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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DEP CORPORATION
(Name of Subject Company)
DEP CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
233202-40-7
(CUSIP Number of Class of Securities)
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ROBERT H. BERGLASS
CHAIRMAN AND PRESIDENT
DEP CORPORATION
2101 EAST VIA ARADO
RANCHO DOMINGUEZ, CA 90220
(310) 604-0777
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) Filing Statement)
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WITH A COPY TO:
PAUL D. TOSETTI, ESQ.
LATHAM & WATKINS
633 WEST FIFTH STREET, SUITE 4000
LOS ANGELES, CA 90071
(213)485-1234
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is DEP Corporation, a Delaware corporation
(the "Company"). The address of the principal executive offices of the Company
is 2101 East Via Arado, Rancho Dominguez, California 90220. The title of the
class of equity securities to which this statement relates is the common stock,
par value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to the tender offer by Henkel Acquisition Corp. II, a
Delaware corporation ("Purchaser"), and a wholly-owned subsidiary of Henkel
KGaA, a Kommandigesellschaft auf Aktien (a partnership limited by shares)
organized under the laws of the Federal Republic of Germany ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1, dated July 20, 1998
(the "Schedule 14D-1"), to purchase all of the issued and outstanding Shares, at
a price of $5.25 per Share, net to the seller in cash (the "Offer Price"), upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated July 20, 1998 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with the Offer to Purchase and all amendments and
supplements thereto, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of July 13, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and
the Company. Subject to certain terms and conditions of the Merger Agreement,
Purchaser will be merged with and into the Company (the "Merger") as soon as
practicable after the expiration of the Offer, with the Company as the
corporation surviving the Merger (the "Surviving Corporation"). A copy of the
Merger Agreement is filed herewith as EXHIBIT 1 and is incorporated herein by
reference.
The Schedule 14D-1 states that the principal executive offices of Parent are
located at HenkelstraSSe 67, D-40191 Dusseldorf, Germany and the principal
executive offices of Purchaser are located at 220 Renaissance Boulevard, Suite
200, Gulph Mills, PA 19406. A copy of the press release issued by the Company
and Parent is filed hereto as EXHIBIT 2 and is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described or referred to below or incorporated herein by
reference, to the knowledge of the Company, as of the date hereof, there are no
material contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Company or its affiliates and (i)
its executive officers, directors or affiliates or (ii) Parent, Purchaser or
their respective officers, directors or affiliates.
ARRANGEMENTS WITH DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES OF THE COMPANY
Information with respect to certain contracts, agreements, arrangements or
understandings between the Company and certain of its directors, executive
officers and affiliates is set forth in the Company's Proxy Statement for its
Annual Meeting of Stockholders held on December 5, 1997 (the "Proxy Statement")
filed with the Securities and Exchange Commission on October 29, 1997. A copy of
the Proxy Statement is attached hereto as EXHIBIT 3, and the relevant portions
thereof are incorporated herein by reference.
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Employment Agreements (March 1998)
The following is a summary of the material terms of the March 1998
Agreements (as defined below). This summary is not a complete description of
such agreements and is qualified in its entirety by reference to the complete
texts of the agreements, copies of which are filed herewith as EXHIBITS 4 AND 5
and are incorporated herein by reference. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the applicable agreement.
The Company has entered into employment agreements with Mr. Robert Berglass
and Mr. Grant Johnson dated as of March 23, 1998 (the "March 1998 Agreements").
The March 1998 Agreements provide for full time employment for a five (5) year
period until March 23, 2003 at an annual Base Salary of not less than $565,000
(in the case of Mr. Berglass) and $227,000 (in the case of Mr. Johnson). In
addition, the March 1998 Agreements provide for the continuation of incentive
compensation under the Company's Performance Bonus Plan (in the case of Mr.
Berglass) and the DEP Company Executive Bonus Plan (in the case of Mr. Johnson)
during the terms of their respective agreements as well as continuation of
benefits under the Company's insurance and health care benefit plans (in the
case of Mr. Berglass, until such time as he is entitled to participate in
medical and hospital benefits under Medicare). In the event the Company
terminates Mr. Berglass' or Mr. Johnson's employment for any reason other than
Just Cause or in the event Mr. Berglass or Mr. Johnson terminates his employment
with the Company for Good Reason, the Company will pay such executive a lump sum
severance benefit equal to the benefits he would have been entitled to receive
over the remaining term of the applicable March 1998 Agreement and full vesting
of his then outstanding stock options. The March 1998 Agreements also provide
certain rights in the event of a Change of Control of the Company. If there is a
Change of Control and within two years following such Change of Control either
Mr. Berglass or Mr. Johnson is terminated for any reason other than Just Cause
or voluntarily terminates employment with the Company for Good Reason, then such
person is entitled to receive a lump sum payment equal to his then accrued and
unpaid Base Salary plus 299% of the sum of his Base Salary and Assumed Incentive
Compensation and full vesting of his then outstanding stock options. Any
termination payments by the Company would be grossed up on an after-tax basis
with respect to certain federal excise taxes, if applicable.
In July 1998, the Company transferred to Mr. Berglass its ownership interest
in a $1 million key-man whole life insurance policy under which Mr. Berglass was
the insured and the Company was the beneficiary. Accordingly, Mr. Berglass will
be responsible for payment of the policy's future premiums.
Merger Agreement and Ancillary Documents
In connection with the transactions contemplated by the Merger, the
following agreements were entered into: the Merger Agreement; Stockholder Option
Agreements, dated July 13, 1998, by and among Parent, Purchaser and each of
Robert H. Berglass, The Berglass Charitable Remainder Trust UDT 7/8/98 and The
Berglass 1995 Irrevocable Trust UDT 6/27/95 (collectively, the "Stockholder
Option Agreements"); the Stock Option Agreement, dated July 13, 1998, by and
among Parent, Purchaser and the Company (the "Company Option Agreement"); the
Employment Agreement dated as of July 8, 1998, by and between Robert H. Berglass
and the Company (the "Berglass Employment Agreement") and the Employment
Agreement, dated as of July 8, 1998, by and between Grant Johnson and the
Company (the "Johnson Employment Agreement" and, together with the Berglass
Employment Agreement, the "July 1998 Agreements") (collectively, the
"Agreements").
The following is a summary of the material terms of the Agreements. Such
summary is not a complete description of the Agreements and is qualified in its
entirety by reference to the complete texts of the Agreements, copies of which
are filed herewith as exhibits and are incorporated herein by reference.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the applicable Agreement.
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The Merger Agreement
The offer is being made pursuant to the Merger Agreement, a copy of which
has been filed with the Commission as EXHIBIT 1 hereto.
THE OFFER. The Merger Agreement provides for the commencement of the Offer,
in connection with which Parent or Purchaser has expressly reserved the right to
waive conditions of the Offer (except as set forth below with respect to the
Minimum Condition), in whole or in part, at any time and from time to time in
their sole discretion. Purchaser has agreed that it will not, without the prior
written consent of the Company, (i) decrease or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought pursuant to the
Offer (except any amendment so that the Offer is the 49.9% Offer), (iii) impose
additional conditions of the Offer, (iv) change the conditions of the Offer
(provided that Parent or Purchaser in its sole discretion may waive any
conditions to the Offer other than the Minimum Condition) or (v) make any other
change in the terms or conditions of the Offer which is materially adverse to
the holders of the Shares. The obligation of Purchaser to consummate the Offer
and to accept for payment and to pay for any Shares tendered pursuant to the
Offer will be subject only to the conditions set forth under "Certain Conditions
of the Offer."
If the conditions set forth under "Certain Conditions of the Offer" are
satisfied as of any scheduled expiration date of the Offer, Purchaser may extend
the Offer for up to ten business days in the aggregate, and may extend the Offer
for a longer period with the prior written consent of the Company or as required
by law.
If the conditions set forth under "Certain Conditions of the Offer" are not
satisfied or, to the extent permitted by the Merger Agreement, waived by Parent
or Purchaser as of any scheduled expiration date, Purchaser may extend the Offer
from time to time (but not beyond the date that is fifty business days from the
date of the Merger Agreement) and, in any event, upon the written request of the
Company, Purchaser will extend the Offer from time to time until the earlier of
the consummation of the Offer or forty business days from the date of the Merger
Agreement (provided, that Purchaser shall not be obligated to make any such
extension if (i) it reasonably determines that all such conditions are not
likely to be satisfied by such date or (ii) it shall then have the right to
terminate the Merger Agreement, pursuant to its terms).
BOARD REPRESENTATION. Promptly upon the purchase of Shares by Purchaser
pursuant to the Offer, and from time to time thereafter, Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give Purchaser
representation on the Board of Directors of the Company equal to the product of
the number of directors on the Board of Directors of the Company (determined
after giving effect to the directors elected pursuant to this provision) and the
percentage that such number of Shares so purchased bears to the number of Shares
outstanding, and the Company shall, upon request by Purchaser, promptly increase
the size of the Board of Directors of the Company or use its best efforts to
secure the resignations of such number of directors as is necessary to provide
Parent with such level of representation and shall cause Parent's designees to
be so elected; provided, however, that Purchaser shall be entitled to designate
a number of directors equal to or greater than 50% of the total number of
directors only if Purchaser then owns 90% or more of the Shares then
outstanding. The Company will also use its best efforts to cause persons
designated by Purchaser to constitute the same percentage as is on the entire
Board of Directors of the Company to be on (i) each committee of the Board of
Directors of the Company and (ii) each Board of Directors and each committee
thereof of each subsidiary of the Company. The Company's obligations to appoint
designees to its Board of Directors shall be subject to Section 14(f) of the
Exchange Act. At the request of Purchaser, the Company shall take all actions
necessary to effect any such election or appointment of Purchaser's designees,
including mailing to its stockholders the information required by Section 14(f)
of the Exchange Act and Rule 14f-l promulgated thereunder which, unless
Purchaser otherwise elects, shall be so mailed together with the Schedule 14D-9.
In light of the provisions of the Merger Agreement described above requiring, as
a condition to Purchaser's designees comprising a
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majority of the Board of Directors, that Purchaser then own 90% or more of the
Shares, Purchaser has determined to elect not to require such information in the
mailing of the Schedule 14D-9. If it becomes necessary to disseminate such
information, Purchaser and Parent will supply to the Company all information
with respect to themselves and their respective officers, directors and
affiliates required by such Section and Rule.
Notwithstanding the foregoing, neither Parent nor Purchaser will take any
action to prevent at least two persons who are directors of the Company on the
date hereof from remaining as directors of the Company ("Continuing Directors")
until the Effective Time. Following the election or appointment of Purchaser's
designees pursuant to the preceding paragraph and prior to the Effective Time,
and so long as there shall be at least one Continuing Director, such designees
shall abstain from acting upon, and the approval of a majority of the Continuing
Directors shall be required, and sufficient, to authorize any resolution with
respect to any termination of the Merger Agreement by the Company, any amendment
of the Merger Agreement requiring action by the Board of Directors of the
Company, any extension of time for the performance of any of the obligations or
other acts of Parent or Purchaser under the Merger Agreement, any waiver of
compliance with any of the agreements or conditions under the Merger Agreement
for the benefit of the Company and any action to seek to enforce any obligation
of Parent or Purchaser under the Merger Agreement. If at any time the Continuing
Directors reasonably deem it necessary to consult independent legal counsel in
connection with their duties as Continuing Directors or actions to be taken by
the Company, the Continuing Directors may retain such counsel for such purpose
and the Company has agreed that it will pay the reasonable expenses incurred in
connection therewith.
THE MERGER. The Merger Agreement provides that upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the relevant
provisions of the DGCL, Purchaser shall be merged with and into the Company as
soon as practicable following the satisfaction or waiver, if permissible, of the
conditions to the Merger. The Company shall be the Surviving Corporation and
shall continue its existence under the laws of Delaware, and the Certificate of
Incorporation and the Bylaws of Purchaser as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Corporation (except the name of the Surviving Corporation shall be
Schwarzkopf & DEP, Inc.). The directors of Purchaser immediately prior to the
Effective Time and the officers of the Company immediately prior to the
Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their death, permanent disability, resignation or
removal or until their respective successors are duly elected and qualified.
Each Share issued and outstanding immediately prior to the Effective Time (other
than Shares owned by Parent, Purchaser or any subsidiary of Parent, Purchaser or
the Company or held in the treasury of the Company, all of which shall be
canceled, and other than Dissenting Shares, as defined herein) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive in cash the Merger Consideration, upon the
surrender of the certificate representing such Shares. The parties to the Merger
Agreement shall cause the Merger to be consummated by filing with the Secretary
of State of the State of Delaware a duly executed and verified certificate of
merger, as required by the DGCL. The Merger will become effective upon such
filing or at such time thereafter as is provided under applicable law.
TERMINATION OF STOCK OPTIONS AND STOCK OPTION PLANS. At the Effective Time
(or at such earlier time as Purchaser shall designate, which time may be
immediately prior to the acceptance of Shares pursuant to the Offer), each
holder of a then outstanding option to purchase Shares, whether or not then
exercisable shall, in settlement thereof, be entitled to receive from the
Surviving Corporation for each Share subject to such option, in lieu of such
Share, an amount (subject to any applicable withholding tax as specified in the
Merger Agreement or as may apply to payments made in connection with the
performance of services) in cash equal to the difference between the Merger
Consideration and the per share exercise or purchase price of such option to the
extent such difference is a positive number (the "Option Consideration"). Upon
receipt of the Option Consideration, the option shall be canceled. In the Merger
Agreement, the Company has agreed to take, or cause to be taken, all action
necessary, to ensure that the Company's stock option
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plans shall terminate as of the Effective Time. The Company's stock option plans
shall terminate as of the Effective Time and any and all rights under any
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of the Company or
any Subsidiary thereof shall be canceled as of the Effective Time.
STOCKHOLDER MEETING; RECOMMENDATION TO STOCKHOLDERS. Unless the Merger is
consummated in accordance with the "short-form" merger provisions under the
DGCL, and subject to applicable law, the Company, acting through its Board of
Directors, shall, in accordance with applicable law, duly call, give notice of,
convene and hold a special meeting of its stockholders (the "Special Meeting")
as soon as practicable following the consummation of the Offer for the purpose
of adopting the agreement and plan of merger set forth in the Merger Agreement,
and subject to the fiduciary duties of its Board of Directors under applicable
law as determined in good faith by the Board of Directors, following the receipt
of advice of outside legal counsel, include in the Proxy Statement the
recommendation of its Board of Directors that stockholders of the Company vote
in favor of the adoption of the plan of Merger set forth in the Merger
Agreement. Parent and Purchaser have agreed that, at the Special Meeting, all of
the Shares acquired pursuant to the Offer or otherwise by Parent or Purchaser or
any of their affiliates will be voted in favor of the Merger.
If Purchaser or any other direct or indirect subsidiary of Parent shall
acquire at least 90 percent of the outstanding shares of each class of capital
stock of the Company, each of Parent, Purchaser and the Company shall take all
necessary and appropriate action to cause the Merger to become effective, as
soon as practicable after the consummation of the Offer, without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to corporate
existence and good standing, capital structure, subsidiaries, corporate
authorization, absence of changes, Commission filings, consents and approvals,
no defaults under of other agreements, investment banking fees, employee
benefits, labor relations, litigation, taxes, compliance with applicable laws,
environmental matters, intellectual property, real property, insurance, material
contracts, related party transactions, liens and other matters.
Purchaser and Parent have also made certain representations and warranties
with respect to corporate existence and good standing, corporate authorization,
Commission filings, consents and approvals, no violations of other agreements
and other matters.
CONDUCT OF BUSINESS AND OTHER COVENANTS PENDING THE MERGER. The Company has
agreed that, except as expressly contemplated by the Merger Agreement, during
the period from the date of the Merger Agreement to the date on which a majority
of the Company's directors are designees of Parent or Purchaser, the Company
will conduct, and will cause each of its subsidiaries to conduct, its operations
according to its ordinary and usual course of business and consistent with past
practice and the Company will use, and will cause each of its subsidiaries to
use, its best efforts to preserve intact its business organization, to keep
available the services of its current officers and employees and to preserve the
goodwill of, and maintain satisfactory relationships with, those having business
relationships with the Company and its subsidiaries. The Company has agreed to
promptly advise Parent and Purchaser in writing of any change in the Company's
or any of its subsidiaries' condition (financial or otherwise), properties,
customer or supplier relationships, assets, liabilities, business prospects or
results of operations which may reasonably be likely to have a Material Adverse
Effect (as defined in the Merger Agreement).
In addition, without limiting the generality of the foregoing and except as
otherwise expressly provided in or contemplated by the Merger Agreement, during
the period specified in the first sentence of the preceding paragraph, the
Company has agreed that, without the prior written consent of Parent, it will
not (and will not permit any of its subsidiaries to): (i) issue, sell, grant
options or rights to purchase, pledge,
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or authorize or propose the issuance, sale, grant of options or rights to
purchase or pledge of (A) any securities of the Company or any of its
subsidiaries, or grant or accelerate any right to convert or exchange any
securities of the Company or any of its subsidiaries, other than Shares issuable
upon exercise of the options or warrants outstanding on the date hereof or (B)
any other securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date of the Merger Agreement; (ii) otherwise acquire or
redeem, directly or indirectly, or amend any of the securities of the Company or
any of its subsidiaries; (iii) split, combine or reclassify its capital stock or
declare, set aside, make or pay any dividend or distribution (whether in cash,
stock or property) on any shares of capital stock of the Company or any of its
subsidiaries (other than cash dividends paid to the Company by its wholly-owned
subsidiaries with regard to their capital stock); (iv) (1) make or offer to make
any acquisition, by means of a merger or otherwise, of assets or securities, or
any sale, lease, encumbrance or other disposition of assets or securities, in
each case involving the payment or receipt of consideration of $100,000 or more,
except for purchases of inventory made in the ordinary course of business and
consistent with past practice, or (2) enter into or amend any or amend a
Material Contract (as defined in the Merger Agreement) or grant any release or
relinquishment of any rights under any material contract; (v) incur or assume
any long-term debt or short-term debt except for short-term debt incurred under
the Company's existing Revolving Credit Facility in the ordinary course of
business consistent with past practice; (vi) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly-owned
subsidiaries of the Company; (vii) make any loans, advances or capital
contributions to, or investments in, any other person (other than wholly-owned
subsidiaries of the Company); (viii) change any of the accounting principles or
practices used by it; (ix) make any tax election or settle or compromise any
material U.S. federal, state or local income tax liability; (x) propose or adopt
any amendments to its Certificate of Incorporation or Bylaws (or similar
documents); (xi) grant any stock-related, performance or similar awards or
bonuses; (xii) forgive any loans to employees, officers or directors or any of
their respective affiliates or associates; (xiii) enter into any new, or amend
any existing, employment, severance, consulting or salary continuation
agreements with any officers, directors or employees, or grant any increases in
the compensation or benefits to officers, directors and employees other than
normal increases to persons who are not officers or directors in the ordinary
course of business consistent with past practices and that, in the aggregate, do
not result in a material increase in benefits or compensation expense to the
Company; (xiv) make any deposits or contributions of cash or other property to
fund or in any other way secure the payment of compensation or benefits under
the Company's employee benefit plans or agreements subject to such plans other
than in the ordinary course of business consistent with past practice; (xv)
enter into, amend, or extend any collective bargaining or other labor agreement;
(xvi) adopt, amend or terminate any employee benefit plan or any other bonus,
severance, insurance pension or other arrangement; (xvii) settle or agree to
settle any suit, action, claim, proceeding or investigation (including any suit,
action, claim, proceeding or investigation relating to the Merger Agreement or
the transactions contemplated thereby) or pay, discharge or satisfy or agree to
pay, discharge or satisfy any claim, liability or obligation (absolute or
accrued, asserted or unasserted, contingent or otherwise) other than the
payment, discharge or satisfaction of liabilities reflected or reserved against
in full in the financial statements as at April 30, 1998 or incurred in the
ordinary course of business subsequent to April 30, 1998; or (xviii) agree in
writing or otherwise to take any of the foregoing actions or any action which
would make any representation or warranty in the Merger Agreement untrue or
incorrect as of the date when made or as of a future date or would result in any
of the conditions of the Offer (as set forth under "Certain Conditions of the
Offer.") not being satisfied.
NO SOLICITATION. The Company has agreed that it will not and will not
permit any of its subsidiaries or their respective officers, directors,
employees, representatives (including its investment bankers or attorneys),
agents or affiliates to, directly or indirectly, solicit, encourage, initiate or
participate in any way in any discussions or negotiations with, or provide any
non-public information to, or afford any access to the properties, books or
records of the Company or any of its Subsidiaries to, or otherwise assist or
facilitate, any corporation, partnership, person or other entity or group (other
than Parent or Purchaser or any
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affiliate or associate of Parent or Purchaser) concerning any Acquisition
Transaction (as defined in the Merger Agreement) or potential Acquisition
Transaction; provided, however, that nothing contained in the Merger Agreement
will prohibit the Board of Directors of the Company from furnishing information
to or entering into discussions or negotiations with any person or entity that
makes an unsolicited bona fide proposal to engage in an Acquisition Transaction
that the Board of Directors of the Company determines in good faith represents a
financially superior transaction for the stockholders of the Company when
compared to the Offer and the Merger if, and only to the extent that, the Board
of Directors determines in good faith, following the receipt of advice of
outside legal counsel, that failure to take any such action is reasonably likely
to be a breach by the Board of Directors of its fiduciary duties to the
stockholders of the Company under applicable law; and provided further, however,
that nothing contained in the Merger Agreement will prohibit the Company or its
Board of Directors from taking and disclosing to the Company's stockholders a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act. The Company has agreed that it
will promptly notify Parent and Purchaser if any such information is requested
from it or any such negotiations or discussions are sought to be initiated with
the Company and will promptly communicate to Parent and Purchaser the terms of
any proposal or inquiry and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction including in the
case of written proposals or inquiries, furnishing Parent and Purchaser with a
copy of any such written proposal or inquiry (and all amendments and supplements
thereto). Except as is required in the exercise of the fiduciary duties of the
Board of Directors of the Company as determined in good faith, following the
receipt of advice of outside legal counsel, the Company has agreed that it will,
and will cause its Subsidiaries, affiliates and their respective officers,
directors, employees, representatives and agents to, immediately cease and cause
to be terminated any existing activities, discussions, or negotiations with any
parties other than Parent, Purchaser or any of their respective affiliates or
associates conducted heretofore with respect to any Acquisition Transaction.
Except as is required in the exercise of the fiduciary duties of the Board of
Directors of the Company as determined in good faith, following the receipt of
advice of outside legal counsel, the Company has agreed not to release any third
party from any confidentiality or standstill agreement to which the Company is a
party without Parent's prior written consent and to take all steps deemed
necessary or appropriate by Parent to enforce to the fullest extent possible all
such agreements.
FEES AND EXPENSES. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses, except that under certain circumstances described in "Termination"
below, the Company may be required to pay a termination fee.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, where permissible, prior to the proposed Effective Time, of the
following conditions: (a) unless the Merger is consummated pursuant to the
"short-form" merger provisions of the DGCL, the Merger Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company required by
and in accordance with applicable law; (b) all necessary waiting periods under
the HSR Act applicable to the Merger shall have expired or been terminated; (c)
no statute, rule, regulation, executive order, judgment, decree or injunction
shall have been enacted, entered, issued, promulgated or enforced by any court
or governmental authority against Parent, Purchaser or the Company and be in
effect that prohibits or restricts the consummation of the Merger or makes such
consummation illegal or otherwise materially restricts Parent's or Purchaser's
exercise of full rights to own and operate the Company (each party agreeing to
use all reasonable efforts to have such prohibition lifted); and (d) Purchaser
shall have accepted for purchase and paid for the Shares tendered pursuant to
the Offer; provided, however, that this condition will be deemed satisfied if
Purchaser shall have failed to purchase Shares pursuant to the Offer in
violation of the terms of the Merger Agreement.
The obligations of Purchaser and Parent to effect the Merger are further
subject to the satisfaction or waiver, where permissible, on or prior to the
proposed Effective Time of the following conditions: (a) the
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Company shall have performed and complied in all material respects with all
agreements and obligations and conditions required by the Merger Agreement to be
performed or complied with by it on or prior to the Effective Time; (b) the
representations and warranties of the Company contained in the Merger Agreement
that are qualified as to materiality shall be true and correct and those not so
qualified shall be true and correct in all material respects in each case on the
date of the Merger Agreement and at and on the proposed Effective Time; and (c)
the Company shall have furnished such certificates of its officers to evidence
compliance with the conditions described in the preceding paragraph as may be
reasonably requested by Purchaser.
The obligations of the Company to effect the Merger are further subject to
the satisfaction or waiver, where permissible, on or prior to the proposed
Effective Time of the following conditions: (a) Parent and Purchaser shall have
performed and complied in all material respects with all agreements and
obligations required by the Merger Agreement to be performed or complied with by
them on or prior to the proposed Effective Time; (b) the representations and
warranties of Purchaser and Parent qualified as to materiality shall be true and
correct and those not so qualified shall be true and correct in all material
respects; and (c) Parent or Purchaser shall have delivered to the Company an
officer's certification that each of the preceding conditions have been
satisfied.
For a description of the conditions of the Offer, see "Certain Conditions of
the Offer."
TERMINATION. The Merger Agreement may be terminated and the Merger may be
abandoned at any time notwithstanding approval thereof by the stockholders of
the Company, but prior to the Effective Time: (a) by mutual written consent of
the Boards of Directors of Company and Parent; (b) by Parent or the Company, if
the Effective Time shall not have occurred on or before December 31, 1998
(provided that this right to terminate the Merger Agreement will not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date); (c) by Parent or the Company, if any
court of competent jurisdiction in the United States or Canada or other United
States or Canadian governmental body shall have issued an order, decree or
ruling, or taken any other action restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by the Merger Agreement or the
Stock Option Agreements and such order, decree, ruling or other action shall
have become final and non-appealable; (d) (i) by the Company, if Purchaser fails
to commence the Offer as provided in Section 1 and (ii) by Parent, if the Offer
expires or is terminated on account of the failure of a condition specified in
Section 14 without any Shares being purchased thereunder; (e) by Parent, if (i)
the Board of Directors or any committee thereof of the Company withdraws or
modifies or amends in a manner adverse to Parent or Purchaser its authorization,
approval or recommendation of the Offer or the Merger or this Merger Agreement
or shall have resolved to do any of the foregoing or shall have failed to have
reiterated its recommendation within five business days of any written request
by Parent or Purchaser therefor or (ii) the Company or any of its Subsidiaries
(or the Board of Directors or any committee thereof of the Company) shall have
approved, recommended, authorized, publicly announced its intention to enter
into or filed a Schedule 14D-9 not opposing any Acquisition Transaction with a
party other than Parent, Purchaser or any of their affiliates, or shall have
resolved to do any of the foregoing; (f) by Parent or the Company, if the other
party (or, in the case of termination by the Company, if Purchaser) shall have
breached or failed to comply in any material respect with any of its
obligations, covenants or agreements under the Merger Agreement, or any of the
representations and warranties of the Company set forth in the Merger Agreement
which is qualified as to materiality, shall not be true and correct, or any such
representation or warranty that is not so qualified, shall not be true and
correct in any material respect when made or at any time prior to the Effective
Time as if made at and as such time; (g) by Parent, if at any time prior to the
purchase by Purchaser of all of the Shares subject to the Stockholder Options,
the Stockholder Option Agreements shall not be in full force and effect, or the
Option Grantors shall have breached in any material respect any representation,
warranty or covenant contained in the Stockholder Option Agreements; or (h) by
the Company, to allow the Company to enter into an agreement in respect of an
Acquisition Transaction that the Board of
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Directors of the Company shall have determined represents a financially superior
transaction for the stockholders of the Company when compared to the Offer and
the Merger if, and only to the extent that, the Board of Directors shall have
determined in good faith, following the receipt of advice of outside legal
counsel, that failure to take any such action would be a breach by the Board of
Directors of its fiduciary duties to the stockholders of the Company under
applicable law; provided, that, prior to any such termination, the Company
notifies Parent promptly of its intention to terminate the Merger Agreement and
enter into an agreement with respect to an Acquisition Transaction and gives
Parent an opportunity to match the terms of such agreement, which notice shall
include the terms of such Acquisition Transaction and shall be given at least
five business days prior to the termination of the Merger Agreement; provided,
further, that such termination shall not be effective unless the Company
contemporaneously pays Parent the fee described herein. In the event of
termination, the Merger shall be abandoned and only liabilities arising prior to
termination shall survive termination, except that (i) obligations under the
Merger Agreement to keep information confidential, (ii) the termination fee
provision and (iii) any provisions of the Merger Agreement relating to the
Company Option Agreement or the Stockholder Option Agreements, shall survive
termination.
In the event that the Merger Agreement is terminated (i) pursuant to clauses
(e) or (h) of the prior paragraph or (ii) pursuant to any other provision of the
prior paragraph (regardless of whether such termination is by Parent or the
Company unless such termination results solely from a material breach by Parent
or Purchaser of their respective obligations under the Merger Agreement) and (in
the case of clause (ii) only) either (y) prior to such termination a Trigger
Event (as defined below) has occurred or (z) prior to such termination a written
proposal shall have been made relating to an Acquisition Event and within twelve
months from the date of such expiration an Acquisition Event has occurred, then
the Company shall pay to Parent a fee of $2,500,000 (the "Termination Fee").
As used herein, "Acquisition Event" means the consummation of any (i)
Acquisition Transaction or (ii) series of transactions that results in any
person, entity or "group" (other than the Option Grantors and their affiliates
and other than Parent, Purchaser or any of their affiliates) acquiring more than
50% of the outstanding Shares or assets of the Company in each case including
through any open market purchases, merger, consolidation, recapitalization,
reorganization or other business combination.
As used herein, "Trigger Event" means the occurrence of any of the following
events: (i) the Company or any of its Subsidiaries (or the Board of Directors or
any committee thereof of the Company) shall have recommended, approved,
authorized, proposed, filed a Schedule 14D-9 not opposing, or publicly announced
its intention to enter into, any Acquisition Transaction (other than with
Parent, Purchaser or any of its affiliates), or shall have resolved to do any of
the foregoing; (ii) the Board of Directors or any committee thereof of the
Company shall have withdrawn or modified or amended in any manner adverse to
Parent or Purchaser its authorization, approval or recommendation to the
stockholders of the Company with respect to the Offer, the Merger or the Merger
Agreement, or shall have resolved to do any of the foregoing or shall have
failed to have reiterated its recommendation within five business days of any
written request by Parent or Purchaser therefor; or (iii) any person, entity or
"group" (as that term is used in Section 13(d)(e) of the Exchange Act) (other
than the Option Grantors and their affiliates and other than Parent, Purchaser
or any of their affiliates and other than persons, entities or groups that are
permitted to report their ownership of Shares with the SEC on Schedule 13G)
shall have become the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of 20% of the then outstanding Shares.
INDEMNIFICATION AND INSURANCE. Purchaser and Parent have agreed that all
rights to indemnification existing in favor of the present or former directors,
officers and employees of the Company or any of its subsidiaries (the
"Indemnified Parties") as provided in indemnification agreements with the
Company, the Company's Certificate of Incorporation or Bylaws, or the articles
of organization, bylaws or similar documents of any of the Company's
subsidiaries as in effect as of the date of the Merger Agreement with respect to
matters occurring prior to the Effective Time including, without limitation,
matters based in
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whole or in part on, or arising in whole or in part out of, or pertaining to
this Merger Agreement or the transactions contemplated thereby, shall survive
the Merger and shall continue in full force and effect for a period of not less
than the statutes of limitations applicable to such matters. In addition, the
Parent agrees to cause the Surviving Corporation to comply fully with its
indemnification obligations.
To the extent that the preceding paragraph does not indemnify and hold
harmless an Indemnified Party, for a period of four years from and after the
Effective Time, the Surviving Corporation and Parent have agreed to indemnify,
defend and hold harmless the Indemnified Parties against all losses, claims,
damages, costs, expenses (including reasonable attorneys' fees and expenses),
liabilities or judgments of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation (an "Action") arising out of or
pertaining to such individuals' services, prior to the Effective Time, as
directors, officers or employees of the Company or any of its Subsidiaries or as
trustees or fiduciaries of any plan for the benefit of employees of the Company
or as (at the request of the Company) directors, officers or employees of
another corporation or other enterprise (including, without limitation, matters
based in whole or in part on, or arising in whole or in part out of, or
pertaining to the Merger Agreement or the transactions contemplated thereby), in
each case to the full extent permitted by applicable law.
The Surviving Corporation will cause to be maintained in effect for a period
of four years after the Effective Time (or, if the statute of limitations with
respect to such claims is extended, for an additional period, not to exceed two
years, equal to the length of such extension), in respect of acts or omissions
occurring prior to the Effective Time (but only in respect thereof), policies of
directors' and officers' liability insurance covering the persons currently
covered by the Company's existing directors' and officers' liability insurance
policies and providing substantially similar coverage to such existing policies;
provided, however, that the Surviving Corporation will not be required to
maintain directors' and officers' liability insurance policies to the extent
that the aggregate annual cost of maintaining such policies exceeds $265,000
(the "Cap"); and provided further that, if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap, the Surviving Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap.
In the event an Action is brought against any Indemnified Parties for which
indemnification may be sought in accordance with the provisions of the Merger
Agreement, (i) such Indemnified Parties shall notify the Company (or, after the
Effective Time, the Surviving Corporation and Parent) in writing promptly after
such Indemnified Party receives notice of such Action and shall deliver to the
Company (or, after the Effective Time, the Surviving Corporation and Parent) the
undertaking contemplated by Section 145(e) of the DGCL, (ii) the Company (or,
after the Effective Time, the Surviving Corporation or Parent) shall be entitled
to assume the defense thereof and, after notice from the Company (or the
Surviving Corporation or Parent, as applicable) to the Indemnified Parties that
it so chooses, the Company (or the Surviving Corporation or Parent, as
applicable) shall not be liable to the Indemnified Parties for any legal fees or
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof (provided, however, that if (x) the Company (or the Surviving
Corporation and Parent, as applicable) does not elect to assume the defense
thereof, (y) the Company (or the Surviving Corporation and Parent, as
applicable) otherwise authorizes the Indemnified Party to retain counsel for the
defense thereof or (z) the assumption of the defense thereof by the Company (or
the Surviving Corporation or Parent, as applicable) would present counsel
selected by the Company (or the Surviving Corporation or Parent, as applicable)
with a conflict of interest or if such counsel's representation of the
Indemnified Parties would otherwise be inappropriate under the applicable
standards of professional conduct, then the Company (or the Surviving
Corporation and Parent, as applicable) will pay the reasonable fees and expenses
of counsel selected by the Indemnified Parties, and reasonably acceptable to
Parent), and (iii) the Company (or the Surviving Corporation and Parent, as
applicable) will cooperate in the defense of any such matter; provided, however,
that none of the Company, the Surviving Corporation or Parent shall be liable
for any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld), and provided further that the Company (or
the Surviving Corporation and Parent, as applicable) shall not be obligated
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pursuant hereby to pay the fees and expenses of more than one counsel for all
Indemnified Parties in any single Action, except to the extent that, in the
reasonable opinion of counsel for the Indemnified Parties, two or more of such
Indemnified Parties have conflicting interests in the outcome of such Action.
AMENDMENT. To the extent permitted by applicable law, the Merger Agreement
may be amended by action taken by or on behalf of the Boards of Directors of the
Company, Parent and Purchaser (subject in the case of the Company to the last
paragraph of "Board Representation" herein) at any time before or after adoption
of the Merger Agreement by the stockholders of the Company but, after any such
stockholder approval, no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stockholders. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties.
