<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for Use of
the Commission Only (as
permitted by
/ / Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [SECTION] 240.14a-11(c) or
[SECTION] 204.14a-12
KEVLIN CORPORATION
---------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
KEVLIN CORPORATION
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/x/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of Securities to which transaction applies:
Common Stock, $.10 par value
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2) Aggregate number of securities to which transaction applies:
3,123,729 shares
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
$4.54
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4) Proposed maximum aggregate value of transaction:
$14,181,730
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5) Total fee paid:
$2,836.35
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
KEVLIN CORPORATION
5 CORNELL PLACE
WILMINGTON, MASSACHUSETTS 01887
December , 1995
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders to be
held at 10:00 a.m., Eastern Time on January , 1996 at the offices of Kevlin at
the address set forth above.
At this meeting, you will be asked to approve the proposed merger of Kevlin
into a subsidiary of Chelton Communication Systems, Inc. ("Chelton"). Chelton is
a Delaware corporation engaged in the manufacture and sale of microwave
waveguides and assorted electronics for application in radar and communication
systems. If the merger is consummated, Kevlin will become a wholly-owned
subsidiary of Chelton and Kevlin stockholders will receive $4.54 in cash for
each share of Kevlin Common Stock.
Details about the proposed merger are included in the attached Proxy
Statement. I urge you to read these materials carefully. Approval of this
important matter will require the affirmative vote of the holders of two-thirds
of the common stock of Kevlin outstanding on December , 1995, the record date
for the special meeting.
Your Board of Directors believes that the merger is in the best interests
of the stockholders of Kevlin and has unanimously approved the merger. In
arriving at its decision, your Board of Directors carefully evaluated the
consideration to be received by Kevlin's stockholders in the merger as a means
of maximizing stockholder value.
We appreciate the loyalty and support our stockholders have demonstrated
over the years. We hope that you will continue this support by voting FOR the
proposal now. I intend to vote FOR the proposal, and recommend that all
stockholders do the same. Regardless of the number of shares you may own, it is
important that your shares be represented at the meeting. Accordingly, please
promptly sign and return your proxy card in the envelope provided whether or not
you plan to attend the meeting. If you attend the meeting, you may vote in
person whether or not you have previously returned your proxy.
Sincerely,
Jonathan D. Donaldson
Chairman of the Board
NOTE: PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES AT THE PRESENT TIME.
<PAGE> 3
KEVLIN CORPORATION
5 CORNELL PLACE
WILMINGTON, MASSACHUSETTS 01887
(508) 657-3900
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY , 1996
A Special Meeting of Stockholders of Kevlin Corporation ("Kevlin" or the
"Company"), will be held on January , 1996, at 10:00 a.m. Eastern Time, at the
offices of Kevlin, 5 Cornell Place, Wilmington, Massachusetts, for the following
purposes:
(1) To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger dated as of December 6, 1995 (the "Merger Agreement") among
Chelton Communications Systems Inc. ("Chelton"), Kevlin Acquisition Corp., a
wholly-owned subsidiary of Chelton, and the Company; and
(2) To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on December ,
1995, as the record date for determining the stockholders entitled to notice of
and to vote at the meeting and any adjournment thereof; only stockholders of
record at the close of business on that date will be entitled to vote.
If the Merger Agreement is approved by the stockholders at the meeting and
effected by the Company, any stockholder (1) who files with the Company before
the taking of the vote on the approval of the Merger Agreement, written
objection to the proposed action stating that such stockholder intends to demand
payment for his shares if the action is taken and (2) whose shares are not voted
in favor of the Merger has or may have a right to demand in writing from the
Company, within twenty days after the date of mailing to him of notice in
writing that the Merger has become effective, payment for his shares and an
appraisal of the value thereof. The Company and any such stockholder shall in
such cases have the rights and duties and shall follow the procedure set forth
in Sections 88 to 98 inclusive, of chapter 156B of the General Laws of
Massachusetts.
A proxy, which is solicited on behalf of the Board of Directors, is
enclosed, together with a return envelope which requires no postage if mailed in
the United States. The affirmative vote of at least two-thirds of the
outstanding shares entitled to vote is required to approve the Merger Agreement.
It is important that your shares be represented at the meeting. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO INDICATE YOUR VOTING
DIRECTIONS, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED POSTPAID
ENVELOPE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME
BEFORE THE VOTING BY GIVING WRITTEN NOTICE OF REVOCATION TO THE CLERK OF THE
CORPORATION, OR BY GIVING ORAL NOTICE TO THE PRESIDING OFFICER DURING THE
MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Jonathan D. Donaldson
Chairman of the Board
Wilmington, Massachusetts
December , 1995
<PAGE> 4
KEVLIN CORPORATION
5 CORNELL PLACE
WILMINGTON, MASSACHUSETTS 01887
PROXY STATEMENT
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY , 1996
This Proxy Statement (the "Proxy Statement") relates to the proposed
acquisition of Kevlin Corporation ("Kevlin"), a Massachusetts corporation, by
Chelton Communications Systems, Inc. ("Chelton"), a Delaware corporation,
pursuant to the terms of an Agreement and Plan of Merger, dated as of December
6, 1995 (the "Merger Agreement"). It is being furnished to stockholders of
Kevlin in connection with the solicitation of proxies by the Board of Directors
of Kevlin for the special meeting of stockholders to be held on January , 1996
at 10:00 a.m., at the offices of Kevlin and any adjournments or postponements
thereof (the "Special Meeting"). Only stockholders of record at the close of
business on December , 1995 (the "Record Date") will be entitled to vote at
the Special Meeting. This Proxy Statement and the enclosed form of proxy are
first being mailed or delivered to stockholders on or about , 1995.
At the Special Meeting, Kevlin will present a proposal to adopt the Merger
Agreement. If the Merger Agreement is adopted and the other conditions set forth
in the Merger Agreement are satisfied, Kevlin Acquisition Corp. ("Newco"), a
wholly-owned subsidiary of Chelton, will be merged with and into Kevlin (the
"Merger"), with the result that Kevlin will become a wholly-owned subsidiary of
Chelton. Each outstanding share of the common stock, $0.10 par value, of Kevlin
(the "Common Stock"), other than shares as to which appraisal rights have been
perfected under Section 85 of the Massachusetts General Corporation Law, will be
converted into the right to receive $4.54 in cash (the "Merger Consideration").
Under Massachusetts law, Kevlin stockholders have certain dissenters'
rights of appraisal in connection with the Merger. See "The
Acquisition -- Kevlin Stockholder Appraisal Rights."
On the Record Date, Kevlin had outstanding shares of Common Stock,
which is its only outstanding class of capital stock. Each share of Common Stock
is entitled to one vote for each matter submitted to a vote at the Special
Meeting. A majority in interest of the outstanding Common Stock, represented at
the Special Meeting in person or by proxy, constitutes a quorum for the
transaction of business. The affirmative vote in favor of adopting the Merger
Agreement by two-thirds of the outstanding Common Stock is a condition to both
Kevlin's and Chelton's obligation to consummate the Merger.
The authority granted by an executed proxy may be revoked at any time
before its exercise by filing with the Clerk of Kevlin a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Special
Meeting. Shares represented by valid proxies will be voted in accordance with
the specifications in the proxies. If no specifications are made, the proxies
will be voted to approve the proposals set forth in the proxy.
The date of this Proxy Statement is , 1995, and it is first
being mailed or delivered to Kevlin stockholders on or about that date.
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by Kevlin with the Commission
(File No. 0-10265) under the Exchange Act are incorporated by reference herein,
except as superseded or modified herein:
(1) Kevlin's annual report on Form 10-K for the year ended May 31, 1995,
filed with the Commission on August 21, 1995.
(2) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal period covered by the annual report
referred to in (1) above.
All documents filed by Kevlin pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be a part hereof from the date of filing such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is or is deemed to be incorporated
herein by reference) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS OF KEVLIN WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS WHICH
RELATE TO KEVLIN (NOT INCLUDING EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE IN THE INFORMATION INCORPORATED HEREIN BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS
PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, FROM D. WAYNE PETERS
AT THE EXECUTIVE OFFICES OF KEVLIN, 5 CORNELL PLACE, WILMINGTON, MASSACHUSETTS
01887 (TELEPHONE (508) 657-3900). IN ORDER TO ENSURE TIMELY DELIVERY OF THESE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER , 1995.
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................................................................... 5
The Parties......................................................................... 5
Chelton.......................................................................... 5
Kevlin Acquisition Corp.......................................................... 5
Kevlin........................................................................... 5
Corporate Actions................................................................... 5
Newco Stockholder Consent........................................................ 5
Special Meeting.................................................................. 5
The Acquisition..................................................................... 6
Merger........................................................................... 6
Payment for Kevlin Securities.................................................... 6
Treatment of Options ............................................................ 6
Market for Kevlin Shares......................................................... 7
Reasons for the Acquisition...................................................... 7
Recommendation of the Board of Directors of Kevlin............................... 7
Interest of Certain Persons in the Matter to be Acted Upon....................... 8
Covenants........................................................................ 8
Conditions of Merger; Termination................................................ 8
Breakup and Termination Fees..................................................... 8
Accounting Treatment............................................................. 8
Certain Federal Income Tax Consequences.......................................... 9
Appraisal Rights................................................................. 9
Selected Financial Data of Kevlin................................................... 10
INTRODUCTION.......................................................................... 11
CORPORATE ACTIONS..................................................................... 11
Newco Stockholder Consent........................................................... 11
Kevlin Stockholder Meeting.......................................................... 11
THE ACQUISITION....................................................................... 12
Principal Terms..................................................................... 12
Background of the Acquisition....................................................... 13
Kevlin's Reasons for the Acquisition................................................ 13
Merger and Effective Time........................................................... 14
Conversion of Kevlin Common Stock................................................... 14
Treatment of Options................................................................ 14
Surrender of Certificates........................................................... 14
Interest of Certain Persons in the Matter to be Acted Upon.......................... 15
Representations, Warranties and Covenants........................................... 15
Conditions of Merger................................................................ 16
Termination......................................................................... 16
Waiver and Amendment................................................................ 17
Breakup and Termination Fees; No Solicitation....................................... 17
Expenses............................................................................ 17
Regulatory Matters.................................................................. 17
Accounting Treatment................................................................ 18
Certain Federal Income Tax Consequences............................................. 18
Kevlin Stockholder Appraisal Rights................................................. 18
KEVLIN CORPORATION SUBSEQUENT EVENTS.................................................. 19
</TABLE>
3
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<TABLE>
<S> <C>
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT................ 20
SOLICITATION COMPENSATION............................................................. 21
OTHER MATTERS......................................................................... 21
ACCOMPANYING KEVLIN REPORTS........................................................... 21
EXHIBIT A -- Agreement and Plan of Merger............................................. A-1
EXHIBIT B -- Sections 85 to 98 of the Massachusetts Business Corporation Law.......... B-1
</TABLE>
4
<PAGE> 8
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information contained elsewhere in this Proxy Statement, including the
exhibits hereto. You are urged to read this Proxy Statement, the Merger
Agreement, which is attached hereto as Exhibit A and incorporated herein by
reference, and the other exhibits attached hereto, in their entirety.
Cross-references in this summary are to captions in this Proxy Statement.
THE PARTIES
CHELTON
Chelton is a Delaware corporation which, through its subsidiaries, designs,
manufactures and markets (i) a wide range of microwave components and subsystems
primarily for use on sophisticated ground and airborne surveillance radar
applications and (ii) airborne and ground antennas and associated products.
Chelton is owned (through subsidiaries) by Cobham plc, an English company listed
on the London Stock Exchange that is engaged in the design, manufacture and sale
of various equipment, specialized systems and components used in the aerospace,
defense, energy and electronic industries.
Chelton's executive offices are located at 179 Avenue of the Commons, Suite
One, Shrewsbury, New Jersey 07702. Its telephone number is (908) 935-9518.
KEVLIN ACQUISITION CORP.
Kevlin Acquisition Corp. ("Newco") is a wholly-owned subsidiary of Chelton
incorporated in Massachusetts in 1995 for the sole purpose of effecting the
Merger. Newco's executive offices are located at 179 Avenue of the Commons,
Suite One, Shrewsbury, New Jersey 07702. Its telephone number is (908) 935-9518.
KEVLIN
Kevlin designs, manufactures and sells microwave components and subsystems.
These products are used in radar systems by domestic and foreign customers,
representing commercial, air traffic control and defense industries. Kevlin's
principal executive offices are located at 5 Cornell Place, Wilmington,
Massachusetts 01887. Its telephone number is (508) 657-3900.
CORPORATE ACTIONS
NEWCO STOCKHOLDER CONSENT
Chelton, as the holder of all of the outstanding shares of common stock of
Newco, intends to approve the Merger by written consent. The written consent
will constitute the corporate action required under Massachusetts law.
SPECIAL MEETING
Time, Place and Purpose. The Special Meeting will be held on January ,
1996, at 10:00 a.m. Eastern Time, at the offices of Kevlin, 5 Cornell Place,
Wilmington, Massachusetts 01887. At the Special Meeting, the stockholders of
Kevlin will be asked to approve and adopt the Merger Agreement.
Required Vote. The affirmative vote of the holders of two-thirds of the
shares of Kevlin Common Stock outstanding as of the Record Date (as defined
below) is required to approve and adopt the Merger Agreement. Such approval and
adoption is a condition to consummation of the Merger. Votes withheld,
abstentions and broker non-votes (where a broker or nominee does not exercise
discretionary authority to vote on a matter) are counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but, since the affirmative vote of two-thirds of outstanding shares is required
to approve the Merger Agreement, such actions will have the effect of a negative
vote. See "Corporate Actions -- Kevlin
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<PAGE> 9
Stockholder Meeting." The officers and directors of Kevlin and their affiliates
hold shares of Kevlin Common Stock representing approximately % of the
outstanding shares of Kevlin Common Stock (excluding shares which such persons
have the right to acquire upon the exercise of stock options).
Record Date and Stockholder Information. The Board of Directors of Kevlin
has fixed the close of business on December , 1995 as the record date for
determining stockholders entitled to notice of and to vote at the Special
Meeting (the "Record Date"). At the close of business on the Record Date,
shares of Kevlin Common Stock were outstanding. The directors and
executive officers of Chelton beneficially own no shares of Kevlin Common Stock,
and Chelton and its subsidiaries own no such shares. See "Corporate
Actions -- Kevlin Stockholder Meeting."
THE ACQUISITION
MERGER
This Proxy Statement relates to the proposed acquisition of Kevlin by
Chelton to be effected by the Merger of Newco with and into Kevlin. In the
Merger, each share of Kevlin Common Stock outstanding as of the Effective Time,
as defined below, will be converted into the right to receive $4.54 in cash.
Upon consummation of the Merger, Kevlin will be the surviving corporation in the
Merger (the "Surviving Corporation") and will conduct the business of Kevlin as
a whollyowned subsidiary of Chelton.
The Merger will become effective as soon as practicable after satisfaction
or waiver of all conditions to the Merger and at the time and on the date
Articles of Merger are duly filed with the Secretary of the Commonwealth of
Massachusetts, or at such later time and date as is specified as the effective
time of the Merger therein (the "Effective Time"). See "The
Acquisition -- Merger and Effective Time." Assuming all conditions to the Merger
are met, or waived where permissible, it is expected that the Effective Time
will occur on January , 1996, or as soon thereafter as practicable.
PAYMENT FOR KEVLIN SECURITIES
As a result of the Merger, at the Effective Time all outstanding shares of
Kevlin Common Stock (other than shares of holders who perfect dissenters' rights
under Massachusetts law ("Kevlin Dissenting Shares"), and shares held by any
subsidiary of Kevlin) will be converted into the right to receive $4.54 in cash
(the "Merger Consideration").
TREATMENT OF OPTIONS
Chelton's obligations under the Merger Agreement are conditioned upon,
among other things, all outstanding options to purchase shares of Kevlin Common
Stock being exercised or terminated at or prior to the closing of the Merger.
Holders of such options will be permitted, prior to the termination of the
option, to pay the exercise price of the option with shares of Common Stock
acquired on exercise, thereby permitting optionholders to exercise their options
prior to termination with the payment of only a nominal amount of cash. Upon the
consummation of the Merger and the payment of the Merger Consideration, each
person who had previously held options and exercised such options as described
in the previous sentence will have received an amount of cash equal to the
difference between the exercise price of the option and the Merger
Consideration. See "The Acquisition -- Treatment of Options."
MARKET FOR KEVLIN SHARES
Kevlin Common Stock is listed on NASDAQ and designated a Nasdaq National
Market security, trading under the symbol "KVLM". On October 11, 1995, the last
trading day prior to the first public announcement of the agreement for the
Merger, the high and low sale prices of Kevlin Common Stock as reported by
NASDAQ were $4.125 and $4.00, and the closing sale price on such date was $4.00.
Upon the consummation of the Merger, Kevlin will cease to be a company whose
stock is registered under Section 12 of
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<PAGE> 10
the Securities Exchange Act of 1934 (the "Exchange Act") and will, therefore, no
longer be subject to the reporting requirements of the Exchange Act.
REASONS FOR THE ACQUISITION
Chelton
Chelton believes that Kevlin's development and sales of rotary couplers for
military and commercial radars and air traffic control ("ATC") systems is a
natural extension of Chelton's air and ground antenna and microwave product
lines. Kevlin's defense, ATC and international markets are well known to
Chelton, and Chelton believes that a synergy will be obtained through combined
sales and marketing efforts, especially in the international arena.
