaries to any such officer, director
or key employee of any increase in severance or termination pay, except as was
required under employment, severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the Filed
Company SEC Documents or (iii) any entry by the Company or any of its
subsidiaries into any employment, severance or termination agreement with any
such officer, director or key employee; (e) any damage, destruction or loss,
whether or not covered by insurance, that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect on the
Company; or (f) any change in accounting methods, principles or practices by the
Company or any subsidiary materially affecting the consolidated assets,
liabilities, results of operations or business of the Company, except insofar as
may have been required by a change in generally accepted accounting principles.
Section 3.5 Reports. Since March 1, 1996, the Company has timely filed
-------
all required forms, reports and documents with the SEC required to be filed by
it pursuant to the federal securities laws and the SEC rules and regulations
thereunder (collectively, the "Company SEC Documents"), all of which have
complied as of their respective filing dates in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, and the
rules promulgated thereunder. The Company has delivered copies of all such
forms, reports or documents to Parent. None of such forms, reports or documents
at the time filed (or at the time amended), contained any untrue statement of a
material fact or omitted to state a 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. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries
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<PAGE>
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (and include, in the case of any unaudited
interim financial statements, reasonable accruals for normal year-end
adjustments). No subsidiaries of the Company are required to file periodic
reports with the SEC under the Exchange Act.
Section 3.6 Proxy Statement. If a Proxy Statement is required for the
---------------
consummation of the Merger under applicable law, the Proxy Statement will comply
in all material respects with the Exchange Act, except that no representation is
made by the Company with respect to information supplied by or on behalf of
Parent or any affiliate of Parent specifically for inclusion in the Proxy
Statement. None of the information supplied by the Company specifically for
inclusion in the Proxy Statement shall, at the time the Proxy Statement is
mailed or at the time of the Shareholder Meeting or at the Effective Time,
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; provided, however, that the Company makes no representation or
warranty as to any of the information relating to and supplied by or on behalf
of Parent and Purchaser specifically for inclusion in the Proxy Statement. The
letter to shareholders, notice of meeting, proxy statement and form of proxy, or
the information statement, as the case may be, to be distributed to shareholders
in connection with the Merger, or any schedule required to be filed with the SEC
in connection therewith, together with any amendments or supplements thereto,
are collectively referred to herein as the "Proxy Statement." If, at any time
prior to the Effective Time, any event relating to the Company or any of its
affiliates, officers or directors is discovered by the Company that shall be set
forth in a supplement to the Proxy Statement, the Company will promptly inform
Parent and Purchaser and prepare, file and disseminate such supplement as may be
required by applicable law.
Section 3.7 Consents and Approvals; No Violation. Subject to obtaining
------------------------------------
the Company Shareholder Approval (if required under the NYBCL) and the taking of
the actions described in the immediately succeeding sentence, the execution,
delivery and performance of this Agreement do not, and the consummation of the
Transactions (including the changes in ownership of Shares or the composition of
the Board of Directors of the Company) and compliance with the provisions of
this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse to time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a material benefit under, or result in the creation of any Lien upon any
of the material properties or assets of the Company or any of its subsidiaries
under, or result in the termination of, or require that any consent be obtained
or any notice be given with respect to, (i) the Certificate of Incorporation or
Bylaws of the Company or the comparable charter or organizational documents of
any of its subsidiaries, (ii) any loan or credit agreement note, bond, mortgage,
indenture, lease, license or other agreement, instrument, Contract or Permit
applicable to the Company or any of its subsidiaries or their respective
properties or assets, (iii) any judgment, order, writ, injunction, decree, law,
statute, ordinance, rule or regulation applicable to the Company or any of its
subsidiaries
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<PAGE>
is a party, other than, in the case of clauses (ii), (iii) or (iv), any such
conflicts, violations, defaults, rights, Liens, losses of a material benefit,
consents or notices that, individually or in the aggregate, have not and would
not reasonably be expected to have a Material Adverse Effect on the Company. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity") is required by the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the Transactions,
except for (i) the filing of a premerger notification and report form by the
Company under the HSR Act (as hereinafter defined), the filing of a notice with
the German Federal Cartel Office under the German Act Against Restraints of
Competition (the "GWB Act") or in connection with any other foreign antitrust or
competition laws, (ii) the filing with the SEC of (x) the Schedule 14D-9, (y) if
required, the Proxy Statement relating to the approval by the Company's
shareholders of this Agreement and (z) such reports under Section 13(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the filing of the Certificate
of Merger pursuant to the NYBCL and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on the Company or where
the requirement to obtain such consent, approval, authorization or permit, or to
make such filing or notification arises solely from the regulatory status of
Parent or Purchaser.
Section 3.8 Brokerage Fees and Commissions. Except for those fees and
------------------------------
expenses payable to The Beacon Group Capital Services LLC (the "Company
Financial Advisor") and Eugene Nadel pursuant to the letter agreement, dated
September 24, 1998, no person is entitled to receive any investment banking,
brokerage or finder's fee or commission in connection with this Agreement or the
Transactions based upon arrangements made by or on behalf of the Company or any
of its subsidiaries or by any affiliate of the Company or any of its
subsidiaries. A copy of the above agreement has previously been delivered to
Parent.
Section 3.9 Schedule 14D-9; Offer Documents. Neither the Schedule 14D-9,
-------------------------------
any other document required to be filed by the Company with the SEC in
connection with the Transactions, nor any information supplied by the Company in
writing specifically for inclusion in the Offer Documents or the Schedule 14D-1
shall, at the respective times the Schedule 14D-9, any such of other filings by
the Company, the Schedule 14D-1, the Offer Documents or any amendments or
supplements thereto are filed with the SEC or are first published, sent or given
to stockholders of the Company, as the case may be, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Schedule 14D-9 and
any other document required to be filed by the Company with the SEC in
connection with the Transactions will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the
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foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of Parent or Purchaser specifically for inclusion or
incorporation by reference therein.
Section 3.10 Litigation. Except as disclosed in the Company SEC
----------
Documents, there is no claim, suit, action or proceeding (including arbitration
proceedings) pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries that, individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect on the
Company, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
subsidiaries which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect on the Company.
Section 3.11 Insurance. The Company and its subsidiaries maintain
---------
policies of fire and casualty, liability and other forms of insurance in such
amounts, with such deductibles and against such risks and losses as are, in the
Company's judgment, reasonable for the assets and properties of the Company and
its subsidiaries and customary in the Company's industry. As of the date of this
Agreement, except as set forth in Section 3.11 of the Company's Disclosure
Schedule, all material insurance policies are in full force and effect, all
premiums due and payable thereon have been paid, and no notice of cancellation
or termination has been received with respect to any such policy.
Section 3.12 ERISA Compliance. (a) Section 3.12(a) of the Company
----------------
Disclosure Schedule sets forth a complete list of all "employee benefit plans"
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and each material employment contract, bonus,
pension, profit sharing, deferred compensation, incentive compensation, excess
benefit, stock, stock option, severance, termination pay, change in control or
other material employee benefit plan, program or arrangement, whether written or
unwritten, qualified or unqualified, funded or unfunded, foreign or domestic
currently maintained, or contributed to, or required to be maintained or
contributed to, by the Company or any subsidiary for the benefit of any current
or former employees, officers or directors of the Company or any of its
subsidiaries or with respect to which the Company or any of its subsidiaries has
any liability (collectively, the "Benefit Plans"), except for Benefit Plans that
are maintained or contributed to by a subsidiary other than a Specified
Subsidiary and which the executive officers of the Company located at the
Company's headquarters do not have actual knowledge of as of the date of this
Agreement. For purposes of the preceding sentence, an employment agreement shall
be deemed material if the Company or a subsidiary may not terminate the contract
or the employment of the individual who is a party to the contract without
incurring a liability in excess of $100,000, and an employee benefit plan,
program or arrangement will be material if the aggregate annual cost associated
therewith exceeds $250,000. As used herein, "Specified Subsidiary" shall mean
LeaRonal (UK) plc, LeaRonal AG and LeaRonal (S.E. Asia) Ltd.
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(b) Each Benefit Plan has been maintained, operated and administered
in all material respects in accordance with its terms. The Company, each
subsidiary and all the Benefit Plans are all in compliance in all material
respects with the applicable provisions of ERISA, the Internal Revenue Code of
1986, as amended (the "Code") and any other applicable law, rule or regulation,
domestic or foreign.
(c) No event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any subsidiary could be subject to any liability under the terms of any
Benefit Plan, or under ERISA, or, with respect to any Benefit Plan, under ERISA,
the Code or any other applicable law, rule or regulation, domestic or foreign,
other than any condition or set of circumstances that, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. Neither the Company nor any subsidiary has
incurred or would reasonably be expected to incur any liability in respect of
any employee benefit plan maintained by any person other than the Company or a
subsidiary which would be treated as a single employer with the Company or a
subsidiary under Section 414(b) or (c) of the Code.
(d) The Benefit Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code (each a "Pension Plan")
now meet, and at all times since their inception have met the requirements for
such qualification, and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code. All
Pension Plans have received determination letters from the IRS to the effect
that such Pension Plans are qualified and the related trust are exempt from
federal income taxes and no determination letter with respect to any Pension
Plan has been revoked nor, to the best knowledge of the Company is there any
reason for such revocation, nor has any Pension Plan been amended since the date
of its most recent determination letter in any respect which would adversely
affect its qualification.
(e) No Benefit Plan is now or at any time has been subject to Part 3,
Subtitle B of Title I of ERISA or Title IV of ERISA.
(f) There are no investigations, audits, actions, suits or claims
pending (other than routine claims for benefits) or, to the knowledge of the
Company, threatened against, or with respect to, any Benefit Plan or its assets,
any fiduciary thereof or service provider thereto nor to the knowledge of the
Company is there any reasonable basis for any such claim, suit or proceeding
that, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect on the Company.
(g) To the knowledge of the Company, there is no matter pending
(other than routine qualification determination filings) with respect to any
Benefit Plan before the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
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<PAGE>
(h) All contributions to, and payments from, any Benefit Plan, except
those to be made from a trust qualified under Section 401(a) of the Code, for
any period ending before the Effective Time that are not yet, but will be,
required are properly accrued and reflected on the most recent financial
statements contained in the Filed Company SEC Documents.
(i) Except as set forth on Section 3.12(i) of the Company Disclosure
Schedule or as otherwise contemplated by this Agreement, and except for Benefit
Plans maintained or contributed to by a subsidiary other than a Specified
Subsidiary which the executive officers of the Company located at the Company's
headquarters do not have actual knowledge of as of the date of this Agreement,
the execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not (i) require the Company or any of its
subsidiaries to pay greater compensation or make a larger contribution to, or
pay greater benefits or accelerate payment or vesting of a benefit under, any
Benefit Plan or any other program, agreement, policy or arrangement or (ii)
create or give rise to any additional vested rights or service credits under any
Benefit Plan or any other program, agreement, policy or arrangement.
(j) Except as set forth in Section 3.12(j) of the Company Disclosure
Schedule, and except for Benefit Plans maintained or contributed to by a
subsidiary other than a Specified Subsidiary which the executive officers of the
Company located at the Company's headquarters do not have actual knowledge of as
of the date of this Agreement, no Benefit Plan provides benefits, including
without limitation, death or medical benefits, beyond termination of employment
or retirement other than (A) coverage mandated by law or (B) death or retirement
benefits under a Benefit Plan qualified under Section 401(a) of the Code.
Neither the Company nor any of its subsidiaries is contractually or otherwise
obligated (whether or not in writing) to provide any person with life, medical,
dental or disability benefits for any period of time beyond retirement or
termination of employment, other than as required by the provisions of Sections
601 through 608 of ERISA and Section 4980B of the Code.
(k) With respect to any Benefit Plan that is an employee welfare
benefit plan (as defined in Section 3(1) of ERISA), (i) no such Benefit Plan in
funded through a "welfare benefit fund", as such term is defined in Section
419(e) of the Code, (ii) each such Benefit Plan that is a "group health plan",
as such term is defined in Section 5000(b)(l) of the Code, complies in all
material respects with the applicable requirements of Sections 601 through 608
of ERISA and Section 4980B(f) of the Code, and (iii) each such Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of its
subsidiaries on or at any time after the consummation of the Offer.
Section 3.13 Taxes. The Company and each of its subsidiaries has timely
-----
filed all material Tax Returns required to be filed by any of them. All such Tax
Returns are true, correct and complete, except for such instances which
individually or in the aggregate would not have a Material Adverse Effect on the
Company. All material Taxes of the Company and its subsidiaries which are due on
or before the Effective Time, have been paid, except for those Taxes which are
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being contested in good faith for which adequate reserves have been established
in the financial statements included in the Company SEC Documents in accordance
with generally accepted accounting principles and which are described in Section
3.13 of the Company Disclosure Statement. The Company does not know of any
proposed or threatened Tax claims or assessments which, if upheld, would
individually or in the aggregate have a Material Adverse Effect on the Company.
The Company and each subsidiary has withheld and paid over to the relevant
Taxing authority all Taxes required to have been withheld and paid in connection
with payments to employees, independent contractors, creditors, stockholders or
other third parties, except for such Taxes which individually or in the
aggregate would not have a Material Adverse Effect on the Company.
As used herein, "Tax Returns" shall mean all returns and reports of
or with respect to any Tax which are required to be filed by or with respect to
the Company or any of its subsidiaries, and "Taxes" shall mean all taxes,
charges, imposts, tariffs, fees, levies or other similar assessments or
liabilities, including income taxes, ad valorem taxes, excise taxes, withholding
taxes, stamp taxes or other taxes of or with respect to gross receipts,
premiums, real property, personal property, windfall profits, sales, use,
transfers, licensing, employment, payroll and franchises imposed by or under any
statute, law, rule or regulation, and such terms shall include any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any such tax or any contest or dispute
thereof.
Section 3.14 Year 2000. The software, operations, systems and processes
---------
(including, to the knowledge of the Company, software, operations, systems and
processes obtained from third parties) which, in whole or in part, are used,
operated, relied upon, or integral to, the Company's or any of its subsidiaries'
conduct of their business, are Year 2000 Compliant (as hereinafter defined),
except where the failure to be Year 2000 Compliant would not, individually or in
the aggregate, have a Material Adverse Effect on the Company, and the Company
has delivered to Parent true and correct copies of any consultant or other
third-party reports prepared on behalf of the Company with respect to such
compliance. For purposes of this Agreement, "Year 2000 Compliant" means the
ability to process (including calculate, compare, sequence, display or store),
transmit or receive data or data/time data from, into and between the twentieth
and twenty-first centuries, and the years 1999 and 2000, and leap year
calculations without error or malfunction.
Section 3.15 Compliance with Applicable Laws. Except as would not
-------------------------------
reasonably be expected to have a Material Adverse Effect on the Company: (a) the
Company and its subsidiaries have in effect all Federal, state, local and
foreign governmental approvals, authorizations, certificates, filings,
franchises, licenses, notices, permits (including Environmental Permits (as
hereinafter defined)) and rights ("Permits") required under applicable
Environmental Laws and necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit, and (b) each of the Company and its
subsidiaries is in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, including in respect
of
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<PAGE>
unlawful expenditures in violation of Section 30A of the Exchange Act.
"Environmental Permit" means any permit, license, approval or other
authorization under any applicable law, regulation and other requirement of any
country, state, municipality or other subdivision thereof relating to pollution
or protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases of pollutants,
contaminants, hazardous substances, toxic materials, or wastes into ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment storage, disposal, transport, or
handling of chemical substances, pollutants, contaminants or hazardous or toxic
materials or wastes.
(b) Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, (i) each of the Company and its subsidiaries and
their respective properties, assets, businesses and operations is, and has been,
and (ii) each of the Company's former subsidiaries, while subsidiaries of the
Company and their respective properties, assets, businesses and operations, was,
in compliance with all applicable Environmental Laws (as hereinafter defined)
and Environmental Permits. The term "Environmental Laws" means any federal,
state, local or foreign statute, code, ordinance, rule, regulation, permit,
consent, approval, license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground storage tanks,
relating to: (i) emissions, discharges, releases or threatened releases of
Hazardous Material (as hereinafter defined) into the environment, including,
without limitation, into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater, publicly-owned
treatment works, septic systems or land; or (ii) the generation, treatment,
storage, disposal, use, handling, manufacturing, transportation or shipment of
Hazardous Material.
(c) Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, (i) during the period of ownership or operation
by the Company and its subsidiaries of any of their respective current or
previously-owned properties, there have been no Releases (as hereinafter
defined) of Hazardous Material in, on, under, from such properties, or to its
knowledge any surrounding site or any off-site location, and (ii) to its
knowledge prior to the period of ownership by the Company and its subsidiaries
of any of their respective current or previously-owned properties there were no
releases of Hazardous Material in, on, under or affecting any such property, any
surrounding site or any off-site location. The term "Hazardous Material" means
(1) hazardous materials, pollutants or contaminants, medical, hazardous or
infectious wastes, hazardous waste constituents, hazardous chemicals, hazardous
or toxic pollutants, and hazardous or toxic substances as those terms are
defined in or regulated by any applicable Environmental Law, including without
limitation, the following statutes and their implementing regulations: the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the
-- ---
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
-- ---
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et
--
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
- --- -- ---
Clean Water Act, 33 U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C.
-- ---
Section 7401 et seq., (2) petroleum, including
-- ---
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<PAGE>
crude oil and any fractions thereof, (3) natural gas, synthetic gas and any
mixtures thereof, (4) radioactive materials including, without limitation,
source byproduct or special nuclear materials and (5) pesticides. "Releases"
means spills, leaks, discharges, disposal, pumping, pouring, emissions,
injection, emptying, leaching, dumping or allowing to escape.
(d) Except as would not reasonably be expected to have a Material
Adverse Effect on the Company, (i) the Company and its subsidiaries and their
respective properties, assets, businesses and operations are not subject to any
Environmental Claims (direct or contingent, and whether known or unknown) or
Environmental Liabilities (as such terms are hereinafter defined) arising from
or based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof or for which the Company and its
subsidiaries are responsible, including without limitation, any such
Environmental Claims or Environmental Liabilities arising from or based upon the
ownership or operation of assets, businesses or properties of the Company or any
subsidiary or their respective predecessors, and (ii) neither the Company nor
any of its subsidiaries has received any notice of any violation of any
Environmental Law or Environmental Permit or any Environmental Claim in
connection with their respective assets, properties, businesses or operations,
or, in each case, those of their respective predecessors. The Company has
provided to Purchaser and has disclosed on Section 3.15(d) of the Company
Disclosure Schedule all material environmental site assessment reports prepared
by, on behalf of or, to the extent in the Company's or any subsidiary's
possession, relating to the Company or any subsidiary since January 1, 1996
regarding the environmental condition of the Company's properties or the
environmental compliance of the Company or any subsidiary. The term
"Environmental Claim" means any third party (including governmental agencies,
regulatory agencies and employees) action, lawsuit, claim, proceeding (including
claims or proceedings under the Occupational Safety and Health Act or similar
laws relating to safety of employees) which seeks to impose liability for (i)
noise; (ii) pollution or contamination of the air, surface water, ground water
or land; (iii) solid, gaseous or liquid waste generation, handling, treatment,
storage, disposal or transportation; (iv) exposure to hazardous or toxic
substances; (v) the safety or health of employees; or (vi) the manufacture,
processing, distribution in commerce, use, or storage of chemical or other
hazardous substances. An "Environmental Claim" includes, but is not limited to,
a common law action, as well as a proceeding to issue, modify or terminate an
Environmental Permit of the Company or any of its subsidiaries. The term
"Environmental Liabilities" includes all costs arising from any Environmental
Claim or violation or alleged violation or circumstance or condition which would
give rise to a violation or liability under any Environmental Permit or
Environmental Law under any theory of recovery, at law or in equity, and whether
based on negligence, strict liability or otherwise, including but not limited
to: remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property, and any other related costs, expenses, losses,
damages, penalties, fines, liabilities and obligations, including attorneys'
fees and court costs.