OTHER AGREEMENTS. Each party has agreed to use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement. However, nothing in the Merger Agreement (other than as
expressly provided therein) shall obligate Parent or Purchaser to keep the Offer
open beyond the expiration date set forth in the Offer, and none of Parent,
Purchaser or any of their subsidiaries or affiliates is obligated (i) to limit
or not to exercise any rights of ownership of any securities (including the
Shares), or to divest, dispose of or hold separate any securities or all or a
portion of their respective businesses, assets or properties or of the business,
assets or properties of the Company or any of its subsidiaries or (ii) to limit
the ability of such entities (A) to conduct their respective businesses or own
such assets or properties or to conduct the businesses or own the properties or
assets of the Company and its subsidiaries or (B) to control their respective
businesses or operations or the businesses or operations of the Company and its
subsidiaries. In addition, among other things, (x) each of the Company, Parent
and Purchaser has agreed to use its reasonable best efforts to make promptly any
required submissions under the HSR Act which the Company and Parent and
Purchaser determine should be made, in each case, with respect to the Offer, the
Merger Agreement, the Company Option Agreement or the Stockholder Option
Agreements and (y) Parent, Purchaser and the Company have each agreed to
cooperate with one another (i) in promptly determining whether any filings are
required to be or should be made or consents, approvals, permits or
authorizations are required to be or should be obtained under any other federal,
state or foreign law or regulation or whether any consents, approvals or waivers
are required to be or should be obtained from other parties to loan agreements
or other contracts or instruments material to the Company's business in
connection with the consummation of the transactions contemplated by the Merger
Agreement, and (ii) in promptly making any such filings, furnishing information
required in connection therewith and seeking to obtain timely any such consents,
permits, authorizations, approvals or waivers and (z) the Company has agreed
that it will use its reasonable best efforts promptly to grant such approvals
and to take or cause to be taken such actions as are necessary to eliminate or
minimize the effects on the transactions contemplated hereby of any antitakeover
statute, regulation or charter provision that is or shall become applicable to
the transactions contemplated hereby (except, in the case of any such approval
or action by the Board of Directors of the Company, to the extent that the Board
of Directors determines in good faith, following the receipt of advice of
outside legal counsel, that granting such approval or taking such action is
reasonably likely to be a breach by the Board of Directors of its fiduciary
duties to the stockholders of the Company under applicable law).
TIMING. The exact timing and details of the Merger will depend upon legal
requirements and a variety of other factors, including the number of Shares
acquired by Purchaser pursuant to the Offer. Although Parent has agreed to cause
the Merger to be consummated on the terms and subject to the conditions set
forth above, there can be no assurance as to the timing of the Merger.
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Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment, purchase or pay for any Shares tendered until
the expiration of any applicable waiting period for the Offer and the
Stockholder Options granted pursuant to the Stockholder Option Agreements under
the HSR Act, and Parent may terminate or, subject to the terms and conditions of
the Merger Agreement, amend the Offer as to any Shares not then accepted for
payment, shall not be required to accept for payment or pay for any Shares, or
may delay the acceptance for payment of Shares tendered, if (i) at the
expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates or which Parent and its affiliates have the right to acquire pursuant
to the Company Option Agreement, shall not constitute at least 90% of the
outstanding Shares on a fully diluted basis, provided, however, that the Minimum
Condition may be required to be amended in accordance with the Merger Agreement
as set forth in Section 1 herein, or (ii) at any time on or after the date of
the Merger Agreement, and prior to the acceptance for payment of Shares, any of
the following events shall occur or exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction, proposed, sought, promulgated,
enacted, entered, enforced or deemed applicable to the Offer, the
Stockholder Options, the Top-Up Option or the Merger, that would or is
reasonably likely to (i) make the acceptance for payment of, or payment for
or purchase of some or all of the Shares pursuant to the Offer, the
Stockholder Options or the Top-Up Option illegal, or otherwise restrict or
prohibit the consummation of the Offer, the Stockholder Options, the Top-Up
Option or the Merger, (ii) result in a significant delay in or restrict the
ability of Purchaser to accept for payment, pay for or purchase some or all
of the Shares pursuant to the Offer, the Stockholder Options or the Top-Up
Option or to effect the Merger, (iii) render Purchaser unable to accept for
payment or pay for or purchase some or all of the Shares pursuant to the
Offer, the Stockholder Options or the Top-Up Option, (iv) impose material
limitations on the ability of Parent, Purchaser or any of their respective
subsidiaries or affiliates to acquire or hold, transfer or dispose of, or
effectively to exercise all rights of ownership of, some or all of the
Shares including the right to vote the Shares purchased by it pursuant to
the Offer, the Stockholder Options or the Top-Up Option on all matters
properly presented to the stockholders of the Company, (v) require the
divestiture by Parent, Purchaser or any of their respective subsidiaries or
affiliates of any Shares, or require Parent, Purchaser, the Company, or any
of their respective subsidiaries or affiliates to dispose of or hold
separate all or any material portion of their respective businesses, assets
or properties or impose any material limitations on the ability of any of
such entities to conduct their respective businesses or own such assets,
properties or Shares or on the ability of Parent or Purchaser to conduct the
business of the Company and its subsidiaries and own the assets and
properties of the Company and its subsidiaries, or (vi) impose any material
limitations on the ability of Parent, Purchaser or any of their respective
subsidiaries or affiliates effectively to control the business or operations
of the Company, Parent, Purchaser, or any of their respective subsidiaries
or affiliates.
(b) there shall have been instituted or pending any action, proceeding
or counterclaim by or before any governmental, administrative or regulatory
agency or instrumentality or before any court, arbitration tribunal or any
other tribunal, domestic or foreign, challenging the making of the Offer or
the acquisition by Purchaser of the Shares pursuant to the Offer or the
Stockholder Options or the Top-Up Option or the consummation of the Merger,
or seeking to obtain any material damages, or seeking to, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (viii) of paragraph (a) above;
(c) any of the Stockholder Option Agreements shall not be in full force
and effect or any of the Option Grantors shall have breached in any material
respect any representation, warranty or covenant contained therein;
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(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange in the United States, including the NASDAQ stock market, or the
Frankfurt Stock Exchange, for a period of more than one full trading day,
(ii) the declaration of any banking moratorium or any suspension of payments
in respect of banks in the United States or Germany, (iii) the commencement
of a war, armed hostilities or any other international or national calamity
involving the United States or Germany, or (iv) in the case of any of the
foregoing existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof;
(e) any Person, entity or "group" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Parent or the Option Grantors
or any of their respective affiliates (and other than persons, entities or
groups that are permitted to report their ownership of Shares with the SEC
on Schedule 13G) shall have become the beneficial owner (as that term is
used in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding Shares;
(f) the Company or any of its subsidiaries (or the Board of Directors or
any committee thereof of the Company) shall have approved, recommended,
authorized, proposed, filed a Schedule 14D-9 not opposing, or publicly
announced its intention to enter into, any Acquisition Transaction (other
than with the Parent, Purchaser or any of their affiliates) or shall have
resolved to do any of the foregoing;
(g) there shall have occurred any change, condition, event or
development in the business, condition (financial or otherwise), assets,
liabilities, results of operations or prospects of the Company or any of its
subsidiaries that is, or is reasonably likely to be, materially adverse to
the Company and its subsidiaries taken as a whole or that materially impairs
the ability of the parties to consummate the Offer or the Merger;
(h) the Company shall have breached or failed to comply in any material
respect with any of its obligations, covenants, or agreements under the
Merger Agreement or the Company Option Agreement or any representation or
warranty of the Company contained in the Merger Agreement, that is qualified
as to materiality, shall not be true and correct, or any such representation
or warranty that is not so qualified, shall not be true and correct in any
material respect, in each case either as of when made or at any time
thereafter;
(i) the Merger Agreement shall have been terminated pursuant to its
terms or shall have been amended pursuant to its terms to provide for such
termination or amendment of the Offer; or
(j) the Board of Directors or any committee thereof of the Company shall
have modified or amended in any manner adverse to Parent or Purchaser or
shall have withdrawn its authorization, approval or recommendation of the
Offer, the Merger or the Merger Agreement, or shall have resolved to do any
of the foregoing or shall have failed to have reiterated its recommendation
within five business days of any written request by Parent or Purchaser
therefor;
which, in the good faith judgment of Parent or Purchaser, in any case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser or any of their affiliates permitted by the Merger Agreement) giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted regardless of the circumstances (including any action or
inaction by Parent or Purchaser or any of their affiliates permitted by the
Merger Agreement giving rise to any such condition) or waived by Parent or
Purchaser in whole or in part at any time or from time to time in its discretion
subject to the terms and conditions of the Merger Agreement; provided, however,
that the Minimum Condition may not be waived without the Company's consent. The
failure of Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, and each such right shall
be deemed an
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ongoing right which may be asserted at any time and from time to time. Any
determination by Parent or Purchaser concerning the events described above will
be final and binding on all parties.
Stockholder Option Agreements
TENDER OF SHARES. Pursuant to the terms of the Stockholder Option
Agreements, copies of which have been filed with the Commission as EXHIBITS 6,
7, AND 8 hereto, Robert H. Berglass, The Berglass Charitable Remainder Trust UDT
7/8/98 and The Berglass 1995 Irrevocable Trust UDT 6/27/95 (collectively, the
"Option Grantors") have agreed to validly tender and not to withdraw pursuant to
and in accordance with the terms of the Offer, not later than the fifth business
day after commencement of the Offer, the Option Grantors' Shares. The Option
Grantors together beneficially own 2,161,460 Shares, constituting approximately
31.4% of the outstanding Shares.
VOTING OF SHARES. At any meeting of the stockholders of the Company,
however called, or in connection with any written consent of stockholders of the
Company, the Option Grantors have agreed to vote (or cause to be voted) all the
Shares held of record or beneficially owned by the Option Grantors (and in the
case of Shares not held of record by the Option Grantors, subject to the Option
Grantors' voting direction) (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement, the Company Option Agreement
and approval of the terms of each and each of the other actions contemplated
under such agreements and any actions required in furtherance thereof and (ii)
against any proposal relating to an Acquisition Transaction and against any
action or agreement that would impede, frustrate, prevent or nullify the
Stockholder Option Agreements or result in a breach in respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or the Company Option Agreement or which would result
in any of the conditions to the Offer set forth under "Certain Conditions to the
Offer" not being fulfilled.
OPTION. To induce Parent and Purchaser to enter into the Merger Agreement,
the Option Grantors have granted Purchaser options (the "Stockholder Options")
to purchase the Option Grantors' Shares at the Offer Price, subject to increase
as set forth below (the "Purchase Price"). The Stockholder Options may be
exercised, in whole but not in part, by written notice to the Option Grantor,
for a period of ten (10) business days (the "10 Day Period") following
termination of the Merger Agreement or termination of the Offer, whichever shall
first occur; provided that, prior to such termination, either (i) a Trigger
Event shall have occurred or (ii) (A) the Company shall have received a written
proposal from any person other than Parent, Purchaser or any affiliate of Parent
or Purchaser for an Acquisition Transaction, which proposal shall not have
expired or been withdrawn, (B) the Merger Agreement shall have been terminated
by Parent pursuant to the rights described under paragraphs (b), (d)(ii), (f) or
(g) of "The Merger Agreement--Termination" herein and (C) at the time of such
termination the Minimum Condition shall not have been satisfied. Notwithstanding
the foregoing, the Stockholder Options may not be exercised until: (i) all
waiting periods under the HSR Act, required for the purchase of the Option
Grantors' Shares upon such exercise shall have expired or been waived and any
other conditions under the other Antitrust Laws shall have been satisfied and
(ii) there shall not be in effect any preliminary injunction or other order
issued by any Governmental Entity prohibiting the exercise of the Stockholder
Options; provided that if (i) all HSR Act waiting periods shall not have expired
or been terminated or (ii) there shall be in effect any such injunction or
order, in each case on the expiration of the 10 Day Period, the 10 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or termination of all HSR Act waiting periods, and (B) the date of
removal or lifting of such injunction or order.
In the event the Option Grantors' Shares are acquired by Purchaser pursuant
to the exercise of the Stockholder Options (the "Acquired Securities") and,
either before or at any time within the one-year period following such
acquisition, Parent, Purchaser or any affiliate of Parent or Purchaser shall
acquire Common Stock (other than from the Company) at a price in excess of the
Purchase Price, then the Purchase Price shall be increased to such higher price.
If the purchase of the Acquired Securities has been completed at the time of
such increase, the Option Grantor will be entitled to receive, and Purchaser
will
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promptly (and in no event more than 48 hours following such increase) pay to the
Option Grantor, by wire transfer of same day funds to such account as the Option
Grantor shall designate, the amount of the increase.
In the event the Option Grantors' Shares are acquired by Purchaser pursuant
to the exercise of the Stockholder Options, the Option Grantors will be entitled
to receive, and Purchaser will promptly (and in no event more than 48 hours
following such Sale) pay to the Option Grantor, upon any subsequent disposition,
transfer or sale to an unaffiliated third party ("Sale") of all or any portion
of the Acquired Securities within the one-year period following such
acquisition, an amount per share in cash equal to the excess, if any, of the net
proceeds received per share in the Sale over the Purchase Price. Any such
payment shall be made by wire transfer of same day funds to such account as the
Option Grantor shall designate.
RESTRICTIONS ON TRANSFER. Except as contemplated by the Stockholder Option
Agreements and the Merger Agreement, the Option Grantors shall not (i) offer to
transfer (which term includes, without limitation, any sale, tender, gift,
pledge (other than a pledge which does not impair such Option Grantor's ability
to perform under the Stockholder Option Agreements), assignment or other
disposition), transfer or consent to any transfer of, any or all of their Shares
or any interest therein, (ii) enter into any contract, option or other agreement
or understanding with respect to any transfer of any or all of their Shares or
any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization or consent in or with respect to their Shares, (iv) deposit their
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to their Shares or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations under the
Stockholder Option Agreements or the transactions contemplated thereby or by the
Merger Agreement or the Company Option Agreement (including, without limitation,
any action that would cause the Merger to be subject to Section 1101 of the
CGCL).
NO SOLICITATION. Each of the Option Grantors has agreed, in its capacity as
a stockholder of the Company, that neither the Option Grantor nor any
affiliates, representatives or agents shall (and, if the Option Grantor is a
corporation, partnership, trust or other entity, the Option Grantor shall cause
its officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
Purchaser or any of their respective affiliates or representatives) concerning
any proposal relating to an Acquisition Transaction. The Option Grantors have
agreed to immediately cease any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any proposal relating to
an Acquisition Transaction. The Option Grantors have agreed to communicate to
Parent, to the same extent as required by the Company as described above, the
terms, and other information concerning, any proposal, discussion, negotiation
or inquiry and the identity of the party making such proposal or inquiry which
an Option Grantor may receive in respect of any such Acquisition Transaction.
Company Option Agreement
TOP-UP OPTION. Pursuant to the terms of the Company Option Agreement, a
copy of which has been filed with the Comission as EXHIBIT 9 hereto the Company
has granted to Purchaser an irrevocable option (the "Top-Up Option"),
exercisable if Purchaser acquires at least 85% of the then outstanding Shares
pursuant to the Offer, to purchase that number of Shares (the "Top-Up Option
Shares") equal to the lowest number of Shares that, when added to the number of
Shares owned by Purchaser at the time of such exercise, shall constitute one
share more than 90% of the Shares then outstanding (assuming issuance of the
Top-Up Option Shares) at a price equal to $5.25 per share (the "Option Price");
provided, however, that the Top-Up Option shall not be exercisable unless
immediately after such exercise Purchaser would own more than 90% of the Shares
then outstanding.
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Purchaser may exercise the Top-Up Option, in whole but not in part, at any
one time after the occurrence of a Top-Up Exercise Event (as defined below) and
prior to the occurrence of a Top-Up Termination Event (as defined below).
A "Top-Up Exercise Event" will occur upon Purchaser's acceptance for payment
pursuant to the Offer of Shares constituting more than 85% but less than 90% of
the Shares then outstanding. A "Top-Up Termination Event" means (i) the
Effective Time, (ii) the date which is 10 business days after the occurrence of
the Top-Up Exercise Event (or such later date on which the closing of a purchase
of Shares pursuant to the Company Option Agreement may be consummated), or (iii)
the termination of the Merger Agreement.
Employment Agreements (July 1998)
In connection with entering into the Merger Agreement, the Company entered
into the July 1998 Agreements with Mr. Berglass and Mr. Johnson which become
effective upon the acquisition by Parent (or an affiliate of Parent) of a
majority of the Shares. Copies of the July 1998 Agreements have been filed with
the Commission as EXHIBITS 10 AND 11 hereto. Upon their effectiveness, the July
1998 Agreements will reduce the respective employment terms of Mr. Berglass and
Mr. Johnson to three (3) years and replace the March 23, 1998 Agreements in
their entirety. Under the July 1998 Agreements, Mr. Berglass will receive a Base
Salary of not less than $565,000 and Mr. Johnson will receive a Base Salary of
not less than $227,000, and both will receive incentive compensation pursuant to
the Henkel Corporation Management Incentive Plan ("MIP") and the Henkel
Corporation Long-Term Incentive Plan ("LTI"), provided, that such annual
incentive compensation shall not be less than $250,000 (or $100,000 in the case
of Mr. Johnson). In addition, Mr. Berglass and Mr. Johnson are entitled to other
benefits on a basis not less favorable than those which are currently provided
to them by the Company. In the event Mr. Berglass' or Mr. Johnson's employment
is terminated during the term of the applicable July 1998 Agreement for any
reason other than Good Cause, death, or permanent and total disability, or in
the event Mr. Berglass or Mr. Johnson terminates his employment for Good Reason,
such person will be entitled to receive the greater of: (i) a one time lump sum
equal to the Base Salary and guaranteed minimum incentive compensation for the
remainder of the three year initial term of the July 1998 Agreement and the
right to participate in all medical and dental, insurance and other benefits of
the Company until such time as he is eligible for Medicare benefits, or (ii)
severance and continuation benefits under the Henkel Corporation Severance Pay
Plan. Under his July 1998 Agreement Mr. Berglass may not engage in competitive
activities for a period of six months, subject to the Company's option to extend
for an additional six month period, after his employment terminates. Until the
effectiveness of the July 1998 Agreements, Mr. Berglass and Mr. Johnson will
continue to be employed pursuant to the terms of their respective March 1998
Agreements.
Confidentiality Agreement
Pursuant to an agreement dated as of November 3, 1997 (the "Confidentiality
Agreement") between the Company and Parent, the Company has supplied Parent with
certain non-public, confidential and proprietary information about the Company.
Parent has agreed in the Confidentiality Agreement that it, together with its
directors, officers, employees, agents and representatives, will keep
confidential all such information supplied by the Company and that it will not,
without the prior written consent of the Board of Directors of the Company,
until November 3, 1999, acquire or offer to acquire any securities or assets of
the Company or enter into or propose to enter into any business combination
involving the Company. In the Merger Agreement, the Company has represented and
warranted that the making of any offer and proposal and the taking of any other
action by Parent or Purchaser in connection with the Merger Agreement, the
Company Option Agreement and the Stockholder Option Agreements and the
transactions contemplated hereby and thereby have been consented to by the Board
of Directors of the Company in accordance with the terms and provisions of the
Confidentiality Agreement.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation. At a meeting of the Company's Board of Directors held on
July 13, 1998, the Board, by unanimous vote, (i) determined that the Offer and
the Merger were fair to, and in the best interests of, the Company and its
stockholders, (ii) approved the Merger Agreement, the Offer and the Merger and
(iii) recommended that the holders of Shares accept the Offer and approve the
Merger Agreement. A letter to the Company's stockholders from the Company's
Chairman of the Board and President, dated July 20, 1998, which includes the
Board's recommendation to the Company's stockholders, is attached AS EXHIBIT 12
hereto and is incorporated herein by reference.
(b) Background; Reasons for the Board's Recommendation.
BACKGROUND. Since the middle of 1995, as a result of the Company's highly
leveraged capital structure and its relatively small size in a consolidating
industry with a number of larger and better capitalized competitors, the Company
has been exploring a variety of potential strategic alternatives in order to
address such factors, including raising capital by issuing additional equity
securities of the Company, selling one or more of the Company's product lines
and selling the Company. Accordingly, pursuant to an engagement letter entered
into in June 1995 the Company retained Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), an investment banking firm, to evaluate and advise the
Company regarding these alternatives. In connection with such engagement, DLJ
prepared an offering memorandum regarding the Company and made preliminary
contacts with potential strategic and financial investors.
Between June 1995 and April 1996, the Company pursued contacts with a number
of such potential partners. During this period, the Company signed
confidentiality agreements with approximately 60 entities and permitted
approximately 25 entities to conduct a preliminary due diligence review of the
Company. Although the Company engaged in substantive discussions with several of
these potential transaction partners, no transaction was agreed upon.
In April 1996, the Company filed for protection under the federal bankruptcy
laws, and subsequent thereto continued to discuss and meet with potential
strategic and financial partners. Upon the effectiveness of its Second Amended
Plan of Reorganization, the Company emerged from bankrupty in November 1996 and
thereafter continued from time to time to engage in preliminary discussions
regarding possible transactions with prospective strategic and financial
partners. In November 1997, the Company commenced discussions with Parent
regarding the possible acquisition of the Company by Parent. The Company
executed a confidentiality agreement with Parent and provided Parent with
certain financial, corporate and other information concerning the Company.
Executives of the Company met several times with representatives of Parent, but
no firm proposal was made. In December 1997, Parent informed the Company that
for internal reasons it had decided not to pursue a transaction with the Company
at that time.
In early January 1998, the Company approached one of its debt holders about
a possible equity investment in the Company by such debt holder and the
concurrent retirement of portions of the Company's debt. Company executives
initiated discussions with such holder and in early March 1998, received an
offer to purchase 40% of the Company's equity at $3.00 per share (the "March
1998 Offer"). After a review of the terms of such proposal at a regular meeting
of the Board on March 23, 1998, the Board determined that it would be in the
best interests of the Company to retain the services of Houlihan Lokey Howard &
Zukin ("Houlihan Lokey") to evaluate such offer and to consider other strategic
alternatives of the Company.
The Company was unable to reach a definitive agreement regarding the March
1998 Offer, but with the advice and assistance of Houlihan Lokey, executives of
the Company continued to pursue discussions with other entities regarding
potential equity investments or debt restructurings. These discussions continued
through May 1998, but no transaction resulted from such discussions.
17
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In early May 1998, Robert Berglass, the Company's Chairman and President,
contacted Parent regarding a possible transaction between the Company and
Parent. A representative of Parent visited the Company's offices on May 7, 1998
and met with Company executives. At such meeting, Mr. Berglass proposed an
equity investment in the Company by Parent of approximately 20% of the
outstanding equity. Parent's representative indicated that Parent was interested
in pursuing a transaction with the Company, but that Parent generally preferred
a purchase of all of the Company's outstanding stock.
From June 4 through June 6, 1998, discussions between the Company and Parent
continued in Los Angeles, with representatives from their respective advisors,
Houlihan Lokey and Rhone Group LLC, in attendance. At these meetings, the
framework of a potential transaction involving the acquisition of the Company by
Parent was outlined. Parent indicated that any transaction would need to include
the grant of an option to Parent to purchase stock owned by Mr. Berglass and
certain family trusts of Mr. Berglass in the event the transaction was not
consummated in certain circumstances. Both parties expressed a willingness to
continue negotiations in the hope of reaching agreement. During the week of June
9, 1998, the Company's management held informal telephonic discussions with its
outside directors regarding the recent developments in the discussions with
Parent.
On June 15, a meeting of the Board of Directors of the Company was held, at
which time Mr. Berglass advised the Board of the possibility of a transaction
with Parent. After a discussion, including advice from Houlihan Lokey, the Board
unanimously determined that negotiations with respect to such a transaction
should continue. From June 17 through June 19, 1998, Parent undertook a due
diligence investigation of the Company and also commenced preparation of
documentation with respect to the transaction. Parent thereafter delivered
initial drafts of the definitive documents to the Company.
On June 30 and July 1, 1998, Mr. Berglass met with executives of Parent in
Germany to continue negotiations regarding the terms of the transaction. At
these meetings, Parent reiterated its insistence that the transaction include an
option to purchase the stock owned by Berglass and certain Burglass family
trusts if the proposed Merger Agreement were terminated.
On July 2, 1998, the Board of Directors of the Company held another
telephonic Board meeting. At the meeting, the Board, together with the Company's
outside legal counsel and a representative from Houlihan Lokey, reviewed the
terms and conditions of the Offer and the Merger as set forth in drafts of the
Merger Agreement, the Stockholder Option Agreements and related documents. The
Board heard presentations by its outside legal counsel with respect to the terms
of the proposed transaction and the Board's fiduciary obligations under Delaware
law. The Board also heard a presentation by the representative of Houlihan Lokey
with respect to the financial terms of the proposed Offer and Merger. The Board,
by unanimous vote, authorized Mr. Berglass to continue negotiations on the
transaction documents.
From July 3 through July 12, 1998, negotiations and document preparation
continued. On July 10, 1998, the Board held a meeting to discuss the status of
the negotiations. At this meeting, the Company's outside counsel and special
Delaware counsel advised the Board regarding its fiduciary duties under
applicable law and a representative of Houlihan Lokey delivered its oral opinion
to the Board that the consideration to be received by the public stockholders of
the Company in connection with the Offer and the Merger was fair to such holders
from a financial point of view. Based upon such presentations, the Board
unanimously voted to authorize Mr. Berglass to finalize the documentation for
the transaction. The transaction documents were finalized on July 12 following a
conference call among the Company, Parent and their respective counsel and
financial advisors.
On July 13, 1998, the Board held a telephonic meeting to discuss the results
of the July 12 negotiations and to approve the final documents. The Board
received Houlihan Lokey's written opinion that the consideration to be received
by the public stockholders of the Company in connection with the Offer and the
Merger is fair to such holders from a financial point of view. Based on such
opinion and on the presentations delivered to it at the July 2 and July 10
meetings, the Board unanimously approved the Offer
18
<PAGE>
and the Merger. The transaction was publicly announced on the morning of July
14, 1998 and on July 20, 1998, Parent commenced the Offer.
REASONS FOR THE BOARD'S RECOMMENDATION.
REASONS FOR THE BOARD'S CONCLUSIONS. In reaching the determination
described in paragraph (a) above, the Board considered a number of factors,
including, without limitation, the following:
(i) The financial condition, results of operations, business and
strategic objectives of the Company, as well as the risks involved in
achieving those objectives;
(ii) The highly-leveraged capital structure of the Company, the
significant competition in and consolidation of the industry in which the
Company operates, the relative size of the other participants in the
industry and the available capital and resources of such other participants
as compared to the available capital and resources of the Company;
(iii) A review of the possible alternatives to the Offer and the Merger
including the possibilities of continuing to operate the Company as an
independent entity, a sale or partial sale of the Company through a merger
or by other means, various financing alternatives involving the possible
sale of the Company's equity; and, in respect of each alternative, the range
of possible benefits to the Company's stockholders of such alternative and
the timing and the likelihood of actually accomplishing such alternative;
(iv) The advice of Houlihan Lokey, regarding the likelihood of other
potential offers for the Company on terms more favorable to the stockholders
of the Company than the Offer and the results of its efforts on behalf of
the Company seeking indications of interest in other possible alternatives;
(v) The financial and valuation analyses presented orally to the Board
by Houlihan Lokey, including market prices and financial data relating to
other companies engaged in businesses considered comparable to the Company
and the prices and premiums paid in recent selected acquisitions of
companies engaged in businesses considered comparable to those of the
Company;
(vi) The relationship of the Offer price to historical market prices of
the Shares and to the Company's book value and liquidation value per Share;
(vii) The written opinion of Houlihan Lokey that, based on certain
assumptions and subject to certain limitations, the consideration to be
received by the Company's public stockholders in the Offer and Merger is
fair to such holders from a financial point of view. A copy of the written
opinion of Houlihan Lokey, which set forth the assumptions made, matters
considered and basis of its review, is filed as EXHIBIT 13 hereto and
incorporated herein by reference;
(viii) The financial and other terms and conditions of the Offer, the
Merger and the Merger Agreement, including, without limitation, that the
terms of the Merger Agreement will not prevent other third parties from
making certain bona fide proposals subsequent to execution of the Merger
Agreement, will not prevent the Company's Board from determining, in the
exercise of its fiduciary duties in accordance with the Merger Agreement, to
provide information to and engage in negotiations with such third parties,
and will permit the Company, subject to the non-solicitation provisions and
the payment of the termination fee discussed above, to enter into a
transaction with a third party that would be more favorable to the Company's
stockholders than the Offer and the Merger;
(ix) The structure of the transaction, which is designed, among other
things, to result in the holders of Shares receiving, at the earliest
practicable time, the consideration to be paid in the Offer and the fact
that the consideration to be paid in the Offer and the Merger is the same;
19
<PAGE>
(x) The fact that Parent required that the Option Grantors enter the
Stockholder Option Agreements before it would consummate the transaction and
its belief, notwithstanding such fact, that the Company would continue to be
able to consider bona fide proposals from third parties;
(xi) The likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of Parent and
the risks to the Company if the acquisition were not consummated;
(xii) The fact that the Offer and the Merger are not subject to a
condition that Parent have available financing; and
(xiii) The availability of dissenters' rights in the Merger under
applicable law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its respective determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter dated March 26, 1998, between the Company
and Houlihan Lokey, subsequently amended as of June 8, 1998 (such engagement
letter as so amended, the "Houlihan Engagement Letter"), the Company retained
Houlihan Lokey as a financial advisor. The original engagement as of March 26,
1998 is referred to herein as the "Original Engagement" and the subsequent
amendment to the terms of such engagement as of June 8, 1998 is referred to
herein as the "Amended Engagement." Pursuant to the Original Engagement,
Houlihan Lokey was retained by the Company (i) to assist it, in connection with
a potential issuance of equity and/or debt securities and/or (ii) to act as the
Company's advisor in connection with consideration and, if desired, negotiation
of the terms of the March 1998 Offer and to render an opinion as to the fairness
of such transaction if so requested. Pursuant to the Amended Engagement,
Houlihan Lokey was also retained to advise the Company in connection with a
potential transaction with Parent. In that regard, Houlihan Lokey was employed
to assist the Company in negotiating and structuring the proposed transaction
and to provide an opinion to the Company's Board of Directors with respect to
the fairness of the proposed transaction from a financial point of view.
Pursuant to the Houlihan Engagement Letter, as amended, the Company has agreed
to pay to Houlihan Lokey, if a transaction with Parent is consummated, a
transaction fee of one and one-eighth percent (1 1/8%) of the total transaction
value with respect to such transaction. The transaction fee payable to Houlihan
Lokey, assuming consummation of the Offer and the Merger on the terms described
herein, is estimated to be approximately $1.0 million. In addition, the Company
has agreed (i) to reimburse Houlihan Lokey for out-of-pocket expenses (including
the reasonable fees and expenses of counsel) incurred in performing its services
under the Houlihan Engagement Letter and (ii) to indemnify Houlihan Lokey and
certain related persons against certain liabilities related to, or arising out
of, Houlihan Lokey's engagement under the Houlihan Engagement Letter.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the transfer of 761,905 shares by Mr. Berglass to The
Berglass Charitable Remainder Trust UDT 7/8/98 in July 1998, no transactions in
the Shares have been effected during the past 60 days by the Company or, to the
best of the Company's knowledge, by any executive officer, director, affiliate
or subsidiary of the Company.
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(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender, pursuant to
the Offer, all Shares held of record or beneficially owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 Agreement and Plan of Merger dated as of July 13, by and among the Company,
Parent and Purchaser.
Exhibit 2 Joint Press Release, issued by the Company and Parent on July 14, 1998.
Exhibit 3 The Company's Proxy Statement on Schedule 14A filed on October 29, 1997.
Exhibit 4 Employment Agreement dated as of March 23, 1998 between the Company and Robert
Berglass.
Exhibit 5 Employment Agreement dated as of March 23, 1998 between the Company and Grant
Johnson.
Exhibit 6 Stockholder Option Agreement, dated as of July 13, 1998, between Purchaser,
Parent and Robert Berglass.
Exhibit 7 Stockholder Option Agreement, dated as of July 13, 1998, between Purchaser,
Parent and Robert Berglass, as Trustee of the Berglass Charitable Remainder
Trust.
Exhibit 8 Stockholder Option Agreement, dated as of July 13, 1998, between Purchaser,
Parent and Judith Berglass, Trustee of the Berglass 1995 Irrevocable Trust.
Exhibit 9 Stock Option Agreement between Parent, Purchaser and the Company dated July 13,
1998.
Exhibit Employment Agreement dated as of July 8, 1998 between the Company and Robert
10 Berglass.
Exhibit Employment Agreement dated as of July 8, 1998 between the Company and Grant
11 Johnson.
Exhibit Letter to Stockholders of the Company dated July 20, 1998.*
12
Exhibit Opinion of Houlihan Lokey Howard & Zukin dated July 13, 1998.*
13
</TABLE>
- ------------------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
<TABLE>
<S> <C> <C>
DEP CORPORATION
By: /s/ ROBERT BERGLASS
-----------------------------------------
Name: ROBERT BERGLASS
Title: CHAIRMAN AND PRESIDENT
</TABLE>
DATED: July 20, 1998
<PAGE>
Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
HENKEL KGaA
HENKEL ACQUISITION CORP. II
AND
DEP CORPORATION
Dated as of July 13, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
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SECTION 1.01 The Offer. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 Company Actions. . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.03 Stockholder Lists. . . . . . . . . . . . . . . . . . . . 4
SECTION 1.04 Directors. . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
THE MERGER
SECTION 2.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.02 Consummation of the Merger . . . . . . . . . . . . . . . 5
SECTION 2.03 Effects of the Merger. . . . . . . . . . . . . . . . . . 5
SECTION 2.04 Certificate of Incorporation and Bylaws. . . . . . . . . 6
SECTION 2.05 Directors and Officers . . . . . . . . . . . . . . . . . 6
SECTION 2.06 Conversion of Shares . . . . . . . . . . . . . . . . . . 6
SECTION 2.07 Conversion of Common Stock of Sub. . . . . . . . . . . . 6
SECTION 2.08 Stockholders' Meeting. . . . . . . . . . . . . . . . . . 6
SECTION 2.09 Merger Without Meeting of Stockholders . . . . . . . . . 6
SECTION 2.10 Withholding Taxes. . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 Dissenting Shares. . . . . . . . . . . . . . . . . . . . 7
SECTION 3.02 Payment for Shares . . . . . . . . . . . . . . . . . . . 7
SECTION 3.03 Closing of the Company's Transfer Books. . . . . . . . . 8
SECTION 3.04 Existing Stock Options . . . . . . . . . . . . . . . . . 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification . . . . . . . . . . . . . 9
SECTION 4.02 Capitalization . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.03 Authority for this Agreement . . . . . . . . . . . . . . 11
SECTION 4.04 Absence of Certain Changes . . . . . . . . . . . . . . . 11
SECTION 4.05 Reports. . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.06 Schedule 14D-9; Offer Documents and Proxy Statement. . . 13
SECTION 4.07 Consents and Approvals; No Violation . . . . . . . . . . 14
SECTION 4.08 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.09 Employee Benefit Matters . . . . . . . . . . . . . . . . 15
SECTION 4.10 Litigation, etc. . . . . . . . . . . . . . . . . . . . . 17
i
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SECTION 4.11 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.12 Compliance with Law. . . . . . . . . . . . . . . . . . . 20
SECTION 4.13 Environmental Matters. . . . . . . . . . . . . . . . . . 20
SECTION 4.14 Intellectual Property. . . . . . . . . . . . . . . . . . 22
SECTION 4.15 Real Property. . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.16 Material Contracts . . . . . . . . . . . . . . . . . . . 25
SECTION 4.17 Related Party Transactions . . . . . . . . . . . . . . . 25
SECTION 4.18 Liens . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.19 Restriction of State Takeover Statutes Inapplicable. . . 26
SECTION 4.20 Required Vote of Company Stockholders. . . . . . . . . . 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 5.01 Organization and Qualification . . . . . . . . . . . . . 26
SECTION 5.02 Authority Relative to this Agreement . . . . . . . . . . 26
SECTION 5.03 Offer Documents; Proxy Statement . . . . . . . . . . . . 26
SECTION 5.04 Consents and Approvals; No Violation . . . . . . . . . . 27
SECTION 5.05 Operations of Sub. . . . . . . . . . . . . . . . . . . . 28
SECTION 5.06 Financing. . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.07 Current Ownership. . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company . . . . . . . . . . . 28
SECTION 6.02 No Solicitation. . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.03 Access to Information. . . . . . . . . . . . . . . . . . 31
SECTION 6.04 Reasonable Best Efforts. . . . . . . . . . . . . . . . . 31
SECTION 6.05 Indemnification and Insurance. . . . . . . . . . . . . . 33
SECTION 6.06 Employee Matters . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.07 State Takeover Statutes. . . . . . . . . . . . . . . . . 35
SECTION 6.08 Proxy Statement. . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.09 Notification of Certain Matters. . . . . . . . . . . . . 36
SECTION 6.10 Subsequent Filings . . . . . . . . . . . . . . . . . . . 36
SECTION 6.11 Termination Fee; Expenses. . . . . . . . . . . . . . . . 36
SECTION 6.12 Exercise of Stockholder Options. . . . . . . . . . . . . 38
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.02 Conditions to the Obligations of Parent and Sub to
Effect the Merger. . . . . . . . . . . . . . . . . . . . 38
SECTION 7.03 Conditions to the Obligations of the Company to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . 39
ii
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ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
<S> <C>
SECTION 8.01 Termination. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.02 Effect of Termination. . . . . . . . . . . . . . . . . . 41
SECTION 8.03 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.04 Extension; Waiver. . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties . . . . . . . 41
SECTION 9.02 Entire Agreement; Assignment . . . . . . . . . . . . . . 42
SECTION 9.03 Enforcement of the Agreement . . . . . . . . . . . . . . 42
SECTION 9.04 Validity . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.06 Governing Law. . . . . . . . . . . . . . . . . . . . . . 43
SECTION 9.07 Descriptive Headings . . . . . . . . . . . . . . . . . . 43
SECTION 9.08 Parties in Interest. . . . . . . . . . . . . . . . . . . 43
SECTION 9.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.10 Fees and Expenses. . . . . . . . . . . . . . . . . . . . 44
SECTION 9.11 Certain Definitions. . . . . . . . . . . . . . . . . . . 44
SECTION 9.12 Press Releases . . . . . . . . . . . . . . . . . . . . . 45
EXHIBIT A - CONDITIONS TO THE OFFER. . . . . . . . . . . . . . . . . . A-1
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of July 13, 1998
among Henkel KGaA, a Kommanditgesellschaft auf Aktien (a partnership limited by
shares), organized under the laws of the Federal Republic of Germany ("PARENT),
Henkel Acquisition Corp. II, a Delaware corporation and a wholly-owned
subsidiary of Parent ("SUB"), and DEP Corporation, a Delaware corporation (the
"COMPANY").