Kevlin
The Board of Directors of Kevlin has unanimously approved the Merger
Agreement and the transactions contemplated thereby and recommends that the
stockholders of Kevlin vote in favor of the adoption of the Merger Agreement.
In evaluating the transaction, the Kevlin Board of Directors was
furnished with and considered the most recent financial statements of Kevlin,
reports from management on management's plans for expansion into additional
related testing markets and reports regarding Kevlin's future financing needs.
After considering the available alternatives and the immediate and foreseeable
prospects for Kevlin, the Board of Directors of Kevlin concluded that the
Merger is in the best interests of the stockholders of Kevlin, that the Merger
offers the greatest immediate and long-term value to the stockholders and that
the Merger provides the best prospect to serve the needs of each other
constituency of Kevlin, including its employees and customers. Specifically,
the Board of Directors concluded that (i) the Merger enhances stockholder value
and liquidity by providing a Merger Consideration that is 182% higher than the
price of the Kevlin Common Stock at the end of fiscal 1995, (ii) the Merger
would enable Kevlin to expand strategically its global presence and diversify
into other markets by combining Kevlin's sales organization with the world-wide
organization of Chelton, and (iii) the Merger has the potential to improve
Kevlin's operational capabilities through Kevlin's association with Chelton and
its affiliates and their management team, additional capital resources and
manufacturing facilities and capabilities. See "The Acquisition -- Kevlin's
Reasons for the Acquisition."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF KEVLIN
THE BOARD OF DIRECTORS OF KEVLIN UNANIMOUSLY RECOMMENDS THAT THE KEVLIN
STOCKHOLDERS VOTE THEIR SHARES OF KEVLIN COMMON STOCK IN FAVOR OF APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
INTEREST OF CERTAIN PERSONS IN THE MATTER TO BE ACTED UPON
In connection with the Merger, the Board of Directors of Kevlin has
approved a payment, upon the completion of the Merger, to each of the Company's
non-employee directors (Jonathan Donaldson, Howard Mileaf and Carmine Vittoria)
of a specified percentage of the aggregate amount calculated by the application
of the so-called "Lehman Formula" to the aggregate Merger Consideration.
Consequently, if the Merger is completed, Messrs. Donaldson, Mileaf and Vittoria
will receive $215,068, $30,724 and $10,241, respectively, or 84%, 12% and 4%,
respectively, of an aggregate amount of $256,033. See "The
Acquisition -- Interest of Certain Persons in the Matter to be Acted Upon."
COVENANTS
Kevlin and Chelton have made certain covenants and agreements with each
other in the Merger Agreement relating to, among other things, (i) the conduct
of Kevlin's business, (ii) access to information, (iii) obtaining necessary
consents, and (iv) the preparation of this Proxy Statement and other matters.
Kevlin has also agreed that it will not enter into negotiations with or solicit
offers from third parties regarding a
7
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potential acquisition of Kevlin, and will notify Chelton promptly of any such
offer received by either of them. See "The Acquisition -- Representations,
Warranties and Covenants."
CONDITIONS OF MERGER; TERMINATION
In addition to the approval of the Merger Agreement by the stockholders of
Kevlin, the respective obligations of Chelton and Kevlin to consummate the
Merger are subject to certain conditions, including that (i) all representations
and warranties contained in the Merger Agreement be correct as of the Effective
Time; (ii) certain covenants and agreements contained in the Merger Agreement
have been performed or waived prior to the Effective Time; (iii) the parties
have received the legal opinions and other documents described in the Merger
Agreement; (iv) the absence of litigation against Kevlin or Chelton with respect
to the Merger; and (v) the receipt of all necessary consents to the Merger. See
"The Acquisition -- Conditions of Merger."
The Merger Agreement may be terminated prior to the Effective Time under
certain circumstances, including at the election of the Board of Directors of
Kevlin or Chelton on or after February 28, 1996 if any of the conditions to its
obligation to consummate the Merger has not been fulfilled (provided that the
terminating party is not in material breach of its representation, warranties or
obligation under the Merger Agreement). Either Kevlin or Chelton may be
obligated, upon a termination of the Merger Agreement under certain
circumstances, to reimburse the other party up to $150,000 for expenses incurred
in connection with the Merger. See "The Acquisition -- Termination."
BREAKUP AND TERMINATION FEES
If, prior to termination of the Merger Agreement, certain events occur
which could preclude the Merger, Chelton may be obligated to pay a fee of
$1,000,000 (the "Breakup Fee") to Kevlin. Upon termination, Kevlin may under
certain circumstances, be obligated to pay a fee of $1,000,000 (the "Termination
Fee") to Chelton. See "The Acquisition -- Breakup and Termination Fees; No
Solicitation."
ACCOUNTING TREATMENT
If the Merger is consummated, Chelton expects to account for the Merger
using the purchase method of accounting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will be treated as a taxable sale of the Kevlin Common Stock.
Kevlin stockholders will be treated as if they sold their shares in a fully
taxable transaction for the cash they will receive. See "The
Acquisition -- Certain Federal Income Tax Consequences."
APPRAISAL RIGHTS
The Massachusetts Business Corporation Law (the "MBCL") gives Kevlin's
stockholders the right to dissent from the Merger. Kevlin stockholders who
dissent from the Merger in accordance with the MBCL have the right to be paid
the "fair value" of their shares as of the date preceding the Special Meeting
(excluding any appreciation or depreciation in anticipation of the Merger). In
order to exercise these appraisal rights, a Kevlin stockholder must file a
written objection to the Merger with Kevlin prior to the taking of the vote
thereon, must not vote in favor of the Merger and must follow the other
procedures described by the MBCL. See "The Acquisition -- Kevlin Stockholder
Appraisal Rights."
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SELECTED FINANCIAL DATA OF KEVLIN
The selected financial data set forth below for Kevlin as of and for each
of the fiscal years ended May 31 are derived from the audited financial
statements of the Company. The summary financial data set forth below for Kevlin
as of and for the three month periods ended August 31, 1995 and 1994 are derived
from its unaudited financial statements, which in the opinion of management of
Kevlin contain all adjustments (consisting only of normal recurring items)
necessary for the fair presentation of this information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED MAY 31, AUGUST 31,
--------------------------------------------------------- ---------------------
1995 1994 1993 1992 1991 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total sales........................ $ 11,065 $ 10,679 $ 10,541 $ 10,354 $ 9,346 $ 2,326 $ 2,837
Income from continuing
operations....................... 552 340 425 858 505 88 131
Net income (loss).................. 552 (1,430) 122 620 554 88 131
Income from continuing operations
per share........................ 0.19 0.12 0.15 0.30 0.18 0.03 0.05
Net income (loss) per share........ $ 0.19 $ (0.52) $ 0.04 $ 0.22 $ 0.20 $ 0.03 $ 0.05
========= ========= ========= ========= ========= ========= =========
Common and common equivalent shares
outstanding...................... 2,857,336 2,765,099 2,798,632 2,835,202 2,789,345 3,092,713 2,901,073
========= ========= ========= ========= ========= ========= =========
Financial Ratios at End of Period:
Return on (based on income from
continuing operations):
Sales.......................... 5.0% 3.2% 4.0% 8.3% 5.4% 3.8% 4.6%
Period end Assets.............. 5.0% 3.4% 3.8% 8.5% 5.4% 0.8% 1.4%
Period end equity.............. 7.2% 4.9% 5.0% 10.3% 6.7% 1.1% 1.8%
Financial Positions at End of
Period:
Working capital................ $ 6,831 $ 6,473 $ 4,831 $ 5,523 $ 5,674 $ 7,077 $ 6,561
Total assets................... 11,084 9,868 11,085 10,126 9,379 10,353 9,626
Stockholders' equity........... 7,632 7,000 8,476 8,299 7,527 7,774 7,115
Stockholders' equity per common
share........................ $ 2.83 $ 2.64 $ 3.16 $ 3.13 $ 2.95 $ 2.89 $ 2.69
Other Statistics:
New orders..................... $ 10,524 $ 11,704 $ 9,600 $ 8,746 $ 12,846 $ 1,514 $ 1,731
Backlog at end of period....... 7,264 7,789 6,765 7,706 9,314 6,460 6,763
Capital expenditures, net...... 144 220 372 98 127 70 71
Product development
expense...................... $ 289 $ 288 $ 398 $ 409 $ 189 $ 148 $ 74
</TABLE>
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<PAGE> 13
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Kevlin in
connection with the solicitation of proxies by the Board of Directors of Kevlin
to be voted at the Special Meeting, and at any adjournment or postponement
thereof.
CORPORATE ACTIONS
NEWCO STOCKHOLDER CONSENT
In connection with the Merger, Chelton, as the holder of all the
outstanding shares of Newco common stock, has approved the Merger Agreement by
written consent. The written consent constitutes the required corporate action
under Massachusetts law.
KEVLIN STOCKHOLDER MEETING
The Special Meeting. The Special Meeting will be held on January , 1996,
at 10:00 a.m. Eastern Time, at the offices of Kevlin, 5 Cornell Place,
Wilmington, Massachusetts 01887. The purpose of the Special Meeting is to
obtain stockholder approval with regard to the Merger Agreement. Each Kevlin
stockholder of record at the close of business on the Record Date will be
entitled to receive notice of and to vote at the Special Meeting. At that date,
there were shares of Kevlin Common Stock outstanding which were held of
record by approximately holders. Each share of Kevlin Common Stock is
entitled to one vote.
All proxies that are properly executed and returned, unless previously
revoked, will be voted at the Special Meeting in accordance with the
instructions thereon. With regard to any other business not specified above that
may properly come before the Special Meeting, shares represented by properly
executed proxies will be voted at the discretion of the persons named in the
relevant proxy. The execution of a proxy will not affect a stockholder's right
to attend the Special Meeting and vote in person.
Required Vote. The affirmative vote of the holders of at least two-thirds
( 2/3rds) of the outstanding Kevlin Common Stock is required to approve and
adopt the Merger Agreement. Votes withheld, abstentions and broker non-votes
(where a broker or nominee does not exercise discretionary authority to vote on
a matter) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business, but, since the affirmative vote of
two-thirds of outstanding shares is required to approve the Merger Agreement,
such actions will have the effect of a negative vote. No vote of Chelton
stockholders is required, or will be sought, to consummate the transaction.
THE BOARD OF DIRECTORS OF KEVLIN HAS UNANIMOUSLY RECOMMENDED A VOTE IN
FAVOR OF THE MERGER AGREEMENT. See "Summary -- Recommendation of the Board of
Directors of Kevlin," "The Acquisition -- Background of the
Acquisition," and "The Acquisition -- Kevlin's Reasons for the Acquisition."
Purpose of the Meeting. At the Special Meeting, the stockholders of Kevlin
will consider and vote upon the approval and adoption of the Merger Agreement
under which (i) the Merger and the other transactions contemplated by the Merger
Agreement are to be consummated, (ii) holders of Kevlin Common Stock are to
receive the Merger Consideration in exchange for the Kevlin Common Stock held by
each of them as of the Effective Time of the Merger, and (iii) Kevlin is to
become a wholly-owned subsidiary of Chelton. See "The Acquisition -- Merger and
Effective Time," "-- Conversion of Kevlin Common Stock" and "-- Treatment of
Options."
The MBCL gives Kevlin's stockholders the right to dissent from the Merger.
Kevlin stockholders who dissent from the Merger in accordance with the MBCL have
the right to be paid the "fair value" of their shares as of the date preceding
the Kevlin Special Meeting (excluding any appreciation or depreciation in
anticipation of the Merger). In order to exercise these appraisal rights under
the MBCL, a Kevlin stockholder must file a written objection to the Merger with
Kevlin prior to the taking of the vote thereon, must not vote in
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<PAGE> 14
favor of the Merger and must follow the other procedures described by the MBCL.
See "The Acquisition -- Kevlin Stockholder Appraisal Rights."
ANY KEVLIN STOCKHOLDER GIVING A PROXY HAS THE POWER TO REVOKE THE PROXY
PRIOR TO ITS EXERCISE. A PROXY MAY BE REVOKED BY (A) FILING WITH THE CLERK OF
KEVLIN, AT OR BEFORE THE TAKING OF THE VOTE AT THE KEVLIN SPECIAL MEETING, (1) A
WRITTEN NOTICE OF REVOCATION SPECIFYING THE NUMBER OF SHARES AND CLEARLY
IDENTIFYING THE PROXY TO BE REVOKED OR (2) DULY EXECUTING AND FILING A NEW PROXY
BEARING A LATER DATE, OR (B) ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON
(ALTHOUGH ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF CONSTITUTE A
REVOCATION OF A PROXY). ANY WRITTEN NOTICE OF REVOCATION OR SUBSEQUENT PROXY
SHOULD BE SENT AND DELIVERED TO KEVLIN CORPORATION, 5 CORNELL PLACE, WILMINGTON,
MASSACHUSETTS 01887, ATTENTION: CLERK, OR HAND DELIVERED TO THE CLERK OF KEVLIN
AT OR BEFORE THE TAKING OF THE VOTE AT THE SPECIAL MEETING.
Miscellaneous. The expenses of soliciting proxies for the Special Meeting
are to be paid by Kevlin. Solicitation of proxies may be made by means of
personal calls upon, or telephonic or telegraphic communications with,
stockholders or their personal representatives by Beacon Hill Partners, Inc. who
has been retained by Kevlin to assist in such solicitation. See "Solicitation
Compensation."
If you have any questions about giving your Kevlin proxy or require
assistance, please contact either of the following persons:
D. Wayne Peters
Kevlin Corporation
5 Cornell Place
Wilmington, Massachusetts 01887
(508) 657-3900
or
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
Attention: Mr. Paul Schulman, Managing Director
THE ACQUISITION
The detailed terms of and conditions to the consummation of the Merger are
contained in the Merger Agreement, a conformed copy of which is attached hereto
as Exhibit A and incorporated herein by reference. The following discussion sets
forth a description of the material terms and conditions of the Merger
Agreement. The description in this Proxy Statement of the terms and conditions
to the consummation of the Merger is qualified by, and made subject to, the more
complete information set forth in the Merger Agreement.
PRINCIPAL TERMS
The Merger Agreement provides for the merger of Newco, a wholly-owned
subsidiary of Chelton, with and into Kevlin. If the Merger Agreement is approved
and adopted by the stockholders of Kevlin, certain additional conditions are
satisfied or waived and the Merger is consummated, Kevlin will be the Surviving
Corporation in the merger with Newco and will conduct the business of Kevlin as
a wholly-owned subsidiary of Chelton.
As a result of the Merger, at the Effective Time the Kevlin Common Stock
then outstanding will be converted as provided in the Merger Agreement into the
right to receive the Merger Consideration, which
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<PAGE> 15
equals $4.54 per share of Kevlin Common Stock. See "The
Acquisition -- Conversion of Kevlin Common Stock."
For a description of the procedures for exchanging Kevlin Common Stock for
the Merger Consideration, see "The Acquisition -- Surrender of Certificates."
BACKGROUND OF THE ACQUISITION
Beginning in July 1995, Kevlin began the process of entertaining bids from
potential acquirors. From August through October of 1995, Kevlin received a
series of competing bids from three companies, which bids ranged from $3.80 per
share to Chelton's bid of $4.68 per share of Kevlin Common Stock. In September
1995, Kevlin entered into a letter of intent with a potential acquiror at a
price of $4.50 per share of Kevlin Common Stock. Subsequent to signing such
letter of intent, Kevlin received an offer from Chelton, and, following
discussions with Chelton, entered into a letter of intent which was signed on
October 13, 1995 by Chelton and Kevlin (the "Letter of Intent"). In the Letter
of Intent, Kevlin agreed to negotiate in good faith exclusively with Chelton for
a limited period with respect to the acquisition by Chelton of Kevlin in
exchange for $4.68 per share of Kevlin Common Stock. Chelton agreed that it
would pay Kevlin the Breakup Fee if the acquisition is not completed by Chelton,
except as a result of certain events, provided that Kevlin has adhered to the
terms of the Letter of Intent in all material respects. Further due diligence
activities and negotiations led to a reduction in the Merger Consideration to
$4.54 per share of Kevlin Common Stock, due principally to certain costs
experienced by Kevlin during the five month period ended October 31, 1995. The
parties signed the Merger Agreement on December 6, 1995.
KEVLIN'S REASONS FOR THE ACQUISITION
The Board of Directors of Kevlin has unanimously approved the Merger
Agreement and the transactions contemplated thereby and recommends that the
stockholders of Kevlin vote in favor of the adoption of the Merger Agreement.
In evaluating the transaction, the Kevlin Board of Directors was
furnished with and considered the most recent financial statements of Kevlin,
reports from management on management's plans for expansion into additional
related testing markets and reports regarding Kevlin's future financing needs.
After considering the available alternatives and the immediate and foreseeable
prospects for Kevlin, the Board of Directors of Kevlin concluded that the
Merger is in the best interests of the stockholders of Kevlin, that the Merger
offers the greatest immediate and long-term value to the stockholders and that
the Merger provides the best prospect to serve the needs of Kevlin, including
its employees and customers. Specifically, the Board of Directors concluded the
following:
First, the Merger enhances stockholder value and liquidity. The Merger
Consideration is 208% higher than the average price of the Kevlin Common Stock
over the last five fiscal years and 182% higher than the price of the Kevlin
Common Stock at the end of fiscal year 1995. In addition, the Merger
Consideration is higher than any other bid received by Kevlin, and, in the
opinion of the Board of Directors, represents the highest value for the Company
that can currently be obtained.
Second, the Board of Directors believes that the Merger would enable Kevlin
to expand strategically its global presence and diversify into other markets.