Section 3.16 State Takeover Statutes. The Company has taken all action
-----------------------
necessary to render Section 912 of the NYBCL inapplicable to Parent and
Purchaser, the Offer, the Merger, the Tender and Option Agreement and this
Agreement and the other Transactions. No other "fair
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<PAGE>
price," "moratorium," "control share acquisition" or other state takeover
statute or similar statute or regulation applies or purports to apply to the
Company, Parent, Purchaser, the Offer, the Merger, the Tender and Option
Agreement, this Agreement or any of the other Transactions. As a result of the
foregoing actions, the only action required to authorize the Merger is the
Company Shareholder Approval and no further action is required to authorize the
other Transactions.
Section 3.17 Contracts. Except for Benefit Plans, Contracts disclosed on
---------
Section 3.11 to the Company Disclosure Schedule and any Contracts filed as an
exhibit to any Filed Company SEC Document, Section 3.17 to the Company
Disclosure Schedule lists, under the relevant heading, all oral or written
contracts, agreements, arrangements, guarantees, leases and executory
commitments (each a "Contract") that exist as of the date hereof to which the
Company or any of its subsidiaries is a party or by which it is bound and which
fall within any of the following categories: (a) Contracts not entered into in
the ordinary course of the Company's and its subsidiaries' businesses other than
those that individually are not material to the business of the Company and its
subsidiaries, taken as a whole, (b) joint venture and partnership agreements,
(c) Contracts containing covenants purporting to limit the freedom of the
Company or any of its subsidiaries to compete in any line of business in any
geographic area, (d) Contracts which after the consummation of any of the
Transactions would have the effect of limiting the freedom of Parent or any of
its subsidiaries to compete in any line of business in any geographic area, (e)
Contracts providing for "earn-outs" or other contingent payments by the Company
involving more than $1,000,000 in the aggregate over the terms of all such
Contracts, (f) Contracts associated with off balance sheet financing in excess
of $1,000,000 in the aggregate, including but not limited to arrangements for
the sale of receivables, (g) stock purchase agreements, asset purchase
agreements or other acquisition or divestiture agreements where the
consideration in any individual transaction exceeds $1,000,000 since January 1,
1995, or (h) Contracts with respect to which a change in the ownership (whether
directly or indirectly) of the Shares or the composition of the Board of
Directors of the Company may result in a violation of or default under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of benefits under such Contract which termination, cancellation,
acceleration or loss of benefit would be material to the Company, except in the
case of clauses (a), (b) and (e) through (h) above for Contracts to which a
subsidiary other than a Specified Subsidiary is a party or by which it is bound
and which the executive officers of the Company located at the Company's
headquarters do not have actual knowledge of as of the date of this Agreement.
All Contracts (including those described in clauses (a) through (h) above) to
which the Company or any subsidiary is a party or by which it is bound are valid
and binding obligations of the Company or such subsidiary and, to the knowledge
of the Company, the valid and binding obligation of each other party thereto
except such Contracts which if not so valid and binding would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company. Neither the Company or such subsidiary nor, to the knowledge of the
Company, any other party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the passage of time or
giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract except such violations or defaults under or
terminations which, individually or in the aggregate, would not reasonably be
expected to have a
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<PAGE>
Material Adverse Effect on the Company. Set forth in Section 3.17(i) to the
Company Disclosure Schedule is the amount of the annual premium currently paid
by the Company for its directors' and officers' liability insurance. The Company
has provided to Parent and Purchaser true and complete copies of each of the
Other Agreements.
Section 3.18 Labor Matters. Except to the extent set forth in Section
-------------
3.18 of the Company Disclosure Schedule, (a) no employee of the Company or any
of its subsidiaries is represented by any union or other labor organization; (b)
the Company and all of its subsidiaries are in compliance with applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice; (c) there is no unfair labor practice complaint against the Company or
any of its subsidiaries pending or, to the knowledge of the Company, threatened
by or before the National Labor Relations Board or any other Governmental
Entity; (d) there is no labor strike, dispute, slowdown, representation campaign
or work stoppage pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries; (e) no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is pending and no claim therefor has been asserted against the Company or its
subsidiaries; and (f) neither the Company or any of its subsidiaries has
experienced any material work stoppage since August 31, 1996. The Company and
its subsidiaries are in material compliance with all applicable federal, state,
local or foreign labor laws, rule and regulations.
Section 3.19 Undisclosed Liabilities. Except as and to the extent
-----------------------
disclosed in the Filed Company SEC Documents, or as set forth in Section 3.19 of
the Company Disclosure Schedule, and except for liabilities incurred in the
ordinary course of business and otherwise not in contravention of this Agreement
which individually and in the aggregate are not material, the Company does not
have any liabilities or obligations of any nature (whether absolute, contingent
or otherwise) that would be required to be reflected or reserved against in a
consolidated balance sheet of the Company and its subsidiaries prepared in
accordance with United States generally accepted accounting principles.
Section 3.20 Opinion of Company Financial Advisor. The Company has
------------------------------------
received the opinion of the Company Financial Advisor, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be received
in the Offer and the Merger by the Company's stockholders is fair to the
Company's stockholders from a financial point of view, a signed copy of which
opinion has been delivered to Parent, and such opinion has not been amended,
modified or revoked in a manner adverse to Parent or Purchaser. The Company has
been authorized by the Company Financial Advisor to permit the inclusion of such
fairness opinion (and, subject to prior review and consent by such Company
Financial Advisor, a reference thereto) in the Offer Documents and in the
Schedule 14D-9 and the Proxy Statement.
Section 3.21 Intellectual Property. Except to the extent the failure of
---------------------
any of the following would not, individually or in the aggregate, have a
Material Adverse Effect on the Company: (i) the Company and each of its
subsidiaries owns and/or is licensed to use (in each
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<PAGE>
case, free and clear of any Liens, claims or similar encumbrances) all patents,
patent applications, trademarks, trademark registrations and applications,
tradenames, service marks, copyright registrations and applications, technology,
inventions, know-how, trade secrets, processes and all agreements and other
rights with respect to intellectual property and computer programs
("Intellectual Property") used in or necessary for the conduct of its business
as currently conducted; (ii) all such patents, trademarks and copyrights owned
by the Company and each of its subsidiaries are valid and enforceable; (iii) the
use of such Intellectual Property by the Company and its subsidiaries and their
agents does not infringe on the rights of any person; (iv) to the knowledge of
the Company, no person is infringing on any right of the Company or any of its
subsidiaries with respect to any such Intellectual Property; (v) the Company and
its subsidiaries are not, and the consummation of the Transactions will not
cause them to be, in breach or violation of any agreement relating to the use of
any of its Intellectual Property, and they have not received any notification,
written or oral, from any third party that there is any such violation, breach
or inability to perform under any such agreement; and (vi) there are no
agreements, written or oral, which materially limit any rights by the Company or
its subsidiaries to use any of their Intellectual Property.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser jointly and severally represent and warrant to
the Company as follows:
Section 4.1 Organization and Qualification. Each of Parent and Purchaser
------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to carry on its business as it is now being conducted. Each
of Parent and Purchaser is duly qualified as a foreign corporation or licensed
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or leased or the nature of its activities
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing would not reasonably be expected
to prevent or materially delay the consummation of the Offer or the Merger.
Section 4.2 Authority Relative to this Agreement. Each of Parent and
------------------------------------
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder, and to consummate the
Transactions. The execution and delivery by Parent and Purchaser of this
Agreement and the performance of their respective obligations hereunder, and the
consummation by Parent and Purchaser of the Transactions have been duly and
validly authorized by the respective Boards of Directors of Parent and
Purchaser, and the shareholder of Purchaser, and no other corporate proceedings
on the part of Parent or Purchaser are necessary to authorize this Agreement, or
commence the Offer or to consummate the Transactions (including the Offer) other
than filing and recordation of appropriate merger
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<PAGE>
documents as required by the NYBCL. This Agreement has been duly and validly
executed and delivered by each of Parent and Purchaser and, assuming this
Agreement constitutes a valid and binding obligation of the Company, this
Agreement constitutes a valid and binding agreement of each of Parent and
Purchaser, enforceable against each of Parent and Purchaser in accordance with
its terms.
Section 4.3 Proxy Statement. None of the information supplied in writing
---------------
by Parent, Purchaser and their respective affiliates specifically for inclusion
in the Proxy Statement, if required, shall, at the time the Proxy Statement is
mailed, at the time of the Shareholder Meeting or at the Effective Time, 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; provided, however, that Parent and Purchaser make no representation
or warranty as to any of the information supplied by or on behalf of the Company
specifically for inclusion in the Proxy Statement. If, at any time prior to the
Effective Time, any event relating to Parent or any of its affiliates, officers
or directors is discovered by Parent that should be set forth in a supplement to
the Proxy Statement, Parent will promptly inform the Company.
Section 4.4 Consents and Approvals; No Violation. Subject to the taking
------------------------------------
of the actions described in the immediately succeeding sentence, the execution
and delivery of this Agreement do not, and the consummation of the Transactions
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
material properties or assets of Parent under (i) the certificate of
incorporation or bylaws of Parent or Purchaser, (ii) any loan or credit
agreement, note, bond, indenture, lease or other agreement, instrument or Permit
applicable to Parent or Purchaser or their respective properties or assets,
(iii) any judgment, order, writ, injunction, decree, law, statute, ordinance,
rule or regulation applicable to Parent or Purchaser or their respective
properties or assets, other than, in the case of clause (ii) and (iii), any such
conflicts, violations, defaults, rights or Liens that individually or in the
aggregate would not (x) impair in any material respect the ability of Parent and
Purchaser to perform their respective obligation under this Agreement or (y)
prevent or impede the consummation of any of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or any other person is required by Parent or
Purchaser in connection with the execution and delivery of this Agreement or the
consummation by Parent or Purchaser, as the case may be, of any of the
Transactions, except (A) in connection with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or in connection with the
GWB Act or any other foreign antitrust or competition laws, (B) pursuant to the
Securities Act and the Exchange Act, (C) the filing of the Certificate of Merger
pursuant to the NYBCL, (D) such consents, approvals, orders, authorizations,
registrations and declarations as may be required under the law of any foreign
country in which the Parent or any of its subsidiaries conducts any business or
owns any assets, (E) such filings and approvals as may be required under the
"blue sky", takeover or securities laws of various states, or (F) where the
failure to obtain any
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<PAGE>
such consent, approval, authorization or permit, or to make any such filing or
notification, would not prevent or delay consummation of the Offer or the Merger
or would not otherwise prevent Parent from performing its obligations under this
Agreement or where the requirement to obtain such consent, approval,
authorization or permit, or to make such filing or notification arises from the
regulatory status of the Company or its subsidiaries.
Section 4.5 Financing. Parent will have at each of (i) the time of
---------
acceptance for purchase by Purchaser of Shares pursuant to the Offer and (ii)
the Effective Time, and will make available to Purchaser, the funds necessary to
consummate the Offer and the Merger.
Section 4.6 Brokerage Fees and Commissions. Except for those fees and
------------------------------
expenses payable to Deutsche Bank Securities Inc. no person is entitled to
receive any investment banking brokerage or finder's fee or commission in
connection with this Agreement or the Transactions based upon arrangements may
by or on behalf of Parent or Purchaser.
Section 4.7 Schedule 14D-1; Offer Documents. Neither the Schedule 14D-1,
-------------------------------
the Offer Documents nor any information supplied by or on behalf of Parent or
Purchaser in writing for inclusion in the Schedule 14D-9 shall, at the
respective times the Schedule 14D-9, the Schedule 14D-1, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-1 and the Offer Documents will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder. Notwithstanding the foregoing, no representation or
warranty is made by Parent or Purchaser with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference therein.
Section 4.8 Operations of Purchaser. Purchaser (and any other wholly
-----------------------
owned subsidiary of Parent which may be used to effect the Offer and the Merger
pursuant to Section 2.1) was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
Section 4.9 Ownership of Shares by Parent and Purchaser. As of the date
-------------------------------------------
hereof and excluding Shares subject to the Tender and Option Agreements, Parent
and Purchaser beneficially own 100 Shares.
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<PAGE>
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business of the Company Pending the Merger. The
-----------------------------------------------------
Company hereby covenants and agrees that, prior to the Effective Time, unless
otherwise expressly contemplated by this Agreement or consented to in writing by
Parent, it will and will cause each of its subsidiaries to:
(a) operate its business in the usual and ordinary course
substantially consistent with past practices;
(b) use its commercially reasonable efforts to preserve intact its
business organization, maintain its rights and franchises, retain the services
of its respective key employees and maintain its relationships with its
respective customers and suppliers and others having business dealings with it
to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time; and
(c) use its commercially reasonable efforts to keep in full force
and effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained.
Section 5.2 Prohibited Actions by the Company. Without limiting the
---------------------------------
generality of Section 5.1, except as set forth in Section 5.2 of the Company
Disclosure Schedule, the Company covenants and agrees that, except as expressly
contemplated by this Agreement or otherwise consented to in writing by Parent,
from the date of this Agreement until the Effective Time, it will not do, and
will not permit any of its subsidiaries to do, any of the following:
(a) (i) increase the compensation (or benefits) payable to or to
become payable to any director or employee, except for increases in salary or
wages of employees in the ordinary course of business and consistent with past
practice; (ii) grant any severance or termination pay (other than pursuant to
the normal severance policy or practice of the Company or its subsidiaries as
disclosed in Section 3.12 of the Company Disclosure Schedule and in effect on
the date of this Agreement) to, or enter into or amend in any material respect
any employment or severance agreement with, any employee; (iii) establish,
adopt, enter into or amend any collective bargaining agreement or Benefit Plan
of the Company or any subsidiary; or (iv) take any action to accelerate any
rights or benefits, or make any determinations not in the ordinary course of
business consistent with past practice, under any collective bargaining
agreement or Benefit Plan of the Company or any subsidiary;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property), outstanding
shares of capital stock, except for (i) dividends by a wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of the Company
and (ii) regular quarterly cash dividends by the Company
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<PAGE>
consistent with past practices (including as to declaration, record and payment
dates) in no event to exceed $0.14 per Share per fiscal quarter; provided that
-------- ----
the Company may declare and pay, prior to the expiration date of the Offer, its
regular quarterly cash dividend of $0.14 per Share scheduled to be declared and
paid in February, 1999;
(c) redeem, purchase or otherwise acquire, or offer or propose to
redeem, purchase or otherwise acquire, any outstanding shares of capital stock
of, or other equity interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity interests in,
or any outstanding options, warrants or rights of any kind to acquire any shares
of capital stock of, or other equity interests in, the Company or any of its
subsidiaries (other than (i) any such acquisition by the Company or any of its
wholly owned subsidiaries directly from any wholly owned subsidiary of the
Company in exchange for capital contributions or loans to such subsidiary, or
(ii) any purchase, forfeiture or retirement of shares of Company Common Stock or
the Options occurring pursuant to the terms (as in effect on the date of this
Agreement) of any existing Benefit Plan of the Company or any of its
subsidiaries, in a manner otherwise consistent with the terms of this Agreement;
(d) effect any reorganization or recapitalization; or split, combine
or reclassify any of the capital stock of, or other equity interests in, the
Company or any of its subsidiaries or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for, shares
of such capital stock or such equity interests;
(e) offer, sell, issue or grant, or authorize or propose the
offering, sale, issuance or grant of, any shares of capital stock of, or other
equity interests in, any securities convertible into or exchangeable for (or
accelerate any right to convert or exchange securities for) any shares of
capital stock of, or other equity interest in, or any options, warrants or
rights of any kind to acquire any shares of capital stock of, or other equity
interests in, or any Voting Company Debt or other voting securities of, the
Company or any of its subsidiaries, or any "phantom" stock, "phantom" stock
rights, stock appreciation rights or stock-based performance units, other than
issuances of shares of Company Common Stock upon the exercise of the Options
outstanding at the date of this Agreement in accordance with the terms thereof
(as in effect on the date of this Agreement);
(f) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire any assets of any
other person if the aggregate consideration is in excess of $500,000 for any
individual transaction, and $5,000,000 for all such transactions (other than the
purchase of assets from suppliers or vendors in the ordinary course of
business);
(g) sell, lease, exchange or otherwise dispose of, or grant any Lien
with respect to, any of the properties or assets of the Company or any of its
subsidiaries that are, individually or in the aggregate, material to the
business of the Company and its subsidiaries, except for (i)
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dispositions of excess or obsolete assets and sales of inventories in the
ordinary course of business, and (ii) dispositions of properties or assets with
a value not in excess of $500,000 for any individual transaction and $5,000,000
for all such transactions;
(h) propose or adopt any amendments to its certificate of
incorporation or bylaws or other organizational documents;
(i) effect any change in any accounting methods, principles or
practices in effect as of February 28, 1998 affecting the reported consolidated
assets, liabilities or results of operations of the Company, except as may be
required by a change in generally accepted accounting principles;
(j) (i) incur any indebtedness for borrowed money in excess of an
aggregate of $5,000,000, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of its subsidiaries,
guarantee any such indebtedness or debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, or (ii) make any loans, advances (other than to employees
of the Company and its subsidiaries in the ordinary course of business) or
capital contributions to, or investments in, any other person, other than to or
in the Company or any subsidiary of the Company;
(k) enter into any Contract described in clauses (a) through (f) of
Section 3.17 or, in the case of any Contract described in Section 3.17(h), enter
into such Contract if the termination, cancellation, acceleration or loss of
benefits described in Section 3.17(h) would have a Material Adverse Effect on
the Company;
(l) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business or in accordance with their terms, of
liabilities reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the Filed
Company SEC Documents or incurred since the date of such financial statements in
the ordinary course of business;
(m) take any of the actions set forth in Section 3.4 not otherwise
specified herein;
(n) settle the terms of any material litigation affecting the
Company or any of its subsidiaries;
(o) make any material Tax election (unless required by law or unless
consistent with prior practice) or settle or compromise any material Tax
liability except, in each case, if Parent is given reasonable prior notice
thereof; or
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(p) make or agree to make any new capital expenditures except for
capital expenditures which are consistent with the capital expenditure budget
previously provided to Parent and which do not individually exceed $500,000 and
do not, in the aggregate, exceed $5,000,000.
ARTICLE VI
COVENANTS
Section 6.1 No Solicitation.