RECITALS
WHEREAS, the Board of Directors or similar governing body of each of
Parent, Sub and the Company has determined that it is in the best interests of
their respective companies and their respective stockholders for Parent to
acquire the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company has unanimously adopted
resolutions approving the acquisition of the Company by Parent, this Agreement
and the transactions contemplated hereby and by the Company Option Agreement (as
defined below) and the Stockholder Option Agreements (as defined below), and has
agreed to recommend that the Company's stockholders approve the agreement of
merger (as such term is used in Section 251 of the Delaware General Corporation
Law (the "DGCL")) contained in this Agreement and the transactions contemplated
hereby and tender their Shares (as hereinafter defined) in the Offer (as
hereinafter defined);
WHEREAS, concurrently with the execution hereof and in order to induce
Parent and Sub to enter into this Agreement, Parent, Sub and the Company are
entering into a Stock Option Agreement (the "COMPANY OPTION AGREEMENT"),
pursuant to which the Company is granting Sub an option (the "COMPANY OPTION")
to purchase newly issued Shares under certain circumstances;
WHEREAS, concurrently with the execution hereof and in order to induce
Parent and Sub to enter into this Agreement, Parent and Sub are entering into
Stockholder Option Agreements (the "STOCKHOLDER OPTION AGREEMENTS") with each of
Robert H. Berglass, Robert H. Berglass, as Trustee of the Berglass Charitable
Remainder Trust UDT 7/8/98, and Judith R. Berglass, as Trustee of the Berglass
1995 Irrevocable Trust UDT 6/27/95 (each, an "OPTION GRANTOR") under which each
Option Grantor is, among other things, agreeing to tender all of such Option
Grantor's Shares in the Offer and granting Parent an irrevocable option
(collectively, the "STOCKHOLDER OPTIONS" and, together with the Company Option,
the "OPTIONS") to purchase all of such Option Grantor's Shares upon the terms
and conditions specified therein; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01 THE OFFER. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 hereof and that none of the
events set forth in clause (2) of Exhibit A hereto shall have occurred or be
existing, Parent shall cause Sub promptly (but in no event later than five
business days following the public announcement of the terms of this Agreement)
to commence (within the meaning of Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT")) an offer to purchase all outstanding
shares of common stock of the Company, par value $.01 per share (the "SHARES"),
at a price of $5.25 per Share, net to the seller in cash (the "OFFER"). Subject
to the satisfaction of the Offer Conditions (as defined below) and the terms and
conditions of this Agreement, Sub shall, and Parent shall cause Sub to, accept
for payment and pay for Shares validly tendered and not withdrawn pursuant to
the Offer as soon as practicable under applicable law. The obligation of Sub to
consummate the Offer and to accept for payment and to pay for any Shares
tendered pursuant thereto shall be subject to only those conditions set forth in
Exhibit A hereto (the "OFFER CONDITIONS"), which may be asserted by Parent or
Sub regardless of the circumstances giving rise to any such condition, or
(except as set forth below with respect to the Minimum Condition (as defined in
Exhibit A)) waived by Parent or Sub, in whole or in part, at any time and from
time to time in their sole discretion. The Company agrees that no Shares held
by the Company or any of its Subsidiaries (as defined in Section 9.11 hereof)
will be tendered to Sub pursuant to the Offer. Sub will not, without the prior
written consent of the Company, (i) decrease or change the form of the
consideration payable in the Offer, (ii) decrease the number of Shares sought
pursuant to the Offer (except as otherwise set forth in Section 1.01(c) hereof),
(iii) impose additional conditions to the Offer, (iv) change the conditions to
the Offer (provided, that Parent or Sub in their sole discretion may waive any
of the conditions to the Offer other than the Minimum Condition) or (v) make any
other change in the terms or conditions of the Offer which is materially adverse
to the holders of the Shares. If the conditions set forth in Exhibit A are
satisfied as of any scheduled expiration date of the Offer, Sub may extend the
Offer for up to ten business days in the aggregate, and may extend the Offer for
a longer period with the prior written consent of the Company or as required by
law. If the conditions set forth in Exhibit A are not satisfied or, to the
extent permitted by this Agreement, waived by Parent or Sub as of any scheduled
expiration date, Sub may extend the Offer from time to time (but not beyond the
date that is fifty business days from the date hereof) and, in any event, upon
the written request of the Company, Sub will extend the Offer from time to time
until the earlier of the consummation of the Offer or forty business days from
the date hereof (provided, that Sub shall not be obligated to make any such
extension if (i) it reasonably determines that all such conditions are not
likely to be satisfied by such date or (ii) it shall then have the right to
terminate this Agreement, pursuant to its terms).
(b) On the date of commencement of the Offer, Parent and Sub shall file or
cause to be filed with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "SCHEDULE 14D-1") with respect to the Offer which
shall contain the offer to purchase and related letter of
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transmittal and other ancillary Offer documents and instruments pursuant to
which the Offer will be made (collectively with any supplements or amendments
thereto, the "OFFER DOCUMENTS"). The Company and its counsel shall be given
a reasonable opportunity to review and comment on the Offer Documents prior
to their filing with the SEC. Parent and Sub agree to provide the Company
with, and to consult with the Company regarding, any comments that may be
received from the SEC or its staff with respect to the Offer Documents
promptly after receipt thereof.
(c) In the event that the Minimum Condition is not satisfied on any
scheduled expiration date of the Offer but there shall have been validly
tendered and not withdrawn as of such expiration date a majority of the
outstanding Shares on a fully diluted basis, Sub shall either (i) extend the
Offer in accordance with, and subject to, the last sentence of Section 1.01(a)
hereof for a period or periods not to exceed, in the aggregate, ten business
days or (ii)(A) amend the Offer to reduce the number of Shares sought pursuant
to the Offer, and the number of Shares needed to satisfy the Minimum Condition,
to that number of Shares which, when added to the Shares then owned directly or
indirectly by Sub, would equal forty-nine and nine-tenths percent (49.9%) of the
Shares then outstanding (the "REVISED MINIMUM NUMBER"), (B) extend the Offer for
a period of not less than ten business days following the public announcement of
such amendment to the Offer (the Offer, as so amended, being sometimes referred
to as the "49.9% OFFER") and (C) if, at the expiration of such extension, a
greater number of Shares is tendered into the 49.9% Offer and not withdrawn,
purchase, on a pro rata basis, the Revised Minimum Number of Shares.
SECTION 1.02 COMPANY ACTIONS. (a) The Company hereby consents to the
Offer and represents and warrants that (i) the making of any offer and proposal
and the taking of any other action by Parent or Sub in connection with this
Agreement, the Company Option Agreement and the Stockholder Option Agreements
and the transactions contemplated hereby and thereby have been consented to by
the Board of Directors of the Company in accordance with the terms and
provisions of the Confidentiality Agreement, dated November 3, 1997, between
Parent and the Company (the "CONFIDENTIALITY AGREEMENT"), (ii) its Board of
Directors (at meetings duly called and held) has unanimously (w) determined that
the Offer and the Merger (as hereinafter defined) are fair to and in the best
interests of the Company and the stockholders of the Company, (x) resolved to
recommend acceptance of the Offer and approval and adoption of the agreement of
merger (as such term is used in Section 251 of the DGCL) contained in this
Agreement by such stockholders of the Company; PROVIDED, HOWEVER, that such
recommendation may be withdrawn, modified or amended if the Company's Board of
Directors determines in good faith, following the receipt of advice of outside
legal counsel, that it is required to do so in the exercise of its fiduciary
obligations under applicable law, (y) taken all necessary steps to render the
restrictions of Section 203 of the DGCL inapplicable to the Merger, the Company
Option Agreement, the Stockholder Option Agreements and the acquisition of
Shares pursuant to the Offer and the Options and (z) resolved to elect, to the
extent permitted by law, not to be subject to any "moratorium," "control share
acquisition," "business combination," "fair price" or other form of antitakeover
laws and regulations (collectively, "TAKEOVER LAWS") of any jurisdiction that
may purport to be applicable to this Agreement, the Company Option Agreement, or
the Stockholder Option Agreements and (iii) Houlihan Lokey Howard & Zukin
("HOULIHAN"), the Company's independent financial advisor, has advised the
Company's Board
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<PAGE>
of Directors that, in its opinion, the consideration to be paid in the Offer
and the Merger to the Company's stockholders is fair, from a financial point
of view, to such stockholders.
(b) Upon commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "SCHEDULE 14D-9") containing, subject to
the fiduciary duties of its Board of Directors to the stockholders of the
Company under applicable law, as determined in good faith following the receipt
of advice of outside legal counsel, the recommendations of its Board of
Directors described in Section 1.02(a) and hereby consents to the inclusion of
such recommendations in the Offer Documents and to the inclusion of a copy of
the Schedule 14D-9 with the Offer Documents mailed or furnished to the Company's
stockholders. Parent, Sub and their counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 prior to its filing with
the SEC. The Company agrees to provide Parent and Sub with, and to consult with
Parent and Sub regarding, any comments that may be received from the SEC or its
staff with respect to the Schedule 14D-9 promptly after receipt thereof.
SECTION 1.03 STOCKHOLDER LISTS. In connection with the Offer, the Company
shall promptly furnish Parent and Sub with mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of the record holders of the Shares as of the latest practicable date
and shall furnish Parent and Sub with such information and assistance (including
periodic updates of such information) as Parent or Sub or their agents may
reasonably request in communicating the Offer to the record and beneficial
holders of the Shares.
SECTION 1.04 DIRECTORS. (a) Promptly upon the purchase of Shares by Sub
pursuant to the Offer and the Options, and from time to time thereafter, Sub
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as will give Sub
representation on the Board of Directors of the Company equal to the product of
the number of directors on the Board of Directors of the Company (determined
after giving effect to the directors elected pursuant to this Section) and the
percentage that such number of Shares so purchased bears to the number of Shares
outstanding, and the Company shall, upon request by Sub, promptly increase the
size of the Board of Directors of the Company or use its best efforts to secure
the resignations of such number of directors as is necessary to provide Sub with
such level of representation and shall cause Sub's designees to be so elected;
PROVIDED, HOWEVER, that Sub shall be entitled to designate a number of directors
equal to or greater than 50% of the total number of directors, only if Sub then
owns 90% of more of the Shares then outstanding. The Company will also use its
best efforts to cause persons designated by Sub to constitute the same
percentage as is on the entire Board of Directors of the Company to be on (i)
each committee of the Board of Directors of the Company and (ii) each Board of
Directors and each committee thereof of each Subsidiary of the Company. The
Company's obligations to appoint designees to its Board of Directors shall be
subject to Section 14(f) of the Exchange Act. At the request of Sub, the
Company shall take all actions necessary to effect any such election or
appointment of Sub's designees, including mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-l
promulgated thereunder which, unless Sub otherwise elects, shall be so mailed
together with the
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Schedule 14D-9. Parent and Sub will supply to the Company all information
with respect to themselves and their respective officers, directors and
affiliates required by such Section and Rule.
(b) Notwithstanding anything set forth in Section 1.04(a), neither Parent
nor Sub shall take any action to prevent at least two persons who are directors
of the Company on the date hereof from remaining as directors of the Company
("CONTINUING DIRECTORS") until the Effective Time (as hereinafter defined).
Following the election or appointment of Sub's designees pursuant to Section
1.04(a) and prior to the Effective Time, and so long as there shall be at least
one Continuing Director, such designees shall abstain fom acting upon, and the
approval of a majority of the Continuing Directors shall be required, and
sufficient, to authorize any resolution with respect to any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Board of Directors of the Company, any extension of time for the performance
of any of the obligations or other acts of Parent or Sub under this Agreement,
any waiver of compliance with any of the agreements or conditions under this
Agreement for the benefit of the Company and any action to seek to enforce any
obligation of Parent or Sub under this Agreement. If at any time the Continuing
Directors reasonably deem it necessary to consult independent legal counsel in
connection with their duties as Continuing Directors or actions to be taken by
the Company, the Continuing Directors may retain such counsel for such purpose
and the Company shall pay the reasonable expenses incurred in connection
therewith.
ARTICLE II
THE MERGER
SECTION 2.01 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, Sub shall be
merged with and into the Company (the "MERGER") as soon as practicable following
the satisfaction or waiver, if permissible, of the conditions set forth in
Article VII hereof. The Company shall be the surviving corporation in the
Merger (the "SURVIVING CORPORATION") under the name "Schwarzkopf & DEP, Inc."
and shall continue its existence under the laws of Delaware. In connection with
the Merger, the separate corporate existence of Sub shall cease.
SECTION 2.02 CONSUMMATION OF THE MERGER. Subject to the provisions of this
Agreement, the Company shall cause the Merger to be consummated by filing with
the Secretary of State of the State of Delaware a duly executed and verified
certificate of merger, as required by the DGCL (the "CERTIFICATE OF MERGER"),
and Sub and the Company shall take all such other and further actions as may be
required by law to make the Merger effective. Prior to the filing referred to
in this Section, a closing (the "CLOSING") will be held at the offices of
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York (or
such other place as the parties may agree) for the purpose of confirming all the
foregoing. The time the Merger becomes effective in accordance with applicable
law is referred to as the "EFFECTIVE TIME."
SECTION 2.03 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth herein and in the applicable provisions of the DGCL.
5
<PAGE>
SECTION 2.04 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and the Bylaws of Sub, in each case as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation and Bylaws of
the Surviving Corporation; PROVIDED, HOWEVER, that Article I of the Certificate
of Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "ARTICLE I. The name of the Corporation is Schwarzkopf &
DEP, Inc."
SECTION 2.05 DIRECTORS AND OFFICERS. The directors of Sub immediately
prior to the Effective Time and the officers of the Company immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their death, permanent disability, resignation or
removal or until their respective successors are duly elected and qualified.
SECTION 2.06 CONVERSION OF SHARES. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent, Sub
or any Subsidiary of Parent, Sub or the Company or held in the treasury of the
Company, all of which shall be canceled, and other than Dissenting Shares, as
defined in Section 3.01 hereof) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
in cash an amount per Share equal to $5.25 (or such greater amount as may be
paid pursuant to the Offer), without interest (the "MERGER CONSIDERATION"), upon
the surrender of the certificate representing such Shares as provided in Section
3.02.
SECTION 2.07 CONVERSION OF COMMON STOCK OF SUB. Each share of common
stock, $.01 par value, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one share of common stock of
the Surviving Corporation.
SECTION 2.08 STOCKHOLDERS' MEETING. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.09, and
subject to applicable law, the Company, acting through its Board of Directors,
shall, in accordance with applicable law, duly call, give notice of, convene and
hold a special meeting (the "SPECIAL MEETING") of its stockholders as soon as
practicable following the consummation of the Offer for the purpose of adopting
the agreement of merger (within the meaning of Section 251 of the DGCL) set
forth in this Agreement; and, subject to the fiduciary duties of its Board of
Directors under applicable law as determined in good faith by the Board of
Directors, following the receipt of advice of outside legal counsel, include in
the Proxy Statement (as hereinafter defined) the recommendation of its Board of
Directors that stockholders of the Company vote in favor of the adoption of the
plan of merger set forth in this Agreement. Parent and Sub each agree that, at
the Special Meeting, all of the Shares acquired pursuant to the Offer, the
Options or otherwise by Parent or Sub or any of their affiliates will be voted
in favor of the Merger.
SECTION 2.09 MERGER WITHOUT MEETING OF STOCKHOLDERS. If Sub, or any other
direct or indirect Subsidiary of Parent, shall acquire at least 90 percent of
the outstanding shares of each class of capital stock of the Company, each of
Parent, Sub and the Company shall take all necessary and appropriate action to
cause the Merger to become effective, as soon as practicable
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<PAGE>
after the consummation of the Offer, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
SECTION 2.10 WITHHOLDING TAXES. Parent and Sub shall be entitled to
deduct and withhold from the consideration otherwise payable to a holder of
Shares pursuant to the Offer or the Merger such amounts as are required to be
withheld under the Internal Revenue Code of 1986, as amended (the "CODE"), or
any applicable provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or Sub, such withheld amounts shall be treated
for all purposes of this Agreement and the Offer as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by Parent or Sub.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by stockholders who did not vote in favor
of the Merger and who meet all of the requirements of, and who comply with, all
of the relevant provisions of Section 262 of the DGCL (the "DISSENTING SHARES")
shall not be converted into the right to receive (and the certificates for such
Dissenting Shares shall not be exchangeable for) the Merger Consideration,
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their rights to appraisal under the DGCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right to appraisal, such holder's Shares shall thereupon be converted
into the right to receive (and the certificates that immediately prior to the
Effective Time represented such Dissenting Shares shall be exchangeable for), as
of the Effective Time, the Merger Consideration without any interest thereon.
The Company shall give Parent (i) prompt notice of any written demands for
appraisal of any Shares, attempted withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisals of
capital stock of the Company, offer to settle or settle any demands or approve
any withdrawal of any such demands.
SECTION 3.02 PAYMENT FOR SHARES. (a) Prior to the Effective Time, Parent
will cause Sub to make available to a bank or trust company designated by Parent
(the "PAYING AGENT") sufficient funds to make the payments pursuant to
Section 2.06 hereof on a timely basis to holders (other than Parent, Sub or the
Company or any of their respective Subsidiaries) of Shares that are issued and
outstanding immediately prior to the Effective Time (such amounts being
hereinafter referred to as the "PAYMENT FUND"). The Paying Agent shall,
pursuant to irrevocable instructions, make the payments provided for in the
preceding sentence out of the Payment Fund. The Payment Fund shall not be used
for any other purpose, except as provided in this Agreement.
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<PAGE>
(b) As soon as practicable after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (the "CERTIFICATES"),
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificate and receiving payment
therefor. Following surrender to the Paying Agent of a Certificate, together
with such letter of transmittal duly executed, the holder of such Certificate
shall be paid in exchange therefor cash in an amount (subject to any applicable
withholding tax as specified in Section 2.10 hereof) equal to the product of the
number of Shares formerly represented by such Certificate multiplied by the
Merger Consideration, and such Certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with the provisions of this Section 3.02, each
Certificate (other than Certificates that immediately prior to the Effective
Time represented Shares owned by Parent, Sub or the Company, or any of their
respective Subsidiaries, and certificates representing Dissenting Shares) shall
represent for all purposes solely the right to receive, in accordance with the
terms hereof, the Merger Consideration in cash multiplied by the number of
Shares evidenced by such Certificate, without any interest thereon.
(c) Any portion of the Payment Fund (including the proceeds of any
investments thereof) that remains unclaimed by the former stockholders of the
Company for one year after the Effective Time shall be repaid to the Surviving
Corporation. Any former stockholders of the Company who have not complied with
Section 3.01 hereof prior to the end of such one-year period shall thereafter
look only to the Surviving Corporation (subject to abandoned property, escheat
or other similar laws) but only as general creditors thereof for payment of
their claim for the Merger Consideration, without any interest thereon. Neither
Parent nor the Surviving Corporation shall be liable to any holder of Shares for
any monies delivered from the Payment Fund or otherwise to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 3.03 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
cash as provided in this Article III, subject to applicable law in the case of
Dissenting Shares.
SECTION 3.04 EXISTING STOCK OPTIONS. At the Effective Time (or at such
earlier time as Sub shall designate, which time may be immediately prior to the
acceptance of Shares pursuant to the Offer), each holder of a then outstanding
option to purchase Shares, whether or
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not then exercisable (an "EXISTING STOCK OPTION"), which theretofore has been
granted under the Company's 1992 Stock Option Plan, the 1983 Stock Option
Plan, the 1988 Directors and Officers Stock Option Plan and the 1993 Stock
Target Ownership Plan (collectively, the "STOCK OPTION PLANS") shall, in
settlement thereof, be entitled to receive from the Surviving Corporation for
each Share subject to such Existing Stock Option, in lieu of such Share, an
amount (subject to any applicable withholding tax as specified in Section
2.10 hereof or as may apply to payments made in connection with the
performance of services) in cash equal to the difference between the Merger
Consideration and the per share exercise or purchase price of such Existing
Stock Option, to the extent such difference is a positive number (such amount
being hereinafter referred to as the "OPTION CONSIDERATION"). Upon receipt
of the Option Consideration, the Existing Stock Option shall be canceled.
The surrender of an Existing Stock Option to the Company in exchange for the
Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Existing Stock Option. Except
as otherwise agreed to by the parties, the Stock Option Plans shall terminate
as of the Effective Time and any and all rights under any provisions in any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any
Subsidiary thereof shall be canceled as of the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.01 ORGANIZATION AND QUALIFICATION. Each of the Company and its
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with all corporate
power and authority to own its properties and conduct its business as currently
conducted and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing, in the aggregate, would not have a
Material Adverse Effect (as defined in Section 9.11 hereof). The Company has
heretofore delivered to Parent and Sub accurate and complete copies of the
Certificate of Incorporation and Bylaws (or similar governing documents) as
currently in effect of the Company and its Subsidiaries. All of the outstanding
shares of capital stock of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all of such shares
owned by the Company or another of its Subsidiaries are owned free and clear of
all liens, claims or encumbrances. Neither the Company nor any of its
Subsidiaries, directly or indirectly, owns any interest in any corporation,
partnership, joint venture or other business association or entity, other than
in the Company's Subsidiaries.
SECTION 4.02 CAPITALIZATION. (a) The authorized capital stock of the
Company consists of Fifteen Million (15,000,000) Shares and Three Million
(3,000,000) shares of preferred stock, par value $.01 per share (the "PREFERRED
STOCK"). As of the close of business on
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the day immediately preceding the date hereof: 6,876,140 Shares were issued
and outstanding; no shares of Preferred Stock were issued and outstanding;
231,000 Shares were held in the Company's treasury; and there were
outstanding, Existing Stock Options to purchase an aggregate of 674,200
Shares under the Stock Option Plans, respectively (copies of which have
previously been made available to Parent and Sub), and there are no stock
appreciation rights or limited stock appreciation rights granted under the
Stock Option Plans or otherwise outstanding. Since such date, the Company
(i) has not issued any Shares other than upon the exercise of Existing Stock
Options outstanding on such date, (ii) has not granted any options, warrants
or rights or entered into other agreements or commitments to purchase Shares
(under the Stock Option Plans or otherwise) and (iii) has not split, combined
or reclassified any of its shares of capital stock. All of the outstanding
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and are free of preemptive rights. Section 4.02(a) of the
disclosure letter, dated the date hereof, delivered by the Company to Parent
and Sub prior to the execution of this Agreement setting forth certain
information with respect to certain matters referred to in this Agreement
(the "DISCLOSURE LETTER"), contains a true, accurate and complete list, as of
the date hereof, of the name of each Existing Stock Option holder, the number
of outstanding Existing Stock Options held by such holder, the grant date of
each such Existing Stock Option, the number of Shares such holder is entitled
to receive upon the exercise of each Existing Stock Option and the
corresponding exercise price. Except as set forth in this Section 4.02(a),
there are no outstanding (i) shares of capital stock or other voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities or ownership
interests in the Company, (iii) options, warrants, rights or other agreements
or commitments to acquire from the Company, or obligations of the Company to
issue, any capital stock, voting securities or other ownership interests in
(or securities convertible into or exchangeable for capital stock or voting
securities or other ownership interests in) the Company, (iv) obligations of
the Company to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement or commitment
relating to any capital stock, voting securities or other ownership interests
in the Company (the items in clauses (i), (ii), (iii) and (iv) being referred
to collectively as "COMPANY SECURITIES") and (v) obligations by the Company
or any of its subsidiaries to make any payments based on the price or value
of the Shares. There are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities and there are no performance awards outstanding under the Stock
Option Plans or any other outstanding stock related awards. There are no
voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of capital
stock of the Company or any of its Subsidiaries.
(b) The Company is, directly or indirectly, the record and beneficial
owner of all the outstanding shares of capital stock of each of its
Subsidiaries, free and clear of any lien, mortgage, pledge, charge, security
interest or encumbrance of any kind, and there are no irrevocable proxies with
respect to any such shares. Except for shares directly or indirectly owned by
the Company, there are no outstanding (i) shares or other securities of the
Company or any of its Subsidiaries convertible into or exchangeable for shares
of capital stock or other voting securities or ownership interests in any
Subsidiary of the Company, (ii) options, warrants, rights or other agreements or
commitments to acquire from the Company or any of its Subsidiaries (or
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obligations of the Company or any of its Subsidiaries to issue) any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any of its Subsidiaries, (iii) obligations of the
Company or any of its Subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock, voting securities
or other ownership interests in any of the Company's Subsidiaries (the items in
clauses (i), (ii) and (iii) being referred to collectively as "SUBSIDIARY
SECURITIES"), or (iv) obligations of the Company or any of its Subsidiaries to
make any payment based on the value of any shares of any Subsidiary. There are
no outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities.
SECTION 4.03 AUTHORITY FOR THIS AGREEMENT. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated, other than the approval and adoption of the
agreement of merger (as such term is used in Section 251 of the DGCL) contained
in this Agreement by the holders of a majority of the outstanding Shares prior
to the consummation of the Merger (unless the Merger is consummated pursuant to
Section 253 of the DGCL). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity (whether considered in a proceeding in equity or at law).
SECTION 4.04 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Reports (as defined in Section 4.05) filed with the SEC prior to the date hereof
or in Section 4.04 of the Disclosure Letter, since July 31, 1997, (i) the
Company and its Subsidiaries have not suffered any Material Adverse Effect or
any change, condition, event or development that could reasonably be expected to
have a Material Adverse Effect, (ii) the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course consistent
with past practice, except in connection with the negotiation and execution and
delivery of this Agreement, and (iii) there has not been (a) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
Shares or any repurchase, redemption or other acquisition by the Company or any
of its Subsidiaries of any outstanding shares of capital stock or other
securities in, or other ownership interests in, the Company or any of its
Subsidiaries; (b) any entry into any employment agreement or severance
compensation agreement with, or any increase in the rate or terms (including any
acceleration of the right to receive payment), of compensation payable or to
become payable by the Company or any of its Subsidiaries to, their respective
directors, officers or employees, except increases to employees who are not
officers or directors occurring in the ordinary course of business in accordance
with its customary past practices; (c) any increase in the rate or terms
(including any acceleration of the right to receive payment) of any Plan (as
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hereinafter defined) or any other bonus, severance, insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any such
directors, officers or employees; (d) any action by the Company which, if taken
after the date hereof, would constitute a breach of any of the clauses of
Section 6.01 hereof; (e) any change by the Company in accounting methods,
principles or practices except as required by changes in United States generally
accepted accounting principles; (f) any labor dispute, other than routine
individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any
Subsidiary, which employees were not then subject to a collective bargaining
agreement or any lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to such employees; (g) any revaluation by the Company or any
of its Subsidiaries of any of their respective assets, including write-downs of
inventory or of accounts receivable other than in the ordinary course of
business consistent with past practice; or (h) any entry into any agreement,
commitment or transaction by the Company which is material to the Company and
its Subsidiaries taken as a whole other than in the ordinary course of business
consistent with past practice.
SECTION 4.05 REPORTS. (a) Since January 1, 1996, the Company has timely
filed with the SEC all forms, reports and documents required to be filed by it
pursuant to the federal securities laws and the rules and regulations of the
SEC thereunder, all of which have complied as of their respective filing dates
in all material respects with all applicable requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder. True and
correct copies of such filings made by the Company with the SEC (the "SEC
REPORTS"), whether or not required under applicable laws, rules and regulations
and including any registration statement filed by the Company under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), have been made
available to Parent and Sub. None of the SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, at the
time filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The audited and unaudited consolidated financial statements of the
Company included (or incorporated by reference) in the SEC Reports or contained
in filings subsequent to the date hereof have been or will have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company as of their
respective dates, and the consolidated income, stockholders equity, results of
operations and changes in consolidated financial position or cash flows for the
periods presented therein (subject to, in the case of any unaudited interim
financial statements, normal year-end adjustments).
(c) The Company will furnish to Parent and Sub a copy of any press release
to be issued by the Company containing the consolidated financial position of
the Company as of July 31, 1998 and the consolidated statements of income,
statements of stockholders equity, results of operations and changes in
consolidated financial position or cash flow for the fourth fiscal quarter and
the fiscal year ending on July 31, 1998. Any such press release will be issued
no later than October 15, 1998. The financial information and results to be
contained in such
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press release will be prepared by management from the books and records of
the Company, will have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto) and fairly present the
information set forth therein.
(d) Except as reflected or reserved against or disclosed in the financial
statements of the Company included in the SEC Reports or as otherwise disclosed
in the SEC Reports, and except as incurred in the ordinary course of business
consistent with past practice since July 31, 1997, neither the Company nor any
of its Subsidiaries has any liabilities of any nature, whether accrued,
absolute, fixed, contingent or otherwise, whether due or to become due and
whether required to be recorded or reflected on a balance sheet under United
States generally accepted accounting principles. Since July 31, 1997, neither
the Company nor any of its Subsidiaries has incurred any liabilities other than
liabilities that (i) have been incurred in the ordinary course of business
consistent with past practice and (ii) have not had and are not reasonably
likely to have a Material Adverse Effect.
SECTION 4.06 SCHEDULE 14D-9; OFFER DOCUMENTS AND PROXY STATEMENT. (a)
None of the information relating to the Company or any of its Subsidiaries
supplied or to be supplied by or on behalf of the Company or any affiliate of
the Company for inclusion in the Offer Documents and any other schedule or
document required to be filed with the SEC in connection with the Offer and the
Merger will, at the times such documents are filed with the SEC and are mailed
to stockholders of the Company, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, or to correct any statement made in any communication with
respect to the Offer previously filed with the SEC or disseminated to the
stockholders of the Company. The Schedule 14D-9 will not, at the time the
Schedule 14D-9 is filed with the SEC and at all times prior to the purchase of
Shares by Sub pursuant to the Offer, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation or warranty
is made by the Company with respect to information supplied in writing by
Parent, Sub or an affiliate of Parent or Sub expressly for inclusion therein.
The Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations of the SEC
thereunder.
(b) The Proxy Statement (as hereinafter defined), and any other schedule
or document required to be filed by the Company in connection with the Merger,
will not, at the time the Proxy Statement is first mailed and at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, or to correct any statement made in any earlier communication with
respect to the solicitation of any proxy or approval for the Merger in
connection with which the Proxy Statement shall be mailed, except that no
representation or warranty is made by the Company with respect to information
supplied in writing by Parent, Sub or an affiliate of Parent or Sub expressly
for inclusion therein. The Proxy Statement will comply as to form in all
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material respects with the provisions of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder. The letter to stockholders,
notice of meeting, proxy statement and form of proxy, or the information
statement, as the case may be, that may be provided to stockholders of the
Company in connection with the Merger (including any amendments or supplements),
and any schedules required to be filed with the SEC in connection therewith, as
from time to time amended or supplemented, are collectively referred to as the
"PROXY STATEMENT."
(c) The written statements, memoranda, certificates, schedules, lists or
other written information (including financial information) that were prepared
by the Company or its Subsidiaries, or under the supervision or control thereof,
and that were heretofore or are hereafter provided by or on behalf of the
Company or its Subsidiaries to Parent or Sub or any of their representatives,
pursuant to the terms hereof or otherwise in connection with the transactions
contemplated hereby, taken as a whole (including, without limitation, as any
such document may have been, or may be, amended, modified or supplemented by any
subsequent document), have been and will be true and correct in all material
respects and do not and will not contain any materially misleading statement or
omit to state any material fact necessary to make the statements therein, taken
as a whole and in light of the circumstances under which they were made, not
misleading.
SECTION 4.07 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective Certificate of Incorporation or Bylaws (or
other similar governing documents) of the Company or any of its Subsidiaries,
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any foreign, federal, state or local government or
subdivision thereof, or governmental, judicial, legislative, executive,
administrative or regulatory authority, agency, commission, tribunal or body (a
"GOVERNMENTAL ENTITY") except as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the Exchange Act
and the DGCL, (iii) require any consent, waiver or approval or result in a
default (or give rise to any right of termination, cancellation, modification or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement, contract, indenture or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective assets may be bound except
as disclosed in Section 4.07(iii) of the Disclosure Letter, (iv) result in the
creation or imposition of any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind on any material asset of the Company or any of its
Subsidiaries, or (v) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its Subsidiaries or by which
any of their respective assets are bound, except, in the case of clause (ii),
(iii), (iv) and (v), for any such consent the absence of which, or lien or
violation the creation of which, would not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 4.08 BROKERS. No person or entity (other than Houlihan, a true
and complete copy of whose engagement letter as in effect has been furnished to
Parent and Sub) is entitled to receive any brokerage, finder's or other fee or
commission in connection with this
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Agreement or the transactions contemplated hereby based upon agreements made
by or on behalf of the Company, any of its Subsidiaries or any of their
respective officers, directors or employees.