Kevlin's sales organization is strengthened by combining its existing network
with the world-wide organization of Chelton.
Finally, the Board of Directors believes that the Merger has the potential
to improve Kevlin's operational capabilities through Kevlin's association with
Chelton and its affiliates and their management team, additional capital
resources and manufacturing facilities and capabilities. In addition, the
benefit of a larger engineering team would enable the combined company to
develop more complex systems for continued growth in markets such as air traffic
control radars, satellite communications systems and commercial positioning and
mapping systems.
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<PAGE> 16
MERGER AND EFFECTIVE TIME
It is expected that the consummation of the transactions contemplated by
the Merger Agreement will take place on January , 1996 (the "Closing Date").
The date and time of the filing of the Articles of Merger with the
Secretary of the Commonwealth of Massachusetts, or such later time as specified
therein, shall be the Effective Time of the Merger. Kevlin and Chelton will
cause the Articles of Merger to be filed and recorded as soon as practicable on
or after the satisfaction or waiver of all conditions to the Merger. It is
expected that the Articles of Merger will be filed on the Closing Date.
CONVERSION OF KEVLIN COMMON STOCK
As a result of the Merger, at the Effective Time each outstanding share of
Kevlin Common Stock (other than shares of holders who perfect dissenters' rights
under Massachusetts law ("Kevlin Dissenting Shares"), and shares held by any
subsidiary of Kevlin) will be converted into the right to receive $4.54 (the
"Merger Consideration").
TREATMENT OF OPTIONS
Chelton's obligations under the Merger Agreement are conditioned upon,
among other things, all outstanding options to purchase shares of Kevlin Common
Stock being exercised or terminated at or prior to the closing of the Merger.
Pursuant to the terms of the Company's 1990 Incentive Stock Option Plan, the
Company intends to notify each optionholder that all outstanding options will be
terminated at the Effective Time. Holders of all outstanding options (including
options granted under the Company's 1980 Stock Option Plan) will be permitted,
prior to the termination of the option, to exercise such options by paying in
cash only an amount necessary to acquire a number of shares of Common Stock with
a value equal to the exercise price for an additional exercise under the option.
Thereafter, additional exercises shall be made successively by the exchange of
shares with a value equal to the exercise price of the option, with each
additional exercise resulting in the issuance of additional shares, until the
option has been exercised in full. Such "pyramiding" transactions shall occur
simultaneously and shall result in the holder of an option receiving a number of
shares with a value equal to the difference between the aggregate exercise price
of all options held by such holder and the aggregate market value of all shares
receivable upon exercise. An optionholder will be permitted to indicate that
such option exercise is to be conditioned upon, and occur immediately following,
the satisfaction of all closing conditions for the Merger, so that an option
will not be exercised if the Merger does not occur. The Closing of the Merger
will occur immediately after the exercise of such options. No stock certificates
will be issued upon the exercise of the option, but each optionholder who
exercises his options will be a holder of record in Kevlin's stock records and
entitled to receive the appropriate Merger Consideration in connection with the
Merger. Upon the consummation of the Merger and the payment of the Merger
Consideration to all Kevlin stockholders (including holders of shares of Kevlin
Common Stock issued pursuant to the exercise of options), each person who had
previously held options and exercised such options as described above will have
received an amount of cash equal to the difference between the exercise price of
the option and the Merger Consideration.
SURRENDER OF CERTIFICATES
The Paying Agent will exchange Kevlin Common Stock certificates for an
amount of cash into which each certificate represents the right to receive. As
soon as practicable after the Effective Time, the Paying Agent will mail to all
holders of record of Kevlin Common Stock at the Effective Time instructions for
surrendering their Kevlin Common Stock certificates in exchange for cash equal
to the Merger Consideration. KEVLIN STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER
THEIR CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A LETTER OF INSTRUCTIONS FROM
THE PAYING AGENT. Upon surrender of a Kevlin Common Stock certificate for
cancellation to the Paying Agent, the holder of such certificate shall be
entitled to receive in exchange cash in an amount equal to $4.54 for each share
previously represented by such certificate. Surrendered certificates shall
forthwith be cancelled. Until
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<PAGE> 17
surrendered, each Kevlin Common Stock certificate shall represent for all
purposes the right to receive cash equal to the Merger Consideration. Any Kevlin
Common Stock certificates surrendered for exchange more than six months after
the Effective Time must be surrendered directly to the Surviving Corporation
instead of the Paying Agent.
If any Merger Consideration is to be paid to a person other than the person
in whose name the Kevlin Common Stock certificate surrendered is registered, it
shall be a condition of such exchange that the person requesting such exchange
shall deliver to the Paying Agent all documents necessary to evidence and effect
such transfer and pay to the Paying Agent any transfer or other taxes required
by reason of the payment of the Merger Consideration to a person other than that
of the registered holder of the certificate surrendered or establish to the
satisfaction of the Paying Agent that such tax has been paid or is not
applicable.
At the Effective Time, the stock transfer books of Kevlin shall be closed
and no transfer of Kevlin Common Stock shall thereafter be made on those stock
transfer books.
INTEREST OF CERTAIN PERSONS IN THE MATTER TO BE ACTED UPON
In connection with the Merger, the Board of Directors of Kevlin has
approved a payment, upon the completion of the Merger, to each of the Company's
non-employee directors (Jonathan Donaldson, Howard Mileaf and Carmine Vittoria)
of a specified percentage of the aggregate amount calculated by the application
of the so-called "Lehman Formula" to the aggregate Merger Consideration. The
aggregate Merger Consideration is expected to be $14,181,730, and the
application of the Lehman Formula to this amount yields an aggregate payment
amount of $256,033. Consequently, if the Merger is completed, Messrs. Donaldson,
Mileaf and Vittoria will receive $215,068, $30,724 and $10,241 respectively, or
84%, 12% and 4%, respectively, of the aggregate amount to be paid. This payment
was approved to compensate these directors for the successful efforts undertaken
by them in connection with the Merger and is intended to reflect the relative
contribution by each such director. Approval of such payments by Kevlin's Board
of Directors occurred prior to the Merger negotiations and, therefore, may have
created a conflict of interest for the non-employee directors in the negotiation
of the Merger Consideration and the approval of the Merger.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Kevlin, Chelton and Newco have made certain representations and warranties
to each other relating to, among other things, compliance with laws, preparation
of financial statements, legal actions and proceedings, and, in the case of
Kevlin, capitalization and share ownership, intellectual property, tax matters,
employee benefit plans, properties, and environmental matters.
Kevlin has agreed that, except with the prior written consent of Chelton,
prior to the consummation of the Merger it shall observe certain covenants,
including a covenant to conduct its operations in its ordinary and usual course
of business and consistent with past practice. Kevlin has also agreed that,
except with the prior written consent of Chelton and with certain other
exceptions set forth in the Merger Agreement, it will not take certain other
actions, including (i) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of any additional securities of Kevlin, (ii) purchase
or otherwise acquire any of its outstanding securities, (iii) declare or pay any
dividend on any shares of its capital stock, (iv) propose or adopt any amendment
to its charter or by-laws, (v) enter into, assign or terminate, or amend in any
material respect, any agreement, other than in the ordinary course, (vi) make
any material capital expenditures, other than pursuant to previously disclosed
capital expenditure programs, or (vii) waive, settle or compromise any material
litigation or material claim in an manner adverse to Kevlin, or incur any
indebtedness for borrowed money.
Kevlin, Chelton and Newco have agreed to use their respective best efforts
to obtain all authorizations and consents of third parties necessary to the
consummation of the transactions contemplated by the Merger Agreement, to
perform and fulfill all conditions and obligations under the Merger Agreement,
to maintain, with certain exceptions, the confidentiality of information
provided by the other party in connection with the Merger, and to promptly
advise the other party prior to a party's required issuance of any press release
or other information to the press or any third party with respect to the Merger
Agreement or the transactions
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<PAGE> 18
contemplated thereby. Chelton has agreed, subject to certain conditions, to
maintain for a period of one year following the Effective Time directors' and
officers' liability insurance with respect to causes of actions that arise out
of facts or omissions occurring on or before the Effective Time.
In addition, Kevlin is permitted under the Merger Agreement to pay (i) up
to $100,000, in the aggregate, to the staff of Kevlin in such proportions as
Kevlin's Board shall determine, and (ii) up to $256,033, in the aggregate, to
Kevlin's non-employee directors in full and final payment for their services to
Kevlin.
CONDITIONS OF MERGER
In addition to the approval of the Merger Agreement by the stockholders of
Kevlin, the respective obligations of Chelton and Kevlin to consummate the
Merger are subject to the following conditions, among others: (i) the
representations and warranties contained in the Merger Agreement shall be
accurate at the Effective Time; (ii) certain covenants and agreements required
of Kevlin by the Merger Agreement to be performed or complied with shall have
been performed or complied with on or prior to the Effective Time; (iii) the
parties shall have received customary legal opinions and other documents as
described in the Merger Agreement; (iv) the parties shall have obtained all
approvals, consents and waivers required to be obtained in connection with the
performance of the Merger Agreement; (v) there shall not have been instituted or
threatened any action to restrict or prohibit the merger or which would result
in material damages to Kevlin or the value of Kevlin's assets; (vi) all
outstanding options to purchase Kevlin Common Stock shall have been exercised or
terminated; and (vii) Newco shall have presented evidence to Kevlin that,
immediately prior to the Closing, it has cash on hand equal or greater to the
aggregate Merger Consideration.
TERMINATION
The Merger Agreement may be terminated prior to the Effective Time (i) by
mutual written consent of Kevlin, Chelton and Newco; (ii) by Chelton or Kevlin
if the Effective Time has not occurred on or before February 28, 1996, if the
terminating party is not in material breach under the Merger Agreement; (iii) by
Chelton or Newco if any of their conditions to closing has not been met or
waived and is no longer capable of satisfaction; (iv) by Kevlin if any of its
conditions to closing has not been met or waived and is no longer capable of
satisfaction; (v) by Chelton or Kevlin if any order, decree or ruling has been
issued or any action taken by an appropriate authority, or any litigation or
proceeding is pending which is reasonably likely to result in such issuance or
action, to prohibit the Merger;or (vi) by Kevlin, if (a) it shall have received
a Superior Proposal (as defined in the Merger Agreement); (b) a written opinion
of Palmer & Dodge that in furtherance of its fiduciary duties, the Board of
Directors of Kevlin is required to terminate the Merger Agreement in favor of
the Superior Proposal; (c) Kevlin's directors shall have resolved to enter into
an agreement with respect to the Superior Proposal within 48 hours after
termination of this Agreement and (d) Kevlin shall have paid $1,000,000 to
Chelton.
If terminated for any reason described above, other than pursuant to
clauses (iii) or (iv) above, the Merger Agreement will become void and have no
effect, without any liability on the part of any party, its directors, officers
or stockholders with the exception of the provisions relating to confidentiality
and publicity, payment of the Termination Fee and payment of expenses, which
shall remain in effect. If either party terminates the Merger Agreement for the
reasons described in clause (iii) or (iv) above, the terminating party is
entitled to reimbursement by the other party of up to $150,000 for expenses
incurred in connection with the Merger. Termination of the Merger Agreement as
described above will not relieve any party from liability for any breach thereof
occurring before such termination.
WAIVER AND AMENDMENT
At any time prior to the Effective Time, (i) the parties to the Merger
Agreement may, by written agreement, modify, amend or supplement any term or
provision of the Merger Agreement or extend the time for performance of any
obligation thereunder and (ii) any term or provision of the Merger Agreement may
be waived in writing by the party which is entitled to the benefits thereof;
provided, however, that after the Merger Agreement is adopted by the
stockholders of Kevlin, no such amendment or modification may be
15
<PAGE> 19
made which would decrease the Merger Consideration to be received in exchange
for the Kevlin Common Stock or adversely affect the rights of such stockholders,
without the further approval of the stockholders so affected.
BREAKUP AND TERMINATION FEES; NO SOLICITATION
Pursuant to the terms of an Escrow Agreement dated as of October 20, 1995
among Kevlin, Chelton and M&T Securities, Inc., as Escrow Agent, Chelton
deposited $1,000,000 (the "Breakup Fee") with the Escrow Agent. This amount,
plus interest earned thereon, will be paid to Kevlin if Chelton does not
complete the Merger, unless such failure to complete the Merger is due to (i) a
failure to receive approval, to the extent necessary, from the Committee on
Foreign Investment in the United States or under the Hart Scott Rodino Fair
Trade Act, (ii) the existence of unrecorded or under recorded liabilities, asset
shortfalls or future adverse events of Kevlin having, individually or in the
aggregate, a potential value of $300,000 or more, or (iii) the failure of Kevlin
to adhere to the terms of the Letter of Intent in all material respects. If the
events described in clauses (i), (ii) or (iii) of the preceding sentence occur,
the Breakup Fee will be paid to Chelton.
Pursuant to the terms of the Merger Agreement, Kevlin is obligated to pay
to Chelton, upon demand, an amount of $1,000,000 (the "Termination Fee") if (i)
Kevlin, upon the advice of counsel, terminates the Merger Agreement and enters
into an agreement with a third party relating to a Superior Proposal (as defined
in the Merger Agreement) or (ii) Chelton or Newco terminate the Merger Agreement
as a result of any of the representations or warranties of Kevlin not being true
at the Effective Time or certain covenants of Kevlin not having been complied
with as of the Effective Time as a result of the intentional, deliberate or
fraudulent misrepresentation or breach of covenant by Kevlin, and such
representations, warranties and covenants are not capable of being true or
complied with on or before February 28, 1996.
In the Merger Agreement, Kevlin has agreed that the Board of Directors of
Kevlin will not negotiate with another party except as required in the exercise
of its fiduciary responsibilities. Kevlin is obligated to immediately inform
Chelton of any approaches made to Kevlin by third parties.
EXPENSES
The Merger Agreement provides that each party will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of the Merger Agreement and the transactions contemplated thereby, including
without limitation, all fees and expenses of agents, representatives, counsel
and accountants.
REGULATORY MATTERS
Pursuant to Title IV, sec. 721(a) of the Defense Production Act, as
amended, 50 U.S.C.A. Appendix sec. 2170(a), the Committee on Foreign Investment
in the United States ("CFIUS") may make an investigation to determine the
effects on national security of mergers by or with foreign persons which could
result in foreign control of persons engaged in interstate commerce in the
United States. Notice has been provided to CFIUS, and approval has been received
from the Committee to proceed with the Merger.
ACCOUNTING TREATMENT
If the Merger is consummated, Chelton expects to account for the Merger
using the purchase method of accounting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to Kevlin stockholders. The discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations, current administrative
rulings of the Internal Revenue Service ("IRS") and judicial decisions, all of
which are subject to change. The discussion does not purport to be a complete
analysis or listing of all potential tax effects relevant to a particular Kevlin
stockholder nor does it address the tax consequences that may be relevant to
particular categories of
16
<PAGE> 20
stockholders subject to special treatment under certain federal income tax laws.
In addition, it does not describe any tax consequences arising under the laws of
any state, local or foreign jurisdiction. Accordingly, each Kevlin stockholder
is urged to consult his own tax advisor regarding the tax consequences of the
Merger in his own particular tax situation and regarding state, local and
foreign tax implications of the Merger and any tax reporting requirements of the
Merger.
Tax Treatment of Kevlin, Chelton and Newco. The Merger will be treated as
a sale of the Kevlin Common Stock. Accordingly, the Company, Chelton and Newco
will recognize no gain or loss by reason of the Merger, and the basis and
holding periods of the Company's and Newco's assets immediately after the Merger
will include the basis and holding period in their hands immediately prior to
the Merger.
Tax Consequences to Kevlin's Stockholders. A stockholder who exchanges his
Kevlin Common Stock for cash in the Merger will be treated as if the shares had
been sold in a taxable transaction. Gain or loss realized will be recognized by
the stockholder with respect to the receipt of the cash in exchange for the
Company Common Stock in the Merger. The amount of gain or loss realized will be
measured by the difference between the amount of cash received and the adjusted
basis of the shares. Such gain or loss will be capital gain or loss, assuming
the shares were a capital asset in the stockholders' hands at the time of the
Merger, and will be long-term capital gain or loss if the stockholder has held
the Common Stock for more than one year at the time of the Merger.
A Kevlin stockholder who exercises dissenters' rights with respect to his
shares will be subject to tax on the receipt of the payments pursuant to Section
302 of the Code (taking into account the application of the stock attribution
rules of Section 318 of the Code). In general, if the shares of Kevlin Common
Stock are held by the stockholder as a capital asset at the Effective Time such
stockholder will recognize capital gain or loss measured by the difference
between the amount of cash received by such stockholder and the basis for his
shares.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. EACH KEVLIN STOCKHOLDER SHOULD CONSULT HIS OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER LAWS.
KEVLIN STOCKHOLDER APPRAISAL RIGHTS
Pursuant to Section 85 of the MBCL any holder of record of Kevlin Common
Stock who follows the procedures specified in Sections 86 to 98 of the MBCL is
entitled to have his shares appraised by superior court in Middlesex County,
Massachusetts, and to receive the appraised value of such shares in lieu of the
Merger Consideration that such holder be otherwise entitled to receive pursuant
to the Merger Agreement. Reference is made to Sections 85 through 98 of the
MBCL, copies of which are attached to this Proxy Statement as Exhibit B, for a
complete statement of the appraisal rights of dissenting stockholders. The
following information is qualified in its entirety by reference to such
Sections.
The MBCL gives stockholders of Kevlin the right to dissent from the Merger.