---------------
(a) From and after the date hereof until the Effective Time or the
termination of this Agreement in accordance with Section 8.1, neither the
Company or any of its subsidiaries, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its subsidiaries) will directly or indirectly initiate,
solicit or encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate, any inquiries or the making
or submission of any Acquisition Proposal (as hereinafter defined), or enter
into or maintain or continue discussions or negotiate with any person or group
in furtherance of such inquiries or to obtain or induce any person or group to
make or submit an Acquisition Proposal or agree to or endorse any Acquisition
Proposal or assist or participate in, facilitate or encourage, any effort or
attempt by any other person or group to do or seek any of the foregoing or
authorize or permit any of its officers, directors or employees or any of its
subsidiaries or affiliates or any investment banker, financial advisor,
attorney, accountant or other representative or agent retained by it or any of
its subsidiaries to take any such action; provided, however, that nothing
-------- -------
contained in this Agreement shall prohibit the Board of Directors of the Company
from, prior to the earlier to occur of acceptance for payment of Shares pursuant
to the Offer or adoption of this Agreement by the requisite vote of the
stockholders of the Company, furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide Acquisition Proposal that constitutes, or may reasonably be
expected to lead to, any Superior Proposal (as hereinafter defined) if, and only
to the extent that (i) the Board of Directors of the Company, after consultation
with independent legal counsel, reasonably determines in good faith that the
failure to do so would be reasonably likely to result in a breach of the
fiduciary duty of the Board of Directors of the Company under applicable law and
(ii) prior to taking such action the Company (x) delivers to Parent and
Purchaser the notice required pursuant to Section 6.1(c) stating that it is
taking such action and (y) receives from such person or group an executed
confidentiality agreement that contains customary confidentiality and standstill
restrictions. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 6.1 by any officer,
director, employee or affiliate of the Company or any of its subsidiaries or any
investment banker, attorney, accountant or other advisor, agent or
representative of the Company or any of its subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its subsidiaries
or otherwise, shall be deemed to be a breach of this Section 6.1 by the Company.
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(b) Except as expressly permitted by this Section 6.1, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw,
modify or fail to make, or propose to withdraw, modify or fail to make its
approval or recommendation of the Offer or the Merger or of the Tender and
Option Agreement and the other Transactions, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, (iii) take any action
to render the provisions of any anti-takeover statute, rule or regulation
(including Section 912 of the NYBCL) inapplicable to any person (other than
Parent, Purchaser or their affiliates) or group or to any Acquisition Proposal
or (iv) cause the Company or any of its subsidiaries to accept such Acquisition
Proposal and/or enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Acquisition Proposal; provided however, that prior to
-------- -------
the earlier to occur of acceptance for payment of Shares pursuant to the Offer
or adoption of this Agreement by the requisite vote of the stockholders of the
Company, the Board of Directors of the Company may terminate this Agreement if,
and only to the extent that (A) such Acquisition Proposal is a Superior
Proposal, (B) the Board of Directors of the Company, after consultation with
independent legal counsel, reasonably determines in good faith that the failure
to do so would be reasonably likely to result in a breach of the fiduciary duty
of the Board of Directors of the Company under applicable law, (C) the Company
shall, prior to or simultaneously with the taking of such action, have paid or
pay to Parent or Purchaser or their designee the Termination Fee and the
Expenses referred to in Section 8.3, (D) the Company is not in breach of this
Section 6.1, (E) the Company shall have complied with its obligations under
Section 8.1(d)(ii) and (F) concurrently with such termination, the Company
enters into an Acquisition Agreement with respect to such Superior Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) above, the Company shall promptly (and in any event,
within 24 hours) advise Parent orally and in writing of any request for
information or the submission or receipt of any Acquisition Proposal, the
material terms and conditions of such Acquisition Proposal, and the identity of
the person making any such Acquisition Proposal. The Company will keep Parent
fully informed of the material developments with respect to any such Acquisition
Proposal. The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(d) "Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the Transactions contemplated by this
Agreement) involving the Company: (i) any merger, consolidation, share exchange,
recapitalization, liquidation, dissolution, business combination or other
similar transaction; (ii) any sale, lease, exchange, or other disposition of 20%
or more of the assets of the Company and its subsidiaries, taken as a whole, or
of any Material Business (as hereinafter defined) or of any subsidiary or
subsidiaries responsible for a Material Business in a single transaction or
series of related transactions; (iii) any tender offer (including a self tender
offer) or exchange offer that, if consummated, would result in any person or
group beneficially owning more than 20% of the outstanding shares of any class
of equity securities of the Company; (iv) any acquisition of 20% or more of the
outstanding shares of capital stock of the Company; or (v) any public
announcement by the Company or any third party
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of a proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction, all the shares of Company Common Stock then outstanding or all or
substantially all of the assets of the Company and its subsidiaries which the
Board of Directors of the Company reasonably determines in good faith (after
consultation with its independent financial advisor and after taking into
account any changes to the terms of this Agreement and the Offer that have been
proposed by Parent in response to such proposal) to be more favorable to the
Company and the Company's stockholders. "Material Business" means any business
(or the assets needed to carry out such business) that contributed or
represented 20% or more of the net sales, the net income or the assets
(including equity securities) of the Company and its subsidiaries taken as a
whole.
(e) Nothing contained in this Section 6.1 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if the Board of Directors of the
Company, after consultation with independent legal counsel, reasonably
determines in good faith that the failure to take such action would be
reasonably likely to result in a breach of the fiduciary duty of the Board of
Directors under applicable law; provided that neither the Board of Directors of
-------- ----
the Company nor any committee thereof withdraws or modifies, or proposes to
withdraw or modify, the approval or recommendation of the Board of Directors of
the Company of the Offer or the Merger or approves or recommends, or publicly
proposes to approve or recommend, an Acquisition Proposal unless the Company and
the Board of Directors of the Company have complied with all the provisions of
this Section 6.1.
Section 6.2 Access to Information. Between the date of this Agreement
---------------------
and the Effective Time, the Company shall, and shall cause its subsidiaries to
(a) afford to Parent and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives full access during
normal business hours and at all other reasonable times to the officers,
employees, agents, properties, offices and other facilities of the Company and
its subsidiaries and to their books and records (including all Tax Returns and
all books and records related to Taxes and such returns), (b) permit Parent to
make such inspections as it may require (and the Company shall cooperate with
Parent in any inspections, including, without limitation, environmental due
diligence), and (c) furnish promptly to Parent and its representatives a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and such other information concerning the business, properties, contracts,
records and personnel of the Company and its subsidiaries (including financial,
operating and other data and information) as may be reasonably requested, from
time to time, by or on behalf of Parent.
Section 6.3 Confidentiality Agreement. The parties agree that the
-------------------------
provisions of the Confidentiality Agreement dated October 21, 1998 between
Parent and the Company shall remain binding and in full force and effect;
provided, however, that any consents from the Company
- -------- -------
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<PAGE>
necessary under the Confidentiality Agreement for Parent and Purchaser to
consummate the transactions contemplated by this Agreement and the Tender and
Option Agreement shall be deemed to have been made and provided that the
provisions of the twelfth paragraph of the Confidentiality Agreement shall
terminate and be of no further force and effect after the date of this
Agreement. The parties shall comply with, and shall cause their respective
Representatives (as defined in the Confidentiality Agreement) to comply with,
all of their respective obligations under the Confidentiality Agreement until
the Effective Time, at which time the Confidentiality Agreement shall terminate
and be of no further force and effect.
Section 6.4 Reasonable Best Efforts. (a) Subject to the terms and
-----------------------
conditions herein, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as soon as reasonably
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 each
party to this Agreement shall take all such necessary action. Such reasonable
best efforts shall include, without limitation, (i) the obtaining of all
necessary consents, approvals or waivers from third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement and (ii) opposing vigorously any litigation or administrative
proceeding relating to this Agreement or the transactions contemplated hereby,
including, without limitation, promptly appealing any adverse court or agency
order. Notwithstanding the foregoing or any other provisions contained in this
Agreement to the contrary, neither Parent or the Company nor any of their
respective affiliates shall be under any obligation of any kind to (i) litigate
against any Governmental Entity, including but not limited to any governmental
or regulatory authority with jurisdiction over the enforcement of any applicable
federal, state, local and foreign antitrust, competition or other similar laws
or (ii) otherwise agree with any Governmental Entity or any other party to sell
or otherwise dispose of, agree to any material limitations on the ownership or
control of, or hold separate (through the establishment of a trust or otherwise)
a material portion of the assets or businesses of any of the Company, its
subsidiaries, Parent or any of Parent's affiliates.
(b) The Company shall give and make all required notices and
reports to the appropriate persons with respect to the Permits and Environmental
Permits that may be necessary for the sale and purchase of the business and the
ownership, operation and use of the assets of Surviving Corporation by Parent
and Purchaser after the Effective Time. Subject to the other terms of this
Agreement, each of the Company, Parent and Purchaser shall cooperate and use
their respective reasonable best efforts to make all filings, to obtain all
actions or nonactions, waivers, Permits and orders of Governmental Entities
necessary to consummate the transactions contemplated by this Agreement and to
take all reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity. Each of
the parties hereto will furnish to the other parties such necessary information
and reasonable assistance as such other parties may reasonably request in
connection with the foregoing.
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(c) The Company and its Board of Directors shall (i) take all
action necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger, this Agreement,
the Tender and Option Agreement or any of the other transactions contemplated by
the foregoing and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Offer, the Merger, this Agreement, the
Tender and Option Agreement or any other Transactions, take all action necessary
to ensure that the Offer, the Merger and the other Transactions, including the
Transactions contemplated by this Agreement and the Tender and Option Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and the Tender and Option Agreement and otherwise to minimize the
effect of such statute or regulation on the Offer, the Merger and the other
Transactions, including the Transactions contemplated by this Agreement and the
Tender and Option Agreement.
Section 6.5 Indemnification of Directors and Officers.
-----------------------------------------
(a) Purchaser agrees that all rights to indemnification for acts or
omissions occurring prior to the Effective Time existing as of the date hereof
in favor of the current or former directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation or
bylaws shall survive the Merger and shall continue in full force and effect in
accordance with their terms for a period of six years from the Effective Time.
Parent shall cause to be maintained, if available, for a period of six years
from the Effective Time the Company's current directors' and officers' insurance
and indemnification policy (the "D&O Insurance") (provided that Parent may
substitute therefor policies or financial guarantees with the same carriers or
other obligors as insure Parent's directors and officers of at least the same
coverage and amounts containing terms and conditions which are substantially
similar to the existing D&O Insurance) to the extent that such insurance
policies provide coverage for events occurring prior to the Effective Time for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium to be paid by the Company after the
date of this Agreement for such D&O Insurance during such six-year period would
not exceed 200% of the current annual premium therefor. If, during such six-year
period, such insurance coverage cannot be obtained at all or can only be
obtained for an amount in excess of 200% of the current annual premium therefor,
Parent shall use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for an amount equal to 200% of the current annual
premium therefor, on terms and conditions substantially similar to the existing
D&O Insurance.
(b) If any claim or claims shall, subsequent to the Effective Time
and within six years thereafter, be made in writing against any present or
former director or officer of the Company based on or arising out of the
services of such person prior to the Effective Time in the capacity of such
person as a director or officer of the Company (and such director or officer
shall have given Parent written notice of such claim or claims within such six
year period), the provisions of subsection (a) of this Section respecting the
rights to indemnify the current or
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former directors or officers under the certificate of incorporation and bylaws
of the Company and its subsidiaries shall continue in effect until the final
disposition of all such claims.
(c) The provisions of this Section 6.5 are intended to be for the
benefit of, and shall be enforceable by, each person entitled to indemnification
hereunder and the heirs and representatives of such person.
Section 6.6 Event Notices and Other Actions. (a) From and after the date
-------------------------------
of this Agreement until the Effective Time, each party hereto shall promptly
notify the other parties hereto of (i) the occurrence or nonoccurrence of any
event, the occurrence or nonoccurrence of which has resulted in, or would
reasonably be expected to result in, any condition to the Offer set forth in
Annex A, or any condition to the Merger set forth in Article VII, not being
satisfied, (ii) the failure of such party to comply with any covenant or
agreement to be complied with by it pursuant to this Agreement which has
resulted in, or would reasonably be expected to result in, any condition to the
Offer set forth in Annex A, or any condition to the Merger set forth in Article
VII, not being satisfied and (iii) any breach of any representation or warranty
made by it contained in this Agreement (excluding for this purpose any
materiality qualifications contained therein) that would be reasonably likely to
have a Material Adverse Effect on the breaching party. No delivery of any notice
pursuant to this Section 6.6(a) shall cure any breach of any representation or
warranty of such party contained in this Agreement or otherwise limit or affect
the remedies available hereunder to the party or parties receiving such notice.
(b) The Company and Parent shall not, and shall not permit any of
their respective subsidiaries to, take any action or nonaction that will, or
that would reasonably be expected to, result in (i) any breach of the
representations and warranties of such party (excluding for this purpose any
materiality qualifications contained therein) set forth in this Agreement that
would be reasonably likely to have a Material Adverse Effect on such party or
(ii) except as otherwise permitted by Section 6.1 and subject to Section 6.4(a),
any condition to the Offer set forth in Annex A, or any condition to the Merger
set forth in Article VII, not being satisfied.
Section 6.7 Third Party Standstill Agreements. During the period from
---------------------------------
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill or similar agreement to which the Company or any of its subsidiaries
is a party (other than any involving Parent). Subject to the foregoing, during
such period, the Company agrees to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements, including obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court or other tribunal
having jurisdiction. Notwithstanding the foregoing, nothing in this Section 6.7
is intended to prevent the Company from exercising its rights under Section 6.1
in accordance with the provisions of such Section.
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Section 6.8 Employee Stock Options; Employee Plans and Benefits and
-------------------------------------------------------
Employment Contracts.
- --------------------
(a) Simultaneously with the execution of this Agreement, the Board
of Directors of the Company (or, if appropriate, any committee administering the
Company Stock Option Plans) shall adopt such resolutions or take such other
actions as are required to effect the transactions contemplated by the first
sentence of Section 2.10 in respect of all outstanding Options and thereafter
the Board of Directors of the Company (or any such committee) shall adopt any
such additional resolutions and take such additional actions as are required in
furtherance of the foregoing.
(b) All amounts payable pursuant to Section 2.10 and Section 6.8(a)
shall be subject to any required withholding of taxes and shall be paid without
interest.
(c) The Company Stock Option Plans shall terminate as of the
Effective Time, and the provision in any other Benefit Plan providing for the
potential issuance, transfer or grant of any capital stock of the Company or any
of its subsidiaries or any interest, or release of restrictions in respect of
any capital stock of the Company or any of its subsidiaries shall be deleted as
of the Effective Time, and the Company shall use its commercially reasonable
best efforts to ensure that following the Effective Time no holder of an
Employee Stock Option, stock appreciation right, restricted stock or derivative
security or any participant in the Company Stock Option Plans or other Benefit
Plan shall have any right thereunder to acquire any capital stock of the Company
or any of its subsidiaries or the Surviving Corporation, except as provided in
Section 2.10 in respect of the Company Stock Option Plans. No participant in the
Company Stock Option Plans shall be entitled to receive any other payment or
benefit thereunder except as provided in Section 2.10.
(d) From and after the Effective Time, the Surviving Corporation
agrees to honor in accordance with their terms all existing employment,
severance, consulting or other compensation agreements or benefit contracts
between the Company or any of its subsidiaries and any officer, director or
employee of the Company or any of its subsidiaries, as the same may be modified
by the Other Agreements, and all benefits or other amounts earned or accrued
through the Effective Time, under the Benefit Plans disclosed in Schedule
3.12(a) of the Company Disclosure Schedule.
(e) No benefits shall be accrued or otherwise earned under an
incentive compensation or bonus plan or arrangement sponsored by the Company or
any of its subsidiaries after the Effective Time.
(f) At, or as soon as practicable, but in any event within 90 days,
after the Effective Time, any bonuses or other incentive compensation accrued
under any plan or arrangement sponsored by the Company or any subsidiary shall
be paid to any officer, director or employee of the Company or any subsidiary
entitled thereto in accordance with the terms of such
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plan or arrangement, provided that in the event that a relevant calculation
-------- ----
period has not closed as of the Effective Time, the amount to be paid shall be a
pro rata portion of the otherwise payable amount (determined, where performance
criteria are applicable, at target levels of award).
(g) For a period of not less than two years from the Effective
Time, Parent shall, or shall cause the Surviving Corporation to, maintain
employee benefit plans, programs and arrangements for former employees of the
Company and its subsidiaries who remain employees of the Surviving Corporation
after the Effective Time that are, in the aggregate, no less favorable than
those provided by the Company and its subsidiaries immediately prior to the
Effective Time. From and after the Effective Time, for purposes of determining
eligibility and vesting (but not for purposes of benefit accrual) under any
severance, compensation, welfare, pension, or other benefit plan or arrangement
of Parent or any of its subsidiaries which, at the election of Parent, employees
of the Company or any of its subsidiaries become eligible to participate in,
service with the Company or any of its subsidiaries (whether before or after the
Effective Time) shall be credited as if such services had been rendered to
Parent or such subsidiary; provided that Parent and Purchaser shall have no
-------- ----
obligation to (i) employ any individual, (ii) include any individual in any
stock option or other equity based compensation or benefit plan or arrangement
or (iii) include any such employees of the Company and its subsidiaries in any
benefit plan of Parent or its subsidiaries.
Section 6.9 Meeting of the Company's Shareholders.
-------------------------------------
(a) To the extent required by applicable law, the Company shall
promptly take all action necessary in accordance with the NYBCL and its
Certificate of Incorporation and Bylaws to convene a meeting of the Company's
shareholders (the "Shareholder Meeting") to consider and vote on the Merger and
this Agreement. At the Shareholder Meeting, all of the Shares then owned by
Parent, Purchaser or any other subsidiary of Parent shall be voted to approve
the Merger and this Agreement. The Board of Directors of the Company shall
recommend that the Company's shareholders vote to approve the Merger and this
Agreement if such vote is sought, shall use its best efforts to solicit from
shareholders of the Company proxies in favor of the Merger and shall take all
other action in its judgment necessary and appropriate to secure the vote of
shareholders required by the NYBCL to effect the Merger.
(b) Parent and Purchaser shall not, and they shall cause their
subsidiaries not to, sell, transfer, assign, encumber or otherwise dispose of
the Shares acquired pursuant to the Offer or otherwise prior to the Shareholder
Meeting; provided, however, that this Section 6.9(b) shall not apply to the
-------- -------
sale, transfer, assignment, encumbrance or other disposition of any or all such
Shares in transactions involving solely Parent, Purchaser and/or one or more of
their wholly owned subsidiaries.
(c) Notwithstanding the foregoing, in the event that Purchaser
shall acquire at least 90% of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, to take all necessary and appropriate action
to cause the Merger to become effective, in accordance
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with Section 905 of the NYBCL, as soon as reasonably practicable after such
acquisition, without a meeting of the shareholders of the Company.
(d) In the event that Purchaser reduces the Minimum Condition as
permitted by Section 1.1(b) and accepts for payment Shares tendered pursuant to
the Offer, which Shares are less than two-thirds of the Fully Diluted Shares,
the Company shall convene a meeting of its shareholders, or take or permit
Purchaser to take such action as may be necessary or desirable, to amend the
Certificate of Incorporation to provide that the requisite vote of the Company's
shareholders on any merger or consolidation (including the Merger) shall be a
majority of the Shares outstanding. At such meeting, all of the Shares then
owned by Parent, Purchaser or any other subsidiary of Parent shall be voted to
approve such amendment.