SECTION 4.09 EMPLOYEE BENEFIT MATTERS. (a) Except as set forth in
Section 4.09(a) of the Disclosure Letter, neither the Company nor any of its
Subsidiaries maintains or contributes to, or has any obligation to contribute to
or has any liability (including a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement) with respect to any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or any other material plan, program,
arrangement, agreement or commitment which is an employment, consulting,
severance, termination, change in control or deferred compensation agreement, or
an executive compensation, incentive bonus or other bonus, profit-sharing,
savings, stock option, stock purchase, stock appreciation rights or severance
pay plan, program, arrangement, agreement or commitment (individually, a "PLAN,"
or collectively, the "PLANS"). Each such Plan is identified in Section 4.09(a)
of the Disclosure Letter to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2) of ERISA) or
an "employee welfare plan" (as defined in Section 3(1) of ERISA). No Plan is a
"defined benefit plan" (as defined in Section 414 of the Code) or a
"multiemployer plan" (as defined in Section 3(37) of ERISA). No Plan is subject
to Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA.
(b) Neither the Company nor any of its Subsidiaries is subject to any
actual or contingent liability under Title IV of ERISA, Section 302 of ERISA,
Section 412 or 4971 of the Code or any similar provision of foreign law or
regulation, whether in respect of any employer benefit plan maintained by the
Company or any of its Subsidiaries or by any other employer or person or
otherwise.
(c) No event has occurred, and no circumstance exists, in connection with
which the Company, any of its Subsidiaries or any Plan, directly or indirectly,
could be subject to any material liability under ERISA, the Code or any other
law, regulation or governmental order applicable to any Plan, including Section
406, 409, 502(i) or 502(1) of ERISA, or Part 6 of Title I of ERISA, or Section
4971, 4972, 4975, 4976, 4977 or 4980B of the Code, or under any agreement,
instrument, statute, rule of law or regulation pursuant to or under which the
Company or any of its Subsidiaries has agreed to indemnify or is required to
indemnify any person against liability incurred under, or for a violation or
failure to satisfy the requirements of, any such statute, regulation or order.
(d) Except as set forth in Section 4.09(d) of the Disclosure Letter, with
respect to each Plan, (i) all payments due from the Company or any of its
Subsidiaries to date have been timely made and all amounts properly accrued to
date or as of the Effective Time as liabilities of the Company or any of its
Subsidiaries which have not been paid have been and will be properly recorded on
the books of the Company; (ii) each such Plan which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and intended to qualify
under Section 401 of the Code has received a favorable determination letter from
the Internal Revenue Service with respect to such qualification, its related
trust has been determined to be exempt from taxation
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under Section 501(a) of the Code, and to the best of the Company's knowledge,
nothing has occurred since the date of such letter that has or is likely to
adversely affect such qualification or exemption; (iii) there are no actions,
suits or claims pending (other than routine claims for benefits) or, to the
knowledge of the Company, threatened with respect to such Plan or against the
assets of such Plan and (iv) the Company has complied with, and such Plan
conforms in form and operation to, all applicable laws and regulations,
including ERISA and the Code, in all material respects.
(e) Except as set forth in Section 4.09(e) of the Disclosure Letter, no
deduction for federal income tax purposes has been or is expected by the Company
to be disallowed for remuneration paid by the Company or any of its Subsidiaries
by reason of Section 162(m) of the Code including by reason of the transactions
contemplated hereby.
(f) No Plan is under audit or is subject of an investigation by the
Internal Revenue Service, the U.S. Department of Labor or any other Governmental
Entity.
(g) Except as set forth in Section 4.09(g) of the Disclosure Letter, the
transactions contemplated by this Agreement will not result in the payment or
series of payments by the Company or any of its Subsidiaries to any person of an
"excess parachute payment" within the meaning of Section 280G of the Code, or
any other payment which is not deductible for federal income tax purposes under
the Code.
(h) Except as set forth in Section 4.09(h) of the Disclosure Letter, the
consummation of the transactions contemplated by this Agreement (alone or
together with any other event) will not (i) entitle any person to any benefit
under any Plan or (ii) accelerate the time of payment or vesting, or increase
the amount, of any compensation due to any person under any Plan.
(i) Except as disclosed in the financial statements referred to in Section
4.05(b) above or in Section 4.09(i) of the Disclosure Letter, neither the
Company nor any of its Subsidiaries has any liability with respect to an
obligation to provide benefits, including death or medical benefits (whether or
not insured) with respect to any person beyond their retirement or other
termination of service other than (i) coverage mandated by Part 6 of Title I of
ERISA Section 4980B of the Code or state law, (ii) retirement or death benefits
under any employee pension plan, (iii) disability benefits under any employee
welfare plan that have been fully provided for by insurance or otherwise, (iv)
deferred compensation benefits accrued as liabilities on the books of the
Company, or (v) benefits in the nature of severance pay.
(j) The Company has made available to Parent and Sub, with respect to each
Plan for which the following exists:
(i) a copy of the annual report, if required under ERISA, with
respect to such Plan for the last two years, together with a copy of the
financial statements for each such Plan for the last two years if required
by ERISA;
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(ii) a copy of the Summary Plan Description, together with each
Summary of Material Modifications, required under ERISA with respect to
such Plan, and, unless the Plan is embodied entirely in an insurance policy
to which the Company or any of its Subsidiaries is a party, a true and
complete copy of such Plan;
(iii) if the Plan is funded through a trust or any third party
funding vehicle (other than an insurance policy), a copy of the trust or
other funding agreement and the latest financial statements thereof; and
(iv) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan that is intended to be a
"qualified plan" under Section 401 of the Code.
(k) With respect to each Plan for which financial statements are required
by ERISA, there has been no material adverse change in the financial status of
such Plan since the date of the most recent such statements made available to
Parent and Sub.
(l) With respect to each Plan that is funded wholly or partially through
an insurance policy, all premiums required to have been paid to date under the
insurance policy have been paid, all premiums required to be paid under the
insurance policy through the Effective Time will have been paid on or before the
Effective Time and, as of the Effective Time, there will be no material
liability of the Company or any of its Subsidiaries under any such insurance
policy or ancillary agreement with respect to such insurance policy in the
nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to the Effective Time.
(m) Neither the Company nor any of its Subsidiaries has any announced plan
or commitment to create any additional Plans or to amend or modify any existing
Plan.
(n) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreements and, to the best knowledge of the Company,
there are no labor unions or other organizations representing, purporting to
represent or attempting to represent, any employee of the Company or any of its
Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries has violated any
provision of federal or state law or any governmental rule or regulation, or any
order, ruling, decree, judgment or arbitration award of any court, arbitrator or
any Governmental Entity regarding the terms and conditions of employment of
employees, former employees or prospective employees or other labor related
matters, including laws, rules, regulations, orders, rulings, decrees, judgments
and awards relating to wages, hours, civil rights, discrimination, fair labor
standards and occupational health and safety, wrongful discharge or violation of
the personal rights of employees, former employees or prospective employees
which, taken alone or together with any other such violation or violations,
could reasonably be expected to have a Material Adverse Effect.
SECTION 4.10 LITIGATION, ETC. (a) Except as disclosed in Section 4.10 of
the Disclosure Letter, there is no claim, action, suit, proceeding or
governmental investigation
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pending or, to the knowledge of the Company, threatened against or relating
to the Company or any of its Subsidiaries that involve a claim against the
Company or any of its Subsidiaries in excess of $100,000 or that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Offer or the Merger or any of the other
transactions contemplated hereby. Neither the Company nor any Subsidiary of
the Company is subject to any outstanding order, writ, injunction or decree
that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect.
(b) The Company's Second Amended Plan of Reorganization (the "PLAN OF
REORGANIZATION") which became effective on November 4, 1996, has not been
modified, revoked or withdrawn since November 4, 1996; an order has been entered
confirming such Plan of Reorganization; and such order is a "Final Order," as
such term is defined in the Plan of Reorganization, in full force and effect.
SECTION 4.11 TAX MATTERS.(a) All material returns and reports relating to
Taxes (as defined in Section 9.11 hereof) (including income taxes, withholding
taxes and estimated taxes) required to be filed with respect to each of the
Company and its Subsidiaries or any of their income, properties or operations as
of the date hereof have been duly filed in a timely manner (taking into account
all extensions of due dates). All information provided in such returns,
declarations and reports is true, correct and complete in all material respects.
The Company and its Subsidiaries, as relevant, have paid, or set up reserves in
accordance with United States generally accepted accounting principles on their
books for, all material Taxes attributable to each of the Company and its
Subsidiaries that were due and payable without regard to whether such taxes have
been assessed. The Company has made available to Parent and Sub complete and
accurate copies of the portions applicable to each of the Company and its
Subsidiaries of all income and franchise Tax returns, and any amendments
thereto, filed by or on behalf of the Company or any of its Subsidiaries or any
member of a group of corporations including the Company or any of its
Subsidiaries for the taxable years ending 1992 through 1997.
(b) Adequate provisions in accordance with United States generally
accepted accounting principles appropriately and consistently applied to each of
the Company and its Subsidiaries have been made in the consolidated financial
statements included in the SEC Reports for the payment of all Taxes for which
each of the Company and its Subsidiaries may be liable for the periods covered
thereby that were not yet due and payable as of the dates thereof, regardless of
whether the liability for such Taxes is disputed.
(c) Except as set forth in Section 4.11(c) of the Disclosure Letter, all
federal, state, local and foreign Tax returns of the Company and its
Subsidiaries have been audited and settled, or are closed to assessment, for all
years through 1997. Except as set forth in Section 4.11(c) of the Disclosure
Letter, there is no claim or assessment pending, or, to the best of the
Company's or any of its Subsidiaries' knowledge, threatened against the Company
or any of its Subsidiaries for any alleged material deficiency in Taxes, and
none of the Company or
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any of its Subsidiaries knows of any audit or investigation with respect to
any liability of the Company or any of its Subsidiaries for Taxes. Except as
set forth in Section 4.11 (c) of the Disclosure Letter, there are no
agreements in effect to extend the period of limitations for the assessment
or collection of any Tax for which the Company or any of its Subsidiaries may
be liable.
(d) The Company and each of its Subsidiaries have withheld (and timely
paid to the appropriate Governmental Entity) all material amounts for all
periods through the date hereof in compliance with all Tax withholding
provisions of applicable federal, state, local and foreign laws.
(e) Except as set forth in Section 4.11(e) of the Disclosure Letter, there
are no liens for Taxes upon any property or assets of the Company or any
Subsidiary except liens for Taxes not yet due or the validity of which is being
contested in good faith by appropriate proceedings.
(f) Any difference between (i) the adjusted bases and remaining useful
lives (for federal income tax purposes) of the tangible and intangible
properties of the Company and its Subsidiaries on the books and records of the
Company and its Subsidiaries dated as of April 30, 1998, and (ii) the adjusted
bases and remaining useful lives (for federal income tax purposes) for such
properties on the books and records of the Company and its Subsidiaries on the
day prior to the date hereof, will not constitute a Material Adverse Effect.
(g) Except as set forth on Section 4.11(g) of the Disclosure Letter, none
of the Company or any of its Subsidiaries have (A) applied for or received a tax
ruling (other than a determination with respect to a qualified employee benefit
plan), (B) entered into any closing agreement under Section 7121 of the Code,
(or any similar provision of state, local or foreign law), (C) filed any
election or caused any deemed election under Section 338 of the Code or (D)
granted a power of attorney to any person regarding any Tax matter of the
Company or any of its Subsidiaries.
(h) No Tax is required to be withheld pursuant to Section 1445 of the Code
as a result of any transfers contemplated by this Agreement.
(i) No consent has been filed relating to the Company or any of its
Subsidiaries pursuant to Section 341(f) of the Code.
(j) There is no contract, agreement or intercompany account system in
existence under which the Company or any of its Subsidiaries has, or may at any
time in the future have, an obligation to contribute to the payment of any
portion of a Tax (or pay any amount calculated with reference to any portion of
a Tax) of any group of corporations of which the Company or any of its
Subsidiaries is or was a part.
(k) Each of the Company and its Subsidiaries has disclosed on its federal
income Tax returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
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(l) None of the assets owned by the Company or any of its Subsidiaries
is property that is required to be treated as owned by any other person
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, as in effect immediately prior to the enactment of the Tax Reform
Act of 1986, or is "tax-exempt use property" within the meaning of Section
168(h) of the Code.
SECTION 4.12 COMPLIANCE WITH LAW. Neither the Company nor any of its
Subsidiaries is in conflict with, in default with respect to or in violation of,
(i) any statute, law, ordinance, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries, or any property or asset of the Company or any of its
Subsidiaries, is bound or affected, in the case of each of (i) and (ii), except
for any such conflicts, defaults or violations that in the aggregate have not
had and are not reasonably expected to have a Material Adverse Effect. The
Company and its Subsidiaries have all material permits, licenses,
authorizations, consents, approvals and franchises from Governmental Entities
required to conduct their businesses as currently conducted (the "COMPANY
PERMITS"), except for such permits, licenses, authorizations, consents,
approvals and franchises the absence of which, individually or in the aggregate,
have not had and are not reasonably expected to have a Material Adverse Effect.
The Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply in the aggregate has not had and
is not reasonably expected to have a Material Adverse Effect.
SECTION 4.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Section
4.13(a) of the Disclosure Letter, to the best knowledge of the Company:
(i)the Company and each of its Subsidiaries have been at all times and
are in substantial compliance with all applicable Environmental Laws (as
hereinafter defined);
(ii)there are no past or present events, conditions, circumstances,
activities, practices, incidents or actions (including proposed changes in
any Company Permit) that are reasonably likely to substantially interfere
with the continued operation of the business of the Company and of its
Subsidiaries in the manner now conducted or to give rise to any liability
under Environmental Laws that could reasonably be expected to have a
Material Adverse Effect;
(iii)no real property or facility currently or formerly owned, used,
operated, leased, managed or controlled by the Company, each of its
Subsidiaries or any predecessor in interest, is listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation,
and Liability Information System ("CERCLIS"), both promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or on any comparable state or local list
established pursuant to any Environmental Law;
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(iv) neither the Company, any of its Subsidiaries nor any predecessor in
interest has received any written notification of potential or actual
liability or request for information under CERCLA or any comparable
foreign, state or local law;
(v) there is no civil, criminal or administrative action, suit, demand,
hearing, notice of violation or deficiency, investigation, proceeding,
notice, demand letter, decree, judgment, complaint, agreement, claim or
citation pending or threatened against the Company or any of its
Subsidiaries under any Environmental Law, except where such liability or
action, suit, demand, hearing, notice of violation or deficiency,
investigation, proceeding, demand letter, decree, judgment, complaint,
agreement, claim or citation would not, individually or in the aggregate,
have a Material Adverse Effect and, also would not adversely affect the
ability to continue to operate each facility in the manner in which it is
currently operating;
(vi) no Hazardous Material (as hereinafter defined) has been at any time
or is on the date hereof treated, recycled, or disposed of at, in, on or
under any facility or real property owned, operated, leased, managed or
controlled by the Company or any of its Subsidiaries, except in compliance
with applicable Environmental Laws, and none of the Company or any of its
Subsidiaries currently require or previously required interim status or a
hazardous waste permit for the treatment, storage or disposal of hazardous
waste pursuant to the Resource Conservation and Recovery Act, as amended,
or pursuant to any comparable foreign or state hazardous waste statute or
regulation; and
(vii) there has been no Release (as hereinafter defined) at, in, on or
under any facility or real property owned, operated, leased, managed or
controlled by the Company or any of its Subsidiaries that would,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.
(b) The Company has given Parent and Sub access to all records and files
in its possession at both its corporate headquarters and its facilities
currently owned, operated, leased, managed, used or controlled by the Company,
or any of its Subsidiaries, including all reports, studies, analyses, tests or
monitoring results, pertaining to the existence of Hazardous Material or any
other environmental concerns relating to facilities or real property owned,
operated, leased, managed, used or controlled by the Company or any of its
Subsidiaries or concerning compliance with or liability under any Environmental
Laws.
(c) For purposes of this Section 4.13, the definition of the Company shall
include all of the Company's former Subsidiaries.
(d) All disclosures, notifications, registrations, and filings required to
have been made under applicable Environmental Law with respect to the
transactions contemplated by this Agreement have been timely made.
(e) For purposes of this Agreement, "ENVIRONMENTAL LAW" means any law,
statute, ordinance, code, rule, regulation, requirement, order, writ,
injunction, decree, demand, judgment, ruling, decision, determination, award or
binding agreement, issued or entered into by any
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Governmental Entity, relating to: (i) pollution, contamination, cleanup,
preservation, protection or reclamation of the environment (including any
ambient, workplace or indoor air, surface water, drinking water, groundwater,
land surface, subsurface strata, river sediment, plant or animal life,
natural resources, workplace and real property and the physical buildings,
structures, improvement and fixtures thereon); (ii) worker health or safety,
including the exposure of employees and other persons to any Hazardous
Material; (iii) any Release or threatened Release, including investigation,
study, assessment, testing, monitoring, containment, removal, remediation,
cleanup and abatement of such Release or threatened Release; and (iv) the
management of any Hazardous Material, including the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce,
registration, use, treatment, handling, storage, disposal, transportation,
re-use, recycling or reclamation of any Hazardous Material.
(f) For purposes of this Agreement, "HAZARDOUS MATERIAL" means any
pollutant, contaminant, constituent, chemical, mixture, raw material,
intermediate, product or by-product, petroleum or any fraction thereof,
asbestos or asbestos-containing-material, polychlorinated biphenyls, urea
formaldehyde foam insulation, or industrial, solid, toxic, radioactive,
infectious, disease-causing or hazardous substance, material, waste or agent,
including all substances, materials, products or wastes which are identified
or regulated under any Environmental Law.
(g) For purposes of this Agreement, "RELEASE" means any spill, discharge,
leak, emission, injection, escape, dumping, leaching, dispersal, emanation,
migration or release of any kind whatsoever of any Hazardous Material at, in,
on, into or onto the environment, including the movement of any Hazardous
Material through or in the environment, the abandonment or discard of barrels,
containers, tanks or other receptacles containing or previously containing any
Hazardous Material.
SECTION 4.14 INTELLECTUAL PROPERTY. (a) Section 4.14(a) of the
Disclosure Letter sets forth a true, correct and complete list of all
Intellectual Property (as hereinafter defined) (other than Intellectual Property
included in clauses (vi), (vii) and (ix) of Section 4.14(d)) owned or held by
the Company or any of its Subsidiaries (or otherwise used in the business of the
Company and its Subsidiaries) on the date hereof and identifies all license
agreements (including all amendments or supplements thereto or continuing
thereunder) in effect on the date hereof pursuant to which any such Intellectual
Property is licensed to or by the Company or its Subsidiaries, in each case,
which are or have been material to the Company and its Subsidiaries taken as a
whole.
(b) Except as otherwise set forth in Section 4.14(b) of the Disclosure
Letter or in the license agreements referred to in the immediately preceding
paragraph (a), (i) the Company and its Subsidiaries at the Effective Time will
be the sole and exclusive owners or holders of all such Intellectual Property
free and clear of any royalty or other payment obligation, lien or charge, (ii)
all such Intellectual Property is fully assignable, without conditions,
limitations or restrictions of any kind, (iii) there are no agreements which
restrict or limit the use by the Company or its Subsidiaries of the Intellectual
Property and (iv) record title to all Intellectual Property owned or held by the
Company or its Subsidiaries or otherwise used in the business of the Company or
its Subsidiaries is registered (or a registration application for which has been
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submitted) in the name of the Company or any of its Subsidiaries in the
respective patent, trademark and copyright offices of countries indicated in
Section 4.14(a) of the Disclosure Letter.
(c) Except as set forth in Section 4.14(c) of the Disclosure Letter, to
the best knowledge of the Company:
(i) (w) such Intellectual Property is valid and enforceable in those
countries in which the Company or its Subsidiaries are currently using such
Intellectual Property, (x) such Intellectual Property does not infringe on
any patents, trademarks, copyrights or any other intellectual property or
proprietary rights of any person or entity in any country, (y) all
maintenance taxes, annuities and renewal fees have been paid and all other
necessary actions to maintain such Intellectual Property have been taken
through the date hereof and will continue to be paid or taken by the
Company through the Effective Time and (z) there exists no impediment which
would impair the Company's rights to conduct its business or the business
of its Subsidiaries after the Effective Time pursuant to such Intellectual
Property;
(ii) the Company and its Subsidiaries have taken all reasonable and
appropriate steps to protect the Intellectual Property and, where
applicable, to preserve the confidentiality of the Intellectual Property;
(iii) during the two-year period immediately preceding the date of this
Agreement, neither the Company nor any of its Subsidiaries has received any
written notice of claim that any of such Intellectual Property has expired,
is not valid or enforceable in any country or that it infringes upon or
conflicts with any patent, trademark, service mark, copyright or trade name
of any third party, and no such claim or controversy, whenever filed or
threatened, currently exists;
(iv) during the two-year period immediately preceding the date of this
Agreement, neither the Company nor any of its Subsidiaries has given any
notice of infringement to any third party with respect to any of such
Intellectual Property or has become aware of facts or circumstances
evidencing the infringement by any third party of any of such Intellectual
Property, and no claim or controversy with respect as any such alleged
infringement currently exists; and
(v) certificates of registration and renewal, letter patents and
copyright registration certificates and all other instruments evidencing
ownership of such Intellectual Property are in the possession of the
Company or its Subsidiaries.
(d) The term "INTELLECTUAL PROPERTY" shall mean:
(i) all trademarks, service marks, trademark registrations, service mark
registrations, trade names and applications for registration of trademarks
and service marks;
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(ii) all licenses which create rights in or to the trademark, service
mark or trade name properties described in clause (i) above;
(iii) all copyrights, copyright registrations and applications for
registration of copyrights;
(iv) all renewals, modifications and extensions of any items referred to
in clauses (i) through (iii) above;
(v) all patents, design patents and utility patents, all applications
for grant of any such patents pending as of the date hereof or as of the
Effective Time or filed within five years prior to the date hereof, and all
reissues, divisions, continuations-in-part and extensions thereof;
(vi) all technical documentation, trade secrets, designs, inventions,
processes, formulae, know-how, operating manuals and guides, plans, new
product development, technical and marketing surveys, material
specifications, product specifications, invention records, research
records, inspection processes, equipment lists, engineering reports and
drawing, architectural or engineering plans, know-how agreements and other
know-how;
(vii) all marketing and licensing records, sales literature, customer
lists, trade lists, sales forces and distributor networks lists,
advertising and promotional materials;
(viii) all rights arising under, and rights to develop, use and sell
under, any of the foregoing and all licenses with respect thereto; and
(ix) all rights and incidents of interest in and to all noncompetition
or confidentiality agreements.
SECTION 4.15 REAL PROPERTY. (a) Section 4.15(a) of the Disclosure Letter
sets forth a true, correct and complete list of all of the real property owned
in fee by the Company and its Subsidiaries. Each of the Company and its
Subsidiaries has good and marketable title to each parcel of real property owned
by it free and clear of all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against in the balance sheet
of the Company dated as of April 30, 1998 and included in the SEC Reports, (ii)
Taxes and general and special assessments not in default and payable without
penalty and interest, and (iii) other liens, mortgages, pledges, encumbrances
and security interests which do not materially interfere with the Company's or
such Subsidiary's use and enjoyment of such real property or materially detract
from or diminish the value thereof.
(b) Section 4.15(b) of the Disclosure Letter sets forth a true, correct
and complete list of all leases, subleases and other agreements under which
the Company or any of its Subsidiaries uses or occupies or has the right to
use or occupy, now or in the future, any real property (the "REAL PROPERTY
LEASES"). The Company has heretofore made available to Parent and Sub true,
correct and complete copies of all Real Property Leases (including all
modifications, amendments, supplements, waivers and side letters thereto).
Each Real Property
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Lease is valid, binding and in full force and effect, all rent and other sums
and charges payable by the Company and its Subsidiaries as tenants thereunder
are current, and no termination event or condition or uncured default of a
material nature on the part of the Company or any such Subsidiary exists
under any Real Property Lease. Each of the Company and its Subsidiaries has
a good and valid leasehold interest in each parcel of real property leased by
it free and clear of all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against in the balance
sheet of the Company dated as of April 30, 1998, (ii) Taxes and general and
special assessments not in default and payable without penalty and interest,
and (iii) other liens, mortgages, pledges, encumbrances and security
interests which do not materially interfere with the Company's use and
enjoyment of such real property or materially detract from or diminish the
value thereof.
SECTION 4.16 MATERIAL CONTRACTS. The Company has filed with the SEC, or
disclosed under Section 4.16 of the Disclosure Letter a true, correct and
complete list of all Material Contracts (as hereinafter defined), and made
available to Parent and Sub, true, correct and complete copies of all Material
Contracts. For purposes of this Agreement, "MATERIAL CONTRACTS" shall mean all
contracts, agreements, commitments, arrangements, leases (including with respect
to personal property), policies, and other instruments to which the Company or
any of its Subsidiaries is a party or by which the Company, any of its
Subsidiaries or any of their respective assets is bound which (a) involves or
could involve aggregate payments of more than $250,000 (but not including any
such contract if it may be canceled on less than twelve months' notice and
without liability, penalty or premium), (b) is with any of the Company's
officers, directors or affiliates, or (c) is or could reasonably be expected to
be material to the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries is, or has received any written notice or
has any knowledge that any other party is, in default in any respect under any
Material Contract, and to the best knowledge of the Company, there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a material default. The Company has not made any claims
or sought indemnification as to any matter relating to any Material Contract.
Except as set forth in Section 6.11, no valid claim against the Company or its
Subsidiaries exists for payment of any "topping," "profit-participation,"
"termination," "break-up" or "bust-up" fee or any similar compensation or
payment arrangement as a result of the transactions contemplated hereby.
SECTION 4.17 RELATED PARTY TRANSACTIONS. No director, officer, partner,
employee, affiliate or associate of the Company or any of its Subsidiaries (i)
has borrowed any monies from or has outstanding any indebtedness or other
similar obligations to the Company or any of its Subsidiaries; (ii) owns any
direct or indirect interest of any kind (other than the ownership of less than
5% of the stock of a publicly traded company) in, or is a director, officer,
employee, partner, affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any person or entity which is (x) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company of any of its
Subsidiaries, (y) engaged in a business related to the business of the Company
or any of its Subsidiaries or (z) participated in any transaction to which the
Company or any of its Subsidiaries is a party; or (iii) is otherwise a party to
any contract, arrangement or understanding
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with the Company or any of its Subsidiaries, other than contracts listed in
Section 4.09 of the Disclosure Letter.
SECTION 4.18 LIENS. Except as set forth in Section 4.18 of the Disclosure
Letter or as disclosed or permitted pursuant to Sections 4.11, 4.14 and 4.15
hereof and other than liens, mortgages, security interests, pledges and
encumbrances which do not materially interfere with the Company's use and
enjoyment of its property or materially diminish or detract from the value
thereof, neither the Company nor any of its Subsidiaries has granted, created or
suffered to exist with respect to any of its assets, any mortgage, pledge,
charge, hypothecation, collateral, assignment, lien (statutory or otherwise),
encumbrance or security agreement of any kind or nature whatsoever.
SECTION 4.19 RESTRICTIONS OF STATE TAKEOVER STATUTES INAPPLICABLE. As of
the date hereof and at all times on or prior to the Effective Time, the
restrictions of Section 203 of the DGCL shall be inapplicable to the Offer, the
Merger, the Company Option Agreement, the Stockholder Option Agreements and the
transactions contemplated by this Agreement, the Company Option Agreement and
the Stockholder Option Agreements.
SECTION 4.20 REQUIRED VOTE OF COMPANY STOCKHOLDERS. Unless the Merger is
consummated in accordance with Section 253 of the DGCL as contemplated by
Section 2.09 if Parent owns, directly or indirectly, no more than the Revised
Minimum Number of Shares, the only vote of the stockholders of the Company
required to adopt the plan of merger contained in this Agreement and approve the
Merger is the affirmative vote of the holders of not less than a majority of the
outstanding Shares. If Parent owns, directly or indirectly, no more than the
Revised Minimum Number of Shares, no other vote of the stockholders of the
Company is required by law, the Certificate of Incorporation or Bylaws of the
Company as currently in effect or otherwise to adopt the plan of merger
contained in this Agreement and approve the Merger. Sub will have full voting
power with respect to any Shares purchased pursuant to the Offer or the Options.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
SECTION 5.01 ORGANIZATION AND QUALIFICATION. Each of Parent and Sub is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with all requisite corporate power and
authority to own its properties and conduct its business as currently conducted.
All of the issued and outstanding capital stock of Sub is owned directly or
indirectly by Parent.
SECTION 5.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Sub
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this
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Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate proceedings on
the part of Parent and Sub. This Agreement has been duly and validly
executed and delivered by Parent and Sub and, assuming this Agreement
constitutes the legal, valid and binding obligation of the Company, this
Agreement constitutes a legal, valid and binding agreement of each of Parent
and Sub, enforceable against each of Parent and Sub in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to
general principles of equity (whether considered in a proceeding in equity or
at law).
SECTION 5.03 OFFER DOCUMENTS; PROXY STATEMENT. (a) None of the Offer
Documents will, at the times such documents are filed with the SEC and are
mailed to the stockholders of the Company, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied in
writing by the Company or an affiliate of the Company expressly for inclusion
therein. The Offer Documents will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations of the SEC
thereunder.
(b) None of the information supplied by Parent, Sub or any affiliate of
Parent or Sub specifically for inclusion in the Proxy Statement or the Schedule
14D-9 will, at the date of filing with the SEC, and, in the case of the Proxy
Statement, at the time the Proxy Statement is mailed and at the time of the
Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.04 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by each of Parent or Sub nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificates of Incorporation or
Bylaws (or other similar governing documents) of Parent or Sub, (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (A) as may be required under the HSR Act,
the Exchange Act, the DGCL and the "takeover" or "blue sky" laws of various
states, or (B) where the failure to obtain such consent, approval, authorization
or permit, or to make such filing or notification, would not, individually or in
the aggregate, have a material adverse effect on the ability of Parent or Sub to
consummate the transactions contemplated hereby, (iii) require any consent,
waiver or approval or result in a default (or give rise to any right of
termination, cancellation, modification or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement, contract, indenture or
other instrument or obligation to which Parent or Sub or any of their respective
Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of
their respective assets may be bound, except for such defaults (or rights of
termination, cancellation, modification or acceleration) as to which requisite
waivers or consents have been obtained or which would not in the aggregate have
a material adverse effect on the ability of Parent or Sub to consummate the
transactions contemplated hereby, or (iv) violate any
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order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, Sub or any of their respective Subsidiaries or by which any of their
respective assets are bound, except for violations which would not,
individually or in the aggregate, have a material adverse effect on the
ability of Parent or Sub to consummate the transactions contemplated hereby.
SECTION 5.05 OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted and will conduct its operations only as
contemplated hereby.
SECTION 5.06 FINANCING. Parent has sufficient funds available to
consummate the transactions contemplated by this Agreement and to pay all fees
and expenses related to the transactions contemplated by this Agreement.
SECTION 5.07 CURRENT OWNERSHIP. Immediately prior to the execution and
delivery of this Agreement, the Company Option Agreement and the Stockholder
Option Agreements, neither Parent nor Sub was an "interested stockholder" of the
Company, as such term is defined in Section 203(c)(5) of the DGCL.
ARTICLE VI
COVENANTS
SECTION 6.01 CONDUCT OF BUSINESS OF THE COMPANY. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the date on which a majority of the Company's directors are
designees of Parent or Sub, the Company will conduct and will cause each of its
Subsidiaries to conduct its operations according to its ordinary and usual
course of business and consistent with past practice, and the Company will use
and will cause each of its Subsidiaries to use its best efforts to preserve
intact its business organization, to keep available the services of its current
officers and employees and to preserve the goodwill of and maintain satisfactory
relationships with those persons and entities having business relationships with
the Company and its Subsidiaries, and the Company will promptly advise Parent
and Sub in writing of any material change in the Company's or any of its
Subsidiaries' condition (financial or otherwise), properties, customer or
supplier relationships, assets, liabilities, business prospects or results of
operations. Without limiting the generality of the foregoing and except as
otherwise expressly provided in or contemplated by this Agreement or as set
forth in the Disclosure Letter, during the period specified in the preceding
sentence, without the prior written consent of Parent, the Company will not and
will not permit any of its Subsidiaries to:
(i) issue, sell, grant options or rights to purchase, pledge, or
authorize or propose the issuance, sale, grant of options or rights to
purchase or pledge of (A) any Company Securities (including any Existing
Stock Option) or Subsidiary Securities, or grant or accelerate any right to
convert or exchange any Company Securities or Subsidiary Securities, other
than Shares issuable upon exercise of the Existing Stock Options
outstanding on the date hereof or (B) any other securities in respect of,
in lieu of or in substitution for Shares outstanding on the date hereof;
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(ii) otherwise acquire or redeem, directly or indirectly, or amend any
Company Securities or Subsidiary Securities;
(iii) split, combine or reclassify its capital stock or declare, set
aside, make or pay any dividend or distribution (whether in cash, stock or
property) on any shares of its capital stock (other than cash dividends
paid to the Company by its wholly-owned Subsidiaries with regard to their
capital stock);
(iv) except as set forth in Section 4.16 of the Disclosure Letter,
(A) make or offer to make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or
other disposition of assets or securities, in each case involving the
payment or receipt of consideration of $100,000 or more, except for
purchases of inventory made in the ordinary course of business and
consistent with past practice, or (B) enter into or amend any Material
Contract or grant any release or relinquishment of any rights under any
Material Contract;
(v) incur or assume any long-term debt or short-term debt except for
debt incurred under the Company's existing Revolving Credit Facility in the
ordinary course of business consistent with past practice;
(vi) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except wholly-owned Subsidiaries of the Company;
(vii) make any loans, advances or capital contributions to, or
investments in, any other person (other than wholly-owned Subsidiaries of
the Company);
(viii) change any of the accounting principles or practices used by it;
(ix) make any Tax election or settle or compromise any material federal,
state or local income Tax liability;
(x) propose or adopt any amendments to its Certificate of Incorporation
or Bylaws (or similar documents);
(xi) except as set forth in Section 6.01 of the Disclosure Letter, grant
any stock-related, performance or similar awards or bonuses;
(xii) forgive any loans to employees, officers or directors or any of
their respective affiliates or associates;
(xiii) except as set forth in Section 6.01 of the Disclosure Letter,
enter into any new, or amend any existing, employment, severance,
consulting or salary continuation agreements with any officers, directors
or employees, or grant any increases in the compensation or benefits to
officers, directors and employees (other than normal increases to persons
who are not officers or directors in the ordinary course of business
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consistent with past practices and that, in the aggregate, do not result in
a material increase in benefits or compensation expense of the Company);
(xiv) make any deposits or contributions of cash or other property to
fund or in any other way secure the payment of compensation or benefits
under the Plans or agreements subject to the Plans, other than in the
ordinary course of business consistent with past practice;
(xv) enter into, amend, or extend any collective bargaining or other
labor agreement;
(xvi) except as set forth in Section 6.01 of the Disclosure Letter,
adopt, amend or terminate any Plan or any other bonus, severance, insurance
pension or other employee benefit plan or arrangement;
(xvii) settle or agree to settle any suit, action, claim, proceeding or
investigation (including any suit, action, claim, proceeding or
investigation relating to this Agreement or the transactions contemplated
hereby) or pay, discharge or satisfy or agree to pay, discharge or satisfy
any claim, liability or obligation (absolute or accrued, asserted or
unasserted, contingent or otherwise) other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in full in the
financial statements as at April 30, 1998 or incurred in the ordinary
course of business subsequent to April 30, 1998; or
(xviii) 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 as of the date when made or as of a
future date or would result in any of the conditions set forth in Exhibit A
not being satisfied.