The MBCL sets forth the procedure whereby a stockholder who desires to dissent
from the merger action must file with Kevlin, prior to the taking of the vote of
the stockholders on the Merger, a written objection to the Merger. Voting in
person or by proxy against the Merger will not constitute the written objection
required. If the Merger is approved by the required vote, Kevlin, as the
Surviving Corporation, shall be obligated, within ten (10) days after such
approval, to notify each stockholder who has filed a written objection to the
action in compliance with Section 86 of the MBCL ("Notice of Merger"). Kevlin
stockholders who have given written notice of objection to the Merger and have
not voted in favor thereof, may, within twenty (20) days after the Notice of
Merger was mailed, make written demand on the Surviving Corporation for payment
of the fair value of such stockholders' shares. Within thirty (30) days after
the expiration of the 20 day period described above, the Surviving Corporation
shall pay to each Kevlin stockholder demanding payment the fair value of his
stock determined as of the day preceding the date of the Special Meeting
(excluding any appreciation or depreciation in
17
<PAGE> 21
anticipation of the Merger). If, within such thirty (30) day period, the
Surviving Corporation and any dissenting Kevlin stockholder cannot agree upon
the fair value of such shares, the Surviving Corporation or the dissenting
stockholder may, at any time within four months after the expiration of such 30
day period, demand a determination of the value of the stock of such dissenting
stockholder by a bill in equity filed in superior court in Middlesex County. All
dissenting stockholders of Kevlin with whom the Surviving Corporation has not
reached agreement as to the value of the Kevlin Common Stock, wherever they
reside, shall be made parties to the proceeding. The fair value of Kevlin
Dissenting Shares, as determined by the court, shall be payable only upon the
surrender to the Surviving Corporation of the certificate or certificates
representing such shares, and upon payment of the fair value, the dissenting
stockholder shall cease to have any interest in such shares. Court costs shall
be borne by the party and to the extent deemed equitable by the court. Interest
shall be paid upon any award from the date of the vote approving the Merger.
Failure to timely make appropriate demand shall result in the stockholder being
bound by the terms of the Merger. Any stockholder making such demand shall not
thereafter be entitled to notice of any meeting of stockholders or to vote such
stock for any purpose and shall not be entitled to the payment of dividends or
other distribution of the stock, except in limited circumstances set forth in
Section 96 of the MBCL.
In the event that stockholders elect to exercise these appraisal rights,
the receipt of cash for shares of Kevlin Common Stock will be a taxable
transaction to the Kevlin stockholders receiving such cash, as described above
under "The Acquisition -- Certain Federal Income Tax Consequences." IT IS
SUGGESTED THAT STOCKHOLDERS CONSIDERING EXERCISING STATUTORY APPRAISAL RIGHTS
CONSULT WITH THEIR OWN TAX ADVISORS WITH REGARD TO THE TAX CONSEQUENCES OF SUCH
ACTIONS.
To the extent there are any inconsistencies between the foregoing summary
and Sections 85 to 98 of the MBCL, the terms of the MBCL shall control.
KEVLIN CORPORATION SUBSEQUENT EVENTS
On November 10, 1995, Arthur Williams, the President and Chief Executive
Officer and a director of the Company, resigned as an officer and a director of
the Company. On November 16, 1995, the Board of Directors elected John Moran as
the President and Chief Executive Officer of the Company. Mr. Moran had
previously held the position of Vice President and Clerk of the Company, as well
as serving as a director of the Company. In addition to serving as President and
Chief Executive Officer of the Company, Mr. Moran will continue to serve as the
Clerk and as a director of the Company. In connection with his resignation
from the Company, Mr. Williams will be paid approximately $380,000 by the
Company.
18
<PAGE> 22
SECURITIES BENEFICIALLY OWNED BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of October 31, 1995, the beneficial
ownership of Common Stock for (i) each director of the Company, (ii) the Chief
Executive Officer and the two most highly compensated executive officers of the
Company, (iii) all executive officers and directors as a group (8 persons) and
(iv) each person known to the Board of Directors to beneficially own more than
five percent of the Common Stock. The address of each director and the Employee
Stock Ownership Plan listed below is care of the Company, 5 Cornell Place,
Wilmington, MA 01887.
<TABLE>
<CAPTION>
NUMBER SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT
--------------------------------------------------------- ---------------------- -------
<S> <C> <C>
Employee Stock Ownership Plan(2)......................... 334,677 12.2%
Ernest W. Lattanzi(2)(3)(4).............................. 334,076 12.0
Arthur C. Williams(2)(4)................................. 291,809 9.8
John J. Moran(2)(4)...................................... 151,400 5.4
Carmine Vittoria(4)...................................... 10,000 *
Howard A. Mileaf(4)...................................... 6,000 *
Jonathan D. Donaldson(4)................................. 5,000 *
All Directors and Executive Officers as a
Group (8 persons)(2)(3)(4)............................. 836,064 26.8%
</TABLE>
- - - ---------------
* Less than one percent
(1) Beneficial ownership of Common Stock is determined in accordance with the
rules of the Securities and Exchange Commission, and includes the holding of
sole or shared voting or investment power with respect to shares of Common
Stock. Shares of Common Stock subject to options currently exercisable or
which become exercisable on or before December 30, 1995 are deemed to be
beneficially owned and outstanding for purposes of computing the percentage
of the person holding such options, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) Includes the following number of shares allocated to the account of these
executive officers and directors under the Company's Employee Stock
Ownership Plan ("ESOP") as of August 11, 1995, as to which such person has
sole voting power and the ESOP Committee has sole dispositive power: Ernest
Lattanzi -- 29,886; Arthur C. Williams -- 1,809; John J. Moran -- 23,805;
all executive officers and directors as a group (8 persons) -- 58,279.
(3) Includes 200 shares held jointly by Mr. Lattanzi with his wife.
(4) Includes the following number of shares subject to options exercisable on or
before December 30, 1995 by these executive officers and directors: Jonathan
D. Donaldson -- 5,000; Arthur C. Williams -- 232,500; John J.
Moran -- 55,000; Ernest W. Lattanzi -- 60,000; Howard A. Mileaf -- 5,000;
Carmine Vittoria -- 10,000; all executive officers as a group (8
persons) -- 387,500.
SOLICITATION COMPENSATION
The cost of soliciting proxies from holders of shares of Kevlin Common
Stock will be borne by Kevlin. In addition to soliciting proxies by mail,
officers and employees of Kevlin, without receiving additional compensation
therefor, may solicit proxies by telephone, by telegram, or in person. Kevlin
has retained Beacon Hill Partners, Inc. to assist in the solicitation of
proxies. The fee to be paid to such firm is expected to be approximately $4,500
plus reimbursement for reasonable out-of-pocket costs and expenses. Kevlin will
also make arrangements with brokerage firms and other custodians, nominees, and
fiduciaries to send proxy materials to their principals.
19
<PAGE> 23
OTHER MATTERS
Kevlin knows of no other business that will be presented for action by the
stockholders at the Special Meeting. The Board of Directors of Kevlin has
approved the contents and mailing of this Proxy Statement.
ACCOMPANYING KEVLIN REPORTS
A copy of Kevlin's Annual Report on Form 10-K for the year ended May 31,
1995, and a copy of the Kevlin Quarterly Report on Form 10-Q for the quarter
ended August 31, 1995 are being delivered to Kevlin stockholders with this Proxy
Statement.
20
<PAGE> 24
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
CHELTON COMMUNICATION SYSTEMS, INC.,
KEVLIN ACQUISITION CORP.
AND
KEVLIN CORPORATION
DATED: DECEMBER 6, 1995
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER................................................................. 1
Section 1.1 The Merger............................................................ 1
Section 1.2 Effective Time........................................................ 1
Section 1.3 Effects of the Merger................................................. 1
Section 1.4 Articles of Organization and By-Laws.................................. 1
Section 1.5 Board of Directors; Officers.......................................... 1
Section 1.6 Conversion of Shares and Options...................................... 1
Section 1.7 Closing............................................................... 2
Section 1.8 Escrow Fund........................................................... 2
ARTICLE II DISSENTING SHARES; SURRENDER OF SHARES AND PAYMENT
THEREFOR.............................................................. 2
Section 2.1 Dissenting Shares..................................................... 2
Section 2.2 Surrender and Payment................................................. 2
Section 2.3 Shareholders Meeting; Preparation of Proxy Statement.................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................... 4
Section 3.1 Representations and Warranties of Kevlin.............................. 4
(a) Corporate Standing and Authority; Binding Agreement................... 4
(b) Capitalization........................................................ 4
(c) Directors, Officers, Key Employees and Other Employees................ 4
(d) Absence of Conflicting Agreements or Required Consents................ 5
(e) Financial Statements.................................................. 5
(f) Undisclosed Liabilities............................................... 5
(g) Taxes................................................................. 5
(h) Inventories........................................................... 6
(i) Non-Infringement of Patents, Trademarks and Other Intellectual
Property.............................................................. 6
(j) Operations and Use of Properties...................................... 6
(k) Licenses.............................................................. 7
(l) Insurance............................................................. 7
(m) Environmental Matters................................................. 7
(n) Employees and Labor Laws.............................................. 7
(o) Product Labeling, Product Liability and Product Warranty.............. 8
(p) Validity and Existence of Agreements.................................. 8
(q) Employee Benefit Plans................................................ 9
(r) Controlled Group Status............................................... 11
(s) No Multiemployer Plans................................................ 11
(t) Debts and Capitalized Leases.......................................... 11
(u) Litigation............................................................ 11
(v) Continuation of Business.............................................. 11
(w) Management Personnel.................................................. 11
(x) Absence of Changes.................................................... 11
(y) Delivery of Exhibits.................................................. 12
(z) No Side Agreements.................................................... 12
(aa) Suppliers and Tooling................................................. 12
(ab) Title to and Location of Assets....................................... 12
(ac) Machinery and Equipment............................................... 12
(ad) Product Design and Drawings; Absence of Defects....................... 12
(ae) Government Assistance................................................. 12
(af) Arrangements with Professionals....................................... 12
</TABLE>
i
<PAGE> 26
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(ag) No Loss Contracts..................................................... 12
(ah) Customer Relations.................................................... 13
(ai) Delivery Schedules.................................................... 13
(aj) Financial Records..................................................... 13
(ak) Guaranties............................................................ 13
(al) Dividends............................................................. 13
(am) No Power of Attorney.................................................. 13
(an) SEC Reports........................................................... 13
(ao) Proxy Statement....................................................... 13
(ap) Management Shares..................................................... 13
(aq) Status of Flow Vision................................................. 13
(ar) Truth of Representations.............................................. 14
Section 3.2 Representations and Warranties of Chelton and NEWCO................... 14
(a) Corporate Standing and Authority...................................... 14
(b) Litigation............................................................ 14
(c) Proxy Statement....................................................... 14
(d) Truth of Representations.............................................. 14
ARTICLE IV COVENANTS................................................................. 14
Section 4.1 Conduct of Business of Kevlin......................................... 14
Section 4.2 Access to Information................................................. 15
Section 4.3 Best Efforts.......................................................... 16
Section 4.4 Consents.............................................................. 16
Section 4.5 Public Announcements.................................................. 16
Section 4.6 Certain Payments...................................................... 16
Section 4.7 Funding of NEWCO...................................................... 16
Section 4.8 Insurance............................................................. 16
ARTICLE V CONDITIONS TO CONSUMMATION OF THE MERGER................................... 17
Section 5.1 Conditions to Kevlin's Obligation to Close............................ 17
(a) Representations and Warranties........................................ 17
(b) No Litigation......................................................... 17
(c) Merger Consideration.................................................. 17
(d) Approval of Kevlin's Stockholders..................................... 17
(e) Receipt of Consents................................................... 17
(f) Opinion of Chelton and NEWCO's Counsel................................ 17
Section 5.2 Conditions to Chelton's and NEWCO's Obligation to Close............... 17
(a) Representations, Warranties and Covenants............................. 17
(b) No Litigation......................................................... 17
(c) Approval of Kevlin's Stockholders..................................... 17
(d) Receipt of Consents................................................... 17
(e) Opinion of Kevlin's Counsel........................................... 17
(f) Resignation Letters................................................... 17
(g) Continuation of Insurance............................................. 18
(h) Environmental Study................................................... 18
(i) Stock Options......................................................... 18
Section 5.3 Other Conditions...................................................... 18
Section 5.4 No Solicitation....................................................... 18
ARTICLE VI TERMINATION; AMENDMENTS; WAIVER........................................... 19
Section 6.1 Termination........................................................... 19
Section 6.2 Effect of Termination................................................. 19
</TABLE>
ii
<PAGE> 27
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.3 Amendment............................................................. 20
Section 6.4 Extension; Waiver..................................................... 20
ARTICLE VII MISCELLANEOUS............................................................ 20
Section 7.1 Survival of Representations and Warranties............................ 20
Section 7.2 Brokerage Fees; Commissions and Expenses.............................. 20
Section 7.3 Entire Agreement; Assignment.......................................... 20
Section 7.4 Validity.............................................................. 20
Section 7.5 Notices............................................................... 20
Section 7.6 Governing Law......................................................... 21
Section 7.7 Descriptive Headings.................................................. 22
Section 7.8 Counterparts.......................................................... 22
Section 7.9 Expenses.............................................................. 22
Section 7.10 Specific Performance.................................................. 22
Section 7.11 Certain Definitions................................................... 22
Section 7.12 Performance by NEWCO.................................................. 22
Section 7.13 Parties in Interest................................................... 22
</TABLE>
iii
<PAGE> 28
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of December
6, 1995, is among KEVLIN CORPORATION, a Massachusetts corporation ("Kevlin"),
Kevlin Acquisition Corp., a Massachusetts corporation and a wholly-owned
subsidiary of Chelton Communication Systems, Inc., ("NEWCO"), and CHELTON
COMMUNICATION SYSTEMS, INC., a Delaware corporation ("Chelton").
The respective Boards of Directors of Chelton, NEWCO and Kevlin have duly
approved the acquisition of Kevlin by Chelton by means of a merger of NEWCO with
and into Kevlin pursuant to the terms of this Agreement. It is therefore agreed
as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Massachusetts
Business Corporation Law (the "Massachusetts Act") including, without
limitation, any required vote of shareholders of Kevlin as described in Section
2.3 of this Agreement, NEWCO shall be merged with and into Kevlin (the "Merger")
as soon as practicable following the satisfaction or waiver, if permissible, of
the conditions set forth in Article V hereof. Following the Merger, Kevlin shall
continue as the surviving corporation (the "Surviving Corporation") under the
laws of the Commonwealth of Massachusetts and the separate corporate existence
of NEWCO shall cease.
Section 1.2 Effective Time. The Merger shall be consummated by filing the
Articles of Merger with the Massachusetts Secretary of State in a form mutually
agreeable to the parties hereto (the "Articles of Merger") (the time that such
filing is accomplished is referred to herein as the "Effective Time").
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 80 of the Massachusetts Act.
Section 1.4 Articles of Organization and By-Laws. The Articles of
Organization and By-Laws of Kevlin, both as in effect at the Effective Time,
shall be the Articles of Organization and By-Laws of the Surviving Corporation.
Section 1.5 Board of Directors; Officers. As of the Effective Time, the
directors of NEWCO in office immediately prior to the Effective Time shall be
the directors of the Surviving Corporation until their respective successors are
duly elected and qualified. The officers of NEWCO immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until their
successors are duly elected and qualified.
Section 1.6 Conversion of Shares and Options.
(a) Each share of common stock, $.10 par value per share ("Shares" or
"Kevlin Common Stock"), of Kevlin issued and outstanding immediately prior to
the Effective Time (other than Shares held by Kevlin as treasury stock, which
shall be cancelled) shall, by virtue of the Merger and without any action on the
part of any holder thereof, be converted into the right to receive a cash
payment in the amount of four dollars and fifty-four cents ($4.54) (the "Merger
Consideration"). The Merger Consideration shall be payable upon surrender of the
certificates formerly representing Shares in accordance with Section 2.2.
(b) Each Share held in the treasury of Kevlin immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger and without
any action on the part of Kevlin, be cancelled and retired and cease to exist
and no payment shall be made with respect thereto.
(c) Each share of common stock of NEWCO issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Chelton, be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
A-1
<PAGE> 29
(d) Kevlin shall make arrangements with each holder of an option to
purchase shares of Kevlin Common Stock outstanding immediately prior to the
Effective Time ("Stock Options") to exercise such options and purchase shares of
Common Stock. Such option exercises may be accomplished by payment of the
exercise price in Common Stock, including stock acquired upon exercise of such
option, valued at the Merger Consideration, with such exercise being contingent
upon the conditions to the consummation of the Merger set forth in Article V
hereof being satisfied or waived. To the extent that a shareholder vote is not
required, all stock option plans of Kevlin shall terminate as of the Effective
Time, and Kevlin shall ensure that no holder of an option to purchase Kevlin
Common Stock shall have any rights under outstanding options or under the
relevant stock option plans except to receive the cash payment as a stockholder
entitled to payment under subsection (a) above.
Section 1.7 Closing. Upon the terms and subject to the conditions hereof,
as soon as practicable after the satisfaction of all conditions described in
Article V, Kevlin and NEWCO shall hold a closing (the "Closing") at the offices
of Palmer & Dodge in Boston, Massachusetts (or such other place as the parties
may agree), for the purpose of implementing all transactions described in this
Agreement. At the Closing, the parties shall arrange for the filing of the
Articles of Merger with the Massachusetts Secretary of State and shall take such
other and further actions as may be required by law to make the Merger
effective. The parties presently contemplate that the Closing will be held
immediately following the Special Meeting described in Section 2.3.