Section 6.10 Proxy Statement. If required under applicable law, the
---------------
Company and Parent shall prepare the Proxy Statement, file it with the SEC under
the Exchange Act as promptly as practicable after Purchaser purchases Shares
pursuant to the Offer, and use all reasonable efforts to have it cleared by the
SEC. As promptly as practicable after the Proxy Statement has been cleared by
the SEC, the Company shall mail the Proxy Statement to the shareholders of the
Company as of the record date for the Shareholder Meeting.
Section 6.11 Public Announcements. Parent and the Company shall to the
--------------------
fullest extent practicable consult with each other before issuing any press
release or otherwise making any public statement with respect to the Offer, the
Merger and the other Transactions and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) if required by the NYBCL, this Agreement shall have been
approved by the affirmative vote of the shareholders of the Company by the
requisite vote in accordance with applicable law;
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated, or enforced by any
court or Governmental Entity which is in effect and has the effect of
prohibiting the consummation of the Merger; and
(c) the waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act, if any, shall have expired or
been terminated.
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Section 7.2 Conditions to Obligations of Parent and Purchaser to Effect
-----------------------------------------------------------
the Merger. The obligations of Parent and Purchaser to effect the Merger are
- ----------
further subject to the satisfaction or waiver, prior to the Effective Time, of
the following conditions:
(a) Purchaser shall have accepted for payment and paid for Shares
tendered pursuant to the Offer; provided, however, that neither Parent nor
Purchaser shall be entitled to assert the failure of this condition if the
failure of such condition results from a breach by Parent or Purchaser of any of
their obligations under this Agreement.
Section 7.3 Conditions to Obligations of the Company to Effect the
------------------------------------------------------
Merger. The obligation of the Company to effect the Merger is further subject
- ------
to the satisfaction or waiver, prior to the Effective Time, of the following
conditions:
(a) Purchaser shall have accepted for payment and paid for Shares
tendered pursuant to the Offer; provided, however, that the Company shall not be
entitled to assert the failure of this condition if the failure of such
condition results from a breach by the Company of any of its obligations under
this Agreement.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time (notwithstanding
approval thereof by the shareholders of the Company) prior to the Effective
Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and Purchaser;
(b) by Parent, Purchaser or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the consummation of the Offer or the Merger and such
order, decree or ruling or other action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance
which would result in the occurrence and continued existence of any of the
conditions set forth in Annex A hereto, Purchaser shall have (i) failed to
commence the Offer within the time required by Regulation 14D under the Exchange
Act, (ii) terminated the Offer without purchasing any Shares pursuant to the
Offer or (iii) failed to accept for payment Shares pursuant to the Offer prior
to April 30, 1999; provided, however, that the right to terminate this Agreement
-------- -------
under this Section 8.1(c) shall not be available to Parent or Purchaser if the
occurrence and continued existence of any of the conditions set forth in Annex A
hereto results from the breach by Parent or Purchaser of any of their respective
obligations under this Agreement;
-40-
<PAGE>
(d) by the Company (i) if Purchaser shall have (A) failed to
commence the Offer within the time required by Regulation 14D under the Exchange
Act, (B) terminated the Offer without purchasing any Shares pursuant to the
Offer or (C) failed to accept for payment Shares pursuant to the Offer prior to
April 30, 1999; provided, however, that the right to terminate this Agreement
-------- -------
under this Section 8.1(d)(i) shall not be available to the Company if such
failure results from the breach by the Company of any of its obligations under
this Agreement or if there shall have occurred any of the events set forth in
paragraph (g) of Annex A, and the right to terminate this Agreement under this
Section 8.1(d)(i) shall not be available to the Company prior to April 30, 1999
if there shall have occurred any of the events set forth in paragraph (i) of
Annex A, or (ii) prior to the purchase of Shares pursuant to the Offer,
concurrently with the execution of an Acquisition Agreement under the
circumstances permitted by Section 6.1 provided, that such termination under
-------- ----
this clause (ii) shall not be effective unless (x) the Company and its Board of
Directors shall have also complied with all their obligations under Section 6.1
and shall have paid the Termination Fee and the Expenses pursuant to Section 8.3
and (y) the Company provides Purchaser with at least five business days' prior
written notice prior to terminating this Agreement, which notice shall be
accompanied by (1) a copy of the proposed Acquisition Agreement with respect to
the Superior Proposal that the Company proposes to accept and (2) the Company's
written certification that it has made the determinations with respect to such
Superior Proposal set forth in clauses (A) and (B) of the proviso in Section
6.1(b) and representation that the Company will, in the absence of any other
superior Acquisition Proposal, execute such Acquisition Agreement unless Parent
or Purchaser modify the Offer or this Agreement such that the Company's Board of
Directors reasonably believes in good faith after consultation with its
independent legal counsel and financial advisors that the Offer and the Merger
(as so modified) are at least as favorable as such Superior Proposal; or
(e) by the Company prior to the purchase of Shares pursuant to the
Offer if (i) there shall have been a material breach of any representation or
warranty in this Agreement on the part of Parent or Purchaser which materially
adversely affects (or materially delays) the consummation of the Offer or (ii)
Parent or Purchaser shall not have performed or complied with, in all material
respects (without reference to any materiality qualifications therein), each
covenant or agreement contained in this Agreement and required to be performed
or complied with by them, and such breach materially adversely affects (or
materially delays) the consummation of the Offer, and which breach, in the case
of clause (i) and clause (ii) above, shall not have been cured prior to the
earlier of (A) 10 days following notice of such breach and (B) two business days
prior to the date on which the Offer expires; provided, however, that Parent and
-------- -------
Purchaser shall have no right to cure such breach and the Company may
immediately terminate this Agreement in the event that such breach by Parent or
Purchaser was willful or intentional.
Section 8.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 8.1, this Agreement, except
for the provisions of Sections 6.3, 8.2, 8.3, 9.3, 9.4 and 9.7, shall forthwith
become void and have no effect, without any liability on the part of any party
or its affiliates, directors, officers or shareholders. Nothing in this Section
8.2 shall relieve any party to this Agreement of liability for breach of this
Agreement.
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<PAGE>
Section 8.3 Termination Fee and Expense Fee.
-------------------------------
(a) Except as provided in Section 8.3(b) of this Agreement, all
fees and expenses incurred by the parties hereto shall be borne solely and
entirely by the party which has incurred such fees and expenses.
(b) If:
(i) Parent or Purchaser terminate this Agreement pursuant
to Section 8.1(c) (in circumstances other than those described in clause
(ii) below) or the Company terminates this Agreement pursuant to Section
8.1(d)(i), in either case, in circumstances when, prior to such termination
any third party shall have acquired beneficial ownership of 20% or more of
the outstanding Shares or shall have consummated an Acquisition Proposal
(or with respect to any proposal that may be existing on the date hereof
and which becomes publicly known prior to such termination, not withdrawn
such Acquisition Proposal), or such third party has publicly made or
announced an intention to make or consummate an Acquisition Proposal (or
the making of such Acquisition Proposal or such intention has otherwise
become publicly known), and, in any such case, within 12 months of such
termination thereafter (x) the Company or any of its subsidiaries enters
into an Acquisition Agreement with respect to an Acquisition Proposal with
such party, or (y) such party or any other party otherwise consummates an
Acquisition Proposal;
(ii) Parent or Purchaser terminates this Agreement pursuant
to Section 8.1(c) and (x) the Company shall have willfully and
intentionally breached its obligations under Section 6.1, or (y) there
shall have occurred any of the events set forth in paragraph (g) of Annex A
of this Agreement; or
(iii) the Company terminates this Agreement pursuant to
Section 8.1(d)(ii).
then, in each case, the Company (A) shall pay to Parent, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such termination pursuant to Section
8.1(d)(ii), a fee, in cash, of $11 million (a "Termination Fee"); provided that
-------- ----
the Company in no event shall be obligated to pay more than one such Termination
Fee with respect to all such agreements and occurrences and such termination and
(B) shall reimburse Parent and Purchaser for all their out-of-pocket fees and
expenses actually incurred by Parent, Purchaser or their respective affiliates
in connection with this Agreement, the Offer, the Merger, the Tender and Option
Agreement and the other transactions contemplated by this Agreement, including
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to each of Parent or Purchaser and their respective affiliates and
the expenses of the preparation, printing, filing and mailing of the Offer
Documents, such fees and expenses not to exceed $2 million (the "Expenses"). Any
payment required to be made pursuant to this subsection (b) shall be made to
Parent by wire transfer of
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<PAGE>
immediately available funds to an account designated by Parent. The provisions
of this Section 8.3 shall not derogate from any other rights or remedies which
Parent or Purchaser may possess under this Agreement (including as provided in
Section 9.3) or under applicable law.
Section 8.4 Amendment. To the extent permitted by applicable law, this
---------
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and Purchaser at any time before or after
approval of this Agreement by the shareholders of the Company but, after any
such shareholder approval, no amendment shall be made that by law requires the
further approval of such shareholders without the approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
-----------------
a party 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 of the other parties contained herein or in any
documents, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties hereto
contained herein; provided that (i) from and after the consummation of the
-------- ----
Offer, no extensions or waivers shall be made which materially adversely affect
the rights of the Company's shareholders hereunder without the approval of a
majority of the Independent Directors if at the time there shall be any
Independent Directors and (ii) after the approval of the Merger by the
shareholders of the Company, no extensions or waivers shall be made that by law
require further approval by such shareholders without the approval of such
shareholders. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Non-Survival of Representations and Warranties. None of the
----------------------------------------------
representations and warranties made in this Agreement shall survive after the
Effective Time. This Section 9.1 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time.
Section 9.2 Entire Agreement; Assignment. This Agreement (including the
----------------------------
Company Disclosure Schedule), the Tender and Option Agreement, the Other
Agreements and, to the extent contemplated in Section 6.3, the Confidentiality
Agreement, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise, provided that Parent or Purchaser may assign any of their
rights and obligations to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent
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<PAGE>
or Purchaser of its obligations hereunder. Any of Parent, Purchaser or any
direct or indirect wholly owned subsidiary of Parent may purchase Shares under
the Offer. Any attempted assignment in violation of this Section 9.2 shall be
void. Subject to the preceding sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Section 9.3 Enforcement of the Agreement. The parties agree that
----------------------------
irreparable damage would occur to the other parties hereto in the event that any
of the provisions of this Agreement were not performed by the parties hereto in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any federal or state court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity including those set forth
in Section 8.3 of this Agreement. Each party further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
Section 9.4 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
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
Section 9.5 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given upon receipt if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
or sent by electronic transmission to the telecopier number specified below (or
at such other address or telecopy number of a party as shall be specified by
like notice):
if to Parent or Purchaser:
Rohm and Haas Company
100 Independence Mall West
Philadelphia, PA 19106
Attention: John S. Stroebel
Telecopy: 215-592-3227
-44-
<PAGE>
Lightning Acquisition Corp.
Suite 104 - Rodney Building
3411 Silverside Road
Wilmington, DE 19810
Attention: John S. Stroebel
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: William G. Lawlor
Telecopy: 215-994-2222
if to the Company:
LeaRonal, Inc.
272 Buffalo Avenue
Freeport, NY 11520
Attention: Ronald F. Ostrow
Telecopy: 516-867-5917
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Robert F. Quaintance, Jr.
Telecopy: 212-909-6836
Notice given by telecopier shall be deemed received on the day the sender
receives telecopier confirmation that such notice was received at the telecopier
number of the addressee. Notice given by mail as set out above shall be deemed
received three days after the date the same is postmarked.
Section 9.6 Failure or Indulgence Not Waiver; Remedies Cumulative. No
-----------------------------------------------------
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
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<PAGE>
Section 9.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the substantive laws of the State of New York
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
Section 9.8 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 9.9 Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for Section 6.5 (which is intended to be for the benefit of the persons
entitled to therein, and may be enforced by such persons).
Section 9.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.11 Certain Definitions. For purposes of this Agreement
-------------------
(including Annex A hereto), the following terms shall have the meanings ascribed
to them below:
(a) "affiliate" of a person shall mean (i) 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 and (ii) an
"associate", as that term is defined in Rule 12b-2 promulgated under the
Exchange Act as in effect on the date of this Agreement.
(b) "beneficial owner" (including the term "beneficially own" or
correlative terms) shall have the meaning ascribed to such term under Rule 13d-
3(a) under the Exchange Act.
(c) "business day" shall have the meaning ascribed to such term
under Rule 14d-1 of the Exchange Act.
(d) "Company Disclosure Schedule" shall mean a letter dated the
date of the Agreement delivered by the Company to Parent and Purchaser
concurrently with the execution of the Agreement, which, among other things,
shall identify exceptions to the Company's representations and warranties
contained in Article III and covenants contained in Article V.
(e) "control" (including the terms "controlling," "controlled by"
and "under common control with" or correlative terms) shall mean the possession,
directly or indirectly or as trustee or executor, of the power to direct or
cause the direction of the management and policies of a person, whether through
ownership of voting securities or as trustee or executor, by contract or credit
arrangement, or otherwise.
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<PAGE>
(f) "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options (including the Options), warrants, rights and securities exercisable or
convertible into such voting securities; provided that Parent may, at its option
exercisable in its sole discretion, exclude from the calculation of Fully
Diluted Shares any Options which are not exercisable at the time such
calculation is made and which will not become exercisable by their terms prior
to April 30, 1999.
(g) "group" shall have the meaning ascribed to such term under
Section 13(d)(3) of the Exchange Act.
(h) "Material Adverse Effect" shall mean (i) any adverse change or
effect in the financial condition, assets, liabilities, business, properties or
results of operations of a specified person or its subsidiaries (other than
changes or effects relating to general economic, financial or industry
conditions), which change or effect is material, individually or in the
aggregate, to the specified person and its subsidiaries taken as a whole, or
(ii) any event, matter, condition or effect which prevents or materially delays
consummation of the Transactions.
(i) "person" shall mean a natural person, company, corporation,
partnership, association, trust or any unincorporated organization.
(j) "subsidiary" shall mean, when used with reference to a person
means a corporation the majority of the outstanding voting securities of which
are owned directly or indirectly by such person.
Each of the following terms is defined as set forth in the following
sections of this Agreement:
<TABLE>
<CAPTION>
Term Section Term Section
- ---- ------- ---- -------
<S> <C> <C> <C>
1990 Plan 2.10 Liens 3.1(c)
1996 Plan 2.10 Material Business 6.1(d)
Acquisition Agreement 6.1(b) Merger Background
Acquisition Proposal 6.1(d) Merger Consideration 2.6(iii)
Agreement Preamble New York Department 2.2
Benefit Plans 3.12(a) NYBCL Background
Cash Payment 2.10 Offer Background
Certain Stockholders Background Offer Documents 1.1(c)
Certificate of Incorporation 2.4(a) Offer Price Background
Certificate of Merger 2.2 Offer to Purchase 1.1(c)
Certificates 2.8(b) Option 2.10
Closing 2.11 Other Agreements Background
Code 3.12(b) Parent Preamble
Company Preamble Paying Agent 2.8(a)
</TABLE>
-47-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Company Common Stock Background PBGC 3.12(g)
Company Financial Advisor 3.8 Pension Plan 3.12(d)
Company SEC Documents 3.5 Permits 3.15(a)
Company Shareholder Approval 3.3(b) Proxy Statement 3.6
Company Stock Option Plans 2.10 Purchaser Preamble
Contract 3.17 Releases 3.15(c)
D&O Insurance 6.5(a) Schedule 14D-1 1.1(c)
Dissenting Shares 2.7(a) Schedule 14D-9 1.2(b)
Effective Time 2.2 SEC 1.1(b)
Environmental Claim 3.15(d) Securities Act 3.2(c)
Environmental Laws 3.15(b) Shareholder Meeting 6.9(a)
Environmental Liabilities 3.15(d) Shares Background
Environmental Permit 3.15(a) Significant Subsidiary 3.1(b)
ERISA 3.12(a) Specified Subsidiary 3.12(a)
Exchange Act 1.1(a) Superior Proposal 6.1(d)
Expenses 8.3(b)(iii) Surviving Corporation 2.1
Filed Company SEC Documents 3.4 Taxes 3.13
Governmental Entity 3.7 Tax Returns 3.13
GWB Act 3.7 Tender and Option Agreement Background
Hazardous Material 3.15(c) Termination Fee 8.3(b)
HSR Act 4.4 Transactions 1.2(a)
Independent Director 1.4 Voting Company Debt 3.2(b)
Intellectual Property 3.21 Year 2000 Compliant 3.14
</TABLE>
Section 9.12 Interpretation. The words "hereof," "herein" and "herewith"
--------------
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." All terms defined in this Agreement shall have
the defined meanings contained herein when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements and
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, on the day
and year first above written.
ROHM AND HAAS COMPANY
ATTEST:
/s/ John S. Stroebel By /s/ Rajiv L. Gupta
- --------------------------------- ---------------------------------
Vice President
LIGHTNING ACQUISITION CORP.
ATTEST:
/s/ John S. Stroebel By /s/ Bradley J. Bell
- --------------------------------- ---------------------------------
Vice President
LEARONAL, INC.