SECTION 6.02 NO SOLICITATION. The Company shall not, and shall not permit
any of its Subsidiaries and their respective officers, directors, employees,
representatives (including its investment bankers or attorneys), agents or
affiliates to, directly or indirectly, encourage, solicit, initiate or
participate in any way in any discussions or negotiations with, or provide any
non-public information to, or afford any access to the properties, books or
records of the Company or any of its Subsidiaries to, or otherwise assist or
facilitate, any corporation, partnership, person or other entity or group (other
than Parent or Sub or any affiliate or associate of Parent or Sub) concerning
any Acquisition Transaction (as defined in Section 6.11 herein) or potential
Acquisition Transaction; PROVIDED, HOWEVER, that nothing contained in this
Agreement shall prohibit the Board of Directors of the Company from furnishing
information to or entering into discussions or negotiations with any person or
entity that makes an unsolicited bona fide proposal to engage in an Acquisition
Transaction that the Board of Directors of the Company determines in good faith
represents a financially superior transaction for the stockholders of the
Company when compared to the Offer and the Merger if, and only to the extent
that, the Board of Directors determines in good faith, following the receipt of
advice of outside legal counsel, that failure to take any such action is
reasonably likely to be a breach by the Board of Directors of its fiduciary
duties to the stockholders of the Company under applicable law; and PROVIDED
FURTHER, HOWEVER, that nothing contained in this Agreement shall prohibit the
Company or its Board of
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Directors from taking and disclosing to the Company's stockholders a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act. The Company will promptly
notify Parent and Sub if any such information is requested from it or any
such negotiations or discussions are sought to be initiated with the Company
and will promptly communicate to Parent and Sub the terms of any proposal or
inquiry and the identity of the party making such proposal or inquiry which
it may receive in respect of any such transaction, including, in the case of
written proposals or inquiries, furnishing Parent and Sub with a copy of such
written proposal or inquiry (and all amendments and supplements thereto).
Subject to the first sentence of this Section 6.02, the Company will and will
cause its Subsidiaries, affiliates and their respective officers, directors,
employees, representatives and agents to immediately cease and cause to be
terminated any existing activities, discussions, or negotiations with any
parties other than Parent, Sub or any of their respective affiliates or
associates conducted heretofore with respect to any Acquisition Transaction.
Except as is required in the exercise of the fiduciary duties of the Board of
Directors of the Company as determined in good faith, following the receipt
of advice of outside legal counsel, the Company agrees not to release any
third party from any confidentiality or standstill agreement to which the
Company is a party without Parent's prior written consent and to take all
steps deemed necessary or appropriate by Parent to enforce to the fullest
extent possible all such agreements.
SECTION 6.03 ACCESS TO INFORMATION. (a) From and after the date of this
Agreement, the Company will (i) give Parent and Sub and their authorized
accountants, investment bankers, counsel and other representatives complete
access (during regular business hours upon reasonable notice) to all employees,
plants, offices, warehouses and other facilities and to all books, contracts,
commitments and records (including Tax returns) of the Company and its
Subsidiaries and cause the Company's and its Subsidiaries' independent public
accountants to provide access to their work papers and such other information as
Parent or Sub may reasonably request, (ii) permit Parent and Sub to make such
inspections as they may require, (iii) cause its officers and those of its
Subsidiaries to furnish Parent and Sub with such financial and operating data
and other information with respect to the business, properties and personnel of
the Company and its Subsidiaries as Parent or Sub may from time to time request
and (iv) furnish promptly to Parent and Sub a copy of each report, schedule and
other document filed or received by the Company during such period pursuant to
the requirements of the federal or state securities laws.
(b) Non-public information obtained by Parent or Sub pursuant to Section
6.03(a) shall be subject to the provisions of the Confidentiality Agreement, the
terms of which are incorporated herein by reference.
SECTION 6.04 REASONABLE BEST EFFORTS. (a) Subject to the terms and
conditions herein provided for, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that nothing in this Agreement (other than as expressly
provided for in Section 1.01) shall obligate Parent or Sub to keep the Offer
open beyond the expiration date set
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forth in the Offer (as it may be extended from time to time) and nothing in
this Agreement shall obligate Parent, Sub or any of their respective
Subsidiaries or affiliates to agree (i) to limit in any manner whatsoever or
not to exercise any rights of ownership of any securities (including the
Shares), or to divest, dispose of or hold separate any securities or all or a
portion of their respective businesses, assets or properties or of the
business, assets or properties of the Company or any of its Subsidiaries or
(ii) to limit in any manner whatsoever the ability of such entities (A) to
conduct their respective businesses or own such assets or properties or to
conduct the businesses or own the properties or assets of the Company and its
Subsidiaries or (B) to control their respective businesses or operations or
the businesses or operations of the Company and its Subsidiaries. In
connection with and without limiting the foregoing, (x) each of the Company,
Parent and Sub shall use its reasonable best efforts to make promptly any
required submissions under the HSR Act which the Company and Parent and Sub
determines should be made, in each case, with respect to the Offer, the
Merger, the Company Option Agreement or the Stockholder Option Agreements and
the transactions contemplated by this Agreement, the Company Option Agreement
and the Stockholder Option Agreements, (y) Parent, Sub and the Company shall
cooperate with one another (i) in promptly determining whether any filings
are required to be or should be made or consents, approvals, permits or
authorizations are required to be or should be obtained under any other
federal, state or foreign law or regulation or whether any consents,
approvals or waivers are required to be or should be obtained from other
parties to loan agreements or other contracts or instruments material to the
Company's business in connection with the consummation of the transactions
contemplated by this Agreement, and (ii) in promptly making any such filings,
furnishing information required in connection therewith and seeking to obtain
timely any such consents, permits, authorizations, approvals or waivers and
(z) the Company will use its reasonable best efforts promptly to grant such
approvals and to take or cause to be taken such actions as are necessary to
eliminate or minimize the effects on the transactions contemplated hereby of
any antitakeover statute, regulation or charter provision that is or shall
become applicable to the transactions contemplated hereby (except, in the
case of any such approval or action by the Board of Directors of the Company,
to the extent that the Board of Directors determines in good faith, following
the receipt of advice of outside legal counsel, that granting such approval
or taking such action is reasonably likely to be a breach by the Board of
Directors of its fiduciary duties to the stockholders of the Company under
applicable law). Without limiting the foregoing, the Company shall use its
best efforts to obtain prior to the consummation of the Offer the consents,
approvals and waivers listed in Section 4.07 of the Disclosure Letter, but,
without Parent's consent, shall not agree to amend any material terms of any
agreements referenced to herein, or pay or agree to pay any amount or other
consideration in order to obtain any such approvals or waivers. 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.
(b) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby is commenced, whether
before or after the Effective Time, the parties hereto agree to cooperate and
use their reasonable best efforts to defend vigorously against it and respond
thereto.
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SECTION 6.05 INDEMNIFICATION AND INSURANCE. (a) Parent and Sub agree
that all rights to indemnification existing in favor of the present or former
directors, officers and employees of the Company or any of its Subsidiaries (the
"INDEMNIFIED PARTIES") as provided in indemnification agreements with the
Company, the Company's Certificate of Incorporation or Bylaws, or the articles
of organization, bylaws or similar documents of any of the Company's
Subsidiaries as in effect as of the date hereof with respect to matters
occurring prior to the Effective Time, including, without limitation, matters
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby, shall
survive the Merger and shall continue in full force and effect for a period of
not less than the statutes of limitations applicable to such matters, and Parent
agrees to cause the Surviving Corporation to comply fully with its obligations
hereunder and thereunder.
(b) To the extent paragraph (a) shall not serve to indemnify and hold
harmless an Indemnified Party, for a period of four years from and after the
Effective Time, the Surviving Corporation and Parent shall indemnify, defend and
hold harmless the Indemnified Parties against all losses, claims, damages,
costs, expenses (including reasonable attorneys' fees and expenses), liabilities
or judgments of or in connection with any threatened or actual claim, action,
suit, proceeding or investigation (an "ACTION") arising out of or pertaining to
such individuals' services, prior to the Effective Time, as directors, officers
or employees of the Company or any of its Subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees of the Company or as (at
the request of the Company) directors, officers or employees of another
corporation or other enterprise (including, without limitation, matters based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby), in each case to the
full extent permitted by applicable law.
(c) The Surviving Corporation will cause to be maintained in effect for a
period of four years after the Effective Time (or, if the statute of limitations
with respect to such claims is extended, for an additional period, not to exceed
two years, equal to the length of such extension), in respect of acts or
omissions occurring prior to the Effective Time (but only in respect thereof),
policies of directors' and officers' liability insurance covering the persons
currently covered by the Company's existing directors' and officers' liability
insurance policies and providing substantially similar coverage to such existing
policies; PROVIDED, HOWEVER, that the Surviving Corporation will not be required
in order to maintain such directors' and officers' liability insurance policies
to pay an annual premium in excess of $265,000 (the "CAP"); and PROVIDED FURTHER
that, if equivalent coverage cannot be obtained, or can be obtained only by
paying an annual premium in excess of the Cap, the Surviving Corporation shall
only be required to obtain as much coverage as can be obtained by paying an
annual premium equal to the Cap.
(d) In the event any Action is brought against any Indemnified Parties for
which indemnification may be sought in accordance with this Section 6.05, (i)
such Indemnified Parties shall notify the Company (or, after the Effective Time,
the Surviving Corporation and Parent) in writing promptly after such Indemnified
Party receives notice of such Action and shall deliver to the Company (or, after
the Effective Time, the Surviving Corporation and Parent) the undertaking
contemplated by Section 145(e) of the DGCL, (ii) the Company (or, after the
Effective Time, the Surviving Corporation or Parent) shall be entitled to assume
the defense
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thereof and, after notice from the Company (or the Surviving Corporation or
Parent, as applicable) to the Indemnified Parties that it so chooses, the
Company (or the Surviving Corporation and Parent, as applicable) shall not be
liable to the Indemnified Parties for any legal fees or expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof
(PROVIDED, HOWEVER, that if (x) the Company (or the Surviving Corporation and
Parent, as applicable) does not elect to assume the defense thereof, (y) the
Company (or the Surviving Corporation and Parent, as applicable) otherwise
authorizes the Indemnified Party to retain counsel for the defense thereof or
(z) the assumption of the defense thereof by the Company (or the Surviving
Corporation or Parent, as applicable) would present counsel selected by the
Company (or the Surviving Corporation or Parent, as applicable) with a
conflict of interest or if such counsel's representation of the Indemnified
Parties would otherwise be inappropriate under the applicable standards of
professional conduct, then the Company (or the Surviving Corporation and
Parent, as applicable) will pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, and reasonably acceptable to Parent),
and (iii) the Company (or the Surviving Corporation and Parent, as
applicable) will cooperate in the defense of any such matter; PROVIDED,
HOWEVER, that none of the Company, the Surviving Corporation or Parent shall
be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld), and PROVIDED FURTHER that
the Company (or the Surviving Corporation and Parent, as applicable) shall
not be obligated pursuant to this Section 6.05 to pay the fees and expenses
of more than one counsel for all Indemnified Parties in any single Action,
except to the extent that, in the reasonable opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such Action.
(e) This Section 6.05 shall survive the consummation of the Merger and is
intended to benefit, and shall be enforceable by any person or entity entitled
to be indemnified hereunder (whether or not parties to this Agreement). The
Company (or the Surviving Corporation and Parent, as applicable) shall pay the
reasonable expenses, including reasonable attorneys' fees, that may be incurred
by any Indemnified Parties in enforcing rights to which such Indemnified Parties
are entitled under the provisions of this Section 6.05.
SECTION 6.06 EMPLOYEE MATTERS. (a) Prior to the Effective Time, except
as set forth below, the Company will, and will cause its Subsidiaries to, and
from and after the Effective Time subject to paragraph (b) below, Parent will,
and will cause the Surviving Corporation to, honor, in accordance with their
terms all existing Plans and employment and severance agreements between the
Company or any of its Subsidiaries and any officer, director or employee of the
Company or any of its Subsidiaries specified in Section 6.06(a) of the
Disclosure Letter. Nothing in this Section 6.06(a) shall be deemed to prevent
or limit in any way the amendment or termination of any such Plan or agreement
in accordance with its terms by the Company or, after the Effective Time, the
Surviving Corporation.
(b) Parent currently intends to cause the Surviving Corporation and its
Subsidiaries, until the first anniversary of the Effective Time, to provide
pension and welfare benefits to their employees (considered as a group)
(excluding employees covered by collective bargaining agreements and excluding
benefits that are contingent on a change in control or that are based on the
value of, or require the issuance of, securities), which benefits will be in the
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aggregate no less favorable than those currently provided by the Company and its
Subsidiaries in the aggregate to such employees. Nothing in this Section
6.06(b) shall be deemed to constitute an amendment of any employee benefit plan,
program or arrangement or to prevent the Surviving Corporation or any of its
Subsidiaries from making any change in any plan, program or arrangement,
including any change required by law or deemed necessary or appropriate to
comply with applicable law or regulation.
(c) The Company shall take, or cause to be taken, all action necessary, as
promptly hereafter as reasonably practicable, to amend any plan, other than the
Stock Option Plans, maintained by the Company or any of its Subsidiaries to
eliminate, effective immediately prior to the Effective Time, all provisions for
the purchase of Shares directly from the Company or any of its Subsidiaries or
securities of any Subsidiary.
(d) Without limiting the foregoing paragraph (c), the Company shall take,
or cause to be taken, all action necessary, to ensure that the Stock Option
Plans shall terminate as of the Effective Time.
(e) Parent will, and will cause the Surviving Corporation to, cause
service rendered by employees of the Company and its Subsidiaries prior to
the Effective Time to be taken into account for vesting and eligibility
purposes under employee benefit plans of Parent, the Surviving Corporation
and its Subsidiaries, to the same extent as such service was taken into
account under the corresponding plans of the Company and its Subsidiaries for
those purposes. Employees of the Company and its Subsidiaries will not be
subject to any pre-existing condition limitation under any health plan of
Parent, the Surviving Corporation or its Subsidiaries for any condition for
which they would have been entitled to coverage under the corresponding plan
of the Company or its Subsidiaries in which they participated prior to the
Effective Time. Parent will, and will cause the Surviving Corporation and
its Subsidiaries, to give such employees credit under such plans for
co-payments made and deductibles satisfied prior to the Effective Time.
(f) No later than two business days prior to its distribution, the Company
and its Subsidiaries shall provide Parent and Sub with a copy of any
communication intended to be made to any of their respective employees relating
to the transactions contemplated hereby, and will provide an opportunity for
Parent and Sub to make reasonable revisions thereto.
(g) Prior to the date hereof, the Company has entered into employment
agreements, each in form and substance satisfactory to Parent, with Robert
Berglass and Grant W. Johnson, which employment agreements shall replace and
supersede the existing employment and severance agreements between the Company
and such officers.
SECTION 6.07 TAKEOVER LAWS. The Company shall, upon the request of Parent
or Sub, take all reasonable steps to exclude the applicability of, or to assist
in any challenge by Parent or Sub to the validity, or applicability to the
Offer, the Merger or any other transaction contemplated by this Agreement, the
Company Option Agreement or the Stockholder Option Agreements, of, any Takeover
Laws.
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SECTION 6.08 PROXY STATEMENT. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.09, the
Company shall prepare and file with the SEC, subject to the prior review and
approval of Parent and Sub (which approval shall not be unreasonably withheld),
as soon as practicable after the consummation of the Offer, a preliminary proxy
or information statement (the "PRELIMINARY PROXY STATEMENT") relating to the
Merger as required by the Exchange Act and the rules and regulations of the SEC
thereunder, with respect to the transactions contemplated hereby. The Company
shall obtain and furnish the information required to be included in the
Preliminary Proxy Statement, shall provide Parent and Sub with, and consult with
Parent and Sub regarding, any comments that may be received from the SEC or its
staff with respect thereto, shall, subject to the prior review and approval of
Parent and Sub (which approval shall not be unreasonably withheld), respond
promptly to any such comments made by the SEC or its staff with respect to the
Preliminary Proxy Statement, shall cause the Proxy Statement to be mailed to the
Company's stockholders at the earliest practicable date and shall use its best
efforts to obtain the necessary approval of the Merger by its stockholders.
SECTION 6.09 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Sub, and Parent or Sub, as the case may be, shall
give prompt notice to the Company, of the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which is likely (i) to cause any
representation or warranty of such party contained in this Agreement
(disregarding any materiality limitation contained therein) to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii) to
result in any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied hereunder
(including the conditions set forth in Exhibit A); PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 6.09 shall not limit or
otherwise affect the remedies available hereunder to any of the parties
receiving such notice.
SECTION 6.10 SUBSEQUENT FILINGS. Until the Effective Time, the Company
will timely file with the SEC each form, report and document required to be
filed by the Company under the Exchange Act and will promptly deliver to Parent
and Sub copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in such reports
shall be prepared in accordance with generally accepted accounting principles in
the United States applied on a consistent basis (except as may be indicated in
the notes thereto) and shall fairly present the financial position of the
Company as at the dates thereof and the results of their operations and changes
in financial position for the periods then ended (subject to, in the case of any
unaudited interim financial statements, normal year-end adjustments).
SECTION 6.11 TERMINATION FEE; EXPENSES. (a) In the event that this
Agreement is terminated (i) pursuant to Sections 8.01(e) or 8.01(h) or
(ii) pursuant to any other provision of Section 8.01 (regardless of whether such
termination is by Parent or the Company, unless such termination results solely
from a material breach by Parent or Sub of their respective obligations
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hereunder) and (in the case of clause (ii) only) either (y) prior to such
termination a Trigger Event (as such term is defined in Section 6.11(b)) has
occurred or (z) prior to such termination a written proposal shall have been
made relating to an Acquisition Event (as such term is defined in Section
6.11(c)) and within twelve months from the date of such termination an
Acquisition Event shall have occurred, then the Company shall pay to Parent a
fee of $2,500,000 (the "TERMINATION FEE"). Such fee shall be payable in
immediately available funds at the time of termination if such fee becomes
payable pursuant to clause (i) or clause (ii)(y) above, or on the second
business day following the occurrence of the Acquisition Event if such fee
becomes payable in the circumstances described in clause (ii)(z) above.
Notwithstanding the foregoing, the Termination Fee shall cease to be payable
immediately following any exercise or repurchase of the Company Option in
accordance with its terms.
(b) As used herein, "TRIGGER EVENT" shall mean the occurrence of any of
the following events:
(i) The Company or any of its Subsidiaries (or the Board of Directors or
any committee thereof of the Company) shall have recommended, approved,
authorized, proposed, filed a Schedule 14D-9 not opposing, or publicly
announced its intention to enter into, any Acquisition Transaction (other
than with Parent, Sub or any of its affiliates), or shall have resolved to
do any of the foregoing. For purposes of this Agreement "ACQUISITION
TRANSACTION" shall mean any tender offer or exchange offer, any merger,
consolidation, liquidation, dissolution, recapitalization, reorganization
or other business combination, any acquisition, sale or other disposition
of a material amount of assets or securities or any other similar
transaction involving the Company, its securities or any of its material
Subsidiaries or divisions;
(ii) the Board of Directors or any committee thereof of the Company
shall have withdrawn or modified or amended in any manner adverse to Parent
or Sub its authorization, approval or recommendation to the stockholders of
the Company with respect to the Offer, the Merger or this Agreement, or
shall have resolved to do any of the foregoing or shall have failed to have
reiterated its recommendation within five business days of any written
request by Parent or Sub therefor; or
(iii) any person, entity or "group" (as that term is used in Section
13(d)(e) of the Exchange Act) (other than the Option Grantors and their
affiliates and other than Parent, Sub or any of their affiliates and other
than persons, entities or groups that are permitted to report their
ownership of Shares with the SEC on Schedule 13G) shall have become the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) of 20% of the then outstanding Shares.
(c) As used herein, "ACQUISITION EVENT" shall mean the consummation of any
(i) Acquisition Transaction or (ii) series of transactions that results in any
person, entity or "group" (other than the Option Grantors and their affiliates
and other than Parent, Sub or any of their affiliates) acquiring more than 50%
of the outstanding Shares or assets of the Company (in each
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case including through any open market purchases, merger, consolidation,
recapitalization reorganization or other business combination).
SECTION 6.12 EXERCISE OF STOCKHOLDER OPTIONS. Parent and Sub hereby agree
that, in the event that Parent or Sub (or any affiliate of Parent or Sub)
exercises any of the Stockholder Options and purchases Shares thereunder, as
promptly as practicable thereafter, Parent will propose to the Company a merger,
on terms and subject to conditions substantially the same as those provided in
this Agreement, between Sub or another of its wholly-owned Subsidiaries and the
Company pursuant to which the stockholders of the Company (other than Parent,
Sub or any Subsidiary of Parent, Sub or the Company) will receive an amount of
cash consideration per Share equal to the Merger Consideration (or such higher
amount as is payable for Shares under any of the Stockholder Option Agreements),
and will take such actions as may be necessary or appropriate in order to effect
such merger at the earliest practicable time.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the proposed Effective Time,
of the following conditions:
(a) unless the Merger is consummated pursuant to Section 253 of the
DGCL as contemplated by Section 2.09, the agreement of merger (as such term
is used in Section 251 of the DGCL) contained in this Agreement shall have
been adopted by the affirmative vote of the stockholders of the Company
required by and in accordance with applicable law;
(b) all necessary waiting periods under the HSR Act applicable to the
Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order, judgment, decree
or injunction shall have been enacted, entered, issued, promulgated or
enforced by any court or Governmental Entity against Parent, Sub or the
Company and be in effect that prohibits the consummation of the Merger or
makes such consummation illegal (each party agreeing to use all reasonable
efforts to have such prohibition lifted); and
(d) Sub shall have accepted for purchase and paid for the Shares
tendered pursuant to the Offer; PROVIDED, HOWEVER, that this condition will
be deemed satisfied if Sub shall have failed to purchase Shares tendered
pursuant to the Offer in violation of the terms of this Agreement.
SECTION 7.02 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger are further
subject to the satisfaction or waiver, where permissible, on or prior to the
proposed Effective Time of the following conditions:
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(a) the Company shall have performed and complied in all material
respects with all agreements and obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time and the representations and warranties of the Company
contained herein that are qualified as to materiality shall be true and
correct, and the representations and warranties of the Company that are not
so qualified shall be true and correct in all material respects, in each
case on the date of this Agreement and at and as of the proposed Effective
Time as though such representations and warranties were made at and as of
such time; and
(b) the Company shall have furnished such certificates of its
officers to evidence compliance with the conditions set forth in
Section 7.02(a) hereof as may be reasonably requested by Sub.
SECTION 7.03 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger are further subject
to the satisfaction or waiver, where permissible, on or prior to the proposed
Effective Time of the following conditions:
(a) Parent and Sub shall have performed and complied in all material
respects with all agreements and obligations required by this Agreement to
be performed or complied with by them on or prior to the proposed Effective
Time and the representations and warranties of Parent and Sub contained
herein that are qualified as to materiality shall be true and correct, and
the representations and warranties of Parent and Sub that are not so
qualified shall be true and correct in all material respects, in each case
on the date of this Agreement and at and as of the proposed Effective Time
as though such representations and warranties were made at and as of such
time; and
(b) Parent and Sub shall have furnished such certificates of its
officers to evidence compliance with the conditions set forth in Section
7.03(a) hereof as may be reasonably requested by the Company.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time notwithstanding approval thereof by the
stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Boards of Directors of the
Company and Parent;
(b) by (i) Parent or (ii) the Company, in either case, if the
Effective Time shall not have occurred on or before December 31, 1998
(provided that the right to terminate this Agreement under this
Section 8.01(b) shall not be available to any party whose
39
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failure to fulfill any obligation under this Agreement has been the cause
of, or resulted, in the failure of the Effective Time to occur on or before
such date);
(c) by Parent or the Company, if any court of competent jurisdiction
or other Governmental Entity shall have issued an order, decree or ruling,
or taken any other action restraining, enjoining or otherwise prohibiting
any of the transactions contemplated by this Agreement, the Company Option
Agreement or the Stockholder Option Agreements and such order, decree,
ruling or other action shall have become final and non-appealable;
(d) (i) by the Company, if Sub fails to commence the Offer as
provided in Section 1.01 or fails to purchase validly tendered Shares in
violation of the terms of the Offer or this Agreement and (ii) by Parent,
if the Offer expires or is terminated or withdrawn on account of the
failure of a condition specified in Exhibit A hereto without any Shares
being purchased thereunder;
(e) by Parent, if (i) the Board of Directors or any committee thereof
of the Company withdraws or modifies or amends in a manner adverse to
Parent or Sub its authorization, approval or recommendation of the Offer or
the Merger or this Agreement or shall have resolved to do any of the
foregoing or shall have failed to have reiterated its recommendation within
five business days of any written request by Parent or Sub therefor or
(ii) the Company or any of its Subsidiaries (or the Board of Directors or
any committee thereof of the Company) shall have approved, recommended,
authorized, publicly announced its intention to enter into or filed a
Schedule 14D-9 not opposing any Acquisition Transaction with a party other
than Parent, Sub or any of their affiliates, or shall have resolved to do
any of the foregoing;
(f) by Parent or the Company, if the other party (or, in the case of
termination by the Company, if Sub) shall have breached or failed to comply
in any material respect with any of its obligations, covenants or
agreements under this Agreement, or any of the representations and
warranties of the other party set forth in this Agreement which is
qualified as to materiality, shall not be true and correct, or any such
representation or warranty that is not so qualified, shall not be true and
correct in any material respect, in each case when made or at any time
prior to the Effective Time as if made at and as of such time;
(g) by Parent, if at any time prior to the purchase by Sub of all of
the Shares subject to the Stockholder Options, the Stockholder Option
Agreements shall not be in full force and effect or the Option Grantors
shall have breached in any material respect any representation, warranty or
covenant contained in the Stockholder Option Agreements; or
(h) by the Company, to allow the Company to enter into an agreement
in respect of an Acquisition Transaction that the Board of Directors of the
Company shall have determined represents a financially superior transaction
for the stockholders of the Company when compared to the Offer and the
Merger if, and only to the extent that, the
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Board of Directors shall have determined in good faith, following the
receipt of advice of outside legal counsel, that failure to take any
such action would be a breach by the Board of Directors of its fiduciary
duties to the stockholders of the Company under applicable law;
PROVIDED, THAT, prior to any such termination, the Company notifies
Parent promptly of its intention to terminate this Agreement and enter
into an agreement with respect to an Acquisition Transaction and gives
Parent an opportunity to match the terms of such agreement, which notice
shall include the terms of such Acquisition Transaction and shall be
given at least five business days prior to the termination of this
Agreement; PROVIDED, FURTHER, that such termination shall not be
effective unless the Company contemporaneously pays Parent the fee
described in Section 6.11 hereof.
SECTION 8.02 EFFECT OF TERMINATION. If this Agreement is terminated and
the Merger is abandoned pursuant to Section 8.01 hereof, this Agreement, except
for the provisions of Sections 6.03(b), 6.11, 6.12, 8.02, 9.10 and 9.12 hereof
and except to the extent provisions of this Agreement relate to the Company
Option Agreement or the Stockholder Option Agreements, shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders. Nothing in this Section 8.02 shall relieve
any party to this Agreement of liability for willful breach of this Agreement.
SECTION 8.03 AMENDMENT. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and Sub, subject in the case of the Company to
Section 1.04(b), at any time before or after adoption of this Agreement by the
stockholders of the Company but, after any such stockholder approval, no
amendment shall be made which decreases the Merger Consideration or which
adversely affects the rights of the Company's stockholders hereunder without the
approval of the stockholders of the Company. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
SECTION 8.04 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 the Company, Parent and Sub, subject in the case of the Company to
Section 1.04(b), may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) 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 (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
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SECTION 9.02 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with
the Disclosure Letter, the Company Option Agreement and the Confidentiality
Agreement, constitutes the entire agreement between the parties with respect to
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to
subject matter hereof. The Agreement shall not be assigned by operation of law
or otherwise; PROVIDED, HOWEVER, that Parent or Sub may assign any of their
respective rights and obligations to any affiliate of Parent or Sub, as the case
may be, but no such assignment shall relieve Parent or Sub, as the case may be,
of its obligations hereunder. It is understood and agreed that either Sub or
any affiliates of Sub may purchase Shares under the Offer.
SECTION 9.03 ENFORCEMENT OF THE AGREEMENT. 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 federal or state
court located in the State of New York (as to which the parties agree to submit
to jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 9.04 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, which shall remain in full force and
effect.
SECTION 9.05 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile transmission with confirmation
of receipt, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to Parent or Sub:
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
Facsimile: (49) 211 798 2470
Attention: Petra U. Hammerlein
with a copy to:
Henkel Acquisition Corp. II
c/o Henkel Corporation
The Triad
2200 Renaissance Boulevard - Suite 200
Gulph Mills, PA 19406
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Facsimile: (610) 270 8219
Attention: Ernest G. Szoke
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Facsimile: 212-225-3999
Attention: William A. Groll, Esq.
if to the Company:
DEP Corporation
2101 East Via Arado
Rancho Dominguez, CA 90220
Facsimile: (310) 537 2524
Attention: Robert H. Berglass
with a copy to:
Latham & Watkins
633 West Fifth Street, Ste. 4000
Los Angeles, CA 90071
Facsimile: 213-891-8763
Attention: Paul D. Tosetti, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.06 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 9.07 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.08 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for Section 6.05 (which is intended to be for the benefit of the persons
referred to therein, and may be enforced by any such persons).
43
<PAGE>
SECTION 9.09 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.10 FEES AND EXPENSES. Whether or not the Offer or the Merger is
consummated, all fees, costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses, except as contemplated by Section 6.11 hereof.
SECTION 9.11 CERTAIN DEFINITIONS. (a) The term "SUBSIDIARY" shall mean,
when used with reference to an entity, any other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions, or a
majority of the outstanding voting securities of which, are owned directly or
indirectly by such entity.
(b) "MATERIAL ADVERSE EFFECT" shall mean any change, condition, event,
fact, circumstance or development (i) constituting or having a material and
adverse effect (or any change, condition, event, fact circumstance or
development which is reasonably likely to have any material and adverse effect)
on any of the condition (financial or otherwise), business, properties, assets,
liabilities, results of operations or prospects of the Company and its
Subsidiaries taken as a whole, or (ii) that materially impairs, or is reasonably
likely to materially impair, the ability of the parties to consummate the
transactions contemplated by this Agreement.
(c) "TAX" shall mean all taxes, charges, fees, levies, imposts, duties,
and other assessments, including any income, alternative minimum or add-on tax,
estimated, gross income, gross receipts, sales, use, transfer, transactions,
intangibles, ad valorem, value-added, franchise, registration, title, license,
capital, paid-up capital, profits, withholding, employee withholding, payroll,
worker's compensation, unemployment insurance, social security, employment,
excise (including the federal communications excise tax under Section 4251 of
the Code), severance, stamp, transfer occupation, premium, recording, real
property, personal property, federal highway use, commercial rent, environmental
(including taxes under Section 59A of the Code) or windfall profit tax, custom,
duty or other tax, fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties, related liabilities, fines or
additions to tax that may become payable in respect thereof imposed by any
country, any state, county, provincial or local government or subdivision or
agency thereof.
(d) The term "including" shall be deemed to be followed by the phrase
"without limitation."
(e) The term "hereby" shall be deemed to refer to this Agreement in its
entirety, rather than to any Article, Section, or other portion of this
Agreement.
(f) The term "the transactions contemplated hereby" shall include the
making and consummation of the Offer, the execution of the Company Option
Agreement and the Stockholder Option Agreements and the exercise by Parent and
Sub of the Options and the
44
<PAGE>
acquisition of shares pursuant thereto and the exercise by Parent or Sub of
any other rights thereunder, and consummation of the Merger.
(g) The term "affiliate" shall have the meaning given to such term in Rule
12b-2 under the Exchange Act.
(h) The term "associate" shall have the meaning given to such term in Rule
12b-2 under the Exchange Act.
(i) The term "best knowledge of the Company" or similar expression shall
mean the knowledge of the senior management of the Company, including the
knowledge that would have been obtained through inquiry of senior managers with
overall responsibility for the relevant matters, whether or not such inquiry has
actually been made.
SECTION 9.12 PRESS RELEASES. Parent, Sub and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement except, upon advice of counsel, as required by law or by obligations
pursuant to any listing agreement with any relevant national securities
exchange.
45
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all at or on
the day and year first above written.
HENKEL KGaA
By: /s/ Uwe Specht
-------------------------
Name: Dr. Uwe Specht
Title: Executive Vice President
By: /s/ Petra Hammerlein
-------------------------
Name: Dr. Perta Hammerlein
Title: Senior Counsel
HENKEL ACQUISITION CORP. II
By: /s/ John E. Knudson
-------------------------
Name: John E. Knudson
Title: Vice President and Treasurer
DEP CORPORATION
By: /s/ Robert H. Berglass
-------------------------
Name: Robert H. Berglass
Title: Chairman and President
46
<PAGE>
EXHIBIT A
CONDITIONS TO THE OFFER
Capitalized terms used in this Exhibit A and not otherwise
defined herein shall have the meanings assigned to them in the Agreement to
which it is attached (the "MERGER AGREEMENT").