Section 1.8 Escrow Fund. The parties acknowledge that Chelton has
deposited $1,000,000 (the "Escrow Fund") in cash with M&T Securities, Inc. (the
"Escrow Agent") pursuant to an Escrow Agreement among Kevlin, Chelton and the
Escrow Agent. The Escrow Fund will be disbursed by the Escrow Agent as provided
for in the Escrow Agreement.
ARTICLE II
DISSENTING SHARES; SURRENDER OF SHARES
AND PAYMENT THEREFOR
Section 2.1 Dissenting Shares. Section 85 of the Massachusetts Act
provides dissenter's rights in connection with the Merger to the shareholders of
Kevlin.
Section 2.2 Surrender and Payment.
(a) Prior to the Closing, Kevlin shall appoint an agent (the "Paying
Agent") for the purpose of paying the Merger Consideration in exchange for
certificates representing shares or options to purchase shares of Kevlin Common
Stock ("Certificates"). As soon as practicable after the Effective Time, the
Paying Agent shall send a notice and transmittal form (which shall specify that
delivery shall be effected, and risk of loss and title to Certificate(s) shall
pass, only upon delivery of such Certificate(s) to the Paying Agent and shall be
in a form and have such other provisions as Kevlin may reasonably specify) to
each Holder of a Certificate(s) theretofore evidencing shares of Kevlin Common
Stock, outstanding immediately prior to the Effective Time, advising each such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Paying Agent such Certificates for payment of the Merger Consideration.
(b) The Surviving Corporation shall transmit by wire or other acceptable
means to the Paying Agent prior to the Effective Time the funds necessary for
all exchanges in accordance with this Agreement. The Paying Agent shall agree to
deliver such funds (in the form of checks of the Paying Agent) in accordance
with this Section 2.2 and such additional terms as may be agreed upon by the
Paying Agent and Kevlin. Any portion of such funds which has not been paid
pursuant to this Section 2.2 by six months after the Effective Time shall
promptly be paid to the Surviving Corporation, and thereafter any stockholders
of Kevlin who have not theretofore complied with this Section 2.2 shall look
only to the Surviving Corporation for payment of the amount to which they are
entitled in the Merger.
(c) Each holder of a Certificate(s) theretofore representing shares of
Kevlin Common Stock which are converted into the right to receive the Merger
Consideration, upon surrender to the Paying Agent of such
A-2
<PAGE> 30
Certificate(s) for cancellation, together with a duly completed transmittal form
and such other documents as may be reasonably requested by the Paying Agent,
will be entitled promptly to receive a check representing cash in the amount of
the Merger Consideration times the number of shares of Kevlin Common Stock
represented by such Certificate(s) less any amount required to be withheld under
applicable Federal income tax regulations ("Back Withholding").
(d) If payment of the Merger Consideration (or any portion thereof) is to
be made to a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition of such
payment that the Certificate(s) so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall pay to the Paying Agent any transfer or other taxes required
by reason of such payment, or shall establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to any
person claiming the right to receive the Merger Consideration for any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate(s) shall not have been surrendered
prior to five years after the Effective Time (or immediately prior to such
earlier date on which any payment pursuant to this Article II would otherwise
escheat to or become the property of any Federal, state or local government
agency or court, administrative agency or commission or other governmental
authority or agency, domestic or foreign, the payment in respect of such
Certificate(s) shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(e) In the event any Certificate(s) theretofore representing shares of
Kevlin Common Stock to be exchanged for the Merger Consideration has been lost,
stolen or destroyed, the Paying Agent shall pay to the person claiming that such
Certificate(s) has been lost, stolen or destroyed the cash into which the shares
theretofore represented by such Certificate(s) have been converted as provided
under the terms of this Agreement (less any required Backup Withholding), upon
receipt of evidence of ownership of such Certificate(s) and appropriate
indemnification in each case satisfactory to the Paying Agent.
(f) Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the amount of cash, without interest, into which
the shares of Kevlin Common Stock theretofore represented by such Certificate
shall have been converted pursuant to Section 1.6. No interest shall accrue or
be paid on any portion of the Merger Consideration.
Section 2.3 Shareholders Meeting; Preparation of Proxy Statement.
(a) Kevlin will duly call, give notice of, convene and hold a special
meeting of the holders of Kevlin Common Stock (the "Special Meeting") for the
purpose of approving this Agreement as soon as practicable after the date
hereof. Subject to the requirements of applicable fiduciary duties, Kevlin will,
through its Board of Directors, recommend to its stockholders approval of this
Agreement.
(b) Kevlin will prepare and file a preliminary Proxy Statement with the SEC
and will use its best efforts to respond to any comments of the SEC or its staff
and to cause the Proxy Statement to be mailed to Kevlin's stockholders as
promptly as practicable after responding to all such comments to the
satisfaction of the staff. Kevlin will notify Chelton promptly of the receipt of
any comments from the SEC or its staff and of any requests by the SEC or its
staff for amendments or supplements to the Proxy Statement or for additional
information and will supply Chelton with copies of all correspondence between
Kevlin or any of its representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement or the Merger. If at any
time prior to the Special Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, Kevlin will promptly
prepare and mail to its stockholders such an amendment or supplement. Kevlin
will not mail any Proxy Statement, or any amendment or supplement thereto, to
which Chelton reasonably objects.
(c) Kevlin and Chelton agree that Kevlin shall engage Beacon Hill Partners
as the proxy solicitor for the Special Meeting.
A-3
<PAGE> 31
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Kevlin. Kevlin represents
and warrants to Chelton and NEWCO that:
(a) Corporate Standing and Authority; Binding Agreement. Kevlin is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts. Kevlin has full power to own all of its
properties and assets that are owned by it and to conduct its business as it is
now being conducted, and neither its ownership or leasing of property nor the
conduct of its business requires it to be qualified as a foreign entity in any
jurisdiction in which it is not qualified where the failure to qualify would
have a Material Adverse Effect (as defined in Section 7.11(a) hereof) on
Kevlin's business. The execution of this Agreement and consummation of the
transactions contemplated herein will not violate any provision of Kevlin's
Articles of Organization or By-laws, and Kevlin has obtained all necessary
authorization and approval from its Board of Directors for the execution of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement is a legal, valid and binding agreement of Kevlin, enforceable against
it in accordance with its terms, subject to the laws of bankruptcy, insolvency
and moratorium and other laws or equitable principles generally affecting
creditors' rights and to general equitable principles. Complete and correct
copies of the Articles of Organization and By-Laws of Kevlin have been made
available to Chelton.
(b) Capitalization. The entire authorized capital stock of Kevlin consists
of 8,000,000 shares of Kevlin Common Stock and 2,000,000 Shares of Preferred
Stock. As of the date of this Agreement, 2,733,794 shares of Kevlin Common Stock
are issued and outstanding and 393,087 shares of Kevlin Common Stock are held by
Kevlin in its treasury. As of the date of this Agreement there are no shares of
Kevlin Preferred Stock outstanding. Of the authorized shares of Kevlin Common
Stock, 695,500 are reserved for issuance upon the exercise of certain Stock
Options (as defined in Section 1.6(d)). All of the issued and outstanding shares
of Kevlin Common Stock and the shares of Kevlin Common Stock which may be sold
pursuant to the exercise of the Stock Options have been duly authorized and are
(or, in the case of shares which may be sold pursuant to the exercise of Stock
Options, will be when so sold) validly issued, fully paid, and nonassessable.
Except for the Stock Options there are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights
or other agreements or commitments to which Kevlin is a party or by which it is
bound providing for the issuance, disposition, redemption, repurchase or
acquisition of any of its capital stock. Exhibit 3.1(b) sets forth with respect
to each Stock Option, (i) the name of the owner of such option, (ii) the date of
the grant, (iii) the expiration date and (iv) the exercise price. Kevlin has no
equity interest in and has not made advances to any corporation, association,
partnership, joint venture or other entity other than the subsidiaries described
in Exhibit 3.1(b).
Exhibit 3.1(b) sets forth the name, the number of shares of authorized
capital stock and the number of issued and outstanding shares of capital stock
or other indicia of ownership of each direct or indirect Subsidiary of Kevlin,
as well as the current status of such Subsidiary. Except as set forth in such
Exhibit, all of the outstanding shares of capital stock of each of the
Subsidiaries are owned, directly or indirectly, by Kevlin, beneficially and of
record. All such shares of capital stock of the Subsidiaries are owned free and
clear of all liens, charges, encumbrances, rights of others, mortgages, pledges
or security interests, and are not subject to any agreements or understandings
among any persons with respect to the voting or transfer of such shares. There
are no outstanding subscriptions, options, convertible securities, warrants or
claims of any kind issued or granted by or binding on Kevlin to purchase or
otherwise acquire any security of or equity interest in any of such
Subsidiaries. All of the outstanding shares of capital stock of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable, and none has been issued in violation of the preemptive rights of
any stockholder.
(c) Directors, Officers, Key Employees and Other Employees. Attached
hereto as Exhibit 3.1(c) is a list of all employees of Kevlin showing their
names, positions and current annual salaries or rate of compensation (including
commitments or understandings with respect to bonus, overtime entitlement and
incentive compensation). The directors, officers and the employees reporting
directly to them of Kevlin are separately identified in Exhibit 3.1(c).
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(d) Absence of Conflicting Agreements or Required Consents. The execution,
delivery and performance of this Agreement by Kevlin does not and will not: (i)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Kevlin or by which it is bound or affected, (ii) result in any
breach of or constitute a default under any note, bond, mortgage, indenture,
lease, license, franchise or other instrument or obligation to which Kevlin is a
party, or (iii) except as set forth in Exhibit 3.1(d), require Kevlin to obtain
any novation, consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
or any person or entity not a party to this Agreement.
(e) Financial Statements. Kevlin has furnished or will furnish Chelton
with: (i) independently audited
financial statements as at May 31, 1993, 1994 and 1995 and for the fiscal years
then ended; (ii) financial statements as at August 31, 1995 and for the period
then ended and (iii) an interim balance sheet as of the end of the month
immediately preceding the Closing and statement of profit and loss and
supporting schedules of expenses for the period then ended and notes, as
appropriate (collectively, the "Financial Statements"). Except as set forth in
the notes to the Financial Statements, the Financial Statements have been or
will be, as the case may be, prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), and fairly present or will
fairly present, as the case may be, the results of the operations of Kevlin and
Kevlin's financial position for the periods indicated other than, with respect
to the interim financial statements, for non-material changes resulting from
normal year-end adjustments. There shall be no changes made in the accounting
principles used in preparing any Financial Statements for periods subsequent to
May 31, 1995, nor shall there be any changes in the method of application of
same.
(f) Undisclosed Liabilities. Kevlin is not liable for or subject to any
Liabilities (as hereinafter defined), except (a) Liabilities adequately
disclosed or reserved for in the most recent Financial Statements and not
heretofore paid or discharged, (b) Liabilities under any contract, commitment or
agreement specifically disclosed in Exhibit 3.1(p) or not required to be
disclosed thereon, none of which Liabilities under any such contract, commitment
or agreement were required under GAAP to have been adequately and specifically
disclosed or reserved for in the most recent Financial Statements, or (c)
Liabilities incurred, consistent with past practice, in or as a result of the
ordinary course of business of Kevlin, and in accordance with this Agreement,
since the date of the most recent Financial Statements which individually do not
exceed $25,000 and in the aggregate do not exceed $175,000. As used in this
Agreement, the term "Liabilities" shall include any direct or indirect
liability, indebtedness, obligation, guarantee or endorsement (other than
endorsements of notes, bills and checks presented to banks for collection or
deposit in the ordinary course of business), whether known or unknown, accrued,
absolute, contingent or otherwise.
(g) Taxes. (i) Kevlin has delivered to Chelton copies of the federal
income tax returns of Kevlin for each of the last three fiscal years and all
schedules and exhibits thereto. Kevlin has duly and timely filed in correct form
all material federal, state and local information returns and tax returns
("Returns") required to be filed by it on or prior to the date hereof (all such
Returns being accurate and complete in all material respects), and has duly paid
or made provision for the payment of all material taxes and other governmental
charges which have been incurred or are due or claimed to be due from them by
any governmental authority (including, without limitation, those due in respect
of Kevlin's properties, income, business, capital stock, franchises, licenses,
sales and payrolls) other than taxes or other charges (i) which are not yet
delinquent or are being contested in good faith and (ii) have not been finally
determined. The liabilities and reserves for taxes in the Financial Statements
are sufficient in the aggregate for the payment of all material unpaid federal,
state and local taxes (including any interest or penalties thereon), whether or
not disputed or accrued, for the period ended May 31, 1995 or for any year or
period prior thereto, and for which Kevlin may be liable in its own right or as
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity. For purposes hereof,
"Tax" or "Taxes" shall mean all taxes, levies, assessments, charges or fees of
any kind or character, including without limitation U.S. federal, state, local
and foreign income, profits, capital gains, franchise, sales, use, service,
gross receipts, occupation, property, property transfer, lease, capital stock,
premium, excise, payroll, withholding, estimated taxes and other governmental
charges imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof, including any interest, additions
to tax and penalties thereon.
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(ii) Except as disclosed in Exhibit 3.1(g), (a) proper and accurate amounts
have been withheld by the Company from its employees and others for all prior
periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws and regulations, and
proper due diligence steps have been taken in connection with back-up
withholding, (b) Returns which are accurate and complete in all material
respects have been filed by Kevlin for all periods for which Returns were due
with respect to income tax withholding, Social Security and unemployment taxes
and (c) the amounts shown on such Returns to be due and payable have been paid
in full, or adequate provision therefor has been included by the Kevlin in the
most recent Financial Statements.
(iii) Tax Audits. Except as disclosed in Exhibit 3.1(g), (a) no audit of
any material Return of Kevlin is currently in progress, nor has Kevlin been
notified that such an audit is contemplated by any taxing authority, (b) Kevlin
has not extended any statute of limitations with respect to the period for
assessment of any federal, state or local Tax, (c) Kevlin does not contemplate
the filing of an amendment to any Return, which amendment would have a Material
Adverse Effect on Kevlin and (d) Kevlin does not have any actual or potential
material liability for any Tax obligation of any taxpayer (including, without
limitation, any affiliated group of corporations or other entities which
included Kevlin during a prior period) other than Kevlin. Except as disclosed in
the Financial Statements or Exhibit 3.1(g), there are no material Tax claims
pending against Kevlin, to the best of Kevlin's knowledge, there are no material
Tax claims threatened to be asserted against Kevlin, and there are no material
issues which have been raised in prior periods or audits which by application of
similar principles are expected to result in a material Tax claim for any other
period.
(h) Inventories. Kevlin's inventory: (i) complies in all material respects
with all applicable federal laws and regulations and with all applicable laws
and regulations of each of the states of the United States into which any
product would be shipped directly by Kevlin; (ii) does not contain any Hazardous
Materials (as hereinafter defined) and (iii) does not consist of any damaged or
obsolete items which are material in amount. The inventories reflected in the
Financial Statements have been or will be acquired in the ordinary course of
business of Kevlin in accordance with its normal inventory practices and are or
will be stated in accordance with GAAP and on a basis that is consistent with
the valuation of same in Kevlin's May 31, 1995 balance sheet.
(i) Non-Infringement of Patents, Trademarks and Other Intellectual
Property. Exhibit 3.1(i) contains a complete list of all of the patents,
copyrights, trademarks, trade names, and service marks and names of Kevlin (the
"Intellectual Property"). To the knowledge of Kevlin, the Intellectual Property
does not infringe on or violate the rights of any person or entity. Kevlin is
not aware of any claim of infringement or violation of the rights of others with
respect to the Intellectual Property; nor is Kevlin aware of any use or
exploitation by another person or entity which would conflict with Kevlin's
claim to ownership of and right to use any of the Intellectual Property or which
is similar to such Intellectual Property so as to create a reasonable
possibility of confusion as to the source or ownership of any Intellectual
Property by any member of the public, other than those licenses or alleged
infringements disclosed on Exhibit 3.1(i). Except as disclosed in Exhibit
3.1(i), Kevlin has not licensed or permitted any other person or entity to use
or exploit any Intellectual Property currently or at any time in the future, nor
has Kevlin known of the existence of any such exploitation. Except as disclosed
in Exhibit 3.1(i), Kevlin has not, within the prior ten years, been involved in
any controversy with another person or entity involving the use or exploitation
of any Intellectual Property. Exhibit 3.1(i) contains a listing of all
registrations in any governmental office or registry with respect to any
Intellectual Property. Kevlin's right to use or exploit any Intellectual
Property is not dependent upon any license, permit, grant or agreement except as
set forth in any registration listed in Exhibit 3.1(i). Kevlin is not obligated
to make any royalty or other payments with respect to any Intellectual Property.
Kevlin owns all Intellectual Property necessary for the conduct of its business
as it is conducted on the date hereof.
(j) Operations and Use of Properties. To Kevlin's knowledge, Kevlin's
operations, business and properties, including leased properties, are in
conformity in all material respects with all applicable laws or orders or other
governmental or administrative laws, ordinances, regulations or orders,
including without limitation zoning, land use and building codes and motor
vehicle registration, permitting, inspection and operation. Kevlin's assets are
sufficient for the conduct of Kevlin's business as it currently is conducted and
as it is proposed to be conducted in accordance with Kevlin's current
commitments. Kevlin does not own or
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lease, directly or indirectly, any real property other than the real property
listed on Exhibit 3.1(j). There are no foreseeable costs payable by Kevlin upon
the scheduled expiration of any real property lease.