ATTEST:
/s/ Richard Kessler By /s/ Ronald F. Ostrow
- --------------------------------- ---------------------------------
President
-49-
<PAGE>
ANNEX A
to
Agreement and Plan of Merger
----------------------------
Conditions to the Offer. Notwithstanding any other provision of the
Offer but subject to the terms and conditions of the Merger Agreement, in
addition to (and not in limitation of) Purchaser's rights pursuant to the
Agreement to extend and amend the Offer in accordance with the Merger Agreement,
Purchaser shall not be required to accept for payment or, subject to Rule 14e-
1(c) of the Exchange Act, pay for and may delay the acceptance for payment of
or, subject to Rule 14e-1(c) of the Exchange Act, the payment for, any Shares
not theretofore accepted for payment or paid for, and may terminate or amend the
Offer if (i) a number of Shares representing at least two thirds of the Fully
Diluted Shares shall not have been validly tendered and not withdrawn
immediately prior to the expiration of the Offer (the "Minimum Condition"), (ii)
any applicable waiting period under the HSR Act shall not have expired or been
terminated or (iii) at any time on or after the date of the Merger Agreement and
prior to the time of acceptance of such Shares for payment or the payment
therefor, any of the following conditions has occurred and continues to exist
(and in the case of the conditions set forth in paragraph (c), continue to exist
as of the scheduled expiration date of the Offer or have continued to exist for
at least the previous 10 business days), other than as a result of a breach by
Parent or Purchaser of its obligations under the Merger Agreement (including,
without limitation, Section 6.4 thereof):
(a) the representation and warranty set forth in Section 3.2(a) shall
not be true and correct in all material respects or any other representations
and warranties of the Company in the Agreement (without regard to any
materiality qualifiers contained therein) shall not be true and correct as of
such time (other than to the extent such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall not be true and correct as of such date) except where the
failure of such representations and warranties to be true and correct would not
be reasonably likely to have a Material Adverse Effect on the Company and except
where such failure shall have been cured prior to the earlier of (i) 10 business
days following notice of such breach and (ii) two business days prior to the
date on which the Offer expires; provided, however, that the Company shall have
-------- -------
no right to cure such breach in the event that such breach by the Company was
willful or intentional);
(b) the Company shall not have performed and complied with, in all
material respects (without reference to any materiality qualifications therein),
all material covenants or agreements contained in the Agreement and required to
be performed or complied with by it and which breach shall not have been cured
prior to the earlier of (i) 10 business days following notice of such breach and
(ii) two business days prior to the date on which the Offer expires; provided,
--------
however, that the Company shall have no right to cure such breach in the event
- -------
that such breach by the Company was willful or intentional or if such breach
involves a breach of Section 6.1 of the Agreement;
<PAGE>
(c) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange (excluding any coordinated trading halt triggered as a
result of a specified decrease in a market index), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States by any Governmental Entity, (iii) any mandatory limitation by any
Governmental Entity on, or other event that materially and adversely affects,
the extension of credit by banks or other lending institutions, (iv) a
commencement of a war, armed hostilities or other national or international
calamity directly or indirectly involving the United States, (v) any material
adverse change in United States currency exchange rates or a suspension of, or
limitation on, the markets therefor or (vi) in the case of any of the foregoing
existing on the date of the Agreement, a material acceleration or worsening
thereof;
(d) there shall have been instituted or pending any suit, action,
investigation or proceeding ("Actions") by any Governmental Entity, or Parent,
Purchaser or the Company shall have been notified by any Governmental Entity (or
a representative thereof) of its present intention to commence, or recommend the
commencement of, such an Action, (i) challenging the acquisition by Parent or
Purchaser of any Shares, seeking to make illegal, materially delay, make
materially more costly or otherwise directly or indirectly restrain or prohibit
the making or consummation of the Offer and the Merger or any of the other
Transactions, or seeking to obtain from the Company, Parent or Purchaser any
damages that are material in relation to the Company and its subsidiaries taken
as whole, (ii) seeking to prohibit or materially limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries or
affiliates of a material portion of the businesses or assets of the Company and
its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, or to compel the Company, Parent or any of their respective subsidiaries
or affiliates to dispose of or hold separate a material portion of the
businesses or assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, or any of their respective
subsidiaries or affiliates, as a result of the Offer, the Merger or any of the
other Transactions, (iii) seeking to impose material limitations on the ability
of Parent or Purchaser to acquire or hold, or exercise full rights of ownership
of, any Shares accepted for payment pursuant to the Offer including, without
limitation, the right to vote the Shares accepted for payment by it on all
matters properly presented to the shareholders of the Company, (iv) seeking to
prohibit Parent or any of its subsidiaries or affiliates from effectively
controlling in any material respect a material portion of the business or
operations of the Company and its subsidiaries, taken as a whole, (v) requiring
divestiture by Purchaser or any of its affiliates of any Shares or (vi) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company
or Parent;
(e) there shall be any statute, rule, regulation, judgment, order or
injunction (including with respect to competition or antitrust matters) enacted,
entered, enforced, promulgated or issued with respect to or deemed applicable
to, or any consent or approval withheld, or any other action shall be taken with
respect to (i) Parent, the Company or any of their respective subsidiaries or
affiliates or (ii) the Offer or the Merger or any of the other Transactions by
any Governmental Entity or court, including without limitation any required
approvals or waiting periods under the GWB Act, other than the application to
the Offer or the Merger or any of the other Transactions of applicable waiting
periods under the HSR Act, that has resulted or is
-2-
<PAGE>
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) though (v) of paragraph (d) above;
(f) since the date of the Agreement there shall have occurred any
event, change, effect or development that, individually or in the aggregate, has
had or is reasonably likely to have, a Material Adverse Effect on the Company;
(g) the Board of Directors of the Company or any committee thereof
shall have (i) withdrawn, or modified, amended or changed (including by
amendment of the Schedule 14D-9), in a manner adverse to Parent or Purchaser,
its approval or recommendation of the Offer, the Merger Agreement and the Merger
or any of the other Transactions, (ii) approved or recommended to the Company's
stockholders an Acquisition Proposal or any other acquisition of Shares other
than the Offer and the Merger or (iii) adopted any resolution to effect any of
the foregoing;
(h) the Merger Agreement shall have been terminated in accordance
with its terms; or
(i) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent, Purchaser, any of their
affiliates, or any group of which any of them is a member, shall have acquired
beneficial ownership of more than 20 percent of the Shares or shall have
consummated or entered into a definitive agreement or an agreement in principle
to consummate an Acquisition Proposal;
which, in the sole judgment of Purchaser, in any such case, makes it
inadvisable to proceed with the Offer or with such acceptance for payment,
purchase of, or payment for Shares.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may, subject to the terms of the Merger Agreement, be waived by Purchaser or
Parent, in whole or in part, at any time and from time to time, in the sole
discretion of Purchaser or Parent. The failure by Purchaser or Parent or any of
their respective affiliates at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right, the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts and circumstances and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
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<PAGE>
Exhibit 4
Tender and Option Agreement, dated as of December 20, 1998 among Parent,
Purchaser, the Company and certain stockholders of the Company.
<PAGE>
TENDER AND OPTION AGREEMENT
---------------------------
TENDER AND OPTION AGREEMENT, dated as of December 20, 1998 (the
"Agreement"), among Rohm and Haas Company, a Delaware corporation ("Parent"),
Lightning Acquisition Corp., a New York corporation and a wholly owned
subsidiary of Parent ("Purchaser"), LeaRonal, Inc., a New York corporation (the
"Company") and each of the persons listed on Schedule A hereto (each a
"Stockholder" and, collectively, the "Stockholders").
WHEREAS, Parent, Purchaser and the Company propose to enter into an
Agreement and Plan of Merger dated as of the date hereof (as the same may be
amended or supplemented, the "Merger Agreement") providing for, among other
things, the making of a cash tender offer (as such offer may be amended from
time to time as permitted under the Merger Agreement, the "Offer") by Purchaser
for all of the issued and outstanding shares of common stock, par value $1.00
per share, of the Company (referred to herein as either the "Shares" or "Company
Common Stock") and the merger of the Company and Purchaser on the terms and
conditions set forth in the Merger Agreement (the "Merger");
WHEREAS, each Stockholder is the beneficial owner of the Shares set
forth opposite such Stockholder's name on Schedule A hereto; such Shares, as
such Shares may be adjusted by stock dividend, stock split, recapitalization,
combination or exchange of shares, merger, consolidation, reorganization or
other change or transaction of or by the Company, together with Shares issuable
upon the exercise of options (including the Options set forth in Schedule A) (as
the same may be adjusted as aforesaid), being collectively referred to herein as
the "Shares" of such Stockholder; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested that the Stockholders enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
Section 1. Certain Definitions. Capitalized terms used but not
-------------------
otherwise defined herein have the meanings ascribed to such terms in the Merger
Agreement.
Section 2. Representations and Warranties of the Stockholders. Each
--------------------------------------------------
Stockholder, severally and not jointly, represents and warrants to Parent and
Purchaser, as of the date hereof and as of the Closing (as defined below), as
follows:
(a) The Stockholder is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which meaning will apply for all purposes of this Agreement) of, and has
good title to, all of the Shares (including the Options), free and clear of any
mortgage, pledge, hypothecation, rights of others, claim, security
<PAGE>
interest, charge, encumbrance, title defect, title retention agreement, voting
trust agreement, interest, option, lien, charge or similar restriction or
limitation, including any restriction on the right to vote, sell or otherwise
dispose of the Shares (each, a "Lien"), except as set forth in this Agreement.
(b) The Shares (including the Options) constitute all of the
securities (as defined in Section 3(a)(10) of the Exchange Act, which definition
will apply for all purposes of this Agreement) of the Company beneficially
owned, directly or indirectly, by the Stockholder.
(c) Except for the Shares (including the Options), the
Stockholder does not, directly or indirectly, beneficially own or have any
option, warrant or other right to acquire any securities of the Company that are
or may by their terms become entitled to vote or any securities that are
convertible or exchangeable into or exercisable for any securities of the
Company that are or may by their terms become entitled to vote, nor is the
Stockholder subject to any Contract, commitment, arrangement, understanding,
restriction or relationship (whether or not legally enforceable), other than
this Agreement, that provides for such Stockholder to vote or acquire any
securities of the Company. The Stockholder holds exclusive power to vote the
Shares and has not granted a proxy to any other person (as defined in the Merger
Agreement, which meaning will apply for all purposes of this Agreement) to vote
the Shares, subject to the limitations set forth in this Agreement.
(d) This Agreement has been duly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Parent and Purchaser, is a valid and binding obligation of the
Stockholder enforceable against the Stockholder in accordance with its terms.
(e) Neither the execution and delivery of this Agreement nor
the performance by the Stockholder of the Stockholder's obligations hereunder
will conflict with, result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would result in a
default) or give rise to any right of termination, amendment, cancellation, or
acceleration or result in the creation of any Lien on any Shares under, (i) any
Contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which the Stockholder is a party or by which the Stockholder is
bound or (ii) any injunction, judgment, writ, decree, order or ruling applicable
to the Stockholder; except for conflicts, violations, breaches, defaults,
terminations, amendments, cancellations, accelerations or Liens that would not
individually or in the aggregate be reasonably expected to prevent or materially
impair or delay the consummation by such Stockholder of the transactions
contemplated hereby.
(f) Neither the execution and delivery of this Agreement nor
the performance by the Stockholder of the Stockholder's obligations hereunder
will violate any law, decree, statute, rule or regulation applicable to the
Stockholder or require any order, consent, authorization or approval of, filing
or registration with, or declaration or notice to, any court, administrative
agency or other governmental body or authority, other than any required notices
or filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the "HSR
Act"), foreign antitrust or competition laws or the federal securities laws.
-2-
<PAGE>
(g) The Stockholder understands and acknowledges that Parent is
entering into, and causing Purchaser to enter into, the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this Agreement.
Section 3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to Parent and Purchaser, as of the date hereof and as of
the Closing, as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery of this
Agreement by the Stockholders, Parent and Purchaser, is a valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor
the performance by the Company of its obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration or result in
the creation of any Lien on the assets or properties of the Company under, (i)
its certificate of incorporation or bylaws, (ii) any Contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which the
Company is a party or by which the Company is bound or (iii) any judgment, writ,
decree, order or ruling applicable to the Company; except in the case of clauses
(ii) and (iii) for conflicts, violations, breaches, defaults, terminations,
amendments, cancellations, accelerations or Liens that would not individually or
in the aggregate be reasonably expected to prevent or materially impair or delay
the consummation by the Company of the transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor
the performance by the Company of its obligations hereunder will violate any
law, decree, statute, rule or regulation applicable to the Company or require
any order, consent, authorization or approval of, filing or registration with,
or declaration or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the HSR Act, foreign antitrust or competition laws or the federal
securities laws.
(e) The Company has taken all necessary corporate or other
action (including approval by the Board of Directors of the Company) to render
inapplicable to this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby Section 912 of the NYBCL.
Section 4. Representations and Warranties of Parent and Purchaser.
------------------------------------------------------
Parent and Purchaser represent and warrant to the Stockholders, as of the date
hereof and as of the Closing, as follows:
-3-
<PAGE>
(a) Each of Parent and Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of their
respective jurisdiction of incorporation, has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement.
(b) This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming the due authorization, execution and delivery
of this Agreement by the Company and the Stockholders, is a valid and binding
obligation of each of Parent and Purchaser, enforceable against each of them in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor
the performance by Parent and Purchaser of their respective obligations
hereunder will conflict with, result in a violation or breach of, or constitute
a default (or an event that, with notice or lapse of time or both, would result
in a default) or give rise to any right of termination, amendment, cancellation,
or acceleration under, (i) their respective certificates of incorporation or
bylaws, (ii) any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Parent or Purchaser is a party or by which
Parent or Purchaser is bound or (iii) any judgment, writ, decree, order or
ruling applicable to Parent or Purchaser; except in the case of clauses (ii) and
(iii) for conflicts, violations, breaches or defaults that would not
individually or in the aggregate be reasonably expected to prevent or materially
impair or delay the consummation by Parent or Purchaser of the transactions
contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor
the performance by Parent and Purchaser of their respective obligations
hereunder will violate any law, decree, statute, rule or regulation applicable
to Parent or Purchaser or require any order, consent, authorization or approval
of, filing or registration with, or declaration or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act or the federal securities
laws.
(e) Any Shares acquired upon exercise of the Purchase Option
(as defined below) will be acquired for Parent's or Purchaser's own account, for
investment purposes only and will not be, and the Purchase Option is not being,
acquired by Parent and Purchaser with a view to public distribution thereof in
violation of any applicable provisions of the Securities Act of 1933, as amended
(the "Securities Act").
Section 5. Transfer of the Shares. During the term of this Agreement,
----------------------
except as otherwise expressly provided herein, each Stockholder agrees that such
Stockholder will not (a) tender into any tender or exchange offer or otherwise
sell, transfer, pledge, assign, hypothecate or otherwise dispose of, or encumber
with any Lien, any of the Shares, except for (i) transfers to any spouse or
descendant (including by adoption) of such Stockholder, or any trust or
retirement plan or account for the benefit of such Stockholder, spouse or
descendant; provided any such transferee agrees in writing to be bound by the
terms of this Agreement and (ii) transfers by operation of law provided that any
such transferee shall be bound by the terms of this Agreement, (b) acquire any
shares of Company Common Stock or other securities of the Company (otherwise
than in connection with a transaction of the type described in Section 6 or by
exercising any of the
-4-
<PAGE>
Options), (c) deposit the Shares into a voting trust, enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect to the Shares, (d) enter into any Contract, option or
other arrangement (including any profit sharing arrangement) or undertaking with
respect to the direct or indirect acquisition or sale, transfer, pledge,
assignment, hypothecation or other disposition of any interest in or the voting
of any Shares or any other securities of the Company or (e) take any other
action that would in any way restrict, limit or interfere with the performance
of such Stockholder's obligations hereunder or the transactions contemplated
hereby or which would otherwise diminish the benefits of this Agreement to
Parent or Purchaser.
Section 6. Adjustments.
-----------
(a) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing a Stockholder's
ownership of the Company's capital stock or other securities or (ii) a
Stockholder becomes the beneficial owner of any additional Shares of or other
securities of the Company, then the terms of this Agreement will apply to the
shares of capital stock held by such Stockholder immediately following the
effectiveness of the events described in clause (i) or such Stockholder becoming
the beneficial owner thereof, as described in clause (ii), as though they were
Shares hereunder.
(b) Each Stockholder hereby agrees, while this Agreement is in
effect, to promptly notify Parent and Purchaser of the number of any new Shares
acquired by such Stockholder, if any, after the date hereof.
Section 7. Tender of Shares. Each Stockholder hereby agrees that such
----------------
Stockholder will validly tender (or cause the record owner of such shares to
validly tender) and sell (and not withdraw, except in the event the Purchase
Option is exercised, in which case such withdrawal shall be for the limited
purpose of consummating the Purchase Option) pursuant to and in accordance with
the terms of the Offer not later than the fifth business day after commencement
of the Offer (or the earlier of the expiration date of the Offer and the fifth
business day after such Shares are acquired by such Stockholder if the
Stockholder acquires Shares after the date hereof), or, if the Stockholder has
not received the Offer Documents by such time, within two business days
following receipt of such documents, all of the then outstanding shares of
Company Common Stock beneficially owned by such Stockholder (including the
shares of Company Common Stock outstanding as of the date hereof and set forth
on Schedule A hereto opposite such Stockholder's name). Upon the purchase by
Purchaser of all of such then outstanding shares of Company Common Stock
beneficially owned by such Stockholder pursuant to the Offer in accordance with
this Section 7, this Agreement will terminate as it relates to such Stockholder.
In the event, notwithstanding the provisions of the first sentence of this
Section 7, any Shares beneficially owned by a Stockholder are for any reason
withdrawn from the Offer or are not purchased pursuant to the Offer, such Shares
will remain subject to the terms of this Agreement. Each Stockholder
acknowledges that Purchaser's obligation to accept for payment and pay for the
shares of Company Common Stock tendered in the Offer is subject to all the terms
and conditions of the Offer.
-5-
<PAGE>
Section 8. Voting Agreement. Each Stockholder, by this Agreement,
----------------
does hereby (a) agree to appear (or not appear, if requested by Parent or
Purchaser) at any annual, special, postponed or adjourned meeting of the
stockholders of the Company or otherwise cause the Shares such Stockholder
beneficially owns to be counted as present (or absent, if requested by Parent or
Purchaser) thereat for purposes of establishing a quorum and to vote or consent,
and (b) constitute and appoint Parent and Purchaser, or any nominee thereof,
with full power of substitution, during and for the term of this Agreement, as
his true and lawful attorney and proxy for and in his name, place and stead, to
vote all the Shares such Stockholder beneficially owns at the time of such vote,
at any annual, special, postponed or adjourned meeting of the stockholders of
the Company (and this appointment will include the right to sign his or its name
(as stockholder) to any consent, certificate or other document relating to the
Company that laws of the State of New York may require or permit), in the case
of both (a) and (b) above, (x) in favor of approval and adoption of the Merger
Agreement and approval and adoption of the Merger and the other transactions
contemplated thereby and (y) against (1) any Acquisition Proposal, (2) any
action or agreement that would result in a breach in any respect of any
covenant, agreement, representation or warranty of the Company under the Merger
Agreement and (3) the following actions (other than the Merger and the other
transactions contemplated by the Merger Agreement): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries; (ii) a sale, lease
or transfer of a material amount of assets of the Company or any of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries; (iii) (A) any change in a majority of
the persons who constitute the board of directors of the Company or any of its
subsidiaries as of the date hereof; (B) any change in the present capitalization
of the Company or any amendment of the Company's or any of its subsidiaries'
certificate of incorporation or bylaws, as amended to date; (C) any other
material change in the Company's or any of its subsidiaries' corporate structure
or business; or (D) any other action that is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or adversely affect the
Offer, the Merger and the other transactions contemplated by this Agreement and
the Merger Agreement. This proxy and power of attorney is a proxy and power
coupled with an interest, and each Stockholder declares that it is irrevocable
until this Agreement shall terminate in accordance with its terms. Each
Stockholder hereby revokes all and any other proxies with respect to the Shares
that such Stockholder may have heretofore made or granted. For Shares as to
which a Stockholder is the beneficial but not the record owner, such Stockholder
shall use his or its best efforts to cause any record owner of such Shares to
grant to Parent a proxy to the same effect as that contained herein. Each
Stockholder hereby agrees to permit Parent and Purchaser to publish and disclose
in the Offer Documents and the Proxy Statement and related filings under the
securities laws such Stockholder's identity and ownership of Shares and the
nature of his or its commitments, arrangements and understandings under this
Agreement. Notwithstanding the foregoing, Alonna Ostad, Sharone N. Ostrow and
Jonathan Ostrow are not bound by the terms of this Section 8.
Section 9. No Solicitation. Each Shareholder agrees that neither such
---------------
Stockholder nor any of such Stockholder's officers, directors, employees,
trustees, representatives, agents or affiliates (including, without limitation,
any investment banker, attorney or accountant retained by any of them) will
directly or indirectly initiate, solicit or encourage (including by way of
furnishing
-6-
<PAGE>
non-public information or assistance), or take any other action to facilitate,
any inquiries or the making or submission of any Acquisition Proposal, or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain or induce any person to make or
submit an Acquisition Proposal or agree to or endorse any Acquisition Proposal
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person or entity to do or seek any of the foregoing or authorize or
permit any of its officers, directors, employees, trustees or any of its
affiliates or any investment banker, financial advisor, attorney, accountant or
other representative or agent retained by any of them to take any such action.