Notwithstanding any other provision of the Offer, Sub shall
not be required to accept for payment, purchase or pay for any Shares
tendered until the expiration of any applicable waiting period for the Offer
and the options granted pursuant to the Company Option Agreement and the
Stockholder Option Agreements (the "OPTIONS") under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and Sub may
terminate or, subject to the terms and conditions of the Merger Agreement,
amend the Offer as to any Shares not then accepted for payment, shall not be
required to accept for payment, purchase or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act,
pay for any Shares, or may delay the acceptance for payment of or, subject to
the restriction referred to above, the payment for Shares tendered, if (1) at
the expiration of the Offer, the number of Shares validly tendered and not
withdrawn, together with the Shares beneficially owned by Parent and its
affiliates or which Parent and its affiliates have the immediate right to
acquire pursuant to the Stockholder Option Agreements and the Company Option
Agreement, shall not constitute at least 90% of the outstanding Shares on a
fully diluted basis (the "MINIMUM CONDITION"); PROVIDED, HOWEVER, that the
Minimum Condition may be required to be amended in accordance with Section
1.01(c) of the Merger Agreement, or (2) at any time on or after the date of
the Merger Agreement and prior to the acceptance for payment of Shares, any
of the following events shall occur or exist:
(a) there shall have been any action taken, or any
statute, rule, regulation, legislation, interpretation,
judgment, order or injunction, proposed, sought, promulgated,
enacted, entered, enforced, issued, amended or deemed
applicable to Parent, Sub, the Company, any other affiliate of
Parent or the Company, the Offer, the Options or the Merger,
that would or is reasonably likely, directly or indirectly, to
(i) make the acceptance for payment of, or payment for or
purchase of some or all of the Shares pursuant to the Offer or
the Options illegal, or otherwise restrict or prohibit the
consummation of the Offer, the Options or the Merger, (ii)
result in a significant delay in or restrict the ability of
Sub to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer or the Options or to effect
the Merger, (iii) render Sub unable to accept for payment or
pay for or purchase some or all of the Shares pursuant to the
Offer or the Options, (iv) impose material limitations on the
ability of Parent, Sub or any of their respective Subsidiaries
or affiliates to acquire or hold, transfer or dispose of, or
effectively to exercise all rights of ownership of, some or
all of the Shares including the right to vote the Shares
purchased by it pursuant to the Offer or the Options on all
matters properly presented to the stockholders of the Company,
(v) require the divestiture by Parent, Sub or any of their
respective Subsidiaries or affiliates of any Shares, or
require
A-1
<PAGE>
Sub, Parent, the Company, or any of their respective
Subsidiaries or affiliates to dispose of or hold separate all
or any material portion of their respective businesses, assets
or properties or impose any material limitations on the
ability of any of such entities to conduct their respective
businesses or own such assets, properties or Shares or on the
ability of Parent or Sub to conduct the business of the
Company and its Subsidiaries and own the assets and properties
of the Company and its Subsidiaries or (vi) impose any
material limitations on the ability of Parent, Sub or any of
their respective Subsidiaries or affiliates effectively to
control the business or operations of the Company, Parent,
Sub, or any of their respective Subsidiaries or affiliates;
(b) there shall have been instituted or pending any
action, proceeding or counterclaim by or before any
governmental, administrative or regulatory agency or
instrumentality or before any court, arbitration tribunal or
any other tribunal, domestic or foreign, challenging the
making of the Offer or the acquisition by Sub of the Shares
pursuant to the Offer or the Options or the consummation of
the Merger, or seeking to obtain any material damages, or
seeking to, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) of
paragraph (a) above;
(c) any of the Stockholder Option Agreements shall not
be in full force and effect or any of the Option Grantors
shall have breached in any material respect any
representation, warranty or covenant contained therein;
(d) there shall have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on any
national securities exchange in the United States, including
the NASDAQ stock market, or the Frankfurt Stock Exchange for a
period of more than one full trading day, (ii) the declaration
of any banking moratorium or any suspension of payments in
respect of banks in the United States or Germany, (iii) the
commencement of a war, armed hostilities or any other
international or national calamity involving the United States
or Germany, or (iv) in the case of any of the foregoing
existing at the time of the execution of the Merger Agreement,
a material acceleration or worsening thereof;
(e) any Person, entity or "group" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than Parent,
Sub or the Option Grantors or any of their respective
affiliates (and other than persons, entities or groups that
are permitted to report their ownership of Shares with the SEC
on Schedule 13G) shall have become the beneficial owner (as
that term is used in Rule 13d-3 under the Exchange Act) of
more than 20% of the outstanding Shares;
(f) the Company or any of its Subsidiaries (or the Board
of Directors or any committee thereof of the Company) shall
have approved, recommended, authorized, filed a Schedule 14D-9
not opposing, or publicly announced its intention to enter
into, any Acquisition Transaction (other than with Parent, Sub
or any of their affiliates);
(g) there shall have occurred any change, condition,
event or development in the business, condition (financial or
otherwise), assets, liabilities, results of operations or
A-2
<PAGE>
prospects of the Company or any of its Subsidiaries that is
materially adverse to the Company and its Subsidiaries taken
as a whole or that materially impairs the ability of the
parties to consummate the Offer or the Merger;
(h) the Company shall have breached or failed to comply
in any material respect with any of its obligations,
covenants, or agreements under the Merger Agreement or the
Company Option Agreement or any representation or warranty of
the Company contained in the Merger Agreement that is
qualified as to materiality shall not be true and correct, or
any such representation or warranty that is not so qualified
shall not be true and correct in any material respect, in each
case either as of when made or at and as of any time
thereafter;
(i) the Merger Agreement shall have been terminated
pursuant to its terms or shall have been amended pursuant to
its terms to provide for such termination or amendment of the
Offer; or
(j) the Board of Directors or any committee thereof of
the Company shall have modified or amended in any manner
adverse to Parent or Sub or shall have withdrawn its
authorization, approval or recommendation of the Offer, the
Merger or the Merger Agreement, or shall have resolved to do
any of the foregoing or shall have failed to have reiterated
its recommendation within five business days of any written
request by Parent or Sub therefor;
which, in the good faith judgment of Parent or Sub, in any case, and
regardless of the circumstances (including any action or inaction by Parent
or Sub or any of their affiliates permitted by the Merger Agreement) giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with acceptance for payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent
and Sub and may be asserted regardless of the circumstances (including any
action or inaction by Parent or Sub or any of their affiliates permitted by
the Merger Agreement giving rise to any such condition) or waived by Parent
or Sub in whole or in part at any time or from time to time in its discretion
subject to the terms and conditions of the Merger Agreement; PROVIDED,
HOWEVER, that the Minimum Condition may not be waived without the Company's
consent. The failure of Parent or Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by Parent or Sub concerning the events
described above will be final and binding on all parties.
A-3
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Exhibit 99.2
DEP CORPORATION
NEWS RELEASE
FOR IMMEDIATE RELEASE
DEP Corporation International Michael Rolf Fischer
2101 East Via Arado Contact: Corporate Communications
Rancho Dominquez, CA 90220 Phone: 011-49-211-797-4191
U.S. Contact: D. Lee Johnson
DEP Corporation
Phone: 310/604-0777
Ann Julsen
Sitrick and Company
Phone: 310/788-2850
HENKEL TO ACQUIRE DEP CORPORATION/USA
HENKEL TO ENTER THE U.S. COSMETICS MARKET
DUSSELDORF/LOS ANGELES -- JULY 14, 1998 -- Henkel KGaA, Dusseldorf, Germany
and DEP Corporation (NASDAQ SMALLCAP MARKET: DEPCC), Los Angeles, California,
USA announced today that they had entered into a merger agreement for U.S. $93
million providing for Henkel's acquisition of DEP, which includes debt of
approximately U.S. $53 million.
In accordance with the merger agreement, a subsidiary of Henkel will make a
cash tender offer to purchase all of DEP's approximately 6.9 million outstanding
shares of common stock for U.S. $5.25 per share, which offer is expected to
commence by July 20, 1998. Any shares not purchased in the tender offer will be
acquired in a second-step merger for U.S. $5.25 per share in cash.
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Berglass family stockholders owning an aggregate of approximately one-third
of DEP's common stock have agreed to tender their shares into Henkel's tender
offer and to grant Henkel an irrevocable option to buy their shares, exercisable
in certain circumstances.
DEP Corporation is engaged in developing, formulating, manufacturing,
marketing and distributing a wide range of trademarked personal care products.
With its 12 main brands including the market leading hair styling lines of
L.A. Looks and DEP are sold in more than 100,000 outlets throughout the United
States. For the year ended July 31, 1997, DEP Corporation realized sales of
U.S. $115 million and employed 300 people.
Robert Berglass, President and CEO of DEP Corporation, commented on the
transaction: "We are delighted with the merger of Henkel and DEP Corporation.
Henkel's proficiency and experience in international marketing, coupled with
DEP's marketing expertise and brand recognition in the United States, will
establish the combined entities as an important presence in this personal care
products marketplace. Henkel also offers an exciting pipeline of innovative
products and adds the financial resources of an international group that are
necessary to remain competitive in this industry. We believe that the merger
will prove beneficial to the future growth and success of DEP, its employees and
customers."
Henkel was founded in 1876 and is headquartered in Dusseldorf, Germany.
The Henkel Group is a worldwide specialist in applied chemistry, consisting of
more than 330 companies operating in over 60 countries. Henkel is the largest
global producer of oleochemical products based on renewable raw materials. It
also holds global market leadership positions in adhesives and surface
technologies. The detergents/household cleansers and cosmetics/toiletries
divisions have market leader positions in Europe. Key segments of the
cosmetics/toiletries division
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include hair care and body care products. The Henkel Group realized sales of
DM 20.1 billion (approximately U.S. $11.2 billion) in 1997.
Prof. Dr. Uwe Specht, Executive Vice President Cosmetics/Toiletries of
Henkel KGaA, Dusseldorf noted: "We are pleased to have reached this agreement
with DEP. With this acquisition, Henkel is entering the U.S. cosmetics market.
We are confident of developing and strengthening DEP's market position in the
United States, based on the success of our already successful brands and product
concepts in Europe and other parts of the world. The acquisition of DEP is a
significant milestone in our drive to strengthen Henkel's position in the
international cosmetics market."
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Exhibit 99.3
[DEP CORPORATION LOGO]
2101 EAST VIA ARADO
RANCHO DOMINGUEZ, CALIFORNIA 90220-6189
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 5, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of DEP Corporation, a Delaware corporation (the "Company"),
of proxies for use at the Annual Meeting of Stockholders to be held on Friday,
December 5, 1997, at 10:00 a.m. (local time), at the Holiday Inn, 19800 South
Vermont Avenue, Torrance, California, and at any adjournment or postponement
thereof (the "Meeting").
Record holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), as of the close of business on October 8, 1997 will be entitled
to receive notice of, and to vote at, the Meeting. As of October 8, 1997, there
were 6,876,140 shares of Common Stock outstanding. Presence at the Meeting, in
person or by proxy, of a majority of the outstanding Common Stock will
constitute a quorum for the transaction of business at the Meeting. Each share
of the Common Stock will be entitled to cast one vote on each matter presented
to the stockholders. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions (which are effective on all matters other than the
election of directors) will be considered as "against" votes for the purpose of
calculating whether the requisite percentage of votes cast has approved a
proposal, whereas broker non-votes will not be counted as cast.
Shares represented by duly executed proxies received prior to the Meeting
will be voted at the Meeting. Such shares will be voted in accordance with all
instructions validly given by a stockholder. When no such instruction is given,
the shares will be voted in accordance with the recommendation of the Board of
Directors of the Company (the "Board") indicated on the proxy.
THE COMPANY WILL PAY ALL EXPENSES OF SOLICITING PROXIES. In addition to the
solicitation being made hereby, solicitation may be made in person or by
telephone by Company officers, directors or employees who will not be specially
compensated therefor. Upon request, the Company will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding proxy materials to beneficial owners of the
Common Stock.
A proxy may be revoked at any time before it is voted by giving written
notice of revocation to the Secretary of the Company, by submission of a
subsequent proxy or by attending and voting in person at the Meeting.
This Proxy Statement and the enclosed form of proxy are being mailed to
holders of the Common Stock on or about October 31, 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is set forth as of October 1, 1997 with respect to
the Company's chief executive officer and four most highly compensated other
officers, each director and nominee, all directors and executive officers as a
group, and each other person or group known to the Company to be the beneficial
owner of more than 5% of the outstanding shares of the Common Stock:
<TABLE>
<CAPTION>
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OPTIONS PERCENT
OF BENEFICIAL OWNERS(1) OWNED(2) EXERCISABLE(2) OF CLASS
- -------------------------------------------------------------- --------------- -------------------- -------------
<S> <C> <C> <C>
DIRECTORS, NOMINEES AND OFFICERS
Robert Berglass............................................... 1,914,693 153,233 27.2
Judith R. Berglass(3)......................................... 510,296 38,500 7.4
Grant W. Johnson.............................................. 78,994 73,500 1.1
Philip I. Wilber.............................................. 6,000 6,000 *
Michael Leiner................................................ 15,000 -- *
Alexander L. Kyman............................................ 1,000 -- *
Michael Nave.................................................. 1,087 -- *
Jerome P. Alpin............................................... 68,416 47,500 *
David Berglass................................................ 23,287 10,667 *
D. Lee Johnson................................................ 8,401 6,667 *
All Directors, Nominees and Officers (12 Persons)............. 2,642,408 349,301 36.6
OTHER 5% BENEFICIAL OWNERS None............................... -- -- --
</TABLE>
- ------------------------
* Denotes less than 1%. Except as otherwise indicated, each person shown in
the above table has sole voting and dispositive power over the Common Stock
or options.
(1) The address for each director, nominee and officer is c/o DEP Corporation,
2101 East Via Arado, Rancho Dominguez, California 90220-6189.
(2) Includes options exercisable on October 1, 1997 or within 60 days
thereafter.
(3) Includes 400,000 shares of the Common Stock held in the Berglass 1995
Irrevocable Trust dated June 27, 1995 for which Mrs. Berglass is the
Trustee.
ELECTION OF DIRECTORS
The Company's Board currently consists of six directors who are divided into
three classes. The term of office of the Class I directors, Messrs. Kyman and
Leiner, expires at the Meeting and Messrs. Kyman and Nave have been nominated by
the Board to serve as Class I directors for a term of three years. The nominees
have indicated to the Company their availability and willingness to serve in
such capacity. However, if prior to the voting for directors, any of the
nominees become unavailable or unable to serve as a director, the proxy holders
will vote for a substitute nominee in accordance with their best judgment.
2
<PAGE>
Information concerning the Class I director nominees and the continuing
directors, based on data furnished by them, is set forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- --------------------------------- ----- ------------------------------------------------------------------------
<S> <C> <C>
NOMINEES:
CLASS I DIRECTORS
(terms expire in 2000)
Alexander L. Kyman 67 Alexander L. Kyman has been a director of the Company since December
1994. Since January 1, 1994, Mr. Kyman has been the principal of Alex
Kyman & Associates, a business and financial consulting firm. For over
27 years prior thereto he was employed by City National Bank where he
served as Vice Chairman for one year and as President and Chief
Operating Officer for eight years prior thereto.
Michael Nave 60 Mr. Nave has been Publisher and President of BSB Communications, Inc.,
publishers of beauty store and professional trade magazines to the
professional beauty industry since 1994. Since June 1997 he has served
as Chairman of the Board of Mercury Distributing Company. For over 25
years prior thereto he served as President and Chief Executive of
Mercury Distributing Company, a beauty products distributorship.
CONTINUING DIRECTORS:
CLASS II DIRECTORS
(terms expire in 1998)
Judith R. Berglass 45 Judith R. Berglass is a Senior Vice President and has been employed by
the Company since 1983. She has served as the Company's Vice President,
Corporate Development since 1984, a director since 1985 and since 1986
has also served as Secretary. For the three years prior to joining the
Company, she was Vice President of CLF Associates, a management
consulting firm. Mrs. Berglass is the wife of the President.
Philip I. Wilber 70 Philip I. Wilber has been a director of the Company since October 1993.
Mr. Wilber founded Drug Emporium, Inc. in 1977 and served as its
President, Chief Executive Officer and Chairman of the Board until 1989,
and as its Chairman of the Board from 1989 until his retirement in
January 1992. He then served as a director until January 1993 and has
been a consultant since that time. Drug Emporium is a chain of 136
company-owned deep discount drug stores which also provides certain
services for 100 independently franchised stores operating under the
same name.
CONTINUING DIRECTORS:
CLASS III DIRECTORS
(terms to expire in 1999)
Robert Berglass 59 Robert Berglass has served as President of the Company since
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- --------------------------------- ----- ------------------------------------------------------------------------
1969 and has been Chairman of the Board of Directors since 1971.
Immediately prior to joining the Company, he was a Vice President of
Faberge, Inc. He has more than 35 years of experience in the personal
care products industry.
<S> <C> <C>
Grant W. Johnson 53 Grant W. Johnson is the Senior Vice President, Finance and Chief
Financial Officer and has been employed by the Company since 1985 and as
a director since 1986. For approximately eight years preceding his
joining the Company, he was Vice President, Finance of Vidal Sassoon,
Inc. Mr. Johnson, a certified public accountant, also has seven years of
experience with Deloitte & Touche LLP.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
The Board held seven meetings during fiscal 1997. Non-employee directors
receive an annual retainer of $6,000, plus $1,000 for each Board meeting
attended and $500 for each committee meeting attended on a date different from a
Board meeting. In addition, each non-employee director is entitled to receive
$2,000 for service as chairman of a committee of the Board. During fiscal year
1997, each director attended at least 75% of all meetings of the Board and any
committees of the Board on which such director served.
Under the Company's 1992 Stock Option Plan, each director of the Company
other than the Company's Chairman is entitled to receive an option grant
covering 1,000 shares of the Common Stock on the last business day of each
fiscal year, at an exercise price equal to the last reported sale price on such
day. In July 1997, each director, other than Mr. Berglass, automatically
received an option for 1,000 shares of Common Stock pursuant to the Company's
1992 Stock Option Plan. Pursuant to an amendment to such Plan that was approved
by the Company's stockholders on January 9, 1996, any person becoming a director
on or after August 1, 1994 will receive a one-time grant of an option to
purchase 5,000 shares of the Common Stock at an exercise price equal to the last
reported sale price on the date of grant. Pursuant to the foregoing amendment,
if elected, on December 5, 1997 Mr. Nave will be granted an option to purchase
5,000 shares of the Common Stock at an exercise price equal to the last reported
sale price on the date of grant.
The Board currently has an Audit Committee, a Compensation and Management
Stock Option Committee (the "Compensation Committee"), and an Employee Stock
Option Committee. The Board does not have a standing Nominating Committee.
During fiscal 1997, the Audit Committee's responsibilities included
selecting the Company's independent auditors, examining the results of the
annual audit and reviewing the Company's internal accounting controls and
estimated fees for services performed by the Company's independent auditors. In
addition, the Audit Committee advised the Board as to particular accounting or
financial matters which came to its attention during the course of its review.
Messrs. Kyman and Leiner are currently the members of the Audit Committee, which
held two meetings during fiscal 1997.
The Compensation Committee is responsible for determining compensation for
the President and stock option grants to all executive officers. Messrs. Wilber
and Leiner are currently the members of the Compensation Committee, which held
three meetings during fiscal 1997.
The Employee Stock Option Committee is responsible for determining stock
option grants to employees who are not executive officers. Mr. Berglass is
currently the sole member of the Employee Stock Option Committee, which met
twice during fiscal 1997.
4
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish the Company with copies of
such reports. Based on the Company's review of the copies of those reports and
written representations which it has received, the Company believes that all
such filings have been made.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for fiscal years 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------
FISCAL ------------------------ STOCK OPTIONS ALL OTHER
NAME YEAR SALARY(2) BONUS(3) NUMBER GRANTED COMPENSATION(4)
- --------------------------------- ----------- ----------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Robert Berglass President and 1997 $ 567,967 $ 0 100,000 $ 1,750
Chief Executive Officer 1996 546,892 0 0 1,750
1995 523,651 0 0 1,750
Grant W. Johnson Senior Vice 1997 222,500 9,999 8,500 2,416
President and Chief Financial 1996 209,814 0 0 2,284
Officer 1995 204,990 0 26,000 1,210
Jerome P. Alpin Senior Vice 1997 212,300 9,999 7,500 4,579
President and General Manager, 1996 200,168 0 0 3,419
1995 195,594 17,970 25,000 2,060
International Sales and Marketing
Stephen R. Berry(5) Vice 1997 151,900 0 3,000 1,815
President, Sales 1996 151,900 0 0 1,815
1995 142,200 9,157 10,000 1,293
D. Lee Johnson Vice President, 1997 139,400 9,999 5,000 1,567
Administration 1996 134,750 0 0 1,560
1995 103,077 17,970 8,500 848
</TABLE>
- ------------------------
(1) Mr. Berglass' base salary remained unchanged throughout the fiscal years
shown on the table. However, during the period March 1995 through October
1995 Messrs. Berglass, Grant Johnson and Alpin participated in voluntary
salary reductions which amounted to 15% for Mr. Berglass and 10% for Messrs.
Johnson and Alpin.
(2) Compensation deferred at the election of the executive pursuant to the DEP
Corporation Executive Deferred Compensation Plan (the "Deferred Compensation
Plan") is included as salary in the year earned. The Deferred Compensation
Plan was terminated in November 1995.
(3) Bonuses are included in the fiscal year earned, but are typically paid in
the following fiscal year. Bonuses paid are subject to the Company's 1993
Stock Target Ownership Plan (the "1993 Plan") pursuant to which executives
receive a portion of their bonus compensation in shares of Common Stock
based on the fair market value of such stock. Since the 1997 bonuses paid to
Messrs. Alpin,
5
<PAGE>
Grant Johnson and D. Lee Johnson were under $10,000, pursuant to the terms
of the 1993 Plan, no percentage of such bonus was allocable to Common Stock.
The fiscal 1995 bonuses paid to Mr. Alpin and Mr. D. Lee Johnson included
the fair market value of 1,734 and 1,734 shares of Common Stock,
respectively.
(4) Amounts paid in fiscal 1997 represent (i) the value of group and
supplemental term life insurance provided in excess of $50,000 basic
coverage of $1,350 for Mr. Berglass, $2,016 for Mr. Grant Johnson, $4,179
for Mr. Alpin, $1,415 for Mr. Berry and $1,167 for Mr. D. Lee Johnson; and
(ii) $400 for each of the named officers as matching contributions under the
Company's 401(k) plan. No contribution was made by the Company to its Profit
Sharing Plan for fiscal 1997, 1996 or 1995.
(5) Mr. Berry resigned from the Company effective July 23, 1997.
CHANGE IN CONTROL BENEFITS
The Company has entered into an Executive Severance Agreement (the
"Severance Agreement") and a Retention Bonus Agreement (the "Retention
Agreement") (collectively, the "Agreements") with each of the executive officers
named in the Summary Compensation Table above, and certain other executive
officers, with the exception of Messrs. Berglass and Berry, who are covered only
by a Severance Agreement. The Agreements provide for a severance payment and a
retention bonus payment should a change in control of the Company occur.
The Severance Agreement provides an executive with a lump sum payment based
on an executive's current annual base salary, as of the date of termination, as
follows: (1) the President and senior vice presidents would receive payments
equal to 18 months of their annual base salary, (2) certain other executive
officers would receive payments equal to 12 months of their annual base salary,
and (3) other vice presidents and key employees would receive payments equal to
six months of their annual base salary plus one month of such employee's annual
base salary multiplied by a number equal to the number of years such employee
has been employed by the Company, provided, however, that the maximum payment
would not exceed 18 months of such employee's annual base salary. In addition,
all such executives and key employees would receive life, disability, accident
and group health insurance benefits for a like period of time.
A change in control will be deemed to have occurred if: (i) Robert Berglass,
Judith R. Berglass and any controlled affiliate thereof no longer is the
beneficial owner of securities of the Company representing 26% or more of the
combined voting power of the Company's then outstanding securities; (ii) within
a two consecutive year period, members of the Board at the beginning of such
period and approved successors no longer constitute a majority of such Board, or
(iii) stockholders of the Company entitled to vote thereon approve a merger or
consolidation (with certain exceptions) or a plan of complete liquidation.
Neither an executive nor a key employee is entitled to receive any
compensation or benefits under the Severance Agreement subsequent to a change in
control if such employee's employment is terminated (i) due to the disability of
such employee, (ii) by the Company, for "just cause," as defined in the
Severance Agreement or (iii) by such employee other than for "good reason," as
defined in the Severance Agreement. Each Severance Agreement will terminate
three years from the date of execution (August 15, 1995) and will automatically
be extended for one year periods unless either party gives notice to the other
of its intent not to extend the term.
The Retention Agreement provides that in the event a change in control
occurs after such executive enters into such Retention Agreement and (i) the
executive remains in the employ of the Company for a period of six months after
such change in control or (ii) if such executive is terminated by the Company or
a successor, unless such termination is for "just cause," as defined in the
Retention Agreement or voluntarily by the executive other than for "good
reason," as defined in the Retention Agreement, then each executive listed on
the Summary Compensation Table above, with the exception of Messrs. Berglass
6
<PAGE>
and Berry, will receive a lump sum payment equal to approximately six months of
the executive's annual base salary.
If payments and benefits under the Agreements pursuant to a change in
control would subject such employees to excise tax under Section 4999 of the
Internal Revenue Code or would result in the Company's loss of a federal income
tax deduction for such payments, then such payments and benefits shall
automatically be reduced to the extent necessary to avoid the imposition of such
tax penalty.
The Board believes that the Agreements, which were unanimously approved by
the independent, non-management directors, reinforce and encourage the continued
attention and dedication of members of the Company's management team to their
assigned duties. The Agreements protect the best interests of the stockholders
by assuring such executives and key employees a level of financial security and
inducing such executives to remain in the employ of the Company. The Board
believes that these advantages outweigh the cost of such benefits.
OPTION GRANTS
The following table shows information regarding grants of stock options
during the fiscal year ended July 31, 1997 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
----------------------
<S> <C> <C> <C> <C> <C> <C>
APPRECIATION
% OF TOTAL EXERCISE FOR OPTION TERM(3)
NUMBER OF OPTIONS OR BASE
OPTIONS GRANTED IN PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE 5% 10%
- -------------------------------------- ------------- --------------------- ----------- ------------- ---------- ----------
Robert Berglass....................... 100,000 57% $ 1.63 11/8/01 $ 125,000 $ 200,000
Grant W. Johnson...................... 1,000 1% 1.31 7/31/02 360 800
7,500 4% 1.63 11/8/01 9,375 15,000
Jerome P. Alpin....................... 7,500 4% 1.63 11/8/01 9,375 15,000
Stephen R. Berry...................... 3,000 2% 1.63 11/8/01 3,750 6,000
D. Lee Johnson........................ 5,000 3% 1.63 11/8/01 6,250 10,000
</TABLE>
- ------------------------
(1) All options are non-qualified stock options and have exercise prices equal
to the fair market value of the Common Stock as of June 8, 1996, except the
1,000 shares of incentive stock options automatically granted to Mr. Grant
Johnson for his services as a director on July 31, 1997, which have an
exercise price equal to the fair market value of the Common Stock at the
date of grant. All options granted in fiscal 1997 are exercisable in three
equal installments and exercisable in full three years from the date of
grant. However, all options would be immediately exercisable in certain
events as provided for in the Company's 1992 Stock Option Plan. The closing
price for the Common Stock on the NASDAQ SmallCap Market on July 31, 1997,
was $1.31.
(2) Options with respect to 174,000 shares of Common Stock were granted to
employees, executives, and directors during fiscal 1997.
(3) The assumed rates of appreciation are calculated from the date of grant,
based upon the fair market value of the Common Stock on such date, through
the last date the option may be exercised. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the future
7
<PAGE>
performance of the Common Stock, including overall stock market conditions.
The Company does not represent that the values reflected in this table will
or will not be realized.
OPTION EXERCISES AND VALUES
The following table presents information regarding options exercised to
acquire shares of the Company's Common Stock during fiscal 1997 and the values
of unexercised options held at the end of fiscal 1997:
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS
SHARES NUMBER OF UNEXERCISED AT FISCAL YEAR
ACQUIRED OPTIONS AT FISCAL YEAR END END(1)
EXERCISE VALUE ----------------------------------- -------------------
NAME ON REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- --------------------- ------------------- --------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Robert Berglass...... 0 $ 0 153,233 76,767 $ 0
Grant W. Johnson..... 0 0 73,500 7,000 0
Jerome P. Alpin...... 0 0 47,500 5,000 0
Stephen R. Berry..... 0 0 9,000 21,000 0
D. Lee Johnson....... 0 0 6,667 6,833 0
<CAPTION>
NAME UNEXERCISABLE
- --------------------- -----------------------
<S> <C>
Robert Berglass...... $ 0
Grant W. Johnson..... 0
Jerome P. Alpin...... 0
Stephen R. Berry..... 0
D. Lee Johnson....... 0
</TABLE>
- ------------------------
(1) Based on the difference between the closing price on the NASDAQ SmallCap
Market of $1.31 for the Common Stock at July 31, 1997, and the exercise
price of options having an exercise price lower than such closing prices.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies are designed to develop a high
quality management team and to motivate this team to achieve the Company's
short-term and long-term goals. With this in mind, the Company seeks to develop
overall compensation programs which provide the competitive compensation levels
necessary to attract and retain experienced, innovative, and well-qualified
executives from the health and beauty care industry and the Company's own middle
management.
Within this framework, the Company's Compensation Committee is responsible
for determining all aspects of the compensation for its president and chief
executive officer (the "CEO"), as well as the stock options to be granted to the
Company's other executive officers. The CEO is responsible for establishing all
compensation for the other executive officers, apart from their stock options.
As one of the factors in its review of compensation matters, the
Compensation Committee considers the anticipated tax effect on the Company and
executives of various payments and benefits. Section 162(m) of the Internal
Revenue Code generally disallows the Company's deduction for compensation in
excess of $1,000,000 paid to the CEO or to any of the four other most highly
compensated executive officers, unless such excess compensation qualifies as
"performance-based compensation." The Compensation Committee will not
necessarily limit executive compensation to that which is deductible by the
Company under Section 162(m), but believes that Section 162(m) will not limit
the deductibility of any compensation granted to date.
The three key components of the Company's compensation programs are base
salary, performance bonuses and stock options.
8
<PAGE>
BASE SALARY
Base salary levels for all executive officers are reviewed annually. As part
of this review, the Company takes into account the compensation packages offered
by other companies in the health and beauty care industry and focuses particular
attention on the compensation paid by a group of the Company's peers (the "Peer
Group"). The Company also gives consideration to the experience,
responsibilities, management and leadership abilities of its individual
executive officers and their actual performance on behalf of the Company.
PERFORMANCE BONUSES
At the commencement of each fiscal year, the Company seeks to provide such
executives with significant performance bonuses closely linked to their
achievement of objective financial goals, such as growth in net sales, earnings
before interest, income taxes, depreciation and amortization (EBITDA), and
operating income and to more subjective goals, such as organizational
development, team work and corporate efficiency which are based upon and exceed
the Company's achievements in the prior year. In addition, at the end of each
fiscal year, the Company may award bonuses to recognize special contributions
made by an executive or his department to long-term strategic goals not
specifically addressed in the individual incentive programs. In compliance with
the 1993 Stock Target Ownership Plan, a portion of the executive's performance
bonus may be paid in the form of Common Stock, with the remainder paid in cash.
STOCK OPTIONS
The Compensation Committee utilizes stock options as a key incentive because
they provide executives with the opportunity to become stockholders of the
Company and thereby share in the potential long-term appreciation in value of
the Company's Common Stock. The Compensation Committee believes that stock
options are beneficial to the Company and its stockholders because they directly
align the interests of the Company's executives with those of its other
stockholders.
The Compensation Committee determines the amount of stock options, if any,
to be granted from time-to-time to executive officers pursuant to the Company's
1992 Stock Option Plan. The majority of the options are incentive stock options
which are granted at no less than prevailing market value. In the case of CEO
incentive stock options, the exercise price is at least 110% of such prevailing
value. Accordingly, stock options will only benefit executives if the price of
the Company's Common Stock increases over the option term.
The number of shares of Common Stock subject to individual options is
usually based on the performance of the executive team as a group, as well as on
departmental and individual contributions. Options are granted as compensation
for performance and as an incentive to promote the future growth and
profitability of the Company. In determining the number of shares of Common
Stock subject to such options, the Committee considers the option and other
compensation policies of the industry, with particular attention to the Peer
Group. It also takes into account the outstanding options already held by each
individual executive officer, and the projected value of the options based on
historical and assumed appreciation rates of the Company's Common Stock.
CEO COMPENSATION
As is the case for the other executive officers, the CEO's compensation
package consists of base salary, performance bonuses and stock options.
The CEO's base compensation for fiscal 1997 was set by the Compensation
Committee in October 1996 and remained unchanged from the fiscal 1995 level. In
determining Mr. Berglass' compensation, the Compensation Committee considered
the Company's performance and its achievement of its financial
9
<PAGE>
and business goals and evaluated Mr. Berglass' overall individual performance,
both in the prior fiscal year and in the prior five years. The Compensation
Committee does not assign relative weights or rankings to each of these factors,
but instead makes a subjective determination based on consideration of all such
factors.
The Compensation Committee met on September 16 and 17, 1997 to consider Mr.
Berglass' base salary and performance bonus for fiscal 1998. Based upon the
Company's financial results for fiscal 1997, and the two years prior thereto,
the Compensation Committee determined not to increase Mr. Berglass' base salary
for fiscal 1998. The Compensation Committee developed a three-year performance
bonus plan for the CEO. Under the terms of such Performance Bonus Plan, the CEO
would be entitled to be paid a bonus only if the Company exceeds the net income
levels projected for fiscal 1998, 1999 and 2000 pursuant to the Company's
Amended Plan of Reorganization dated August 23, 1996 (the Plan). A performance
bonus of five percent (5%) of net income would be payable for each of the fiscal
years covered by the bonus plan if net income, as defined in the Plan, is
exceeded by five percent (5%).
The Plan further provides that the CEO would be eligible to earn a maximum
performance bonus of seven and one-half percent (7 1/2%) of net income for the
fiscal years ending July 31, 1999 and 2000 if net income in such year, as
defined in the Plan, is exceeded by seven and one-half percent (7 1/2%) and net
income, as defined in the Plan, in the prior year is exceeded by five percent
(5%). Furthermore, if the maximum performance bonus is achieved in fiscal 1999,
then the CEO would be eligible to earn a maximum performance bonus of ten
percent (10%) of net income for the fiscal year ending July 31, 2000, if net
income in such year, as defined in the Plan, is exceeded by ten percent (10%).
COMPENSATION COMMITTEE
Philip I. Wilber, Chairman
Michael Leiner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Wilber and Leiner served on the Compensation Committee during 1997.
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's total return to stockholders over
a five-year period commencing August 1, 1992 against the NASDAQ Market index and
the Peer Group. The Peer Group currently consists of Chattem, Inc., Del
Laboratories, Inc. and The Lamaur Corporation. The Peer Group for fiscal 1996
(the "1996 Group") consisted of Chattem, Inc.; Del Laboratories, Inc. and Mem
Company, Inc. In October of 1996 the Mem Company, Inc. was acquired by
Renaissance Cosmetics, Inc. Renaissance Cosmetics, Inc. is a privately held
company and, as such, information regarding its results are not available.
Therefore, the Company added The Lamaur Corporation to the Peer Group for fiscal
1997, which the Company believes to be comparable to it and other members of
such Peer Group.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DEP
(FISCAL YEAR COVERED) CORPORATION NASDAQ 1996 GROUP PEER GROUP
- --------------------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
1992........... 100 100 100 100
1993........... 57 122 125 130
1994........... 23 125 98 99
1995........... 17 176 132 138
1996........... 12 191 198 184
1997........... 12 282 373 323
</TABLE>
ASSUMPTIONS:
Assumes $100 invested on August 1, 1992 with reinvestment of any dividends.
No dividends were paid on the Company's securities during the period.
10
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors for the
fiscal year ended July 31, 1997 and has been selected by the Company's Audit
Committee to serve as the independent auditors for the fiscal year ending July
31, 1998. Representatives of such firm are expected to be present at the Meeting
and will have the opportunity to respond to appropriate questions and to make a
statement if they desire to do so.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended for consideration at the 1998 Annual
Meeting of Stockholders must be received by July 25, 1998 and otherwise conform
to the applicable requirements of the Exchange Act to be included in the proxy
materials relating to that meeting. It is recommended that any such proposals be
sent to the Secretary of the Company by certified mail, return-receipt
requested.
ANNUAL REPORT
The Annual Report to Stockholders covering the Company's fiscal year ended
July 31, 1997 is being mailed to stockholders of record and beneficial
stockholders at the same time as this Proxy Statement. The fiscal 1997 Annual
Report to Stockholders includes the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission (not including exhibits).
The Company will provide without charge to any person, on written request of
such person, a copy of the Company's Annual Report to Stockholders. Written
request for such copies should be addressed to Investor Relations, DEP
Corporation, 2101 East Via Arado, Rancho Dominguez, California 90220.
OTHER MATTERS
The Board does not intend to bring any matter before the Meeting except as
specifically indicated in the notice, nor does the Board know of any matters
which anyone else proposes to present for action at the Meeting. If any other
matters properly come before the Meeting, the persons named in the enclosed
proxy, or their duly constituted substitutes acting at the Meeting, will be
authorized to vote or otherwise act thereon in accordance with their best
judgment.
The Compensation Committee Report and the Company Stock Price Performance
Graph that appear herein shall not be deemed to be soliciting material or to be
filed with the Securities and Exchange Commission under the Securities Act of
1933 or Exchange Act and, unless specifically incorporated by the Company, shall
not be deemed incorporated by reference in any document filed under such Acts.
ALL STOCKHOLDERS ARE URGED TO PROMPTLY VOTE, SIGN AND MAIL THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED.
/S/__JUDITH R. BERGLASS____________
Judith R. Berglass
Secretary
Rancho Dominguez, California
October 31, 1997
11
<PAGE>
Exhibit 99.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of March 23,
1998 by and between Robert Berglass, an individual ("Berglass"), and DEP
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Berglass is currently the Chairman, President and Chief Executive
Officer of the Company; and
WHEREAS, the Board of Directors of DEP has determined that it is in the
best interests of DEP and the stockholders of DEP that Berglass' continued
employment by the Company be assured and the terms of such employment
established pursuant to this Agreement; and
WHEREAS, Berglass is willing to enter into an employment agreement on the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties do hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) POSITION AND REPORTING. Subject to the terms set forth herein,
the Company agrees to employ Berglass as Chairman, President and Chief Executive
Officer and Berglass hereby accepts such employment. During the term of his
employment hereunder, Berglass will report solely and directly to the Board of
Directors of the Company (the "Board"). During the term of his employment
hereunder, the Company will nominate and recommend Berglass for re-election as a
director at each annual meeting of stockholders coinciding with the expiration
of his term as a director.