(k) Licenses. Kevlin has all licenses, permits, approvals and other
governmental authorizations necessary to own all of its properties and assets
and to carry on its business as it is now being conducted except such as do not
materially interfere with the conduct of its business, all of which are listed
in Exhibit 3.1(k) (collectively, the "Licenses"). Each License is valid and in
full force and effect. Upon obtaining any required consents, the continuation,
validity and effectiveness of each License will in no way be affected by the
consummation of the transactions contemplated by this Agreement. Kevlin has not
breached any provision of, is not in default under the terms of, and has not
engaged in any activity that would cause revocation or suspension of, any
License and no action or proceeding looking to or contemplating the revocation
or suspension of any License is pending or, to the knowledge of Kevlin,
threatened.
(l) Insurance. Kevlin is covered by valid and currently effective
insurance policies as set forth in Exhibit 3.1(l). Any insurance for which the
current policy period by its terms extends beyond the Closing shall be kept in
place by Kevlin and not terminated for any reason.
(m) Environmental Matters. Kevlin has been and currently is in full
compliance with all Environmental Laws as hereinafter defined (i) at all the
property leased by Kevlin during the past eight years ("Kevlin's Facilities")
and (ii) in connection with all of Kevlin's operations conducted at Kevlin's
Facilities. Except as set forth in Exhibit 3.1(m), there is not now, and has not
been since Kevlin commenced operations, any presence, disposal, release or
threatened release of any Hazardous Materials at Kevlin's Facilities, and to
Kevlin's knowledge, no such event or condition occurred at Kevlin's Facilities
prior to Kevlin's occupancy of same. To the knowledge of Kevlin, no asbestos,
urea-formaldehyde foam or other forms of urea formaldehyde have been installed
on or are included in the furnishing or construction of any building or other
improvement at Kevlin's Facilities. To the knowledge of Kevlin, Kevlin has made
no disposal of any Hazardous Materials at any site currently listed pursuant to
42 U.S.C sec. 9605(a)(8)(B) (or pursuant to any similar state or local law
identifying hazardous sites) or any site currently being investigated for such
listing pursuant to any such federal, state or local law. To the knowledge of
Kevlin, there are no pending or threatened claims with respect to Hazardous
Materials relating to Kevlin's Facilities or relating to any operations of
Kevlin at Kevlin's Facilities, and Kevlin does not know of any basis for a claim
being made against Kevlin with respect to any Hazardous Materials or under any
Environmental Laws. Kevlin has never used nor owned any underground storage
tanks.
For purposes of this Agreement, the term "Hazardous Material" shall mean
any hazardous or toxic chemical, waste, byproduct, pollutant, contaminant,
compound, product or substance, including, without limitation, asbestos,
polychlorinated biphenyls, petroleum (including crude oil or any fraction
thereof), radioactive substances and any material the manufacture, possession,
presence, use, generation, storage, transportation, treatment, release,
disposal, abatement, cleanup, removal, remediation or handling of which is
prohibited, controlled or regulated by any law, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. sec. 9601, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. sec. 1801, et seq.; the Resource Conservation and Recovery Act,
42 U.S.C. sec. 6901, et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
sec. 1251, et seq.; the Safe Drinking Water Act, 42 U.S.C. sec. 300f, et seq.;
Toxic Substances Control Act, 15 U.S.C. sec. 2601, et seq.; Occupational Safety
and Health Act, 29 U.S.C. sec. 651, et seq.; Clean Air Act, 42 U.S.C. sec. 7401,
et seq.; and comparable provisions of applicable local county and city
ordinances, or any substances so defined or stated in any of the regulations
adopted and publications promulgated pursuant to those laws as they may have
been amended from time to time on or before the date hereof (collectively,
"Environmental Laws").
(n) Employees and Labor Laws. Kevlin has not experienced any strikes,
lockouts, grievances or other material labor disputes or demands for recognition
of a union as collective bargaining agent for all or any part of Kevlin's
employees, and Kevlin is not and has never been a party to any collective
bargaining or other labor agreement. Except as disclosed in Exhibit 3.1(n),
Kevlin has no written agreements of employment and no oral agreements or
understandings with any employee as to any specific period of employment. Kevlin
is in compliance in all material respects with all federal, state and local
governmental laws and regulations relating
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to the employment of labor, including provisions relating to wages, fringe
benefits, hours, working conditions, occupational safety and health, safety of
the premises, collective bargaining, payment of social security and unemployment
taxes, civil rights and discrimination in hiring, retention, promotion, pay and
other conditions of employment; and Kevlin is not liable for arrearages on wages
or any tax or penalties for failure to comply with those laws or regulations.
There are no oral agreements or understandings with employees except as to
current salary or wage rates and no other oral agreements or understandings
which will affect Kevlin's employment practices or operations. Kevlin is in
compliance with the Immigration Reform and Control Act of 1986. Employees are
generally required to work 40 hours a week.
(o) Product Labeling, Product Liability and Product Warranty. Kevlin is in
compliance in all material respects with all federal and state laws and
regulations relating to product labeling, product safety and public health and
safety. Kevlin has not received any notice of any claim that any product now or
heretofore offered for sale or sold by it or distributed by it in connection
with product sales is injurious to the health and safety of any person or is not
in conformity with its specifications or not suitable for any purpose or
application for which it is offered for sale, sold or distributed. Attached as
Exhibit 3.1(o) are complete and correct copies of all product warranties with
Kevlin's customers and instances where Kevlin has obligated itself to provide
repair and product support services at no cost (or discounted cost) to its
customers and such obligation is currently outstanding and will be outstanding
as of the Effective Time. There are no outstanding returns of product from
customers of Kevlin which have not been recorded in Kevlin's books or issues
relating to products delivered by Kevlin that could give rise to product
returns. Where contractually required, products sold by Kevlin have been
released in conformance with Kevlin's own certification of conformity.
(p) Validity and Existence of Agreements. Exhibit 3.1(p) sets forth all
the following with respect to Kevlin (collectively referred to as the
"Agreements"):
(1) All written agreements, contracts, arrangements, commitments,
understandings or obligations to which Kevlin is a party or by which it or
its properties is or may be bound which involve more than $25,000 in the
aggregate;
(2) All written agreements, contracts, arrangements, commitments,
understandings or obligations, limiting in any respect the freedom of
Kevlin or any of its key employees to compete in any line of business or
with any person or to do business with any particular customers or class of
customers or to carry on business in any geographic area;
(3) All written agreements, contracts, arrangements, commitments,
understandings or obligations with respect to the payment by Kevlin of
commissions which involve more than $25,000 in the aggregate;
(4) Kevlin's published standard conditions of purchase and sale;
(5) All written agreements of Kevlin with distributors and sales
agents or representatives;
(6) All written agreements of Kevlin with customers relating to the
return of products previously sold; and
(7) To Kevlin's knowledge, all oral agreements, contracts,
arrangements, commitments, understandings or obligations to which Kevlin is
a party or by which it or its properties is or may be bound which involve
more than $25,000 in the aggregate.
Kevlin has delivered or made available to Chelton a true and complete copy
of each of the written Agreements that involve more than $25,000, which copies
accurately reflect the understanding of Kevlin with respect to the Agreements.
Kevlin has delivered or made available to Chelton a fair and accurate summary of
each of the oral Agreements listed on Exhibit 3.1(p) that involve more than
$25,000. Each of the Agreements listed on Exhibit 3.1(p)is a valid and binding
obligation of Kevlin in accordance with its respective terms, Kevlin has
performed and complied in all material respects with the provisions thereof, and
no party is in default or would be in default with the lapse of time or notice
under the terms of, any of the Agreements.
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(q) Employee Benefit Plans.
(1) Exhibit 3.1(q) lists all employee pension benefit plans (as
defined in section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) ("Pension Plan"), all employee welfare benefit
plans (as defined in sec. 3(1) of ERISA) ("Welfare Plan"), all specified
fringe benefit plans (as defined in section 6039D(d) of the Internal
Revenue Code of 1986, as amended (the "Code")), and all executive
compensation, retirement, supplemental retirement, deferred compensation,
incentive, bonus, severance, compensation associated with change in
control, perquisite, health care, death benefit, medical insurance,
disability insurance, life insurance, vacation pay, sick pay or other
plans, programs, and arrangements to which Kevlin is or has during the
prior six years been a party, with respect to which Kevlin has an
obligation, or that have been or are maintained, contributed to, or
sponsored by Kevlin for the benefit of any current or former employee,
officer, or director (such plans, programs, and arrangements to be referred
to collectively as "Employee Benefit Plans"), that relate to Kevlin and are
in effect or in connection with which any obligation remains on the date of
this Agreement or that by their present terms will become effective after
the date of this Agreement. The Financial Statements accurately reflect all
commitments of Kevlin with respect to the Employee Benefit Plans to the
extent required by GAAP, and Exhibit 3.1(q) sets forth a description of the
actuarial and accounting valuation of each plan as of October 31, 1995 and
August 31, 1995, respectively.
(2) Kevlin has furnished to Chelton a complete and accurate copy of
each Employee Benefit Plan document (including all amendments) and a
complete and accurate copy of all documents relating to such Employee
Benefit Plan, including, if applicable: (A) each trust agreement, insurance
or annuity contract, investment management agreement, custodial agreement,
and other agreement relating to the funding of the Employee Benefit Plan,
and all amendments to them; (B) the most recent summary plan description
and any subsequent summary of material modifications; (C) the three most
recently filed annual return reports (Form 5500 series), including all
applicable schedules; (D) the most recent determination letter issued by
the Internal Revenue Service, if the Employee Benefit Plan is intended to
be qualified under section 401(a) of the Code, the application submitted
for it, any correspondence with the Internal Revenue Service in connection
with the determination letter or application, and any pending application
for a determination letter; (E) the three most recent financial statements;
and (F) the three most recent actuarial valuation reports. Attached as
Exhibit 3.1(q)(2) are correct and complete copies of the following plans:
(a) Kevlin Corporation Employee Stock Ownership Plan; (b) 401(k) Plan
Adoption Agreement and Merrill Lynch Prototype Defined Contribution Plan
Base Plan Document; (c) Kevlin Corporation Supplemental Executive
Retirement Plan; (d) Executive Deferral Plan; (e) Objective Setting and
Management Incentive Compensation Program; (f) Executive Severance
Agreements with (i) Arthur C. Williams, (ii) Jack Moran, (iii) Jeffrey
Bandrowski, (iv) Robert M. Ricci, (v) John F. Rice; (vi) Andrew Pellerin;
(vii) D. Wayne Peters and (viii) Daniel Whelan; (g) Retirement Benefit to
James Galbraith; (h) Employment Agreement with Ernest Lattanzi; (i) Split
Dollar Whole Life Insurance Policy for Marguerite Fitzgerald; (k) Executive
Supplemental Disability Income Policy and (l) a Letter Agreement dated
November 10, 1995 among Kevlin and Arthur Williams regarding severance
payments.
(3) Each Employee Benefit Plan is now and always has been operated in
all material respects in accordance with its terms and the requirements of
all applicable laws, including, without limitation, ERISA, all provisions
of the Code applicable to secure intended tax consequences, and federal
securities law, and all regulations and rulings under such laws. All
persons who participate in the operation of the Employee Benefit Plans and
all Employee Benefit Plan fiduciaries have always acted in all material
respects in accordance with the provisions of all applicable law,
including, without limitation, ERISA, the Code, and federal securities law,
and all regulations and rulings under such laws. Kevlin has performed all
obligations required to be performed by it under, is not in any material
respect in default under or in violation of, and has no knowledge of any
material default or violation by any party to, any Employee Benefit Plan.
No legal action, suit, claim, or governmental proceeding or investigation
is pending or, to the knowledge of Kevlin, threatened or imminent with
respect to any Employee Benefit Plan (other than claims for benefits in the
ordinary course) and, to the knowledge of Kevlin, no fact or event exists
that could give rise to any such action, suit, claim, or governmental
proceeding or investigation.
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(4) The administrator of each Employee Benefit Plan that is an
"employee benefit plan" as defined in section 3(3) of ERISA ("ERISA Plan")
has complied with all applicable reporting and disclosure requirements
under Part 1 of Title I of ERISA. Each summary plan description and summary
of material modifications with respect to each such ERISA Plan describes
the ERISA Plan accurately and comprehensively in accordance with the
requirements of ERISA and each annual report/return filed with respect to
each such ERISA Plan, including all schedules and attachments, are correct
and accurate as of the date of filing.
(5) With respect to any Pension Plan intended to qualify under section
401(a) of the Code, each such Pension Plan is qualified under section
401(a) of the Code and any trust through which such Pension Plan is funded
is exempt from federal income tax under section 501(a) of the Code; a
favorable determination letter has been received from the Internal Revenue
Service as to the qualified status of such Pension Plan and trust under the
Internal Revenue Code as amended by the Tax Reform Act of 1986 and
subsequent legislation. Nothing has occurred that could adversely affect
the qualified status of such Pension Plan or trust.
(6) There has been no prohibited transaction (within the meaning of
section 406 of ERISA or section 4975 of the Code) with respect to any ERISA
Plan, other than any transaction subject to a statutory or administrative
exemption. No person has acted or failed to act in connection with any
Employee Benefit Plan in a manner that would subject Kevlin to direct or
indirect liability, by indemnity or otherwise, for a breach of any
fiduciary duty.
(7) Kevlin has not incurred liability for any excise tax arising under
section 4971, 4972, 4980, or 4980B of the Code, and no fact or event exists
that could give rise to any such liability.
(8) Kevlin has not incurred liability under Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty Corporation
("PBGC") arising in the ordinary course), and, to its knowledge, no fact or
event exists that could give rise to such liability. No complete or partial
termination has occurred within the past five years with respect to any
Pension Plan. No reportable event (within the meaning of section 4043 of
ERISA) or event described in section 4063(a) of ERISA has occurred or is
expected to occur with respect to any Pension Plan subject to Title IV of
ERISA. No proceeding has been instituted by the PBGC to terminate any
Pension Plan, nor has any notice of intent to terminate any Pension Plan
been filed with the PBGC. All premiums due the PBGC have been paid in full
on a timely basis.
(9) No Pension Plan (subject to section 302 of ERISA or section 412 of
the Code) has had an accumulated funding deficiency (within the meaning of
section 302 of ERISA or section 412 of the Code), whether or not waived. No
asset of Kevlin is the subject of a lien arising under section 302(f) of
ERISA or section 412(n) of the Code. Kevlin has not been required to post
security under section 307 of ERISA or section 401(a)(29) of the Code, and
no fact or event exists that could give rise to such a lien or requirement
to post any such security.
(10) All contributions, insurance premiums, or payments required to be
made with respect to the Employee Benefit Plans have been made by their due
dates.
(11) As to each Pension Plan that is a defined benefit plan (as
defined in section 3(35) of ERISA) and that is subject to section 302 of
ERISA or section 412 of the Code, the most recent actuarial valuation
report accurately reflects the value of the plan assets and liabilities on
an on-going basis as of the date of such valuation based on the funding
method and actuarial assumptions specified in the report, all employee
census data furnished to the plan's actuary by Kevlin in connection with
such valuation and prior valuations has been accurate and complete in all
material respects, and nothing has occurred since the date of such
valuation that would have a materially adverse effect on the funding
condition of the Pension Plan.
(12) Except as disclosed on Exhibit 3.1(q), no Employee Benefit Plan,
and no other commitment or agreement, provides for the payment of
separation, severance, or similar benefits to any person solely as a result
of any transaction contemplated by this Agreement or as a result of a
"change in control", within
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the meaning of such term under section 280G of the Code, and the
consummation of the transaction contemplated by this Agreement will not
accelerate the time of payment or vesting of, or increase the amount of,
any compensation due to any employee. Kevlin has no liability under the
Executive Severance Agreement among Kevlin and Jeffrey Bandrowski, which is
referenced in Exhibit 3.1(n).
(13) Except as disclosed on Exhibit 3.1(q), Kevlin has no liability
with respect to any employee or former employee for post-employment
benefits, other than those associated with the Pension Plans, and other
than as required by section 4980B of the Code and Part 6 of Title I of
ERISA.
(14) There has been no representation made to or communication with
any employee that is not in accordance with the existing terms and
limitations of the Employee Benefit Plans. Kevlin has made no commitment to
modify any, or create any other, Employee Benefit Plan.
(r) Controlled Group Status. Kevlin has never been a member of either (i)
a controlled group (within the meaning of section 414(b) or (c) of the Code or
(ii) an affiliated service group (within the meaning of section 414(m) or (o) of
the Code).
(s) No Multiemployer Plans. Kevlin has never had any obligation to
contribute to any multiemployer plan within the meaning of section 3(37) or
4001(a)(3) of ERISA with respect to any of its employees. Kevlin is not and
could not become subject to any withdrawal liability within the meaning of
section 4201 of ERISA with respect to any multiemployer plan. Kevlin has never
been a substantial employer within the meaning of section 4001(a)(2) of ERISA
with respect to any single-employer plan within the meaning of section
4001(a)(15) of ERISA for which an employer could incur liability under section
4063 or 4064 of ERISA.
(t) Debts and Capitalized Leases. Exhibit 3.1(t) contains a list of all
liabilities under any capitalized lease of Kevlin. The consummation of the
transactions contemplated by this Agreement will not cause the acceleration of
or otherwise adversely affect the terms or conditions of any such liabilities or
obligations.
(u) Litigation. Except as disclosed on Exhibit 3.1(u), there are no (i)
claims, suits, actions, citations, administrative or arbitration or other
proceedings or governmental investigations pending or, to the knowledge of
Kevlin, threatened against Kevlin or to which Kevlin is a party or relating to
any of the properties, businesses or business practices of Kevlin or the
transactions contemplated by this Agreement (including but not limited to
proceedings and investigations related to Environmental Laws, civil rights,
discrimination in employment and occupational safety and health) or (ii)
judgments, orders, writs, injunctions or decrees of any court or administrative
agency naming the Seller or directly affecting its assets or business.