Each Stockholder shall immediately advise Parent in writing of the receipt of
request for information or any inquiries or proposals relating to an Acquisition
Proposal.
Section 10. Grant of Purchase Option. The Stockholder hereby grants
------------------------
to Parent and Purchaser an irrevocable option (the "Purchase Option") to
purchase for cash, in a manner set forth below, any or all of the Shares (and
including Shares acquired after the date hereof by such Stockholder)
beneficially owned by the Stockholder at a price (the "Exercise Price") per
Share equal to $34.00 (the "Offer Price"). In the event of any stock dividends,
stock splits, recapitalizations, combinations, exchanges of shares or the like,
the Offer Price will be appropriately adjusted for the purpose of this Section
10.
Section 11. Exercise of Purchase Option.
---------------------------
(a) Subject to the conditions set forth in Section 13 hereof,
the Purchase Option may be exercised by Parent or Purchaser, in whole or in
part, at any time or from time to time after the occurrence of any Trigger Event
(as defined below). The Company and each Stockholder shall notify Parent
promptly in writing of the occurrence of any Trigger Event, it being understood
that the giving of such notice by the Company or the Stockholder is not a
condition to the right of Parent or Purchaser to exercise the Purchase Option.
In the event Parent or Purchaser wishes to exercise the Purchase Option, Parent
shall deliver to each Stockholder a written notice (an "Exercise Notice")
specifying the total number of Shares it wishes to purchase from such
Stockholder. Each closing of a purchase of Shares (a "Closing") will occur at a
place, on a date and at a time designated by Parent or Purchaser in an Exercise
Notice delivered at least two business days prior to the date of the Closing.
(b) A "Trigger Event" means any one of the following: (i) the
Merger Agreement becomes terminable under circumstances that entitle Parent or
Purchaser to receive the Termination Fee or the Expenses under Section 8.3(b) of
the Merger Agreement (regardless of whether the Merger Agreement is actually
terminated and whether such Termination Fee or Expenses are then actually paid),
(ii) the Offer is consummated but, due to the failure of the Stockholder to
validly tender and not withdraw all of the then outstanding shares of Company
Common Stock beneficially owned by such Stockholder, the Purchaser has not
accepted for payment or paid for all of such shares of Company Common Stock,
(iii) a tender or exchange offer for at least 20% of the shares of Company
Common Stock shall have been publicly proposed to be made or shall have been
made by another person, or (iv) it shall have been publicly disclosed or Parent
or Purchaser shall have otherwise learned that (A) any person or "group" (as
defined in Section 13(d)(3) of the Exchange Act) (other than Parent or
Purchaser) shall have acquired or proposed to acquire beneficial ownership of
more than 20% of any class or series of capital stock
-7-
<PAGE>
of the Company (including the Company Common Stock), through the acquisition of
stock, the formation of a group or otherwise, or shall have been granted any
option, right or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 20% of any class or series of capital stock of the
Company or any of its subsidiaries, or (B) any person or group (other than
Parent and Purchaser) shall have entered into or publicly offered to enter into
a definitive agreement or an agreement in principle with respect to a merger,
consolidation or other business combination with the Company or any of its
subsidiaries.
(c) If requested by Parent and Purchaser in the Exercise
Notice, such Stockholder shall exercise all Options (to the extent exercisable)
and other rights (including conversion or exchange rights) beneficially owned by
such Stockholder and shall sell or, if directed by Parent and Purchaser, tender
the Shares acquired pursuant to such exercise to Parent or Purchaser as provided
in this Agreement.
(d) In the event (i) Parent or Purchaser exercises the Purchase
Option and purchases Shares pursuant to this Section 11 representing at least
20% of the then outstanding shares of Company Common Stock on a fully diluted
basis (the "Purchase Event"), (ii) no Acquisition Proposal shall have been
consummated and (iii) the Merger Agreement shall have terminated and the Company
shall not have been in material breach of the Merger Agreement at the time of
such termination, upon the written request of the Company made within five
business days after the Purchase Event, Parent shall cause Purchaser or another
subsidiary of Parent to commence, as soon as reasonably practicable, a tender
offer for all shares of Company Common Stock at a cash price equal to the Offer
Price, on terms and subject to conditions substantially similar to those
contained in the Merger Agreement.
(e) If, within twelve months following the exercise of the
Purchase Option by Parent or Purchaser, Parent or Purchaser sells any or all of
the Shares acquired upon exercise of the Purchase Option to an unaffiliated
third party (a "Subsequent Sale") at a per Share price in excess of the Offer
Price (the "Subsequent Sale Price"), then Parent or Purchaser will pay to each
Stockholder, within five days of receipt of payment by Parent or Purchaser, an
amount equal to such Stockholder's pro rata share of 50% of the excess of the
Subsequent Sale Price over the Offer Price multiplied by the number of shares
sold in the Subsequent Sale.
Section 12. Termination of Purchase Option. The Purchase Option will
------------------------------
terminate (a) if this Agreement terminates pursuant to Section 7 or (b) upon the
earliest of: (i) the Effective Time; (ii) termination of the Merger Agreement
other than upon, during the continuance of or after a Trigger Event; or (iii) 90
days following any termination of the Merger Agreement upon, during the
continuance of or after a Trigger Event (or if, at the expiration of such 90 day
period the Purchase Option cannot be exercised by reason of any applicable
judgment, decree, order, injunction, law or regulation, 10 business days after
such impediment to exercise has been removed or has become final and not subject
to appeal). Upon the giving by Parent or Purchaser to the Stockholder of the
Exercise Notice and the tender of the aggregate Exercise Price, Parent or
Purchaser, as the case may be, will be deemed to be the holder of record of the
Shares transferable upon such exercise, notwithstanding that the stock transfer
books of the Company are then closed or that certificates representing such
Shares have not been actually delivered to Parent.
-8-
<PAGE>
Section 13. Conditions To Closing. The obligation of each
---------------------
Stockholder to sell such Stockholder's Shares to Parent or Purchaser hereunder
is subject to the conditions that (i) all waiting periods, if any, under the HSR
Act, applicable to the sale of the Shares or the acquisition of the Shares by
Parent or Purchaser, as the case may be, hereunder have expired or have been
terminated; (ii) all consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any court, administrative agency or
other Governmental Entity, if any, required in connection with sale of the
Shares or the acquisition of the Shares by Parent or Purchaser hereunder have
been obtained or made; and (iii) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or otherwise
restraining such sale or acquisition is in effect.
Section 14. Closing. At any Closing with respect to Shares
-------
beneficially owned by a Stockholder, (a) such Stockholder will deliver to
Parent, Purchaser or their respective designee a certificate or certificates in
definitive form representing the number of the Shares designated by Parent or
Purchaser, as the case may be, in its Exercise Notice, such certificate to be
registered in the name of Parent, Purchaser or their respective designee and (b)
Parent or Purchaser, as the case may be, will deliver to the Stockholder the
aggregate Exercise Price for the Shares so designated and being purchased by
wire transfer of immediately available funds.
Section 15. Registration Rights.
-------------------
(a) Following termination of the Merger Agreement, Parent or
Purchaser may in its sole discretion (but shall not be required) by written
notice (the "Registration Notice") to the Company request the Company to
register under the Securities Act all or any part of the shares of Company
Common Stock acquired under the Purchase Option (the "Registrable Securities").
(b) The Company shall use commercially reasonable efforts to
effect, as promptly as practicable, the registration under the Securities Act of
the Registrable Securities; provided, however, that (i) Parent and Purchaser
will be entitled to no more than one effective registration statement hereunder
and (ii) the Company will not be required to file any such registration
statement during any period of time (not to exceed 40 days after such request in
the case of clause (A) below or 90 days in the case of clauses (B) and (C)
below) when (A) the Company is in possession of material non-public information
that it reasonably believes would be detrimental to be disclosed at such time
and that such information would have to be disclosed if a registration statement
were filed at that time; (B) the Company is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Company determines, in its reasonable
judgment, that such registration would interfere with any proposed financing,
acquisition or other material transaction involving the Company or any of its
affiliates. The Company shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 15 to be qualified
for sale under the securities or blue-sky laws of such jurisdictions as Parent
or Purchaser may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Company will not be required to qualify to do business in, or to consent to
general service of process in, any jurisdiction by reason of this provision.
-9-
<PAGE>
(c) The registration rights set forth in this Section 15 are
subject to the condition that Parent and Purchaser shall provide the Company
with such information with respect to their Registrable Securities, the plans
for the distribution thereof, and such other information with respect to such
holder as, in the reasonable judgment of counsel for the Company, is necessary
to enable the Company to include in such registration statement all material
facts required to be disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 15 will be
effected at the Company's expense, except for underwriting discounts and
commissions and the fees and the expenses of counsel to Parent and Purchaser
(which will be paid by Parent and Purchaser, and the Company shall provide to
the underwriters (in connection with an underwritten offering) such
documentation (including certificates, opinions of counsel and "comfort" letters
from auditors) as are customary in connection with underwritten offerings as
such underwriters may reasonably require. In connection with any such
registration, the parties agree (i) to indemnify each other and the underwriters
in the customary manner, (ii) to enter into an underwriting agreement in form
and substance customary for transactions of such type with the underwriters
participating in such offering and (iii) to take all further actions that will
be reasonably necessary to effect such registration and sale (including, if the
underwriters deem it necessary, participating in road-show presentations).
Section 16. Termination. This Agreement will terminate (a) as to any
-----------
Stockholder upon the purchase of all the Shares beneficially owned by such
Stockholder pursuant to the Offer in accordance with Section 7, (b) except for
Sections 10, 11, 12, 13, 14 and 15 hereof, which will only terminate as and when
provided therein, on the earlier to occur of (i) the Effective Time or (ii) the
date the Merger Agreement is terminated in accordance with its terms, or (c) by
the mutual consent of each Stockholder as to its rights and obligations
hereunder, the Board of Directors of the Company and the Board of Directors of
Parent.
Section 17. Expenses. Except as otherwise expressly provided herein
--------
or in the Merger Agreement, all costs and expenses incurred by any of the
parties hereto will be borne by the party incurring such costs and expenses.
Section 18. Further Assurances. Each party hereto will execute and
------------------
deliver all such further documents and instruments and take all such further
action as may be reasonably necessary in order to consummate the transactions
contemplated hereby. The Company covenants to Parent and Purchaser that it and
its Board of Directors shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Purchase Option, the Offer, the Merger, this Agreement, the Merger
Agreement or any of the other transactions contemplated by the foregoing (the
"Transactions") and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to any of the Transactions, take all action
necessary to ensure that the Purchase Option and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Merger Agreement and otherwise to minimize the effect of such
statute or regulation on the Purchase Option and the other Transactions.
-10-
<PAGE>
Section 19. Publicity. A Stockholder shall not issue any press
---------
release or otherwise make any public statements with respect to this Agreement
or the Merger Agreement or the other transactions contemplated hereby or thereby
without the consent of Parent and Purchaser, except as may be required by law or
applicable stock exchange rules.
Section 20. Stop Transfer Order; Legend. The Company agrees with, and
---------------------------
covenants to, Parent and Purchaser that the Company shall not register the
transfer of any certificate representing any Stockholder's Shares unless such
transfer is made in accordance with the terms of this Agreement. Each
Stockholder agrees to place the following legend on any and all certificates
evidencing the Shares:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND OPTION
AGREEMENT, DATED AS OF DECEMBER 20, 1998, BY AND AMONG ROHM AND HAAS COMPANY,
LIGHTNING ACQUISITION CORP., LEARONAL, INC. AND CERTAIN STOCKHOLDERS OF
LEARONAL, INC. ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE
TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER.
Section 21. Stockholder Capacity. No person executing this Agreement
--------------------
makes any agreement or understanding herein in such Stockholder's capacity as a
director or officer of the Company or any subsidiary of the Company. Each
Stockholder signs solely in such Stockholder's capacity as the beneficial owner
of such Stockholder's Shares and nothing herein shall limit or affect any
actions taken by a Stockholder in such Stockholder's capacity as an officer or
director of the Company or any subsidiary of the Company to the extent
specifically permitted by the Merger Agreement.
Section 22. Enforcement. Each Stockholder and the Company acknowledge
-----------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that Parent and Purchaser will
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Each Stockholder and the Company further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief. The provisions of this paragraph are
without prejudice to any other rights that any party hereto may have against
another party hereto for any failure to perform its obligations under this
Agreement. In addition, each Stockholder (i) consents to submit to the personal
jurisdiction of any Federal court located in the State of New York or any New
York state court in the event any dispute arises out of this Agreement or any of
the transactions contemplated hereby, (ii) agrees not to attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees not to bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court located in the State of New York or a New York state court and (iv) waives
any right to trial by jury with respect to any claim or proceeding related to or
arising out
-11-
<PAGE>
of this Agreement or any of the transactions contemplated hereby. Each
Stockholder hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of New York
or of the United States of America located in the State of New York, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 23. Miscellaneous.
-------------
(a) All representations and warranties contained herein will
survive for twelve months after the termination hereof. The covenants and
agreements made herein will survive in accordance with their respective terms.
(b) Any provision of this Agreement may be waived at any time
by the party that is entitled to the benefits thereof. No such waiver, amendment
or supplement will be effective unless in writing and signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement or one or more sections hereof will not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(c) This Agreement, the Merger Agreement, the Other Agreements
and the Confidentiality Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements among the parties with respect to such matters. This Agreement
may not be amended, changed, supplemented, waived or otherwise modified, except
upon the delivery of a written agreement executed by the parties hereto.
(d) This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
(e) The descriptive headings contained herein are for
convenience and reference only and will not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Words in the singular include the plural, and
words in the plural include the singular.
(f) All notices and other communications hereunder will be in
writing and will be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by telecopy, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
-12-
<PAGE>
If to the Company to:
LeaRonal, Inc.
272 Buffalo Avenue
Freeport, NY 11520
Attention: Ronald F. Ostrow
Telecopy: 516-867-5917
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Robert F. Quaintance, Jr.
Telecopy: 212-909-6836
If to Parent or Purchaser to:
Rohm and Haas Company
100 Independence Mall West
Philadelphia, PA 19106
Attention: John S. Stroebel
Telecopy: 215-592-3227
Lightning Acquisition Corp.
Suite 104 - Rodney Building
3411 Silverside Road
Wilmington, DE 19810
Attention: John S. Stroebel
with copies to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: William G. Lawlor
Telecopy: 215-994-2222
If to a Stockholder, at the address set forth on Schedule A hereto.
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
-13-
<PAGE>
(g) This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one agreement.
(h) This Agreement is binding upon and is solely for the
benefit of the parties hereto and their respective successors, legal
representatives and assigns. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement will be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that Parent and Purchaser will have the right to assign to any direct or
indirect wholly owned subsidiary of Parent or Purchaser any and all rights and
obligations of Parent or Purchaser under this Agreement, provided that any such
assignment will not relieve either Parent or Purchaser from any of its
obligations hereunder.
(i) In the event any term or provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect. Upon any such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto will 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 the transactions contemplated by this
Agreement are consummated to the fullest extent possible.
(j) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity will be
cumulative and not alternative, and the exercise of any thereof by either party
will not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the Company, Parent and Purchaser has
caused this Agreement to be signed by its officer or director thereunto duly
authorized and each Stockholder has signed this Agreement, all as of the date
first written above.
ROHM AND HAAS COMPANY
By: /s/ Rajiv L. Gupta
_______________________________________________
Name: Rajiv L. Gupta
Title: Vice President
LIGHTNING ACQUISITION CORP.
By: /s/ Bradley J. Bell
_______________________________________________
Name: Bradley J. Bell
Title: Vice President
LEARONAL, INC.
By: /s/ Ronald F. Ostrow
_______________________________________________
Name: Ronald F. Ostrow
Title: President
STOCKHOLDERS:
/s/ Barnet D. Ostrow
__________________________________________________
Barnet D. Ostrow, individually, as Trustee and
General Partner of Ostrow Properties Limited
Partnership #1
/s/ Annette Ostrow
_________________________________________________
Annette Ostrow, individually, as Trustee and
General Partner of Ostrow Properties Limited
Partnership #2
[signatures continue on next page]
-15-
<PAGE>
/s/ Fred I. Nobel
_________________________________________________
Fred I. Nobel, individually and as General Partner
of Nobel Limited Partnership
/s/ Ronald F. Ostrow
_________________________________________________
Ronald F. Ostrow, as Trustee and individually
/s/ Michael Katz
_________________________________________________
Michael Katz, as Trustee
/s/ Kenneth L. Stein
_________________________________________________
Kenneth L. Stein, as Trustee
/s/ Richard Kessler
_________________________________________________
Richard Kessler
/s/ Sol Berg
_________________________________________________
Sol Berg
/s/ Donald Thomson
_________________________________________________
Donald Thomson
/s/ David L. Rosenthal
_________________________________________________
David L. Rosenthal
/s/ Alonna Ostad
_________________________________________________
Alonna Ostad
/s/ Sharone N. Ostrow
_________________________________________________
Sharone N. Ostrow
/s/ Jonathan Ostrow
_________________________________________________
Jonathan Ostrow
-16-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number Number
of of
Stockholder Address Shares Options
----------- ------- ------ -------
<S> <C> <C> <C>
Barnet D. Ostrow and (1) 420,928
Michael Katz, as
Trustees of Revocable
Trust f/b/o Barnet D.
Ostrow
Annette Ostrow and (1) 351,354
Michael Katz, as
Trustees of Revocable
Trust f/b/o Annette
Ostrow
Fred I. Nobel, individually (1) 1,217,660
and as general partner (1) 5,917
on behalf of Nobel
Limited Partnership
Ronald F. Ostrow (1) 284,018
Ronald F. Ostrow and (1) 263,671
Kenneth L. Stein, as
Trustees f/b/o Ronald
Ostrow
Michael Katz, as Trustee (1) 50,000
f/b/o Ronald Ostrow
Barnet D. Ostrow as (1) 242,500
General Partner on
behalf of Ostrow
Properties Limited
Partnership #1
Annette Ostrow as (1) 15,000
General Partner on
behalf of Ostrow
Properties Limited
Partnership #2
Richard Kessler (1) 76,715 217,382
Donald Thomson (1) 53,942 106,096
David L. Rosenthal (1) 19,731 171,400
Sol Berg 1453 Landings Circle 754,519
Sarasota, FL 34231
Alonna Ostad (1) 48,566
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Number
of of
Stockholder Address Shares Options
----------- ------- ------ -------
<S> <C> <C> <C>
Sharone N. Ostrow (1) 50,596
Jonathan Ostrow (1) 48,565
__________ ---------
Totals 3,619,664 778,896
========== =========
</TABLE>
(1) c/o LeaRonal Inc., 272 Buffalo Avenue, Freeport, NY 11520
<PAGE>
Exhibit 5
Form of Amended Employment Agreement, dated as of December 20, between the
Company and certain executives of the Company.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 20th day of December, 1998, by and between
LEARONAL, INC., a New York corporation, having its office and place of business
at 272 Buffalo Avenue, Freeport, New York 11520 (the "Company") and [ ],
residing at [ ] (the "Executive").