(b) FULL TIME AND BEST EFFORTS. During the term of his employment
with the Company; Berglass will devote substantially all of his business time,
except for sick leave, vacations and approved leaves of absence, and use his
best efforts to advance the business and welfare of the Company. During the
term of Berglass' employment, he will not engage in any other employment or
business activities that would be directly harmful or detrimental to, or that
may compete with, the business and affairs of the Company, or that would
interfere with his duties hereunder. However, the foregoing will not prevent
Berglass from devoting a reasonable amount of time to personal investment, civic
and charitable activities.
<PAGE>
(c) DUTIES. Berglass' duties during the term of his employment
hereunder shall be consistent with those in effect immediately prior to the
execution of this Agreement and shall be such as are customarily associated with
his position in a corporation of the size and nature of the Company, consistent
with the Bylaws of the Company. Berglass' principal place of business shall be
in Los Angeles, California or its neighboring communities, subject to normal and
reasonable requirements for business travel. Subject to the authority of the
Board of Directors, Berglass shall have the authority to hire or terminate, and
to establish compensation for all subordinate officers and employees of the
Company and to establish stock option levels for all non-executive officer
subordinate employees of the Company.
(d) COMPANY POLICIES. The employment relationship between the
parties will be governed by the general employment policies and practices of the
Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement will control.
(e) TERM. The term of this Agreement ("Employment Term") will begin
as of March 23, 1998 and end on March 23, 2003. Such term shall automatically
be renewed for additional one year terms unless either party has given written
notice to the other at least six months prior to the expiration of this
Agreement.
2. COMPENSATION AND BENEFITS.
(a) SALARY. Berglass will receive for services to be rendered
hereunder a base salary at the annual rate of Five Hundred Sixty-Five Thousand
Three Hundred and Fifty Four Dollars ($565,354) payable at least as frequently
as every other week and subject to payroll deductions as may be necessary or
customary in respect of the Company's salaried employees. Such amount, as it
may be increased from time to time hereunder, is referred to herein as the "Base
Salary". The Base Salary will be subject to review at least annually and to
increase (but not decrease) at such times and in such amounts as the Board may
approve. In the event that the Company, in its sole discretion, from time to
time determines to increase the Base Salary, such increased amount shall, from
and after the effective date of the increase, constitute "Base Salary" for
purposes of this Agreement.
(b) PARTICIPATION IN INSURANCE AND BENEFIT PLANS. During the
Employment Term, DEP shall maintain in full force and effect, at its expense,
the $1,000,000 life insurance policy heretofore maintained by it on Berglass'
life (the "Berglass Life Policy"). In addition, Berglass and his wife will be
entitled to participate in any insurance, hospitalization, medical, dental,
health, accident, disability or similar plan or program of the Company now
existing or established hereafter until such time, in the case of each such
person, as he or she shall be entitled to medical and hospital benefits under
Medicare. In the event Berglass or his wife is not eligible to participate in
any plan or program of the Company under the general provisions thereof, the
Company will make arrangements for such participation (including any necessary
amendment of the applicable plan) if permitted by applicable law and, except as
otherwise provided in Sections 5(d), 5(e) and 6(c) if the cost of doing so is
not unreasonable or if such cost
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<PAGE>
is reimbursed to the Company by the affected person. Following the Employment
Term, or if later the termination of Berglass' employment, the provision of any
benefit to Berglass' wife pursuant to this Section 2(b) shall be at her election
and expense. The Company may, in its sole discretion and from time to time,
amend, eliminate or establish additional benefit programs as it deems
appropriate. Berglass will also participate in all fringe benefits offered by
the Company to any of its senior Executives.
3. INCENTIVE, BONUS AND OPTION PLANS. During the Employment Term,
Berglass will be entitled to participate in the bonus plan set forth in Exhibit
A attached hereto. Upon expiration of such plan, a new performance bonus
program will be developed, which shall provide the opportunity for Berglass to
receive future bonuses on a basis: (a) no less favorable than provided under the
plan set forth in Exhibit A; and (b) no less favorable than those applying to
other senior Executives of the Company. In addition, Berglass will, during the
Employment Term, be entitled to participate on terms and conditions appropriate
to his position and responsibilities at the Company in deferred compensation,
retirement, stock option and other compensation plans of the Company currently
or hereafter made available by the Company to senior Executives of the Company
4. PERQUISITES, VACATIONS AND REIMBURSEMENT OF EXPENSES. During the term
of the Berglass' employment:
(a) The Company will furnish Berglass with, and Berglass will be
allowed full use of, office facilities, automobiles (including maintenance,
repairs and insurance), secretarial and clerical assistance and other Company
property and services commensurate with his position and of at least comparable
quality, nature and extent to those made available to Berglass prior to the date
hereof or, if greater, those made available to other senior Executives of the
Company from time to time.
(b) Berglass will be allowed four weeks paid vacation per year to be
taken at such times as Berglass may designate.
(c) The Company will reimburse Berglass for all monies which he has
expended for purposes of the Company's business, including entertainment, such
reimbursement to be effected in accordance with Company reimbursement practices,
policies and procedures as in effect prior to the date hereof. The parties
agree that Berglass shall be entitled to first class travel and accommodations
in connection with all business travel on behalf of the Company.
5. TERMINATION OF EMPLOYMENT.
(a) DEFINITIONS. The following definitions will apply to Sections 5
and 6 as applicable:
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(i) JUST CAUSE. The term "Just Cause" means: (A) conviction
of a felony involving moral turpitude, or (B) willful gross neglect or
willful gross misconduct in carrying out Berglass' duties under this
Agreement, resulting in material economic harm to the Company, unless
Berglass believed in good faith that such conduct was in, or not contrary
to, the best interests of the Company.
(ii) DISABILITY. The term "Disability" means the inability of
Berglass due to illness (mental or physical), accident, or otherwise, to
perform his duties for any period of 180 consecutive days, as determined by
an independent physician selected by the Company and reasonably acceptable
to Berglass or his legal representative. Any return to work from a period
of disability must be authorized by Berglass' physician.
(iii) GOOD REASON. The term "Good Reason" means: (A) a
material breach of this Agreement by the Company; (B) without Berglass'
prior written consent, assignment to Berglass of duties materially
inconsistent in any respect with his position or any other action by the
Company that results in a material diminution in Berglass' position,
authority, duties or responsibilities, it being expressly understood that a
change in Berglass' reporting responsibility so that he does not report
directly and solely to the Board will constitute "Good Reason"; (C) any
transaction in which the Company becomes a subsidiary of another
corporation or which is described in clause (iii) of the definition of
"Change in Control" in Section 6(a) below; (D) reduction, without Berglass'
prior written consent, of Berglass' Base Salary, or his bonus or other cash
incentive compensation opportunity; (E) any material reduction of fringe
benefits provided to Berglass; (F) assignment of Berglass, without his
prior written consent, to a Company office located more than 25 miles from
Berglass' current office location; or (G) the Company's failure to obtain
an agreement from any successor or assign of the Company to assume and to
agree to perform this Agreement.
(iv) NOTICE OF TERMINATION. The term "Notice of Termination"
means a notice which indicates the specific termination provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment
under the provision so indicated. Any purported termination of employment
by the Company or by Berglass must be communicated by written Notice of
Termination to the other party hereto in accordance with Section 11(a)
hereof. With respect to any termination of employment by Berglass for Good
Reason, Berglass will have 180 days following the occurrence of any event
described in Section 5(a)(iii) to provide the Company with Notice of
Termination, and may not do so thereafter.
(v) TERMINATION DATE. The term "Termination Date" means:
(i) if Berglass terminates his employment for Good Reason, the date that is
60 days after Notice of Termination is given and (ii) if Berglass'
employment is terminated by the Company other than for Just Cause, death or
Disability, the date that is 30 days after Notice of Termination is given.
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(b) TERMINATION BY THE COMPANY FOR JUST CAUSE. The Board may
terminate Berglass' employment with the Company at any time for Just Cause,
immediately upon notice to Berglass of the circumstances leading to such
termination for Just Cause. In the event that Berglass' employment is
terminated for Just Cause, Berglass will receive payment for all accrued salary
and vacation time through the Termination Date, which in this event will be the
date upon which Notice of Termination is given; and the Company shall continue
to provide the benefits specified under Section 2(b) as specified therein.
Except as set forth in this paragraph (b), the Company will have no further
obligation to pay severance of any kind whether under this Agreement or
otherwise nor to make any payment in lieu of notice. Berglass shall have the
right, by notice in writing to the Company, to receive an assignment of the
Berglass Life Policy, upon payment to the Company of the cash surrender value
thereof.
(c) TERMINATION BY BERGLASS FOR GOOD REASON. Berglass will have the
right, at his election, to terminate his employment with the Company by written
notice to the Company to that effect for a period of 180 days following any
occurrence constituting Good Reason; PROVIDED, HOWEVER, that termination for
Good Reason will not be effective until Berglass gives written notice specifying
the occurrence constituting Good Reason and, PROVIDED that if such occurrence is
curable, the Company fails to correct it within 10 days after the receipt of the
applicable notice.
(d) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE OR BY BERGLASS FOR
GOOD REASON. In the event that Berglass' employment is terminated by the
Company (other than pursuant to Section 5(b)) or such employment is terminated
by Berglass for Good Reason, (and in either such case Berglass is not entitled
to benefits pursuant to Section 6(b)), the Company agrees to pay or provide to
Berglass as termination compensation the following:
(i) A single lump sum payment, payable in cash within five
days of the Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and
vacation through the Termination Date; plus
(B) an amount representing bonus and all other cash
incentive compensation for such period determined by multiplying:
(I) the greater of the following ("Assumed Incentive
Compensation"): (x) the average of such bonus and other cash
incentive compensation accrued for each of the three preceding
full years, (y) the amount of such bonus and other cash incentive
compensation accrued for the immediately preceding year, and (z)
the projected amount of such bonus and other cash incentive
compensation for the year in which termination occurs, based upon
the most recent available interim results of operations and
projected results of operations for the remainder of such year,
prepared by the Company in the normal course of its business; by
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<PAGE>
(II) the fraction of the year of termination elapsed
prior to the Termination Date; plus
(C) the total amount of:
(I) Berglass' Base Salary in effect upon the
Termination Date for the remaining part of the Employment Term,
plus
(II) incentive compensation for the remaining part of
the Employment Term, at the rate per year of the Assumed
Incentive Compensation,
less standard withholdings for tax and social security purposes.
(ii) All stock options, restricted stock or other equity
awards then held by Berglass will automatically be deemed amended, without
further action on the part of the Company or Berglass, so that (A) all
options will be fully vested and not subject to forfeiture or expiration by
reason of Berglass' termination, and will be subject to exercise in full
until the end of the Employment Term or their normal expiration date,
whichever comes first; and (B) all restricted stock or other equity awards
subject to vesting prior to the end of the Employment Term will be fully
vested and all restrictions thereon will lapse.
(iii) All benefits provided under Section 2(b) will continue as
specified herein.
(A) Notwithstanding the foregoing, to the extent any
such benefit referred to in Section 2(b) cannot be provided through
the applicable plan of the Company, the Company will provide such
benefit outside of the plan or will provide a cash lump sum payment
equal to the value of such additional benefit.
(B) The Company shall meet its obligation under (A),
above, in connection with its group medical/dental plan for the period
ending on the date Berglass ceases to be eligible for continuation
coverage under the Company's group medical/dental plan pursuant to the
provisions of COBRA, by providing the continuation of such coverage at
Company expense, contingent upon the Berglass' timely election of such
coverage under COBRA.
(C) To the extent required to avoid adverse tax
consequences under Section 105(h) of the Internal Revenue Code of 1986
(the "Code"), the Company's payments under this Section 5(d)(iii) will
be recognized by Berglass in his taxable income and Berglass will
receive, in addition, a "gross-up" payment to hold Berglass from and
to insulate him from all of the effects of any income or other tax
liability attributable to such recognized income; provided that such
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<PAGE>
gross-up shall, if necessary, be limited consistent with principles of
paragraph 6(c)(v), below.
(iv) Berglass shall have the right, by notice in writing to
the Company, to receive an assignment of the Berglass Life Policy, upon
payment to the Company of the cash surrender value thereof.
(e) TERMINATION BY REASON OF DEATH OR DISABILITY. This Agreement
will terminate upon the death of Berglass; and Berglass' employment hereunder
may be terminated by Berglass or the Company, at either of their election, upon
Berglass' Disability. In the event Berglass' employment is terminated as the
result of death or Disability, except as set forth in the following sentence,
Berglass, or his estate or legal representative, will be entitled to receive the
accrued portion of any Base Salary and vacation through the Termination Date,
plus any unreimbursed business expenses, plus for the remainder of the
Employment Term: (i) periodically not less frequently than every other week in
accordance with the Company's normal payroll practice, payments at the rate of
his then Base Salary; and (ii) at the normal and customary time for payment of
bonuses and all other cash incentive compensation, incentive compensation for
the remaining part of the Employment Term, at the rate per year of the Assumed
Incentive Compensation; in each case subject to any applicable withholdings for
tax and social security purposes. In addition, all benefits provided in Section
2(b) will continue as specified therein. The payments provided in this Section
5(e) will be reduced by the amount of any payments made to Berglass pursuant to
any disability or life insurance policy (other than the Berglass Life Policy)
provided by the Company for this purpose, which insurance policy is in addition
to any other insurance benefits provided to Berglass as a benefit hereunder.
6. BENEFITS UPON CHANGE OF CONTROL.
(a) DEFINITIONS. In addition to the definitions provided in Section
5, the following definition will apply to this Section 6:
CHANGE IN CONTROL. The term "Change in Control" means the
occurrence of any of the following events after the date of this Agreement:
(i) Berglass, Judith Berglass and any controlled affiliate
thereof (collectively, the "Berglass Family") is no longer the Beneficial
Owner of securities of the Company representing 26% or more of the combined
voting power of the Company's then outstanding securities. For purposes of
this Agreement, the term "Beneficial Owner" shall have the meaning given to
such term in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, however, that the Berglass Family
shall be deemed to be the Beneficial Owner of any securities of the Company
which are owned by the Berglass Family but subject to call options by third
parties unless and until such options are exercised;
(ii) individuals who at the beginning of any period of two
consecutive years constitute the Board, and any new director (other than a
director designated by a Person who has entered into an agreement with the
Company to effect a transaction
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described in clauses (i) or (iv)) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof. For purposes of this Agreement,
the term "Person" is used as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided, however, that the term shall not include the Company, any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other entity),
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 66-2/3% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation
or (ii) a merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which the
Berglass Family remains the Beneficial Owner of securities of the Company
representing at least 26% of the combined voting power of the Company's
securities outstanding upon consummation of such transaction; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
(b) ELIGIBILITY FOR BENEFITS. The Company agrees to pay to Berglass
the benefits specified in Section 6(c) hereof if (i) there is a Change in
Control during the term of this Agreement and (ii) within the period commencing
on the date of the Change in Control, or (if earlier) the date of any agreement
by the Company to enter into the transaction resulting in such Change in
Control, and ending two years after the Change in Control (A) the Company
terminates the employment of Berglass for any reason other than Just Cause,
death or Disability or (B) Berglass voluntarily terminates employment with the
Company for Good Reason. A Change of Control will be deemed to have occurred
during the term of this Agreement, for purposes of this paragraph 6(b), if an
agreement is entered into during the term of this Agreement for a transaction
resulting in a Change of Control, notwithstanding that the Change of Control
transaction is not completed until after the Employment Term.
(c) BENEFITS UPON TERMINATION OF EMPLOYMENT. If Berglass is entitled
to benefits pursuant to Section 6(b) hereof, in lieu of any payments and
benefits provided in Section 5 the Company agrees to pay or provide to Berglass
as termination compensation the following:
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(i) A single lump sum payment, payable in cash within five
days of the Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and
vacation through the Termination Date; plus
(B) an amount representing bonus and all other cash
incentive compensation for such period determined by multiplying:
(I) the Assumed Incentive Compensation, by
(II) the fraction of the year of termination elapsed
prior to the Termination Date; plus
(C) 299% of the sum of:
(I) Berglass' Base Salary in effect upon the
Termination Date, plus
(II) the Assumed Incentive Compensation.
(ii) All stock options, restricted stock or other equity
awards then held by Berglass will automatically be deemed amended, without
further action on the part of the Company or Berglass, so that (A) all
options will be fully vested and not subject to forfeiture or expiration by
reason of the Berglass' termination, and will be subject to exercise in
full for the remainder of their stated term; and (B) all restricted stock
or other equity awards will be fully vested and all restrictions thereon
will lapse.
(iii) All benefits provided under Section 2(b) will continue as
set forth in Section 5(b) above.
(iv) Berglass shall have the right, by notice in writing to the
Company, to receive an assignment of the Berglass Life Policy, upon payment
to the Company of the cash surrender value thereof.
(v) In the event that any amount or benefit that may be paid
or otherwise provided to Berglass by the Company or any affiliated company,
whether pursuant to this Agreement or otherwise (collectively, "Covered
Payments"), is or may become subject to the tax imposed under Code Section
4999 ("Excise Tax"), the Company will pay to Berglass a "Reimbursement
Amount" equal to the total of: (A) any Excise Tax on the Covered Payments,
plus (B) any Federal, state, and local income taxes, employment and excise
taxes (including the Excise Tax) on the Reimbursement Amount (but without
reduction for any Federal, state, or local income or employment taxes on
such Covered Payments), plus (C) the product of any deductions disallowed
for Federal, state or local income tax purposes because of the inclusion of
the Reimbursement Amount in Berglass' adjusted gross income multiplied by
the highest applicable marginal
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rate of Federal, state, and local income taxation, respectively, for the
calendar year in which the Reimbursement Amount is to be paid. For
purposes of this Section 6(c)(v), Berglass will be deemed to pay
(Y) Federal income taxes at the highest applicable marginal rate of Federal
income taxation for the calendar year in which the Reimbursement Amount is
to be paid and (Z) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year in which
such Reimbursement Amount is to be paid, net of the maximum reduction in
Federal income taxes which could be obtained from the deduction of such
state or local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of Berglass' adjusted gross
income).
7. NO OBLIGATION TO MITIGATE DAMAGES. In the event of a termination of
Berglass' employment for any reason, Berglass will not be required to seek other
employment or to mitigate any of the Company's obligations under this Agreement,
and no amount payable hereunder will be reduced (a) by any claim the Company may
assert against Berglass or (b) by any compensation or benefits earned by
Berglass as a result of employment by another employer, self-employment or from
any other source after such termination of employment with the Company;
PROVIDED, HOWEVER, that the benefits provided pursuant to Sections 5(d)(iii) and
6(c)(iii) will terminate at such time as Berglass becomes eligible for
comparable benefits as the result of employment by another Person.
8. PROPRIETARY INFORMATION OBLIGATIONS. During Berglass' employment
pursuant to this Agreement, Berglass will have access to and become acquainted
with confidential and proprietary information of the Company and its
subsidiaries, including, but not limited to, information or plans regarding
customer relationships, personnel, or sales, marketing, and financial operations
and methods; trade secrets; formulas; devices; secret inventions; processes; and
other compilations of information, records, and specifications (collectively
"Proprietary Information"). Berglass will not disclose any such Proprietary
Information directly or indirectly, or use it in any way, either during
Berglass' employment pursuant to this Agreement or at any time thereafter,
except as required in the course of his employment for the Company or as
authorized in writing by the Company. Notwithstanding the foregoing, nothing
contained herein shall prevent Berglass from making use of any knowledge or
information properly in his possession in the course of any business or
consulting activities in which he may engage following the termination of his
employment by the Company. Notwithstanding the foregoing, Proprietary
Information will not include (a) information which is or becomes generally
public knowledge or public except through disclosure by Berglass in violation of
this Agreement and (b) information that may be required to be disclosed by
applicable law.
9. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
will be deemed effective upon the earlier of two days following personal
delivery (including personal delivery by telecopy or telex), or the fourth day
after mailing by first class mail to the recipient at the address indicated
below:
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To the Company:
2101 East Via Arado
Rancho Dominguez, CA 90220
Attn: Secretary
Telecopier No: (310) 537-2524
With a copy to:
To Berglass:
12770 Bristol Circle South
Los Angeles, CA 90049
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed
invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction and subject to this Section be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant will be
modified so that the scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This document constitutes the final, complete,
and exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral; provided that nothing contained herein
shall affect the continuation of Berglass' rights to indemnification from the
Company pursuant to any and all contract, bylaw or charter provisions which may
be in effect on the date hereof. Without limiting the generality of the
foregoing, the parties expressly agree that the agreement between them dated
August 15, 1998 pursuant to the Company's Retention and Severance Plan shall be
terminated and of no further effect.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Berglass, Berglass' wife (as
provided in Section 2(b)) and the Company, and their respective successors and
assigns, except that Berglass may not assign any of his duties hereunder and he
may not assign any of his rights hereunder without the prior written consent of
the Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Berglass to terminate his employment and receive
compensation from the Company in the same amount and on the same terms to which
he would be entitled hereunder if he terminated his employment for Good Reason.
Where the context requires, the term Company shall include any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
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(f) AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No amendment
or waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.
(g) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of California without giving effect to principles of conflicts of law.
10. ARBITRATION.
(a) Any disputes or claims arising out of or concerning Berglass'
employment or termination by the Company, whether arising under theories of
liability or damages based upon contract, tort or statute, will be determined
exclusively by arbitration before a single arbitrator in accordance with the
employment arbitration rules of the American Arbitration Association, except as
modified by this Agreement. The arbitrator's decision will be final and binding
on both parties. Judgment upon the award rendered by the arbitrator may be
entered in any court of competent jurisdiction. In recognition of the fact that
resolution of any disputes or claims in the courts is rarely timely or cost
effective for either party, the Company and Berglass enter this mutual agreement
to arbitrate in order to gain the benefits of a speedy, impartial and
cost-effective dispute resolution procedure.
(b) Any arbitration will be held in Berglass' place of employment
with the Company. The arbitrator must be an attorney with substantial
experience in employment matters, selected by mutual agreement of the parties.
If the parties are unable to agree to an arbitrator within 30 days following a
demand for arbitration hereunder, an arbitrator meeting the foregoing experience
requirement shall be selected by alternately striking names from a list of five
such persons provided by the American Arbitration Association (AAA) office
located nearest to the place of employment, following a request by the party
seeking arbitration for a list of five such attorneys. If either party fails to
strike any of the names from the list, the arbitrator will be selected from the
list by the other party.
(c) Each party will have the right to take the deposition of one
individual and any expert witness designated by the other party. Each party
will also have the right to propound requests for production of documents to any
party and the right to subpoena documents and witnesses for the arbitration.
Additional discovery may be made only where the arbitrator selected so orders
upon a showing of substantial need. The arbitrator will have the authority to
entertain a motion to dismiss and/or a motion for summary judgment by any party
and will apply the standards governing such motions under the Federal Rules of
Civil Procedure.
(d) The Company and Berglass agree that they will attempt, and they
intend that they and the arbitrator should use their best efforts in that
attempt, to conclude the arbitration proceeding and have a final decision from
the arbitrator within 120 days from the date of selection of the arbitrator;
PROVIDED, HOWEVER, that the arbitrator will be entitled to extend such
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120-day period for one additional 120-day period. The arbitrator will deliver a
written award with respect to the dispute to each of the parties, who must
promptly act in accordance therewith.
(e) The Company will pay any and all reasonable fees and expenses
incurred by Berglass in seeking to obtain or enforce any rights or benefits
provided by this Agreement, including all reasonable attorneys' and experts'
fees and expenses, accountants' fees and expenses, and court costs (if any) that
may be incurred by Berglass in pursuing a claim for payment of compensation or
benefits or other right or entitlement under this Agreement, PROVIDED that
Berglass shall refund to the Company any amounts so paid, and shall not be
entitled to any further such payment if the Arbitrator shall rule against
Berglass on all claims asserted by him and shall determine, in writing, that
such claims were without any substantial basis.
(f) In a contractual claim under this Agreement, the arbitrator must
act in accordance with the terms and provisions of this Agreement and applicable
legal principles and will have no authority to add, delete or modify any term or
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date it is last executed below by either party.
/s/ Robert Berglass
-------------------------------------
ROBERT BERGLASS
DEP CORPORATION
By: /s/ Philip A. Wilber
----------------------------------
Name: Philip A. Wilber
Title: Chairman, Compensation & Management
Stock Option Committee
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Exhibit 99.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of March 23,
1998 by and between Grant Johnson, an individual ("Johnson"), and DEP
Corporation, a Delaware corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Johnson is currently the Chief Financial Officer and Senior Vice
President, Finance of the Company; and
WHEREAS, the Board of Directors of DEP has determined that it is in the
best interests of DEP and the stockholders of DEP that Johnson's continued
employment by the Company be assured and the terms of such employment
established pursuant to this Agreement; and
WHEREAS, Johnson is willing to enter into an employment agreement on the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties do hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) POSITION AND REPORTING. Subject to the terms set forth herein,
the Company agrees to employ Johnson as Chief Financial Officer and Senior Vice
President, Finance and Johnson hereby accepts such employment. During the term
of his employment hereunder, Johnson will report solely and directly to the
President and Chief Executive Officer of the Company (the "CEO"). During the
term of his employment hereunder, the Company will nominate and recommend
Johnson for re-election as a director at each annual meeting of stockholders
coinciding with the expiration of his term as a director.
(b) FULL TIME AND BEST EFFORTS. During the term of his employment
with the Company; Johnson will devote substantially all of his business time,
except for sick leave, vacations and approved leaves of absence, and use his
best efforts to advance the business and welfare of the Company. During the
term of Johnson's employment, he will not engage in any other employment or
business activities that would be directly harmful or detrimental to, or that
may compete with, the business and affairs of the Company, or that would
interfere with his duties hereunder. However, the foregoing will not prevent
Johnson from devoting a reasonable amount of time to personal investment, civic
and charitable activities.
<PAGE>
(c) DUTIES. Johnson's duties during the term of his employment
hereunder shall be consistent with those in effect immediately prior to the
execution of this Agreement and shall be such as are customarily associated with
his position in a corporation of the size and nature of the Company, consistent
with the Bylaws of the Company. Johnson's principal place of business shall be
in Los Angeles, California or its neighboring communities, subject to normal and
reasonable requirements for business travel.
(d) COMPANY POLICIES. The employment relationship between the
parties will be governed by the general employment policies and practices of the
Company, including but not limited to those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement will control.
(e) TERM. The term of this Agreement ("Employment Term") will begin
as of March 23, 1998 and end on March 23, 2003. Such term shall automatically
be renewed for additional one year terms unless either party has given written
notice to the other at least six months prior to the expiration of this
Agreement.
2. COMPENSATION AND BENEFITS.
(a) SALARY. Johnson will receive for services to be rendered
hereunder a base salary at the annual rate of Two Hundred Twenty-Seven Thousand
Dollars ($227,000) payable at least as frequently as every other week and
subject to payroll deductions as may be necessary or customary in respect of the
Company's salaried employees. Such amount, as it may be increased from time to
time hereunder, is referred to herein as the "Base Salary". The Base Salary
will be subject to review at least annually and to increase (but not decrease)
at such times and in such amounts as the Board may approve. In the event that
the Company, in its sole discretion, from time to time determines to increase
the Base Salary, such increased amount shall, from and after the effective date
of the increase, constitute "Base Salary" for purposes of this Agreement.
(b) PARTICIPATION IN INSURANCE AND BENEFIT PLANS. During the
Employment Term, Johnson will be entitled to participate in any insurance,
hospitalization, medical, dental, health, accident, disability or similar plan
or program of the Company now existing or established hereafter. In the event
Johnson is not eligible to participate in any plan or program of the Company
under the general provisions thereof, the Company will make arrangements for
such participation (including any necessary amendment of the applicable plan) if
permitted by applicable law and, except as otherwise provided in Sections 5(d),
5(e) and 6(c) if the cost of doing so is not unreasonable or if such cost is
reimbursed to the Company by the affected person. The Company may, in its sole
discretion and from time to time, amend, eliminate or establish additional
benefit programs as it deems appropriate. Johnson will also participate in all
fringe benefits offered by the Company to any of its senior Executives.
3. INCENTIVE, BONUS AND OPTION PLANS. During the Employment Term,
Johnson will be entitled to participate in the bonus plan similar to that set
forth in Exhibit A attached hereto. Upon expiration of such plan, a new
performance bonus program will be developed, which shall
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provide the opportunity for Johnson to receive future bonuses on a basis: (a) no
less favorable than provided under the plan set forth in Exhibit A; and (b) no
less favorable than those applying to other senior Executives of the Company.
In addition, Johnson will, during the Employment Term, be entitled to
participate on terms and conditions appropriate to his position and
responsibilities at the Company in deferred compensation, retirement, stock
option and other compensation plans of the Company currently or hereafter made
available by the Company to senior Executives of the Company
4. PERQUISITES, VACATIONS AND REIMBURSEMENT OF EXPENSES. During the term
of the Johnson's employment:
(a) The Company will furnish Johnson with, and Johnson will be
allowed full use of, office facilities, a monthly car allowance of $575,
secretarial and clerical assistance and other Company property and services
commensurate with his position and of at least comparable quality, nature and
extent to those made available to Johnson prior to the date hereof or, if
greater, those made available to other senior Executives of the Company from
time to time.
(b) Johnson will be allowed three weeks paid vacation per year to be
taken at such times as Johnson may designate.
(c) The Company will reimburse Johnson for all monies which he has
expended for purposes of the Company's business, including entertainment, such
reimbursement to be effected in accordance with Company reimbursement practices,
policies and procedures as in effect prior to the date hereof. The parties
agree that Johnson shall be entitled to first class travel and accommodations in
connection with all business travel on behalf of the Company.
5. TERMINATION OF EMPLOYMENT.
(a) DEFINITIONS. The following definitions will apply to Sections 5
and 6 as applicable:
(i) JUST CAUSE. The term "Just Cause" means: (A) conviction
of a felony involving moral turpitude, or (B) willful gross neglect or
willful gross misconduct in carrying out Johnson's duties under this
Agreement, resulting in material economic harm to the Company, unless
Johnson believed in good faith that such conduct was in, or not contrary
to, the best interests of the Company.
(ii) DISABILITY. The term "Disability" means the inability of
Johnson due to illness (mental or physical), accident, or otherwise, to
perform his duties for any period of 180 consecutive days, as determined by
an independent physician selected by the Company and reasonably acceptable
to Johnson or his legal representative. Any return to work from a period
of disability must be authorized by Johnson's physician.
(iii) GOOD REASON. The term "Good Reason" means: (A) a
material breach of this Agreement by the Company; (B) without Johnson's
prior written consent, assignment to Johnson of duties materially
inconsistent in any respect with his position or
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any other action by the Company that results in a material diminution in
Johnson's position, authority, duties or responsibilities, it being
expressly understood that a change in Johnson's reporting responsibility so
that he does not report directly and solely to the CEO will constitute
"Good Reason"; (C) any transaction in which the Company becomes a
subsidiary of another corporation or which is described in clause (iii) of
the definition of "Change in Control" in Section 6(a) below; (D) reduction,
without Johnson's prior written consent, of Johnson's Base Salary, or his
bonus or other cash incentive compensation opportunity; (E) any material
reduction of fringe benefits provided to Johnson; (F) assignment of
Johnson, without his prior written consent, to a Company office located
more than 25 miles from Johnson's current office location; or (G) the
Company's failure to obtain an agreement from any successor or assign of
the Company to assume and to agree to perform this Agreement.
(iv) NOTICE OF TERMINATION. The term "Notice of Termination"
means a notice which indicates the specific termination provision in this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment
under the provision so indicated. Any purported termination of employment
by the Company or by Johnson must be communicated by written Notice of
Termination to the other party hereto in accordance with Section 11(a)
hereof. With respect to any termination of employment by Johnson for Good
Reason, Johnson will have 180 days following the occurrence of any event
described in Section 5(a)(iii) to provide the Company with Notice of
Termination, and may not do so thereafter.
(v) TERMINATION DATE. The term "Termination Date" means:
(i) if Johnson terminates his employment for Good Reason, the date that is
60 days after Notice of Termination is given and (ii) if Johnson's
employment is terminated by the Company other than for Just Cause, death or
Disability, the date that is 30 days after Notice of Termination is given.
(b) TERMINATION BY THE COMPANY FOR JUST CAUSE. The Board may
terminate Johnson's employment with the Company at any time for Just Cause,
immediately upon notice to Johnson of the circumstances leading to such
termination for Just Cause. In the event that Johnson's employment is
terminated for Just Cause, Johnson will receive payment for all accrued salary
and vacation time through the Termination Date, which in this event will be the
date upon which Notice of Termination is given; and the Company shall have no
future obligation to pay compensation or benefits. Except as set forth in this
paragraph (b), the Company will have no further obligation to pay severance of
any kind whether under this Agreement or otherwise nor to make any payment in
lieu of notice.
(c) TERMINATION BY JOHNSON FOR GOOD REASON. Johnson will have the
right, at his election, to terminate his employment with the Company by written
notice to the Company to that effect for a period of 180 days following any
occurrence constituting Good Reason; PROVIDED, HOWEVER, that termination for
Good Reason will not be effective until Johnson gives written notice specifying
the occurrence constituting Good Reason and, PROVIDED that if such
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occurrence is curable, the Company fails to correct it within 10 days after the
receipt of the applicable notice.
(d) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE OR BY JOHNSON FOR
GOOD REASON. In the event that Johnson's employment is terminated by the
Company (other than pursuant to Section 5(b)) or such employment is terminated
by Johnson for Good Reason, (and in either such case Johnson is not entitled to
benefits pursuant to Section 6(b)), the Company agrees to pay or provide to
Johnson as termination compensation the following:
(i) A single lump sum payment, payable in cash within five
days of the Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and
vacation through the Termination Date; plus
(B) an amount representing bonus and all other cash
incentive compensation for such period determined by multiplying:
(I) the greater of the following ("Assumed Incentive
Compensation"): (x) the average of such bonus and other cash
incentive compensation accrued for each of the three preceding
full years, (y) the amount of such bonus and other cash incentive
compensation accrued for the immediately preceding year, and (z)
the projected amount of such bonus and other cash incentive
compensation for the year in which termination occurs, based upon
the most recent available interim results of operations and
projected results of operations for the remainder of such year,
prepared by the Company in the normal course of its business; by
(II) the fraction of the year of termination elapsed
prior to the Termination Date; plus
(C) the total amount of:
(I) Johnson's Base Salary in effect upon the
Termination Date for the remaining part of the Employment Term,
plus
(II) incentive compensation for the remaining part of
the Employment Term, at the rate per year of the Assumed
Incentive Compensation,
less standard withholdings for tax and social security purposes.
(ii) All stock options, restricted stock or other equity
awards then held by Johnson will automatically be deemed amended, without
further action on the part of the Company or Johnson, so that (A) all
options will be fully vested and not subject to forfeiture or expiration by
reason of Johnson's termination, and will be subject to exercise
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<PAGE>
in full until the end of the Employment Term or their normal expiration
date, whichever comes first; and (B) all restricted stock or other equity
awards subject to vesting prior to the end of the Employment Term will be
fully vested and all restrictions thereon will lapse.
(iii) All benefits provided under Section 2(b) will continue as
specified herein.
(A) Notwithstanding the foregoing, to the extent any
such benefit referred to in Section 2(b) cannot be provided through
the applicable plan of the Company, the Company will provide such
benefit outside of the plan or will provide a cash lump sum payment
equal to the value of such additional benefit.
(B) The Company shall meet its obligation under (A),
above, in connection with its group medical/dental plan for the period
ending on the date Johnson ceases to be eligible for continuation
coverage under the Company's group medical/dental plan pursuant to the
provisions of COBRA, by providing the continuation of such coverage at
Company expense, contingent upon the Johnson's timely election of such
coverage under COBRA.