(v) Continuation of Business. Except as otherwise disclosed in this
Agreement, Kevlin does not know of any facts or circumstances which it
reasonably expects to have a Material Adverse Effect (as defined in Section
7.11(a)) on the continuance of Kevlin's business after the Closing in the same
manner as such business was conducted by Kevlin prior to the Closing.
(w) Management Personnel. To the knowledge of Kevlin, none of the
management personnel of Kevlin have (i) been convicted of a criminal act (other
than a minor traffic violation) during the ten-year period immediately preceding
the date of this Agreement, or (ii) any health problem which might prevent the
individual from fulfilling his or her work responsibilities in the foreseeable
future.
(x) Absence of Changes. Since May 31, 1995, and except as otherwise
disclosed in this Agreement, there has not been (i) any material adverse change
in the financial condition, assets (excluding normal wear and tear and
obsolescence) or business of Kevlin, (ii) any material damage to, destruction of
or loss of the assets, whether or not covered by insurance, (iii) any material
changes in compensation or bonus payments or arrangements for any employees of
Kevlin except as provided in Section 4.6, (iv) any sale or transfer of any
assets of Kevlin other than in the ordinary course of its business and
consistent with past practice, (v) any cancellation or compromise of any debts
or claims owed to Kevlin other than in the ordinary course of its business and
consistent with past practice, (vi) any transaction not in the ordinary course
of Kevlin's business and consistent with past practice, or (vii) any amendment
or termination of any contract or agreement which materially and adversely
affects the assets or business of Kevlin.
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(y) Delivery of Exhibits. All exhibits referred to in this Section 3.1 or
any other exhibits referred to in this Agreement and all documents listed in
those exhibits have been delivered to Chelton and Chelton acknowledges receipt
thereof.
(z) No Side Agreements. Except as separately listed in Exhibit 3.1(p),
Kevlin is not a party to any agreement calling for any action by Kevlin outside
of the ordinary course of business; no agreement or understanding exists calling
for any payment or consideration from a customer or supplier of Kevlin to an
officer, director or shareholder of Kevlin respecting any transaction between
Kevlin and such supplier or customer; and no affiliate of Kevlin, directly or
through any business concern affiliated with such affiliate, transacts any
business with Kevlin except for employment covered by Section 3.1(n) hereof.
(aa) Suppliers and Tooling. Except as set forth in Exhibit 3.1(aa), there
are no sole source suppliers for any of Kevlin's purchased parts or
sub-assemblies in respect of current sales or projected sales by Kevlin. Exhibit
3.1(aa) also sets forth a list of all tooling and castings used in the
manufacture of the parts or sub-assemblies Kevlin procures from its suppliers,
as well as where the tooling is located, who owns it and whether there is any
restriction on Kevlin taking possession of or relocating same.
(ab) Title to and Location of Assets. Except as disclosed in Exhibit
3.1(ab), there are no liens, claims, security interests, mortgages, easements,
restrictions, charges or encumbrances affecting any of Kevlin's assets or
Kevlin's leasehold interests and Kevlin has good and marketable title to or a
valid leasehold interest in all of its assets. Except as disclosed in Exhibit
3.1(ab), all of Kevlin's assets are located at Kevlin's facility at 5 Cornell
Street, Wilmington, Massachusetts.
(ac) Machinery and Equipment. Kevlin's machinery and equipment is in good
operating condition and repair sufficient to permit the conduct of its business
consistent with past practice. The machinery and equipment owned by Kevlin at
the Closing will be sufficient for the conduct of Kevlin's business and the
fulfillment of Kevlin's existing orders and will constitute substantially all
machinery and equipment used by Kevlin in its business as of May 31, 1995,
except for unnecessary items or items which have been replaced with
substantially equivalent items.
(ad) Product Design and Drawings; Absence of Defects. Kevlin has
sufficient documentation to support the manufacture of the products manufactured
by Kevlin during the past 60 months. Kevlin is not aware of any design defect
which may adversely affect the performance or safety of any of Kevlin's products
or the ability to manufacture those products profitably.
(ae) Government Assistance. Exhibit 3.1(ae) attached hereto describes any
agreements, loans, other funding arrangements and assistance programs
(collectively called "Government Assistance Programs") which have been provided
to Kevlin from any federal, state, municipal or other government or governmental
agency, board, commission or authority, domestic or foreign (collectively called
"Government Agencies"). Kevlin has performed all of its obligations under the
Government Assistance Programs, and no basis exists for any Government Agencies
to seek payment or repayment of any amount or benefit provided under any of the
Government Assistance Programs.
(af) Arrangements with Professionals. Any arrangements of Kevlin with
attorneys, accountants or other professional advisors can be terminated by
Kevlin at or after the Closing without penalty by Kevlin (except with respect to
unbilled services rendered prior to the date of such termination).
(ag) No Loss Contracts. Except as disclosed in Exhibit 3.1(ag), to
Kevlin's knowledge, Kevlin does not have any Contract with any customer that
will result in a loss to Kevlin as determined under GAAP. For purposes of this
Agreement, "Contract" or "Contracts" shall mean those contracts and purchase and
sales commitments and orders to which Kevlin is a party or by which Kevlin or
the properties of Kevlin is or may be bound, including, without limitation,
contracts and orders providing for the purchase, receipt, sale or distribution
of goods, products or services by Kevlin, all prepaid items and deposits of
Kevlin with respect to those contracts and Kevlin's health insurance and
disability plan (but excluding all contracts of employment and contracts
relating to employees).
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(ah) Customer Relations. Except as set forth on Exhibit 3.1(ah), since May
31, 1995, no customer of Kevlin has terminated or communicated to Kevlin the
intention or threat to terminate its relationship with Kevlin, or the intention
to substantially reduce the quantity of products or services it purchases from
Kevlin, or its dissatisfaction with the products or services sold by Kevlin, nor
has Kevlin terminated or communicated to any customer the intention or threat to
terminate its relationship with the customer. No amounts of money are or will
become repayable to any of Kevlin's customers under any of the Contracts
relating to performance of those Agreements prior to the Closing.
(ai) Delivery Schedules. Kevlin and its customers are in agreement with
respect to all delivery schedules under Kevlin's Agreements with its customers,
and there are no material delivery delays, to its knowledge, or other
non-compliance by Kevlin with the terms of those Agreements that could give rise
to penalties or cancellation of the Agreement.
(aj) Financial Records. Kevlin makes and keeps accurate books and records
reflecting its assets and maintains internal accounting controls that provide
reasonable assurance that (i) transactions are executed with management's
authorization, (ii) transactions are recorded as necessary to permit preparation
of Kevlin's financial statements and to maintain accountability for its assets,
and (iii) the book records of its assets is compared with its actual assets at
reasonable intervals.
(ak) Guaranties. Kevlin is not a party to any guaranty or other credit
accommodation which accommodates the credit of another person.
(al) Dividends. Since May 31, 1995, Kevlin has not declared or paid any
dividends in cash or in kind upon any of its capital stock or returned any
capital to its stockholders in the form of cash or other property or paid or
made any distribution of cash or other property to the stockholders.
(am) No Power of Attorney. There are no outstanding powers of attorney
granted by Kevlin except with respect to checking accounts and those listed on
Exhibit 3.1(am).
(an) SEC Reports. Kevlin has filed all required forms, reports and
documents with the SEC ("Kevlin SEC Reports") required to be filed by it
pursuant to the federal securities laws and the SEC rules and regulations
thereunder, all of which have complied in all material respects with all
applicable requirements of the Securities Act of 1933 (the "Securities Act") and
the Securities and Exchange Act of 1934 (the "Exchange Act"), and the rules and
interpretive releases promulgated thereunder. None of such Kevlin SEC Reports,
including without limitation any financial statements, notes, or schedules
included therein, at the time filed, contained nor contains, or, if to be filed
in the future will contain, any untrue statement of a material fact, or omitted,
omits or will omit 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.
(ao) Proxy Statement. The Proxy Statement required for the consummation of
the Merger will comply in all material respects with the Exchange Act, except
that no representation will be made by Kevlin with respect to information
supplied in writing by Chelton or any affiliate of Chelton specifically for
inclusion in the Proxy Statement. None of the information relating to Kevlin and
its Subsidiaries shall, at the time the Proxy Statement is mailed or at the time
of the Special Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(ap) Management Shares. The officers, directors and Kevlin Corporation
Employee Stock Ownership Plan, own, in the aggregate, 13.7% of the outstanding
Kevlin Stock.
(aq) Status of Flow Vision. Attached hereto as Exhibit 3.1(aq) is a copy
of all correspondence relating to pending claims under the agreement by which
Kevlin sold most of the assets of Flow Vision Inc. (a Massachusetts corporation)
(the "Flow Vision Agreement"). To Kevlin's knowledge, there are no past or
current events or circumstances that could give rise to claims against Kevlin
under the provisions of the Flow Vision Agreement. Kevlin has received written
confirmation from the purchaser under the Flow Vision
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Agreement that there can be no further claims against Kevlin for product
warranty claims under the Flow Vision Agreement; a copy of this written
confirmation is included in Exhibit 3.1(aq).
(ar) Truth of Representations. On the date of this Agreement and on the
date of the Closing, no representation or warranty of Kevlin in this Agreement,
nor any written statement or certificate executed by Kevlin and furnished or to
be furnished to Chelton pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
Section 3.2 Representations and Warranties of Chelton and NEWCO. Chelton
and NEWCO, each jointly and severally, represent and warrant to Kevlin that:
(a) Corporate Standing and Authority. Chelton and NEWCO are corporations
duly organized, validly existing and in good standing under the laws of the
State of Delaware and Massachusetts, respectively, and have full corporate power
and authority to carry on their current business operations and consummate the
transactions contemplated by this Agreement. The execution of this Agreement and
consummation of the transactions contemplated herein will not violate any
provision of Chelton's or NEWCO's By-Laws, or Certificate of Incorporation or
Articles of Incorporation or any law, regulation or ordinance or any provision
of any contract, instrument, order, award, judgment or decree to which Chelton
or NEWCO is a party or by which Chelton and NEWCO are bound. This Agreement is a
legal, valid and binding agreement of Chelton and NEWCO enforceable against
Chelton and NEWCO in accordance with its terms, subject to the laws of
bankruptcy, insolvency and moratorium and other laws or equitable principles
generally affecting creditors' rights and to general equitable principles.
Chelton and NEWCO have obtained all necessary authorization and approval by
their Boards of Directors and, in the case of NEWCO, by its sole stockholder,
for the execution of this Agreement and the consummation of the transactions
contemplated hereby, and no other corporate action is necessary by either
Chelton or NEWCO for the execution of this Agreement and the consummation of the
transactions contemplated hereby. No consent, authorization, order or approval
of any person, governmental authority or any court is required in connection
with the execution and delivery by Chelton and NEWCO of this Agreement or the
consummation by Chelton and NEWCO of the transactions contemplated hereby other
than as contemplated by Section 5.2(g) hereof.
(b) Litigation. There is no litigation pending or, to the knowledge of
Chelton or NEWCO, threatened against Chelton or NEWCO which seeks to prevent, or
if successful would prevent, Chelton or NEWCO from consummating the Merger.
(c) Proxy Statement. None of the information furnished in writing by
Chelton relating to Chelton, NEWCO and their subsidiaries for use in the Proxy
Statement shall, at the time the Proxy Statement is mailed or at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Truth of Representations. On the date of this Agreement and on the
date of the Closing, no representation or warranty of Chelton or NEWCO in this
Agreement, nor any written statement or certificate executed by Chelton and
furnished or to be furnished to Kevlin pursuant to this Agreement or in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business of Kevlin. Except as otherwise
contemplated by this Agreement or disclosed in the Exhibits hereto, during the
period from the date of this Agreement to the Effective Time, Kevlin and its
Subsidiaries will each conduct their operations according to their ordinary and
usual course of business and consistent with past practice. Without limiting the
generality of the foregoing, and except as
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otherwise expressly provided in this Agreement or disclosed in the Exhibits
hereto, neither Kevlin nor any of its Subsidiaries will, prior to the Effective
Time, without the prior written consent of Chelton (a) issue, sell or pledge, or
authorize or propose the issuance, sale or pledge of (i) additional shares of
capital stock of any class, or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other convertible
securities, other than pursuant to commitments outstanding at the date hereof,
or (ii) any other securities in respect of, in lieu of or in substitution for,
capital stock outstanding on the date hereof, (b) purchase or otherwise acquire,
or propose to purchase or otherwise acquire, any of its outstanding securities,
(c) declare or pay any dividend or distribution on any shares of its capital
stock, (d) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an agreement
with respect to, any merger, consolidation or business combination (other than
the Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any material change
in its capitalization, or any entry into a material contract or any release or
relinquishment of any material contract rights, not in the ordinary course of
business, (e) propose or adopt any amendments to its charter or by-laws, (f)
enter into, assign or terminate, or amend in any material respect, any Agreement
other than in the ordinary course of business, (g) acquire, dispose of, encumber
or relinquish any material asset other than in the ordinary course of business,
(h) waive, compromise or settle any right or claim that would adversely affect
the ownership, operation or value of any material asset, (i) make any material
capital expenditures other than pursuant to existing capital expenditure
programs that are disclosed in Exhibit 4.1(i), (j) allow or permit the
expiration, termination or cancellation at any time prior to the Effective Time
of any of the insurance policies or coverages or surety bonds currently
maintained by or on behalf of Kevlin unless replaced with a policy, coverage or
bond having substantially the same coverage and similar terms and conditions,
(k) waive, settle or compromise any material litigation or other material claim
on a basis materially adverse to Kevlin or its Subsidiaries, (l) agree in
writing or otherwise to take any of the foregoing actions or any action which
would make any representation or warranty in this Agreement untrue or incorrect
in any material respect or (m) incur any indebtedness for borrowed money (other
than any indebtedness in place at the date of this Agreement).
Section 4.2 Access to Information.
(a) Between the date of this Agreement and the Effective Time, Kevlin will
afford to Chelton and its authorized representatives full access during normal
business hours to the real estate, offices, warehouses or other facilities and
to the books and records of Kevlin and its Subsidiaries, will permit Chelton and
its representatives to make such inspections as they may require during normal
business hours and will cause Kevlin's officers to furnish Chelton and its
representatives with such financial and operating data, environmental
assessments and other information with respect to the business and real property
of Kevlin and its Subsidiaries as Chelton and its representatives may from time
to time reasonably request. No inspection or examination by Chelton will
constitute a waiver of any claim against Kevlin for misrepresentation or breach
of this Agreement.
(b) The parties will hold and will cause their representatives to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process (as to which it will give the other party notice and an opportunity to
contest disclosure), or, in the opinion of counsel, by other requirements of
law, all documents and information concerning the parties furnished to them and
their representatives in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) in the public domain through no fault of the parties or their
representatives or (ii) later lawfully acquired by the parties or their
representatives from other sources, which acquisition can be demonstrated in
writing by the disclosing party, unless they or their representatives know that
such other sources are not entitled to disclose such information) and will not
use such information or release or disclose such information to any other
person, except their auditors, attorneys, financial advisors and other
consultants and advisors in connection with this Agreement, provided that such
person shall have first been advised of the confidentiality provision of this
Section 4.2. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information can be shown to have been (i) in the public domain through no fault
of Chelton, NEWCO or Kevlin, as the case may be, or their respective
representatives or (ii) later lawfully acquired by the parties or
representatives from other
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sources, which acquisition can be demonstrated in writing by the disclosing
party, and, if requested, either party will, and will cause its agents,
auditors, consultants, representatives and advisors to return to the other, or
destroy, all copies of written information furnished.
(c) Kevlin agrees to furnish Chelton at the time of filing with copies of
all reports and filings (including exhibits and schedules) filed by Kevlin with
the SEC between the date hereof and the Closing.
Section 4.3 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Boards of Directors of the parties
under applicable law, each of the parties hereto agrees to use its best efforts
to take, or cause to be taken, all 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 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.
Section 4.4 Consents. Chelton and Kevlin each will use its best efforts to
obtain such consents of third parties to agreements which would otherwise be
violated by any provisions hereof, to take all actions necessary to effect the
transactions contemplated hereby, and to make such filings with Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement including, without limitation, (a) the vigorous defense of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transaction contemplated
hereby unless in the good faith judgment of the party against whom the lawsuit
or other legal proceeding is brought the claims against such party have a
reasonable likelihood of success, including seeking to have any stay or
temporary restraining order entered by any court or governmental authority
vacated or reviewed, and (b) the execution and delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by
this Agreement.
Section 4.5 Public Announcements. Except as required by law or other
regulatory body, neither party shall make any news releases or other public
announcement pertaining to the existence of this Agreement or the Merger without
the prior consent of the other party hereto. To the extent such a release or
announcement is required by law, the party making the same shall give the other
party advance notice of, and an opportunity to comment on, the proposed release
or announcement.
Section 4.6 Certain Payments. The parties agree that Kevlin will be
permitted to make certain payments in connection with the Merger as follows:
(a) up to $100,000, in the aggregate, to the staff of Kevlin, to be
apportioned as determined by Kevlin's Board of Directors, as set forth in
Exhibit 4.6(a); and
(b) up to $256,033, in the aggregate, to Kevlin's non-employee directors in
full and final payment for their services on behalf of Kevlin as set forth in
Exhibit 4.6(b).