BACKGROUND
----------
The Company has entered into an Agreement and Plan of Merger dated
December 20, 1998 among the Company, ROHM AND HAAS COMPANY ("Parent") and
LIGHTNING ACQUISITION CORP. ("Purchaser") (the "Merger Agreement").
Parent, Purchaser and the Company want to continue the employment
relationship between Executive and the Company following the effective date of
the contemplated merger (the "Merger") and the Executive wants to continue in
that employment, in each case on the terms and conditions set forth herein.
AGREEMENT
---------
Accordingly, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree that
contingent upon, and effective upon the date of the earlier of the consummation
of the Offer or the Merger (as such terms are defined in the Merger Agreement),
(a) all prior employment agreements and amendments thereto are hereby amended
and restated in their entirety as follows, and simultaneously with the earlier
to occur of the Offer or the
<PAGE>
Merger, will be of no further effect, and (b) that the Executive will remain
employed by the Company on the terms and conditions set forth herein.
1. Employment; Duties:
(A) The Company hereby continues the employment of the Executive
and the Executive hereby accepts such continued employment on the terms and
conditions hereinafter set forth. During his employment hereunder, the Executive
shall serve as [ ] of the Company, and shall have and perform such duties
and responsibilities relating to the business and operations of the Company as
may be appropriate to such position, and as the Board of Directors from time to
time may assign to him, consistently with the requirement that his duties be
appropriate to his position, subject to reasonable vacation periods and other
leaves of absence.
(B) During his employment hereunder, the Executive shall devote
his full time, attention and best efforts to the business of the Company and to
the furtherance of its interests, and shall not, without the prior written
consent of the Board of Directors of the Company, directly or indirectly, engage
in, or enter into the employment of, or otherwise render services to or for, or
act as a director, officer or employee of any other business, partnership,
association, corporation or other entity (other than established trade
associations of which the Company is a member) except for non-remunerative
participation in charitable organizations.
-2-
<PAGE>
(C) The principal place of performance of the Executive's
services hereunder shall be Freeport, New York, subject to reasonable travel
requirements on behalf of the Company.
(D) The Executive represents and warrants that he is free to
enter into this Agreement and the performance of his obligations and duties in
the manner contemplated hereunder will not violate the provisions of any other
agreement or understanding to which he is a party or by which he is bound.
2. Term: The term of this Agreement shall be for the period
----
commencing on the earlier of the date of the consummation of the Offer or the
date of the Merger and ending on the third anniversary of that date.
3. Compensation:
------------
(A) As compensation for the Executive's services hereunder, the
Company shall pay and the Executive shall accept an annual salary ("Base
Salary") of not less than [ ] Dollars per year, or such greater sum as the
Company may from time to time deem appropriate, payable in such installments and
at such regular intervals as the Company may from time to time use for the
payment of salaries, but not less frequently than monthly.
(B) Executive shall also be entitled to participate in an annual
bonus program that shall provide an opportunity to receive an annual bonus,
including for the year, if any that begins before and ends after the Effective
Time, that is as a dollar amount at least consistent with the opportunity
provided to him in accordance with the Company's practices and policies in
effect before the Effective Time, based on
-3-
<PAGE>
performance objectives established by the Board, in consultation with the Chief
Executive Officer, following the Effective Time.
(C) In addition to the compensation set forth in (A) above, to
induce the Executive to remain in the employ of the Company, and as additional
compensation for the critical services to rendered by the Employee during the
difficult period of integration and transition following the Effective Time, the
Executive shall be entitled on the first anniversary of the effective date of
this Agreement, to an amount equal to 60% of the annual Compensation then
payable under (A) above, provided that the Executive is employed on the payment
date. If the Executive's employment is terminated by the Company without Cause,
or by the Executive for Good Reason, the Executive shall be paid a pro rata
portion of the amount otherwise payable under this Section 3(C) determined by
dividing the number of days elapsed from the beginning of the term of this
Agreement (determined under Section 2) by 365. If the Executive's employment
hereunder is terminated for any other reason, no payment shall be made under
this Section 3(C).
4. Additional Benefits:
-------------------
(A) The Company shall provide the Executive with such
retirement, medical and other fringe benefits as the Company or the Parent may
from time to time decide to generally provide for the Company's similarly
situated executive personnel, provided that during the term of this Agreement,
the total of such benefits shall be substantially comparable in the aggregate to
those provided to the Executive before the Effective Time. Until the third
anniversary of the Effective Time, as defined
-4-
<PAGE>
in the Merger Agreement, there shall be no adverse change or reduction in the
level or amount of any Executive perquisite made available to the Executive
immediately before the Effective Time.
(B) The Company shall reimburse the Executive for all reasonable
and necessary travel, entertainment and other expenses incurred by the Executive
in connection with the performance of his duties hereunder, provided such
expenses are documented and vouchers supported by receipts are submitted; the
good faith determination of the Company as to the reasonableness and necessity
of any such expense shall be binding and conclusive. Any reimbursed expense
which is disallowed as the result of any audit of the Company's tax returns by
any governmental taxing authority shall be refunded by the Executive to the
Company promptly following such disallowance.
5. Stock Option Payments: Executive agrees with respect to each
---------------------
outstanding stock option (each "Option") heretofore granted under the Company's
1990 Nonqualified Stock Option Plan, dated June 1, 1990 (the "1990 Plan") and
the Company's 1996 Long-Term Incentive Plan (the "1996 Plan", and together with
the 1990 Plan, the "Company Stock Option Plans"), to be bound by the terms of
Section 2.10 of the Merger Agreement.
6. Termination:
-----------
(A) The Company may terminate the Executive's employment at any
time for "Cause" or upon 90 days notice for any other reason. The Executive may
-5-
<PAGE>
terminate employment hereunder upon 90 days written notice, with or without
"Good Reason."
(B) If the Executive's employment is terminated for "Cause" or
by the Executive without "Good Reason" the Executive shall have no further
rights under this Agreement, except the right to receive the Compensation
payable under Section 3 up to the date of termination by the Company of the
Executive's employment hereunder, and the right to receive any vested benefits
under any plan or arrangement described in Section 4. The Executive's employment
shall be deemed to have been terminated for "Cause" if his employment is
terminated for: (i) embezzlement, theft, or other misappropriation of any
property of more than nominal value of the Company; (ii) the Executive's neglect
of, or failure substantially to perform or comply with, his duties,
responsibilities and obligations as an officer of the Company (other than any
such failure resulting from his incapacity due to physical or mental illness, as
determined by a physician appointed by the Company) after a demand for
substantial performance is delivered to the Executive by the Board which
specifically identifies the manner in which such Board believes that the
Executive has not substantially performed his duties and the Executive fails or
refuses to remedy such failure to the reasonable satisfaction of the Board
within ninety (90) days after the receipt of such notice; (iii) the Executive's
willful and material breach of his restrictive covenants set forth in this
Agreement; (iv) any act which if the subject of a criminal proceeding could
reasonably result in a conviction for a felony; (v) an act or acts of dishonesty
on the Executive's part intended to result or resulting in substantial gain or
personal enrichment to him at
-6-
<PAGE>
the expense of the Company or (vi) a material breach of the Parent's Code of
Business Conduct or other policies governing employee conduct.
(C) In the event the Executive's employment is terminated by the
Company without "Cause" or by the Executive with "Good Reason," the Executive
shall have the right to receive (a) the Compensation payable under Section 3 and
(b) continuation of the benefits in which the Executive is participating under
Section 4 on the date of termination, in each case for the remaining term of
this Agreement following the date of such termination without "Cause." The
amount payable under (a) above shall be paid in a lump sum within 30 days of the
date of the Executive's termination without "Cause."
(D) "Good Reason" shall mean, without the Executive's express
prior written consent, the occurrence of any one or more of the following:(i)
The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status (including titles
and reporting requirements) as an officer of the Company, or a material
reduction or alteration in the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of the effective date (or as
subsequently increased), other than an insubstantial and inadvertent act that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive; (ii) The Company's requiring the Executive to be based at a location
in excess of twenty five (25) miles from the location of the Executive's
principal job location or office as of the effective date, except for required
travel on the Company's business to an extent substantially consistent with the
-7-
<PAGE>
Executive's present business obligations; (iii) A reduction by the Company of
the Executive's Base Salary as in effect on the effective date, or as the same
shall be increased from time to time; (iv) A failure by the Company to provide
the benefits described in Section 4, other than an immaterial failure that is
remedied by the Company promptly after the receipt of timely notice thereof
given by the Executive. For this purpose, the Company may eliminate and/or
modify existing programs and coverage levels; provided, however, that the
Executive's level of coverage under all such programs must be at least as great
as is such coverage provided to executives who have the same or lesser levels of
reporting responsibilities within the Company's organization;
(E) Any provision hereof to the contrary notwithstanding, if
this Agreement shall not have previously expired or the Executive's employment
hereunder shall not have otherwise been sooner terminated, the Executive's
employment hereunder shall automatically terminate upon:
(i) the Executive's becoming physically or mentally disabled so as to
be unable to perform the essential duties of his employment with
or without reasonable accommodation for a period aggregating six
months in any twelve (12) month period; provided that the
Executive shall be entitled to continue to receive his then
effective annual salary, in such installments and intervals as
then payable, less the sum of any payments to which the Executive
or the Executive's family may then be entitled under Social
Security, the Company's disability insurance plan, if any, and
any other source of disability income, for the balance of the
then remaining term hereunder or six months, whichever is longer,
but only for so long as the Executive is living; or
(ii) the Executive's death; provided that the Executive's widow shall
be entitled to receive payments equal to fifty (50%) percent of
the Executive's then effective annual salary, less the sum of
payments
-8-
<PAGE>
to which the Executive's widow may then be entitled under Social
Security, and the Company's pension or retirement plans, if any,
for the balance of the then remaining term hereunder or six (6)
months, whichever is longer, but only for so long as the
Executive's widow survives him.
(F) Upon the expiration of this Agreement or the sooner
termination of the Executive's employment hereunder, the Executive shall
promptly return all copies of all documents and records reflecting any trade
secrets, confidential information, formulae, proprietary data or other matter
pertaining to the business of the Company, its customers or suppliers, to which
access by the public is restricted, all of which are and shall remain the
Company's property. The Company may withhold any monies due the Executive
hereunder or otherwise until all such property is returned.
7. Confidential Information:
------------------------
Executive acknowledges that the Company owns, possesses or controls
trade secrets, proprietary information, formulae, methods, products, processes,
data customer lists, sources of supply, and other information pertaining to the
business of the Company (singly and collectively, the "Confidential
Information") , that it may from time to time develop or improve upon such
Confidential Information, and acquire additional Confidential Information,
sometimes from third parties upon the express condition that such Confidential
Information will not be disclosed, that all of such Confidential Information
constitutes a unique and valuable asset of the Company, and that disclosure of
any such Confidential Information to or use by anyone other than in the ordinary
course of the Company's business and for its benefit would result in irreparable
and continuing damage to the Company. The Executive shall keep all such
-9-
<PAGE>
Confidential Information and other matters pertaining to the business of the
Company, its customers or Suppliers, which is not generally available to the
public, in strict secrecy and confidence, and shall not at any time during the
term of his employment hereunder, or thereafter for so long as access thereto is
not generally available to the public, directly or indirectly, make use of,
disclose or furnish to any person, firm or Company or other third party any such
Confidential Information, nor participate in the use, disclosure or publication
of any elements thereof, either alone or in conjunction with others, except as
may be required in the ordinary course of the Company's business, or as may be
mandated under applicable law by competent authority.
8. Executive Knowledge:
-------------------
(A) Executive shall from time to time communicate and make known
to the Company all knowledge possessed by him relating to any methods,
developments, inventions or improvements, whether patented, patentable or
unpatentable, which relate to the business of the Company, whether acquired by
him prior to or during his employment by the Company; provided, however, that
nothing herein shall be construed as requiring any such communication where the
method, development, invention or improvement is lawfully protected from
disclosure as the trade secret of a third party or by any other lawful bar to
such communication existing prior to the commencement of such employment.
(B) Any such methods, developments, inventions or improvements,
whether patentable or unpatentable, which Executive may conceive of or develop
while in the Company's employ, shall be and remain the exclusive property
-10-
<PAGE>
of the Company. Executive shall, on request, execute patent applications, and
any other records or memoranda requested by the Company, utilizing,
incorporating or based on any such methods, developments, inventions or
improvements, including instruments deemed necessary by the Company for the
prosecution of any patent application or the acquisition of Letters Patent in
this, any foreign country, or otherwise.
(C) Executive shall keep records in connection with his
employment as the Company may from time to time direct, and all such records
shall be the sole and exclusive property of the Company. At any time and from
time to time, within five (5) days after the Company's request, Executive shall
surrender to the Company any and all documents, memoranda, books, papers
letters, price lists, notebooks, reports, logbooks, code books, salesmen
records, customer lists, activity reports, video or audio recordings, computer
programs, any and all data and information, and any and all copies thereof
relating to the Company's business or any Confidential Information.
9. Restrictive Covenants:
---------------------
(A) The services of Executive are unique, extraordinary and
essential to the business of the Company, particularly in view of Executive's
access to Confidential Information. Accordingly, if the Executive's employment
by the Company shall at any time be terminated for any reason whatsoever (other
than as a result of the Company's failure to make payments due to Executive
hereunder), for a period equal to eighteen (18) months, twelve (12) months if
the Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason, commencing with
-11-
<PAGE>
the date of such termination without the Company's prior written approval, the
Executive shall not, actively or inactively, directly or indirectly, for himself
or for others (i) employ, become employed by, or associate in any business
relationship with any person who was an employee of the Company, or any
business, partnership, association, corporation or other entity which was
affiliated with, or was a customer or supplier of the Company, during the twelve
(12) month period preceding such termination, where such employment, association
or relationship would result in the Executive's being engaged in a commercial
enterprise which competes with or contemplates competing with the Company; nor
(ii) engage in any business which competes or then contemplates competing with
the Company; nor (iii) solicit for competitive purposes any prospective or
existing account of the Company which at the time of such termination was then
actively being solicited by or doing business with the Company; nor (iv)
purposefully affect to the Company's detriment any relationship of the Company
with any customer, supplier or employee of the Company or cause any customer or
supplier to refrain from entrusting additional business to the Company. In the
event that any of the provisions of this Section 8 shall be adjudicated to
exceed the time, geographic or other limitations permitted by applicable law in
any jurisdiction, then such provision shall be deemed reformed in such
jurisdiction to the maximum time, geographic or other limitations permitted by
applicable law.
(B) As specifically used in Sections 6, 7 and 8 hereof as well
as in this Agreement throughout, the term "Company" shall mean and include any
parent
-12-
<PAGE>
or subsidiary of the Company, as well as any and all corporations or other
entities as may succeed to all or substantially all of the business or assets of
the Company.
10. Injunctive Relief: The Executive acknowledges that the Company's
------------------
remedies at law for the breach of any of the confidentiality or other
requirements and restrictive covenants of Sections 6, 7 or 8 of this Agreement
would be inadequate, that the harm to the Company's business likely to arise
from any threatened or actual breach thereof would be material and irreparable,
and, accordingly, that the Company shall be entitled to enforce such
requirements and restrictive covenants by temporary and permanent injunction or
other mandatory remedies restraining the Executive from committing or continuing
any threatened or actual violation of such requirements or restrictive
covenants, without the necessity of proving damages and without prejudice to any
other rights and remedies available to the Company under this Agreement or
otherwise, at law or in equity.
11. Notices: All notices or other communications required or
-------
permitted to be given hereunder shall be in writing and shall be deemed
sufficient if delivered against receipt or mailed by registered or certified
mail, return receipt requested, as follows: if to the Company, to its offices at
272 Buffalo Avenue, Freeport, New York 11520, or such other address as the
Company may hereafter designate for that purpose; and if to the Executive, to
him at 9 Gilder Court, Northport, NY 11768, or such other address as he may
hereafter designate for that purpose.
12. Binding Effect: This Agreement shall be binding upon and inure to
---------------
the benefit of the legal representatives, successors and permitted assigns of
the
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<PAGE>
parties, including any corporation or other entity into which the Company may
consolidate or merge or to which it may transfer substantially all of its
assets, provided that the rights and obligations of the Executive hereunder
shall not be assignable or delegable without the prior written consent of the
Company.
13. Merger: This Agreement is intended as the final and sole
-------
expression of the agreement between the parties regarding the subject matter
thereof. Neither party shall be bound by any representations, promises or
inducements not set forth herein, none of which have been made or relied upon in
the making of this Agreement. No change, modification, discharge or termination
of any of the provisions of this Agreement or the obligations of either party
thereunder shall be valid unless in writing signed by the parties hereto.
14. Waiver: Any waiver by either party hereto of any right, default,
-------
terms, conditions, options or remedies hereunder in any one or more instances
shall not thereafter be deemed a waiver of the future enforceability of any such
right or of any subsequent default, or any such term, condition, option or
remedy.
15. Severability: The invalidity or unenforceability of any
-------------
paragraph, term or provision hereof shall in no way affect the validity or
enforceability of the remaining paragraph, terms and provisions thereof. In any
such event, it is the parties' intention and agreement that any such paragraph,
term or provision which is held or determined to be unenforceable, as written,
shall nonetheless be in force and binding
-14-
<PAGE>
to the fullest extent permitted by law as though such paragraph, term or
provision had been written in such a manner and to such an extent as to be
enforceable under the circumstances. Without limiting the foregoing, with
respect to any confidentiality requirement or restrictive covenant contained
herein, if it is determined that any such provision is excessive as to duration
or scope, it is intended that it nevertheless be enforced for such shorter
duration or with such narrower scope as will render it enforceable.
16. Headings: Headings to paragraphs contained herein are for
---------
reference purposes only and are not to be given any substantive effect or
meaning.
17. Governing Law: This Agreement has been made in the State of New
--------------
York, shall be interpreted and construed in accordance with the laws of that
State, without giving effect to conflict of law and principles requiring the
application of the substantive laws of another jurisdiction.
IN WITNESS WHEREOF, the parties hereunto have duly executed this
Agreement as of the day and year first above written.
LEARONAL, INC.
By:__________________
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<PAGE>
Exhibit 6
Confidentiality Agreement, dated October 21, 1998, between Parent and the
Company.
<PAGE>
CONFIDENTIALITY AGREEMENT
In connection with the consideration of a possible transaction between each
of the parties that have signed this agreement and/or its respective
subsidiaries, affiliates or divisions (each such party being hereinafter
referred to, collectively with such subsidiaries, affiliates and divisions, as a
"Company"), each Company (in its capacity as a provider of information hereunder
being referred to as a "Provider") is prepared to make available to the other
Company (in its capacity as a recipient of information hereunder being referred
to as a "Recipient") certain information concerning the business, financial
condition, operations, assets and liabilities of the Provider. As a condition to
such information being provided to each Recipient and its Recipient
Representatives (as hereinafter defined), each Recipient agrees to treat any
information concerning the Provider (whether prepared by the Provider, such
Provider's Representatives (as hereinafter defined) or otherwise and
irrespective of the form of communication) which is furnished to the Recipient
or such Recipient's Representatives now or in the future by or on behalf of the
Provider (herein collectively referred to, with respect to information furnished
by or on behalf of either Company in its capacity as a Provider to the other
Company in its capacity as a Recipient, as the "Evaluation Material") in
accordance with the provisions of this agreement, and to take or abstain from
taking certain other actions as hereinafter set forth. As used in this
agreement, a "Recipient's Representatives" shall include the directors,
officers, employees, agents, partners or advisors of such Recipient (including,
without limitation, attorneys, accountants, consultants, bankers and financial
advisors).