Section 4.7 Funding of NEWCO. Prior to the Closing, Chelton shall cause
NEWCO to be funded with an amount of cash sufficient to pay the aggregate Merger
Consideration for the outstanding Shares and Stock Options.
Section 4.8 Insurance. Chelton shall use its best efforts to obtain and
maintain for a period of one year after the Effective Time an endorsement
extending the period in which claims may be made under Kevlin's directors' and
officers' liability insurance policy in effect on the date of this Agreement, or
a policy of such other responsible carrier as Chelton may elect, with respect to
causes of action that arise out of facts or omissions occurring on or before the
Effective Time; provided, however, that in no event shall Chelton be required to
expend pursuant to this section more than an amount per year equal to 125% of
current annual premiums paid by Kevlin for such insurance.
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ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1 Conditions to Kevlin's Obligation to Close. The obligations of
Kevlin at Closing shall be subject to satisfaction of the following conditions
at Closing:
(a) Representations and Warranties. The representations and warranties of
Chelton and NEWCO set forth in Section 3.2 hereof shall be true and correct as
of the date of this Agreement and as of Closing as though those representations
and warranties had been made at and as of that time, and Kevlin shall have
received at Closing a certificate signed by Chelton's President to that effect.
(b) No Litigation. There shall not have been instituted or threatened on
or before Closing any action or proceeding to restrict or prohibit the
transactions contemplated by this Agreement.
(c) Merger Consideration. NEWCO shall present evidence reasonably
satisfactory to Kevlin that, immediately prior to the Closing, it has cash on
hand equal to or greater than the aggregate Merger Consideration for the
outstanding Shares and Stock Options.
(d) Approval of Kevlin's Stockholders. The approval of Kevlin's
stockholders of this Agreement and the Merger as required by the Massachusetts
Act shall have been obtained.
(e) Receipt of Consents. Any consents from third parties required to be
obtained by Kevlin to effect the Merger shall have been obtained by Kevlin.
(f) Opinion of Chelton and NEWCO's Counsel. Chelton and NEWCO shall have
delivered to Kevlin an opinion of Jaeckle, Fleischmann & Mugel, dated as of the
Closing, in form and substance satisfactory to Kevlin, with respect to the
matters set forth in Sections 3.2(a), (b) and (d) of this Agreement.
Section 5.2 Conditions to Chelton's and NEWCO's Obligation to Close. The
obligations of Chelton and NEWCO at Closing shall be subject to satisfaction of
the following conditions at Closing:
(a) Representations, Warranties and Covenants. The representations and
warranties of Kevlin set forth in Section 3.1 hereof shall be true and correct
as of the date of this Agreement and as of Closing as though those
representations and warranties had been made at and as of that time, the
covenants contained in Sections 2.3, 4.1 and 4.2(a), hereof shall have been
performed, and Chelton and NEWCO shall have received at Closing a certificate
signed by each of Kevlin's officers (currently, Jonathan Donaldson, Wayne
Peters, John Moran, Robert Ricci) to that effect.
(b) No Litigation. There shall not have been instituted or threatened any
action, proceeding or investigation to restrict or prohibit the transactions
contemplated by this Agreement or which would give rise to material damages to
Kevlin or have a Material Adverse Effect on the value of the assets of Kevlin.
(c) Approval of Kevlin's Stockholders. The approval of Kevlin's
stockholders of this Agreement and the Merger as required by the Massachusetts
Act shall have been obtained.
(d) Receipt of Consents. All consents from third parties required to be
obtained by Kevlin to effect the Merger shall have been obtained by Kevlin in
form and substance reasonably satisfactory to Chelton and NEWCO.
(e) Opinion of Kevlin's Counsel. Kevlin shall have delivered to Chelton
and NEWCO an opinion of Palmer & Dodge, dated as of the Closing, in form and
substance reasonably satisfactory to Chelton and NEWCO, with respect to the
matters set forth in Sections 3.1(a) (other than as to qualification as a
foreign corporation or the last sentence of that section) and (d) of this
Agreement, as well as whether there exists, to Palmer & Dodge's knowledge, any
pending litigation which seeks to prevent, or if successful would prevent,
Kevlin from consummating the Merger.
(f) Resignation Letters. Kevlin shall have obtained letters of resignation
from each officer and director in office immediately prior to the Effective
Time.
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(g) Continuation of Insurance. Chelton shall have received confirmation
from Kevlin's insurers that the insurance policies listed in Exhibit 3.1(l) will
continue in effect after the Closing notwithstanding the Merger.
(h) Environmental Study. Chelton shall have received an environmental
study from an environmental consulting firm approved by Chelton relating to
Kevlin's Facilities that, in Chelton's reasonable judgment, indicates that there
are no significant risks associated with Hazardous Materials or violations of
any Environmental Laws at Kevlin's Facilities.
(i) Stock Options. At or prior to the Closing, all Stock Options shall
have been exercised (or terminated) as described in Section 1.6(d).
Section 5.3 Other Conditions. The respective obligations of each party to
effect the Merger are subject to the condition that no statute, rule,
regulation, executive order, decree, or injunction shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction in the
United States or domestic governmental authority which prohibits or restricts
the consummation of the Merger.
Section 5.4 No Solicitation.
(a) Other than as required by their fiduciary responsibilities, the Board
of Directors of Kevlin shall not negotiate an Acquisition Proposal (as defined
below) with a Third Party unless and until this Agreement has been terminated in
accordance with the provisions hereof.
(b) Neither Kevlin nor any of its subsidiaries shall, directly or
indirectly, take (nor shall Kevlin authorize or permit its subsidiaries,
officers, directors, employees, representatives, investment advisors, bankers,
attorneys, accountants or other agents or affiliates, to take) any action to (i)
encourage, solicit or initiate the submission of any Acquisition Proposal (as
defined below), (ii) enter into any agreement with respect to any Acquisition
Proposal or (iii) participate in discussions or negotiations with, or furnish
any information to, any person in connection with any Acquisition Proposal;
provided, that, to the extent required by the fiduciary obligations of the Board
of Directors of Kevlin (as determined in good faith by the Board of Directors of
Kevlin based upon written advice of Palmer & Dodge), upon receipt of (x) an
unsolicited and written Superior Proposal (as defined in Section 5.4(c) below)
or (y) an unsolicited and written Potential Superior Proposal (as defined
below), Kevlin may: (1) take the action referred to in clause (ii) of this
sentence with respect to such Superior Proposal or Potential Superior Proposal
but only in connection with a simultaneous termination of this Agreement in
accordance with Section 6.1, and (2) take any of the actions referred to in
clause (iii) of this sentence with respect to such Superior Proposal or
Potential Superior Proposal. A "Potential Superior Proposal" shall mean a
proposal that a majority of the disinterested members of the Board of Directors
of Kevlin determines in its good faith judgment to be reasonably likely to lead
to a Superior Proposal (as defined in Section 5.4(c) below). "Acquisition
Proposal" shall mean, except for the transactions contemplated by this
Agreement, any proposed (i) merger, consolidation or similar transaction
involving Kevlin, (ii) sale, lease or other disposition directly or indirectly
by merger, consolidation, share exchange or otherwise of assets of Kevlin or it
subsidiaries representing 10% or more of the consolidated assets of Kevlin and
its subsidiaries, (iii) issue, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 10% or more of the voting power of Kevlin or (iv)
transaction in which any person shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership or any "group" (as such term is defined under the Exchange
Act) shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 10% or more of the outstanding Kevlin Common Stock.
Kevlin shall notify Chelton promptly of any Acquisition Proposal and shall
provide Chelton with all available information with respect thereto.
(c) The provisions of Section 5.4(a) shall not be deemed to prohibit the
Board of Directors of Kevlin, prior to the consummation of the Merger, from
withdrawing or modifying its approval or recommendation of the Merger or this
Agreement, if a Superior Proposal is made, provided that (i) such action is
required by the fiduciary obligations of the Board of Directors of Kevlin as
determined in good faith by a majority of the disinterested members thereof,
taking into account (x) the financial and other terms and conditions of the
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Superior Proposal and (y) the time period within which the transactions
contemplated by such Superior Proposal can be consummated and (ii) the Board of
Directors of Kevlin shall have received the written opinion of Palmer & Dodge to
the effect that such action is required by the fiduciary obligations of the
Board of Directors of Kevlin. For purposes of this Agreement, "Superior
Proposal" means a bona fide proposal made by a Third Party to acquire all the
outstanding Kevlin Common Stock or all or substantially all the assets of Kevlin
pursuant to a tender or exchange offer, a merger or otherwise on terms which a
majority of the disinterested members of the Board of Directors of Kevlin
determine in its good faith judgment to be financially superior to Kevlin's
stockholders than the Merger (based on a good faith determination that the value
of such proposal, as a whole, exceeds the value of the consideration provided
for in the Merger plus the amount of the Termination Fee, as hereinafter
defined). For purposes of this Agreement, "Third Party" shall mean any
corporation, partnership, person or other entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act) other than Chelton, any affiliate of
Chelton or any of their respective directors, trustees, officers, employees,
representatives and agents or any entity controlled by one or more such persons.
(d) Kevlin shall pay to Chelton upon demand an amount in cash equal to
$1,000,000 (the "Termination Fee") if: (i) Kevlin terminates this Agreement
pursuant to Section 6.1(f) or (ii) Chelton and NEWCO terminate this Agreement
pursuant to Section 6.1(c) for the reason that any of the conditions specified
in Sections 5.2(a), have not been met as a result of the intentional, deliberate
or fraudulent misrepresentation or breach of covenant by Kevlin and are not
capable of being met on or before February 28, 1996.
ARTICLE VI
TERMINATION; AMENDMENTS; WAIVER
Section 6.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time, notwithstanding approval
thereof by the shareholders of Kevlin, prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of Directors of
Kevlin, Chelton and NEWCO;
(b) by Chelton or Kevlin if the Effective Time shall not have occurred on
or before February 28, 1996 (providing the terminating party is not otherwise in
material breach of its representations, warranties or obligations under this
Agreement);
(c) by Chelton and NEWCO if any of the conditions specified in Section 5.2
shall not have been met or waived by them at such time as such condition is no
longer capable of satisfaction;
(d) by Kevlin if any of the conditions specified in Section 5.1 shall not
have been met or waived by it at such time as such condition is no longer
capable of satisfaction;
(e) by Chelton or Kevlin: (i) if any court of competent jurisdiction or
other governmental authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger, (ii) if litigation or proceedings shall be pending that are reasonably
likely to result in any of the foregoing or (iii) the condition specified in
Section 5.3 cannot be met;
(f) by Kevlin if all of the following conditions are satisfied: (i) prior
to the consummation of the Merger, Kevlin or its Board of Directors shall have
received a Superior Proposal from a Third Party, (ii) the Board of Directors of
Kevlin shall have received the written opinion of Palmer & Dodge to the effect
that the fiduciary obligations of the Board of Directors require that Kevlin
terminate this Agreement and enter into an agreement with respect to the
Superior Proposal, (iii) the Board of Directors of Kevlin shall have resolved to
enter into definitive documentation with respect to the Superior Proposal within
48 hours of the termination of this Agreement and (iv) Kevlin shall have paid to
Chelton an amount in cash equal to the Termination Fee.
Section 6.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party or its directors, officers, or shareholders, except (i) to the extent
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applicable, the provisions of Sections 4.2(b), 5.4(d) and 7.9 and (ii) if the
termination is pursuant to Sections 6.1(c) or (d), the non-terminating party
shall reimburse the terminating party for its costs and expenses incurred in
connection with the Merger (including without limitation legal and accounting
fees, travel expenses and other out of pocket expenses incurred in due diligence
investigations and contract negotiations) up to a maximum of $150,000, which
reimbursement shall be made immediately upon submission to the non-terminating
party of the terminating party's written records with respect to such costs and
expenses.
Section 6.3 Amendment. This Agreement may be amended by action taken by
or on behalf of the Boards of Directors of Kevlin, Chelton and NEWCO at any time
before or after adoption of this Agreement by the stockholders of Kevlin but,
after any such approval, no amendment shall be made which decreases the Merger
Consideration per Share or which adversely affects the rights of Kevlin's
stockholders hereunder without the approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of
Kevlin, Chelton and NEWCO.
Section 6.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken by or on behalf of the respective Boards of
Directors of Kevlin, Chelton and NEWCO may (a) extend the time for the
performance of any of the obligations or other acts of any other applicable
party hereto, (b) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party, or (c)
subject to the proviso contained in Section 6.3, waive compliance with any of
the agreements of any other applicable party or with any conditions to its own
obligations. Any agreement on the part of any other applicable 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 VII
MISCELLANEOUS
Section 7.1 Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. This Section 7.1, however, shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after the Effective Time.
Section 7.2 Brokerage Fees; Commissions and Expenses. Kevlin hereby
represents and warrants to Chelton with respect to Kevlin, and Chelton and NEWCO
hereby represent and warrant to Kevlin with respect to Chelton and NEWCO, that,
except as set forth in Exhibit 7.2, no person or entity is entitled to receive
from Kevlin on the one hand, or Chelton and NEWCO, on the other hand, any
investment banking, brokerage or finder's fee or fees for financial consulting
or advisory services in connection with this Agreement or the transactions
contemplated hereby. Other costs, expenses and liabilities which may be incurred
in connection with the consummation of this Agreement or the Merger, such as,
for example and without limitation, the cost of professional fees shall be paid
by the party incurring the cost.
Section 7.3 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes 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.
Section 7.4 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
Section 7.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered by overnight courier,
when sent by confirmed facsimile or three days after being
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<PAGE> 48
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such address for a party as shall be specified
by like notice):
If to Kevlin:
Kevlin Corporation
5 Cornell Place
Wilmington, Massachusetts 01887
Attention: Mr. Jonathan D. Donaldson
Copies of notices to Kevlin shall be sent to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Attention: Leon J. Glazerman, Esq.
Marc A. Rubenstein, Esq.
If to Chelton and NEWCO:
Chelton Communication Systems, Inc.
c/o Chelton Ltd.
Fieldhouse Lane, Marlow
Buckinghamshire, England SL7 1LR
Attention: Mr. Paul D. Long
Chelton Communication Systems, Inc.
179 Avenue of the Commons, Suite One
Shrewsbury, New Jersey 07702
Attention: Mr. David V. Gaggin
Copies of notices to Chelton and NEWCO shall be sent to:
Jaeckle, Fleischmann & Mugel
800 Fleet Bank Building
12 Fountain Plaza
Buffalo, New York 14202-2292
Attention: Charles F. Horne, IV, Esq.
Colleen A. Van Gelder, Esq.
Section 7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 7.7 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 7.8 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 7.9 Expenses. Except as otherwise provided herein, each of the
parties shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial or other consultants, investment bankers,
accountants and counsel.
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Section 7.10 Specific Performance. The parties hereto agree 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 the parties 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 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.
Section 7.11 Certain Definitions.
(a) "Material Adverse Effect" shall mean any adverse change in the
financial condition, assets, business or operations of any party which is
material to such party and its subsidiaries taken as a whole.
(b) "Special Meeting" shall mean the special meeting of the shareholders of
the Company called pursuant to the Proxy Statement to consider approval of the
Merger.
(c) "Subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. Such term shall also refer to any other
partnership, limited partnership, joint venture, trust, or other business entity
in which a party hereto owns a majority interest.
Section 7.12 Performance by NEWCO. Chelton agrees to cause NEWCO to
comply with its obligations hereunder and to cause NEWCO to consummate the
Merger as contemplated herein.
Section 7.13 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 or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Each of the parties has caused this Agreement to be executed on its behalf
by its duly authorized officers as of the day and year set forth above.
KEVLIN CORPORATION
By:__________________________________
Jonathan D. Donaldson, Chairman
KEVLIN ACQUISITION CORP.
By:__________________________________
David V. Gaggin, President
CHELTON COMMUNICATION SYSTEMS, INC.
By:__________________________________
David V. Gaggin, President
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<PAGE> 50
EXHIBIT B
M.G.L.A. CHAPTER 156B
SEC. 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SEC. 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SEC. 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
SEC. 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
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SEC. 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
SEC. 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SEC. 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SEC. 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
SEC. 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
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SEC. 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SEC. 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SEC. 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the corporation, or
in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SEC. 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SEC. 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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<PAGE> 53
[Front of Proxy Card]
KEVLIN CORPORATION
PROXY FOR SPECIAL MEETING TO BE HELD
JANUARY ___, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special Meeting and the
Board of Directors' Proxy Statement, hereby appoint(s) Jonathan D. Donaldson and
John J. Moran, and each of them, Proxies of the undersigned (with full power of
substitution) to attend the above Special Meeting and all adjournments thereof
(the "Meeting") and there to vote all shares of Common Stock of Kevlin
Corporation (the "Company") that the undersigned would be entitled to vote, if
personally present, hereby revoking any Proxy heretofore given with respect to
such shares in regard to all matters which may come before the Meeting, and
specifically with respect to that matter set forth on the reverse hereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
SEE REVERSE SIDE. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN ON THE REVERSE SIDE. YOU NEED NOT MARK
ANY BOXES.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 54
<TABLE>
[Back of Proxy Card]
<S> <C> <C> <C>
/X/ Please mark votes as
in this example.
1. To approve and adopt the Agreement and Plan FOR AGAINST ABSTAIN
of Merger among the Company, Chelton
Communication Systems, Inc. and Kevlin / / / / / /
Acquisition Corp.
2. To consider and act upon such other business matters or proposals as may
properly come before the Meeting.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
Signature:______________________________________ Date________
Signature:______________________________________ Date________
</TABLE>