The term "Evaluation Material" also shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
either Recipient or such Recipient's Representatives which contain, reflect or
are based upon, in whole or in part, the information furnished to such Recipient
or such Recipient's Representatives pursuant hereto. The term Evaluation
Material does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by the Recipient
or such Recipient's Representatives in breach of this Agreement, (ii) was within
the Recipient's or such Recipient's Representatives' possession prior to its
being furnished to the Recipient or such Recipient's Representatives by or on
behalf of the Provider pursuant hereto, provided that the source of such
information was not known by the Recipient to be bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, the Provider or any other party with respect to such
information or (iii) becomes available to the Recipient or such Recipient's
Representatives on a non-confidential basis from a source other than the
Provider or any of its directors, officers, employees, agents or advisors
(including, without limitation, attorneys, accountants, consultants, bankers and
financial advisors) (collectively, "Provider Representatives"), provided that
such source is not known by the Recipient to be bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, the Provider or any other party with respect to such
information.
Each Recipient hereby agrees that such Recipient and such Recipient's
Representatives shall use the Evaluation Material solely for the purpose of
evaluating a possible
<PAGE>
transaction between the Companies and for no other purpose, that the Evaluation
Material will be kept confidential and that the Recipient and such Recipient's
Representatives will not disclose any of the Evaluation Material in any manner
whatsoever: provided, however, that (i) the Recipient may make any disclosure of
such information as to which the Provider gives its prior written consent, and
(ii) any of such information may be disclosed to the Recipient's Representatives
who need to know such information for the sole purpose of evaluating a possible
transaction between the Companies, who are provided with a copy of this
agreement and who you shall cause to be bound by the terms hereof to the same
extent as if they were such Recipient. In any event, each Recipient agrees to
undertake reasonable precautions to safeguard and protect the confidentiality of
the Evaluation Material, to accept responsibility for any breach of this
agreement by any of such Recipient's Representatives, and at such Recipient's
sole expense to take all reasonable measures (including but not limited to
court proceedings) to restrain such Recipient's Representatives from prohibited
or unauthorized disclosure or uses of the Evaluation Material.
In addition, each Recipient agrees that, without the prior written
consent of the Provider, such Recipient and such Recipient's Representatives
will not disclose to any other person the fact that the Evaluation Material has
been made available to such Recipient, that discussions or negotiations are
taking place concerning a possible transaction between the Companies or any of
the terms, conditions or other facts with respect thereto (including the status
thereof); provided, however, that such Recipient may make such disclosure in
the circumstances set forth in clause (i) or clause (ii) of the immediately
preceding paragraph.
In the event that either Recipient or any of such Recipient's
Representatives are requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) to disclose any of the Evaluation
Material, such Recipient shall provide the Provider with prompt written notice
of any such request or requirement so that the Provider may seek a protective
order or other appropriate remedy and/or waive compliance with the provision of
this agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by the Provider, the Recipient or any of such Recipient's
Representatives are nonetheless, as advised by counsel, legally compelled to
disclose Evaluation Material to any tribunal or else stand liable for contempt
or suffer other censure or penalty, such Recipient or such Recipient's
Representatives may, without liability hereunder, disclose to such tribunal only
that portion of the Evaluation Material which such counsel advises the Recipient
is legally required to be disclosed, provided that the Recipient exercises its
best efforts to preserve the confidentiality of the Evaluation Material,
including, without limitation, by cooperating with the Provider to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Evaluation Material by such tribunal.
If either Company decides that it does not wish to proceed with a
transaction with the other, it will promptly inform the other of that decision.
In that case, each Company will promptly deliver to the other Company all
Evaluation Material (and all copies thereof) furnished to such Company in its
capacity as a Recipient or such Recipient's Representatives by or on
-2-
<PAGE>
behalf of the other Company in its capacity as Provider pursuant hereto. In the
event of such a decision, all other Evaluation Material prepared by either
Company in its capacity as a Recipient or such Recipient's Representatives
shall, at the Recipient's option, be destroyed or returned and no copy thereof
shall be retained and the Recipient shall provide to the other Company a
certificate of compliance with this sentence. Notwithstanding the return or
destruction of the Evaluation Material, each Company in its capacity as a
Recipient and such Recipient's Representatives will continue to be bound by
such Recipient's respective obligations of confidentiality and other obligations
hereunder.
Each Company understands and acknowledges that neither Company, in its
capacity as a Provider, nor such Provider's Representatives, makes any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material furnished by or on behalf of such
Provider and shall have no liability to the other Company in its capacity as a
Recipient or to any of such Recipient's Representatives relating to or resulting
from the use of the Evaluation Material furnished to such Recipient or any
errors therein or omissions therefrom. Only those representations or warranties
which are made in a final definitive agreement regarding any transactions
contemplated hereby, when, as and if executed, and subject to such limitations
and restrictions as may be specified therin, will have any legal effect.
To the extent that any Evaluation Material may include materials
subject to the attorney-client privilege, work product doctrine or any other
applicable privilege concerning pending or threatened legal proceedings or
governmental investigations, each Company understands and agrees that the
Companies have a commonality of interest with respect to such matters and it is
the desire, intention and mutual understanding of both Companies that the
sharing of such material is not intended to, and shall not, waive or diminish in
any way the confidentiality of such material or its continued protection under
the attorney-client privilege, work product doctrine or other applicable
privilege. All Evaluation Material provided by either Company that is entitled
to protection under the attorney-client privilege, work product doctrine or
other applicable privilege shall remain entitled to such protection under these
privileges, this agreement, and under the joint defense doctrine.
Each Company, in its capacity as a Recipient, acknowledges and agrees
that such Recipient is aware (and that such Recipient's Representatives are
aware or, upon receipt of any Evaluation Material, will be advised by such
Recipient) of the restrictions imposed by the United States federal securities
laws and other applicable foreign and domestic laws on a person possessing
material non-public information about a public company and that such Recipient
and such Recipient's Representatives will comply with such laws.
Each Company understands and agrees that no contract or agreement
providing for any transaction between the Companies shall be deemed to exist
between the Companies unless and until a final definitive agreement has been
executed and delivered, and each Company hereby waives, in advance, any claims
(including, without limitation, breach of contract) in connection with any such
transaction unless and until both Companies shall have entered into a
-3-
<PAGE>
final definitive agreement. Each Company also agrees that unless and until a
final definitive agreement regarding a transaction between the Companies has
been executed and delivered, neither Company will be under any legal obligation
of any kind whatsoever with respect to such a transaction by virtue of this
agreement except for the matters specifically agreed to herein. Each Company
further acknowledges and agrees that the other Company reserves the right, in
its sole discretion, to reject any and all proposals made by the agreeing
Company or any of the persons who are Recipient Representatives or Provider
Representatives with respect to the agreeing Company with regard to a
transaction between the Companies, and, subject to the next paragraph of this
agreement, to terminate discussions and negotiations with the agreeing Company
at any time. Neither this paragraph nor any other provision in this agreement
can be waived or amended in favor of either Company except by written consent of
the other Company, which consent shall specifically refer to this paragraph (or
such provision) and explicitly make such waiver or amendment.
[LeaRonal, Inc.] agrees that during the period commencing on the date
hereof and ending on the earlier of February 28, 1999 and three days after the
date on which [LeaRonal, Inc.] notifies [Rohm and Haas Company] in writing of
its intention to terminate discussions in regard to the transactions described
in the first paragraph of this agreement, neither [LeaRonal, Inc.] nor any of
its Provider or Recipient Representatives shall take any action to directly or
indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to, any entity or person other
that [Rohm and Haas Company] (and its Provider and Recipient Representatives)
concerning any Alternate Transaction (as defined below). For purposes hereof,
and "Alternate Transaction" shall mean (a) any stock purchase, merger,
consolidation, reorganization, change in organizational form, spin-off, split-
off, recapitalization, sale of equity interests or other similar transaction
involving [LeaRonal, Inc.] or any of its majority-owned affiliates which would
prejudice the ability of [Rohm and Haas Company] and [LeaRonal, Inc.] to
complete the transactions described in the first paragraph of this agreement, or
(b) any sale of all or any significant portion of [LeaRonal, Inc.'s] or any of
its majority-owner affiliates' business, operations or assets, or (c) any other
transaction or series of transactions which has substantially similar economic
effects.
Each Company represents to the other Company that neither it nor its
majority-owned affiliates beneficially own more than 1% of any class of
securities entitled to be voted generally in the election of directors of the
other Company (including for this purpose any direct or indirect options or
other rights to acquire any such securities) ("Voting Securities"). Each
Company agrees that, for a period of two years from the date of this agreement,
except pursuant to the terms of a specific written request from the other
Company that has been approved by its board of directors, neither such Company
nor any of it majority-owned affiliates will (or will assist or encourage others
to):
(1) propose or publicly announce or otherwise disclose an intent to
propose, or enter into or agree to enter into, singly or with any
other person or directly or indirectly, any form of business
combination, acquisition, restructuring,
-4-
<PAGE>
recapitalization or other transaction relating to the other Company or any
majority-owned affiliate thereof,
(2) acquire, or offer, propose, seek or agree to acquire, by purchasing or
otherwise, ownership (including as a beneficial owner) of any Voting
Securities or any other securities, assets or businesses of the other
Company or any of its majority-owned affiliates or any of their respective
successors, or any options or other rights to acquire any such ownership
from a third party or otherwise,
(3) make, or in any way participate in, any solicitation of proxies with
respect to any Voting Securities (including by the execution of action by a
written consent) or take any similar action with respect to any Voting
Securities, become a participant in any election contest with respect to
the other Company, or seek to advise or influence any person with respect
to any Voting Securities or demand a copy of the other Company's list of
stockholders,
(4) participate in or encourage the formation of any group that owns or seeks
or offers to acquire beneficial ownership of any Voting Securities or seeks
to affect control of the other Company or for the purpose of circumventing
any provision of this agreement,
(5) otherwise act, alone or in concert with others (including by providing
financing for another person), to seek, offer or purpose to control or
influence, in any manner, the board of directors, management or policies of
the other Company,
(6) publicly make or announce, or otherwise disclose an intent to propose, any
demand, request or proposal to amend, waive or terminate any provision of
this agreement,
(7) enter into any discussions, negotiations, arrangements or understandings
with any third party to facilitate or encourage the efforts of such third
party with respect to any of the foregoing,
(8) disclose any intention, plan or arrangement inconsistent with the
foregoing,
or
(9) take any action that would require the other Company to make a public
announcement regarding a possible transaction involving the other Company.
-5-
<PAGE>
provided that (i) it is understood that the provisions of this paragraph shall
not prohibit the ongoing discussion between the management of the respective
Companies in respect of the transaction described in the first paragraph of this
agreement in accordance with the other provisions of this Agreement, and (ii) if
a Company enters into a definitive agreement with a third party pursuant to
which such third party will make a tender or exchange offer for, or otherwise
acquire (by merger, consolidation, purchase or otherwise), 50% or more of the
common stock or other equity interests, assets or earning power of such other
Company: then the other Company shall be permitted to contact privately the
chairman of the board of directors of such Company (or any person designated by
such chairman) and submit to such chairman or other person an offer to acquire
Voting Securities or assets of such Company and/or a request to negotiate with
such Company with respect to such offer.
Each Company agrees that, for a period of eighteen months from the
date of this agreement, it will not, directly or indirectly, solicit for
employment or hire any employee of the other Company or any of the other
Company's majority-owned affiliates with whom it has had contact or who was
specifically identified to such Company during the period of its investigation
of the other Company in connection with its consideration of a transaction
between the Companies so long as such employee is employed by such other
company; provided that the foregoing provision will not prevent either Company
from employing any such person who contacts such Company on his or her own
initiative without any direct or indirect solicitation by or encouragement from
such Company; and provided further that such solicitation or hiring shall not be
deemed a breach of this agreement if (i) the personnel who performed such
solicitation have no knowledge of any Evaluation Material provided by such other
Company, and (ii) none of the soliciting or hiring Company's personnel who have
knowledge of any such Evaluation Material have actual advance knowledge of such
solicitation. For purposes of this paragraph, "solicit to employ" shall not be
deemed to include any general solicitations of employment not specifically
directed towards employees of the other Company.
It is understood and agreed that no failure or delay by either Company
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be
sufficient remedy for any breach of this agreement by either Company or any of
its Recipient or Provider Representatives, as the case may be, and that the
Company against which such breach is committed shall be entitled to equitable
relief, including injunction and specific performance, as a remedy for any such
breach. Such remedies shall not be deemed to be the exclusive remedies for a
breach by either Company of this agreement but shall be in addition to all
other remedies available at law or equity to the Company against which such
breach is committed. In the event of litigation relating to this agreement, if a
court of competent jurisdiction determines that either
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<PAGE>
Company or any of the persons who are Recipient Representatives or Provider
Representatives with respect to such Company has breached this agreement, then
the Company which, or the Recipient Representatives or Provider Representatives
of which, is determined to have so breached shall be liable and pay to the other
Company the reasonable legal fees incurred by the other Company in connection
with such litigation, including any appeal therefrom.
This agreement is for the benefit of each Company, the persons who are
Recipient Representatives or Provider Representatives with respect to such
Company and their respective directors, officers, stockholders, owners,
affiliates, and agents, and shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed entirely within such State.
This agreement shall terminate immediately upon written notice given
by either Company to the other, provided that in any event the confidentiality
(and related enforcement) provisions in this agreement shall survive until
the fifth anniversary of the date hereof.
This agreement contains the entire agreement between the Companies
regarding the subject matter hereof and supersedes all prior agreements,
understandings, arrangements and discussions between the Companies regarding
such subject matter.
This agreement may be signed in counterparts, each of which shall be
deemed an original but all of which shall be deemed to constitute a single
instrument.
IN WITNESS WHEREOF, each Company has caused this agreement to be
signed by its duly authorized representatives as of the date written below.
Date: October 21, 1998
[ROHM AND HAAS COMPANY] [LEARONAL, INC.]
By: /s/ Pierre Brondeau By: /s/ Ronald F. Ostrow
----------------------- -------------------------
Name: Pierre Brondeau Name: Ronald F. Ostrow
Title: Vice President Title: President
-7-
<PAGE>
Exhibit 7
Joint Press Release, dated December 21, 1998.
<PAGE>
[LETTERHEAD OF ROHM AND HAAS COMPANY APPEARS HERE]
ROHM AND HAAS TO ACQUIRE LEARONAL;
WILL BE COMBINED WITH SHIPLEY OPERATIONS
Philadelphia, PA, December 21, 1998: Rohm and Haas Company (NYSE: ROH) and
LeaRonal, Inc. (NYSE: LRI) of Freeport, New York, announced today they have
signed a definitive merger agreement for Rohm and Haas to acquire all of the
outstanding shares of LeaRonal, a maker of specialty chemicals for the
electronics industry, for $34 per share. The value of the transaction is
approximately $460 million. LeaRonal will be combined with Shipley Company, the
cornerstone of Rohm and Haas's $400 million Electronic Materials business group.
LeaRonal, which reported $242 million in fiscal 1998 sales, is a rapidly growing
firm that develops and makes specialty chemical processes for the manufacture of
printed circuit boards, semiconductor packaging and for electronic connector
plating. LeaRonal also provides processes for metal-finishing applications.
Under the merger agreement, Rohm and Haas soon will commence a cash tender offer
for all the outstanding common shares of LeaRonal. Following the consummation of
the tender offer, Rohm and Haas will acquire through a merger all shares not
purchased in the tender offer at the same price.
"This is an excellent opportunity for LeaRonal because it will accelerate the
growth of our patented technologies into new markets around the world," said
Ronald Ostrow, President and CEO of LeaRonal. Added Rajiv L. Gupta, Vice
Chairman elect of Rohm and Haas and leader of the Electronic Materials business
group, "This is a wonderful marriage of complementary technologies, geographic
presence and cultures that share a strong entrepreneurial spirit. We are
fortunate LeaRonal wants to join forces with us, for they are our partner of
choice." Gupta continued, "We look forward to having LeaRonal and Shipley
management working side by side to create a new organization that will bring
cutting-edge technology and products to the electronics market faster and more
efficiently."
The boards of directors of both firms have approved the transaction. In
addition, holders
--more--
<PAGE>
of approximately 30 percent of outstanding LeaRonal shares have agreed to tender
their shares and have granted Rohm and Haas an option to purchase those shares.
The tender offer is contingent upon at least two-thirds of LeaRonal
fully-diluted shares being tendered and receipt of normal regulatory approvals.
The offer will expire 20 business days after it is begun, unless extended or
withdrawn.
# # #
Contacts: Laura L. Hadden Mr. Ronald F. Ostrow
Rohm and Haas Company President and CEO, LeaRonal, Inc.
215-592-3054 516-868-8800 x202
or [email protected]
Editor's Notes: Rohm and Haas is a Fortune 400 specialty chemical company with
nearly $4 billion in annual sales. The company's specialty products are found in
many of the items that improve the quality of life, including decorative and
industrial paints, semiconductors, shampoos and other personal care products,
and water purification systems. Shipley Company is the cornerstone of Rohm and
Haas's Electronic Materials division, which reported sales of $400 million in
1997. This business, which became wholly owned by Rohm and Haas in 1992, has
reported revenue growth at approximately 11 percent per year during the past
five years.
For more than 40 years, LeaRonal, Inc. has been a leader in the development and
marketing of specialty chemical additives used by the worldwide electronics and
metal finishing industries. The company has developed a number of patented
precious metal electoplating processes that are used in the production of
semiconductors, printed circuit boards and electrical contacts used in guidance
systems, telecommunications equipment, computers, consumer appliances,
electronic games, and so on. This technology also is used to make decorative
items including watches, spectacle frames and jewelry. The company reported $242
million in sales for its fiscal year 1998, which ended on February 28, 1998.
During the past five years, LeaRonal has reported average annual sales increases
of 12 percent per year, and earnings increases of 19 percent per year.
This press release contains statements that are forward looking, and that are
subject to certain risks and uncertainties. Actual results may vary because of
changing economic conditions in key geographic or product markets, fluctuating
currency exchange rates, acquisitions or divestitures, customer demand, product
mix, competitive products and pricing, technological innovation, litigation and
other factors. Details can be found in Rohm and Haas's March 27, 1998, 10-K
filing and LeaRonal's October 15, 1998, 10-Q filing with the Securities and
Exchange Commission.
This press release is neither an offer to purchase, nor a solicitation of an
offer to sell securities. The tender offer will be made only through an offer to
purchase and related letter of transmittal, which will be distributed to
LeaRonal shareholders.
<PAGE>
Contacts: For D.F. King & Company, Inc.
Robert Fraina: (212) 493-6941
For Deutsche Bank Securities
Naushad Madon: (212) 469-5764
For Rohm and Haas
Eric Norris: (215) 592-2664