(C) To the extent required to avoid adverse tax
consequences under Section 105(h) of the Internal Revenue Code of 1986
(the "Code"), the Company's payments under this Section 5(d)(iii) will
be recognized by Johnson in his taxable income and Johnson will
receive, in addition, a "gross-up" payment to hold Johnson from and to
insulate him from all of the effects of any income or other tax
liability attributable to such recognized income; provided that such
gross-up shall, if necessary, be limited consistent with principles of
paragraph 6(c)(iv), below.
(e) TERMINATION BY REASON OF DEATH OR DISABILITY. This Agreement
will terminate upon the death of Johnson; and Johnson's employment hereunder may
be terminated by Johnson or the Company, at either of their election, upon
Johnson's Disability. In the event Johnson's employment is terminated as the
result of death or Disability, except as set forth in the following sentence,
Johnson, or his estate or legal representative, will be entitled to receive the
accrued portion of any Base Salary and vacation through the Termination Date,
plus any unreimbursed business expenses, plus for the remainder of the
Employment Term: (i) periodically not less frequently than every other week in
accordance with the Company's normal payroll practice, payments at the rate of
his then Base Salary; and (ii) at the normal and customary time for payment of
bonuses and all other cash incentive compensation, incentive compensation for
the remaining part of the Employment Term, at the rate per year of the Assumed
Incentive Compensation; in each case subject to any applicable withholdings for
tax and social security purposes. In addition, all benefits provided in Section
2(b) will continue as specified therein. The payments provided in this Section
5(e) will be reduced by the amount of any payments made to Johnson pursuant to
any disability or life insurance policy provided by the
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Company for this purpose, which insurance policy is in addition to any other
insurance benefits provided to Johnson as a benefit hereunder.
6. BENEFITS UPON CHANGE OF CONTROL.
(a) DEFINITIONS. In addition to the definitions provided in Section
5, the following definition will apply to this Section 6:
CHANGE IN CONTROL. The term "Change in Control" means the
occurrence of any of the following events after the date of this Agreement:
(i) Berglass, Judith Berglass and any controlled affiliate
thereof (collectively, the "Berglass Family") is no longer the Beneficial
Owner of securities of the Company representing 26% or more of the combined
voting power of the Company's then outstanding securities. For purposes of
this Agreement, the term "Beneficial Owner" shall have the meaning given to
such term in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, however, that the Berglass Family
shall be deemed to be the Beneficial Owner of any securities of the Company
which are owned by the Berglass Family but subject to call options by third
parties unless and until such options are exercised;
(ii) individuals who at the beginning of any period of two
consecutive years constitute the Board, and any new director (other than a
director designated by a Person who has entered into an agreement with the
Company to effect a transaction described in clauses (i) or (iv)) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority
thereof. For purposes of this Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that the term
shall not include the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other entity),
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 66-2/3% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation
or (ii) a merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which the
Berglass Family remains the Beneficial Owner of
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securities of the Company representing at least 26% of the combined voting
power of the Company's securities outstanding upon consummation of such
transaction; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
(b) ELIGIBILITY FOR BENEFITS. The Company agrees to pay to Johnson
the benefits specified in Section 6(c) hereof if (i) there is a Change in
Control during the term of this Agreement and (ii) within the period commencing
on the date of the Change in Control, or (if earlier) the date of any agreement
by the Company to enter into the transaction resulting in such Change in
Control, and ending two years after the Change in Control (A) the Company
terminates the employment of Johnson for any reason other than Just Cause, death
or Disability or (B) Johnson voluntarily terminates employment with the Company
for Good Reason. A Change of Control will be deemed to have occurred during the
term of this Agreement, for purposes of this paragraph 6(b), if an agreement is
entered into during the term of this Agreement for a transaction resulting in a
Change of Control, notwithstanding that the Change of Control transaction is not
completed until after the Employment Term.
(c) BENEFITS UPON TERMINATION OF EMPLOYMENT. If Johnson is entitled
to benefits pursuant to Section 6(b) hereof, in lieu of any payments and
benefits provided in Section 5 the Company agrees to pay or provide to Johnson
as termination compensation the following:
(i) A single lump sum payment, payable in cash within five
days of the Termination Date, equal to the sum of:
(A) the accrued portion of any Base Salary and
vacation through the Termination Date; plus
(B) an amount representing bonus and all other cash
incentive compensation for such period determined by multiplying:
(I) the Assumed Incentive Compensation, by
(II) the fraction of the year of termination elapsed
prior to the Termination Date; plus
(C) 299% of the sum of:
(I) Johnson's Base Salary in effect upon the
Termination Date, plus
(II) the Assumed Incentive Compensation.
(ii) All stock options, restricted stock or other equity
awards then held by Johnson will automatically be deemed amended, without
further action on the part of the Company or Johnson, so that (A) all
options will be fully vested and not subject to
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forfeiture or expiration by reason of Johnson's termination, and will be
subject to exercise in full for the remainder of their stated term; and (B)
all restricted stock or other equity awards will be fully vested and all
restrictions thereon will lapse.
(iii) All benefits provided under Section 2(b) will continue as
set forth in Section 5(b) above.
(iv) In the event that any amount or benefit that may be paid
or otherwise provided to Johnson by the Company or any affiliated company,
whether pursuant to this Agreement or otherwise (collectively, "Covered
Payments"), is or may become subject to the tax imposed under Code Section
4999 ("Excise Tax"), the Company will pay to Johnson a "Reimbursement
Amount" equal to the total of: (A) any Excise Tax on the Covered Payments,
plus (B) any Federal, state, and local income taxes, employment and excise
taxes (including the Excise Tax) on the Reimbursement Amount (but without
reduction for any Federal, state, or local income or employment taxes on
such Covered Payments), plus (C) the product of any deductions disallowed
for Federal, state or local income tax purposes because of the inclusion of
the Reimbursement Amount in Johnson's adjusted gross income multiplied by
the highest applicable marginal rate of Federal, state, and local income
taxation, respectively, for the calendar year in which the Reimbursement
Amount is to be paid. For purposes of this Section 6(c)(v), Johnson will
be deemed to pay (Y) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar year in which the
Reimbursement Amount is to be paid and (Z) any applicable state and local
income taxes at the highest applicable marginal rate of taxation for the
calendar year in which such Reimbursement Amount is to be paid, net of the
maximum reduction in Federal income taxes which could be obtained from the
deduction of such state or local taxes if paid in such year (determined
without regard to limitations on deductions based upon the amount of
Johnson's adjusted gross income).
7. NO OBLIGATION TO MITIGATE DAMAGES. In the event of a termination of
Johnson's employment for any reason, Johnson will not be required to seek other
employment or to mitigate any of the Company's obligations under this Agreement,
and no amount payable hereunder will be reduced (a) by any claim the Company may
assert against Johnson or (b) by any compensation or benefits earned by Johnson
as a result of employment by another employer, self-employment or from any other
source after such termination of employment with the Company; PROVIDED, HOWEVER,
that the benefits provided pursuant to Sections 5(d)(iii) and 6(c)(iii) will
terminate at such time as Johnson becomes eligible for comparable benefits as
the result of employment by another Person.
8. PROPRIETARY INFORMATION OBLIGATIONS. During Johnson's employment
pursuant to this Agreement, Johnson will have access to and become acquainted
with confidential and proprietary information of the Company and its
subsidiaries, including, but not limited to, information or plans regarding
customer relationships, personnel, or sales, marketing, and financial operations
and methods; trade secrets; formulas; devices; secret inventions; processes; and
other compilations of information, records, and specifications (collectively
"Proprietary
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Information"). Johnson will not disclose any such Proprietary Information
directly or indirectly, or use it in any way, either during Johnson's employment
pursuant to this Agreement or at any time thereafter, except as required in the
course of his employment for the Company or as authorized in writing by the
Company. Notwithstanding the foregoing, nothing contained herein shall prevent
Johnson from making use of any knowledge or information properly in his
possession in the course of any business or consulting activities in which he
may engage following the termination of his employment by the Company.
Notwithstanding the foregoing, Proprietary Information will not include
(a) information which is or becomes generally public knowledge or public except
through disclosure by Johnson in violation of this Agreement and (b) information
that may be required to be disclosed by applicable law.
9. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
will be deemed effective upon the earlier of two days following personal
delivery (including personal delivery by telecopy or telex), or the fourth day
after mailing by first class mail to the recipient at the address indicated
below:
To the Company:
2101 East Via Arado
Rancho Dominguez, CA 90220
Attn: Secretary
Telecopier No: (310) 537-2524
With a copy to:
To Johnson:
16802 Stonehaven Circle
Huntington Beach, CA 92649
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed
invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction and subject to this Section be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant will be
modified so that the scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable.
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(c) ENTIRE AGREEMENT. This document constitutes the final, complete,
and exclusive embodiment of the entire agreement and understanding between the
parties related to the subject matter hereof and supersedes and preempts any
prior or contemporaneous understandings, agreements, or representations by or
between the parties, written or oral; provided that nothing contained herein
shall affect the continuation of Johnson's rights to indemnification from the
Company pursuant to any and all contract, bylaw or charter provisions which may
be in effect on the date hereof. Without limiting the generality of the
foregoing, the parties expressly agree that the agreement between them dated
August 15, 1998 pursuant to the Company's Retention and Severance Plan shall be
terminated and of no further effect.
(d) COUNTERPARTS. This Agreement may be executed on separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Johnson (as provided in
Section 2(b)) and the Company, and their respective successors and assigns,
except that Johnson may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the prior written consent of the
Company. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Johnson to terminate his employment and receive compensation from
the Company in the same amount and on the same terms to which he would be
entitled hereunder if he terminated his employment for Good Reason. Where the
context requires, the term Company shall include any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(f) AMENDMENTS. No amendments or other modifications to this
Agreement may be made except by a writing signed by both parties. No amendment
or waiver of this Agreement requires the consent of any individual, partnership,
corporation or other entity not a party to this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any third person any
rights or remedies under or by reason of this Agreement.
(g) CHOICE OF LAW. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of California without giving effect to principles of conflicts of law.
10. ARBITRATION.
(a) Any disputes or claims arising out of or concerning Johnson's
employment or termination by the Company, whether arising under theories of
liability or damages based upon contract, tort or statute, will be determined
exclusively by arbitration before a single arbitrator in accordance with the
employment arbitration rules of the American Arbitration
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Association, except as modified by this Agreement. The arbitrator's decision
will be final and binding on both parties. Judgment upon the award rendered by
the arbitrator may be entered in any court of competent jurisdiction. In
recognition of the fact that resolution of any disputes or claims in the courts
is rarely timely or cost effective for either party, the Company and Johnson
enter this mutual agreement to arbitrate in order to gain the benefits of a
speedy, impartial and cost-effective dispute resolution procedure.
(b) Any arbitration will be held in Johnson's place of employment
with the Company. The arbitrator must be an attorney with substantial
experience in employment matters, selected by mutual agreement of the parties.
If the parties are unable to agree to an arbitrator within 30 days following a
demand for arbitration hereunder, an arbitrator meeting the foregoing experience
requirement shall be selected by alternately striking names from a list of five
such persons provided by the American Arbitration Association (AAA) office
located nearest to the place of employment, following a request by the party
seeking arbitration for a list of five such attorneys. If either party fails to
strike any of the names from the list, the arbitrator will be selected from the
list by the other party.
(c) Each party will have the right to take the deposition of one
individual and any expert witness designated by the other party. Each party
will also have the right to propound requests for production of documents to any
party and the right to subpoena documents and witnesses for the arbitration.
Additional discovery may be made only where the arbitrator selected so orders
upon a showing of substantial need. The arbitrator will have the authority to
entertain a motion to dismiss and/or a motion for summary judgment by any party
and will apply the standards governing such motions under the Federal Rules of
Civil Procedure.
(d) The Company and Johnson agree that they will attempt, and they
intend that they and the arbitrator should use their best efforts in that
attempt, to conclude the arbitration proceeding and have a final decision from
the arbitrator within 120 days from the date of selection of the arbitrator;
PROVIDED, HOWEVER, that the arbitrator will be entitled to extend such 120-day
period for one additional 120-day period. The arbitrator will deliver a written
award with respect to the dispute to each of the parties, who must promptly act
in accordance therewith.
(e) The Company will pay any and all reasonable fees and expenses
incurred by Johnson in seeking to obtain or enforce any rights or benefits
provided by this Agreement, including all reasonable attorneys' and experts'
fees and expenses, accountants' fees and expenses, and court costs (if any) that
may be incurred by Johnson in pursuing a claim for payment of compensation or
benefits or other right or entitlement under this Agreement, PROVIDED that
Johnson shall refund to the Company any amounts so paid, and shall not be
entitled to any further such payment if the Arbitrator shall rule against
Johnson on all claims asserted by him and shall determine, in writing, that such
claims were without any substantial basis.
(f) In a contractual claim under this Agreement, the arbitrator must
act in accordance with the terms and provisions of this Agreement and applicable
legal principles and will have no authority to add, delete or modify any term or
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date it is last executed below by either party.
/s/ Grant Johnson
-----------------------------------
GRANT JOHNSON
DEP CORPORATION
By: /s/ Philip A. Wilber
--------------------------------
Name: Philip A. Wilber
Title: Chairman, Compensation & Management
Stock Option Committee
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Exhibit 99.6
STOCKHOLDER OPTION AGREEMENT
AGREEMENT, dated July 13, 1998, among Henkel KGaA, a
Kommanditgesellschaft auf Aktien (a partnership limited by shares), organized
under the laws of the Federal Republic of Germany ("PARENT"), Henkel
Acquisition Corp. II, a Delaware corporation and a wholly-owned subsidiary of
Parent ("PURCHASER"), and Robert H. Berglass ("STOCKHOLDER").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Purchaser and DEP Corporation, a Delaware corporation (the
"COMPANY"), are entering into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "MERGER
AGREEMENT"), which provides, among other things, for the acquisition of the
Company by Parent by means of a cash tender offer (the "OFFER") by Purchaser
for all outstanding shares of Common Stock (as defined in Section 1 hereof)
and for the subsequent merger of Purchaser with and into the Company (the
"MERGER"), all on the terms and subject to the conditions set forth in the
Merger Agreement; and
WHEREAS, in accordance with the Merger Agreement, as soon as
practicable (and not later than five business days) after the announcement of
the execution of the Merger Agreement, Purchaser shall commence the Offer at
the Offer Price (as defined in Section 1 hereof); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent and Purchaser have required that Stockholder agree,
and Stockholder agrees, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person (as hereinafter defined) shall include securities
Beneficially Owned by all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d)(3) of the Exchange
Act.
(b) "COMMON STOCK" shall mean the shares of Common Stock, par
value $0.01 per share, of the Company.
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(c) "OFFER PRICE" shall mean cash in the amount of $5.25 per share
of Common Stock or, if greater, the price per share paid by Purchaser in the
Offer.
(d) "PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement.
2. TENDER OF SHARES.
(a) In order to induce Parent and Purchaser to enter into the
Merger Agreement, Stockholder hereby agrees to validly tender (or cause the
record owner of such shares to validly tender), and not to withdraw, pursuant
to and in accordance with the terms of the Offer, not later than the fifth
business day after commencement of the Offer pursuant to Section 1.01 of the
Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Common Stock set forth opposite Stockholder's name on Schedule I hereto
(the "EXISTING SECURITIES" and, together with any shares of Common Stock
acquired by Stockholder (whether beneficially or of record) after the date
hereof and prior to the termination of this Agreement by means of purchase,
dividend, distribution, exercise of options or other rights to acquire Common
Stock or in any other way, the "SECURITIES"), all of which are Beneficially
Owned by Stockholder. If Stockholder acquires Securities after the date
hereof, Stockholder shall tender (or cause the record holder to tender) such
Securities on or before such fifth business day or, if later, on or before
the second business day after such acquisition. Stockholder hereby
acknowledges and agrees that Parent's and Purchaser's obligation to accept
for payment, purchase and pay for the Securities in the Offer, including the
Securities Beneficially Owned by Stockholder, is subject to the terms and
conditions of the Offer.
(b) Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Merger by the
Company's stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC) Stockholder's
identity and ownership of the Securities and the nature of Stockholder's
commitments, arrangements and understandings under this Agreement; provided
that Stockholder shall have a right to review and comment on such disclosure
a reasonable time before it is publicly disclosed.
3. OPTION.
(a) In order to induce Parent and Purchaser to enter into the
Merger Agreement, Stockholder hereby grants to Purchaser an irrevocable
option (a "SECURITIES OPTION") to purchase the Securities (the "OPTION
SECURITIES") at the Offer Price, subject to increase as set forth below (the
"PURCHASE PRICE"). The Securities Option may be exercised, in whole but not
in part, by written notice to Stockholder (as set forth below), for a period
of ten (10) business days (the "10 DAY PERIOD") following termination of the
Merger Agreement or termination of the Offer, whichever shall first occur;
PROVIDED that, prior to such termination, either (i) a Trigger Event shall
have occurred or (ii) (A) the Company shall have received a written proposal
from any
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person other than Parent, Purchaser or any affiliate of Parent or Purchaser
for an Acquisition Transaction, which proposal shall not have expired or been
withdrawn, (B) the Merger Agreement shall have been terminated by Parent
pursuant to Section 8.01(b), 8.01(d)(ii), 8.01(f) or 8.01(g) and (C) at the
time of such termination the Minimum Condition shall not have been satisfied.
Notwithstanding the foregoing, the Securities Option may not be exercised
until: (i) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), required for the
purchase of the Securities upon such exercise shall have expired or been
waived and any other conditions under the other Antitrust Laws shall have
been satisfied and (ii) there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Securities Option pursuant to this Agreement; provided that
if (i) all HSR Act waiting periods shall not have expired or been terminated
or (ii) there shall be in effect any such injunction or order, in each case
on the expiration of the 10 Day Period, the 10 Day Period shall be extended
until five (5) business days after the later of (A) the date of expiration or
termination of all HSR Act waiting periods, and (B) the date of removal or
lifting of such injunction or order.
(b) In the event that Purchaser wishes to exercise the Securities
Option, Purchaser shall send a written notice (the "NOTICE") to Stockholder
identifying the date (not less than two (2) nor more than five (5) business
days from the date of the Notice) for the closing of such purchase, which
closing shall be held at the executive offices of the Company (or such other
place as the parties may agree). At the closing, Stockholder shall deliver
to Purchaser appropriate and effective instruments of transfer of the Option
Securities, against payment to Stockholder of the Purchase Price, in same day
funds, by wire transfer to such account as Stockholder shall designate.
(c) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option (the "ACQUIRED SECURITIES")
and, either before or at any time within the one-year period following such
acquisition, Parent, Purchaser or any affiliate of Parent or Purchaser shall
acquire Common Stock (other than from the Company) at a price in excess of
the Purchase Price, then the Purchase Price hereunder shall be increased to
such higher price. If the purchase of the Acquired Securities has been
completed at the time of such increase, Stockholder shall be entitled to
receive, and Purchaser shall promptly (and in no event more than 48 hours
following such increase) pay to Stockholder, by wire transfer of same day
funds to such account as Stockholder shall designate, the amount of the
increase.
(d) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option, Stockholder shall be
entitled to receive, and Purchaser shall promptly (and in no event more than
48 hours following such Sale) pay to Stockholder, upon any subsequent
disposition, transfer or sale to an unaffiliated third party ("SALE") of all
or any portion of the Acquired Securities within the one-year period
following such acquisition, an amount per share in cash equal to the excess,
if any, of the net proceeds received per share in the Sale over the Purchase
Price. Any such payment shall be made by wire transfer of same day funds to
such account as Stockholder shall designate.
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4. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Stockholder shall, at any meeting of the
stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, vote (or cause to be
voted) all Securities then held of record or Beneficially Owned by
Stockholder (and, in the case of Securities not held of record by
Stockholder, subject to Stockholder's voting direction), (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the Company Option Agreement and the approval of the terms of each thereof
and each of the other actions contemplated by the Merger Agreement, the
Company Option Agreement and this Agreement and any actions required in
furtherance thereof and hereof; and (ii) against any proposal relating to an
Acquisition Transaction and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or the
Company Option Agreement or which would result in any of the conditions set
forth in Exhibit A to the Merger Agreement or set forth in Article VII of the
Merger Agreement not being fulfilled.
(b) NO INCONSISTENT ARRANGEMENTS. Stockholder hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, Stockholder shall not (i) offer to transfer (which term shall
include, without limitation, any sale, tender, gift, pledge (other than a
pledge which does not impair Stockholder's ability to perform under this
Agreement), assignment or other disposition), transfer or consent to any
transfer of, any or all of the Securities or any interest therein, (ii) enter
into any contract, option or other agreement or understanding with respect to
any transfer of any or all of the Securities or any interest therein, (iii)
grant any proxy, power-of-attorney or other authorization or consent in or
with respect to the Securities, (iv) deposit the Securities into a voting
trust or enter into a voting agreement or arrangement with respect to the
Securities or (v) take any other action that would in any way restrict, limit
or interfere with the performance of its obligations hereunder or the
transactions contemplated hereby or by the Merger Agreement or the Company
Option Agreement (including, without limitation, any action that would cause
the Merger to be subject to Section 1101 of the CGCL).
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OR PROXY.
(i) Stockholder hereby irrevocably grants to, and appoints,
Parent and Petra Hammerlein and Ernest G. Szoke, or either of them, in
their respective capacities as officers or representatives of Parent,
and any individual who shall hereafter succeed to any such office or
representation of Parent, and each of them individually, Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Stockholder, to vote the Securities,
or grant a consent or approval in respect of the Securities, in favor
of the various transactions contemplated by the Merger Agreement and
the Company Option Agreement and against any proposal relating to an
Acquisition Transaction.
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(ii) Stockholder represents that any proxies heretofore given in
respect of Stockholder's Securities are not irrevocable, and that any
such proxies are hereby revoked.
(iii) Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4(c) is given in connection with the execution
of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Stockholder under this
Agreement. Stockholder hereby further affirms that the irrevocable
proxy is coupled with an interest and may under no circumstances be
revoked. Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212 of the
DGCL. A legend reflecting the foregoing irrevocable proxy shall be
placed on the certificate or certificate representing the Securities.
(d) NO SOLICITATION. Stockholder hereby agrees, in the capacity
as a stockholder of the Company, that neither Stockholder nor any affiliates,
representatives or agents shall (and, if Stockholder is a corporation,
partnership, trust or other entity, Stockholder shall cause its officers,
directors, partners, and employees, representatives and agents, including,
but not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. Stockholder
will immediately cease any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any proposal relating
to an Acquisition Transaction. Stockholder will immediately communicate to
Parent, to the same extent as is required by the Company pursuant to Section
6.02 of the Merger Agreement, the terms, and other information concerning,
any proposal, discussion, negotiation or inquiry and the identity of the
party making such proposal or inquiry which Stockholder may receive in
respect of any such Acquisition Transaction. Any action taken by the Company
or any member of the Board of Directors of the Company, including any action
taken by Stockholder in Stockholder's capacity as a Director or officer of
the Company, in accordance with Section 6.02 of the Merger Agreement shall be
deemed not to violate this Section 4(d).
(e) REASONABLE EFFORTS. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this
Agreement. Each party shall promptly consult with the other and provide any
necessary information and material with respect to all filings made by such
party with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
(f) WAIVER OF APPRAISAL RIGHTS. Stockholder hereby waives any
rights of appraisal or rights to dissent from the Merger that Stockholder may
have.
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5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder
hereby represents and warrants to Parent and Purchaser as follows:
(a) OWNERSHIP OF SECURITIES. Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On
the date hereof, the Existing Securities constitute all of the Securities
owned of record or Beneficially Owned by Stockholder. Stockholder has sole
voting power and sole power to issue instructions with respect to the matters
set forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole
power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Existing Securities with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.
(b) POWER; BINDING AGREEMENT. Stockholder has the power and
authority to enter into and perform all of Stockholder's obligations under
this Agreement. This Agreement has been duly and validly executed and
delivered by Stockholder and constitutes a valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of
equity. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which Stockholder is a trustee, or any party
to any other agreement or arrangement, whose consent is required for the
execution and delivery of this Agreement or the consummation by Stockholder
of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery of this Agreement by Stockholder, the consummation by Stockholder of
the transactions contemplated hereby and the compliance by Stockholder with
the provisions hereof and (ii) none of the execution and delivery of this
Agreement by Stockholder, the consummation by Stockholder of the transactions
contemplated hereby or compliance by Stockholder with any of the provisions
hereof, except in cases in which any conflict, breach, default or violation
described below would not interfere with the ability of Stockholder to
perform Stockholder's obligations hereunder, shall (A) conflict with or
result in any breach of any organizational documents applicable to
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration)
under, any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind, including, without limitation, any voting agreement, proxy
arrangement, pledge agreement, shareholders agreement or voting trust, to
which Stockholder is a party or by which Stockholder or any of its properties
or assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to Stockholder or any
of Stockholder's properties or assets.
(d) NO LIENS. Except as permitted by this Agreement, the Existing
Securities and the certificates representing such securities are now, and at all
times during the term hereof will
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be, held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of all liens, proxies, voting trusts or
agreements, understandings or arrangements or any other rights whatsoever,
except for any such liens or proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf
of Stockholder.
(f) RELIANCE BY PARENT. Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon Stockholder's execution and delivery of, and
representations and warranties contained in, this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER. Each
of Parent and Purchaser hereby represents and warrants to Stockholder as
follows:
(a) POWER; BINDING AGREEMENT. Parent and Purchaser each has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. This Agreement has been duly and validly
executed and delivered by each of Parent and Purchaser and constitutes a
valid and binding agreement of each of Parent and Purchaser, enforceable
against each of Parent and Purchaser in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally and (ii) is subject to general principles of
equity.
(b) NO CONFLICTS. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and
Purchaser, the consummation by each of Parent and Purchaser of the
transactions contemplated hereby and the compliance by Parent and Purchaser
with the provisions hereof and (ii) none of the execution and delivery of
this Agreement by each of Parent and Purchaser, the consummation by each of
Parent and Purchaser of the transactions contemplated hereby or compliance by
each of Parent and Purchaser with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below
would not interfere with the ability of Parent or Purchaser to perform their
respective obligations hereunder, shall (A) conflict with or result in any
breach of any organizational documents applicable to either of Parent or
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration)
under, any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or Purchaser is a party or by which either
of Parent or Purchaser or any of their properties or assets may be bound, or
(C) violate any order, writ, injunction, decree, judgment, order, statute,
rule or regulation applicable to either of Parent or Purchaser or any of
their properties or assets.
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7. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute
and deliver such additional documents and take all such further lawful action
as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
8. STOP TRANSFER. Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such
transfer is made in compliance with this Agreement. In the event of a stock
dividend or distribution, or any change in the Common Stock by reason of any
stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, the term "SECURITIES" shall refer to and include the Securities
as well as all such stock dividends and distributions and any shares into
which or for which any and all of the Securities may be changed or exchanged.
9. INDEMNIFICATION. For a period of four years from and after the
Effective Time, Parent shall indemnify Stockholder and hold Stockholder
harmless against any loss, cost or expense (including without limitation
reasonable attorneys' fees) in the event of any claim against Stockholder
relating to the actions of Stockholder, as stockholder, in connection with
the Merger Agreement, this Agreement and any of the transactions contemplated
thereby; PROVIDED that Stockholder shall have first sought indemnification
from the Company pursuant to insurance, the Company's charter or by-laws and
any indemnification agreement or other arrangement between the Company and
Stockholder; PROVIDED FURTHER, HOWEVER, that the obligations of Parent
hereunder shall be limited to the excess, if any, of Stockholder's loss, cost
or expense over the sum of (x) amounts actually recovered from the Company in
accordance with the preceding proviso plus (y) an aggregate amount for
Stockholder and all other stockholders executing agreements substantially the
same as this Agreement in connection with the Merger Agreement of $100,000.
In the event of any claim for which indemnification is provided herein,
Stockholder shall promptly notify Parent, PROVIDED that the failure to give
such notice shall not relieve Parent from its obligations hereunder except
if, and to the extent that, it suffers actual prejudice thereby. Parent
shall have the right to undertake, with counsel of its choice (subject to the
reasonable approval of Stockholder and which counsel may be counsel to
Parent), the defense of such claim. Stockholder shall have the right to
employ its own counsel to participate (but not to control the defense) in any
such action, but the fees and expenses of such counsel shall be at the sole
expense of Stockholder unless (i) Parent or the Company shall have failed to
employ counsel to assume the defense of such claim within a reasonable time
after receiving notice thereof, or (ii) a conflict of interest shall prevent
the same counsel from representing Parent or the Company and the Stockholder.
Parent shall not be liable hereunder for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld).
10. TERMINATION. The covenants, agreements and proxy contained
herein with respect to the Securities shall terminate upon the earliest of
(a) the Effective Time, (b) the first anniversary of the date hereof, (c) the
termination of the Merger Agreement pursuant to Section 8.01(a), 8.01(c) or
8.01(d)(i) or, by the Company, pursuant to Section 8.01(f) thereof and (d)
the expiration of the 10 Day Period.
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11. NO LIMITATION. Nothing in this Agreement shall be construed
to prohibit Stockholder, or any officer or affiliate of Stockholder who is or
has designated a member of the Board of Directors of the Company, from taking
any action solely in his or her capacity as a member of the Board of
Directors of the Company or from exercising his or her fiduciary duties as a
member of such Board of Directors.
12. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement and
Company Option Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Securities and shall be binding upon the
parties and any person or entity to which legal or beneficial ownership of
the Securities shall pass, whether by operation of law or otherwise,
including, without limitation, Stockholder's administrators or successors.
Notwithstanding any transfer of Securities, the transferor shall remain
liable for the performance of all obligations of the transferor under this
Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of Stockholder or
Parent and Purchaser, as the case may be, provided that Parent or Purchaser
may assign, in its respective sole discretion, its rights and obligations
hereunder to any direct or indirect subsidiary of Parent, but no such
assignment shall relieve Parent or Purchaser of its obligations hereunder if
such assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or facsimile
transmission (with a confirmation copy sent for next day delivery via courier
service, such as Federal Express), or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Stockholder:
Robert H. Berglass
c/o DEP Corporation
2101 East Via Arado
Rancho Dominguez, CA 90220
Telephone No.: (310) 764-2207
Facsimile No.: (310) 537-2524
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Copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Andrew E. Bogen, Esq.
Telephone No.: (213) 229-7159
Facsimile No.: (213) 229-7520
If to Parent or Purchaser:
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
Attention: Petra U. Hammerlein
Telephone No.: (49) 211-797-3362
Facsimile No.: (49) 211-798-2470
Copy to:
Henkel Acquisition Corp. II
c/o Henkel Corporation
The Triad
2200 Renaissance Boulevard - Suite 200
Gulph Mills, PA 19406
Attention: Ernest G. Szoke
Telephone No.: (610) 270-8124
Facsimile No.: (610) 270-8219
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
Telephone No.: (212) 225-2000
Facsimile No.: (212) 225-3999
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction such
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invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein. Notwithstanding anything to the contrary
contained in this Agreement, neither Parent nor Purchaser shall be deemed to
be the owner, nor shall Parent or Purchaser have the power to vote for the
election of directors, with respect to some or all of the Securities for
purposes of the CGCL until the purchase of, and payment for, such Securities
is actually consummated. The rights of Parent and Purchaser hereunder shall
be limited as provided in the preceding sentence.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained
in this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to
which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a
waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by or confer any
rights upon, any person or entity who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect
to the principles of conflicts of law thereof.
(l) WAIVER OF JURY TRIAL. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used 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.
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(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
(o) EXPENSES. Except as otherwise provide herein, neither Parent
and Purchaser, on the one hand, nor Stockholder, on the other hand, shall be
required to pay the expenses incurred by the other party in connection with
this Agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
HENKEL KGaA
By: /s/ Uwe Specht
------------------------------------
Name: Dr. Uwe Specht
Title: Executive Vice President
By: /s/ Petra Hammerlein
------------------------------------
Name: Dr. Petra Hammerlein
Title: Senior Counsel
HENKEL ACQUISITION CORP. II
By: /s/ John E. Knudson
------------------------------------
Name: John E. Knudson
Title: Vice President and Treasurer
ROBERT H. BERGLASS
/s/ Robert H. Berglass
---------------------------------------
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SCHEDULE I
<TABLE>
NAME OF NUMBER OF SHARES OF COMMON STOCK
STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------------------------------------------------------
<S> <C>
Robert H. Berglass 999,555
</TABLE>
<PAGE>
Exhibit 99.7
STOCKHOLDER OPTION AGREEMENT
AGREEMENT, dated July 13, 1998, among Henkel KGaA, a
Kommanditgesellschaft auf Aktien (a partnership limited by shares), organized
under the laws of the Federal Republic of Germany ("PARENT"), Henkel Acquisition
Corp. II, a Delaware corporation and a wholly-owned subsidiary of Parent
("PURCHASER"), and Robert H. Berglass, as Trustee of the Berglass Charitable
Remainder Trust UDT 7/8/98 ("STOCKHOLDER").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Purchaser and DEP Corporation, a Delaware corporation (the
"COMPANY"), are entering into an Agreement and Plan of Merger (as such agreement
may hereafter be amended from time to time, the "MERGER AGREEMENT"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "OFFER") by Purchaser for all outstanding
shares of Common Stock (as defined in Section 1 hereof) and for the subsequent
merger of Purchaser with and into the Company (the "MERGER"), all on the terms
and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, in accordance with the Merger Agreement, as soon as
practicable (and not later than five business days) after the announcement of
the execution of the Merger Agreement, Purchaser shall commence the Offer at the
Offer Price (as defined in Section 1 hereof); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that Stockholder agree, and
Stockholder agrees, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person (as hereinafter defined) shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act.
(b) "COMMON STOCK" shall mean the shares of Common Stock, par value
$0.01 per share, of the Company.
<PAGE>
(c) "OFFER PRICE" shall mean cash in the amount of $5.25 per share of
Common Stock or, if greater, the price per share paid by Purchaser in the Offer.
(d) "PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement.
2. TENDER OF SHARES.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and in
accordance with the terms of the Offer, not later than the fifth business day
after commencement of the Offer pursuant to Section 1.01 of the Merger Agreement
and Rule 14d-2 under the Exchange Act, the number of shares of Common Stock set
forth opposite Stockholder's name on Schedule I hereto (the "EXISTING
SECURITIES" and, together with any shares of Common Stock acquired by
Stockholder (whether beneficially or of record) after the date hereof and prior
to the termination of this Agreement by means of purchase, dividend,
distribution, exercise of options or other rights to acquire Common Stock or in
any other way, the "SECURITIES"), all of which are Beneficially Owned by
Stockholder. If Stockholder acquires Securities after the date hereof,
Stockholder shall tender (or cause the record holder to tender) such Securities
on or before such fifth business day or, if later, on or before the second
business day after such acquisition. Stockholder hereby acknowledges and agrees
that Parent's and Purchaser's obligation to accept for payment, purchase and pay
for the Securities in the Offer, including the Securities Beneficially Owned by
Stockholder, is subject to the terms and conditions of the Offer.
(b) Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Merger by the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) Stockholder's identity and
ownership of the Securities and the nature of Stockholder's commitments,
arrangements and understandings under this Agreement; provided that Stockholder
shall have a right to review and comment on such disclosure a reasonable time
before it is publicly disclosed.
3. OPTION.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, Stockholder hereby grants to Purchaser an irrevocable option (a
"SECURITIES OPTION") to purchase the Securities (the "OPTION SECURITIES") at the
Offer Price, subject to increase as set forth below (the "PURCHASE PRICE"). The
Securities Option may be exercised, in whole but not in part, by written notice
to Stockholder (as set forth below), for a period of ten (10) business days (the
"10 DAY PERIOD") following termination of the Merger Agreement or termination of
the Offer, whichever shall first occur; PROVIDED that, prior to such
termination, either (i) a Trigger Event shall have occurred or (ii) (A) the
Company shall have received a written proposal from any
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person other than Parent, Purchaser or any affiliate of Parent or Purchaser
for an Acquisition Transaction, which proposal shall not have expired or been
withdrawn, (B) the Merger Agreement shall have been terminated by Parent
pursuant to Section 8.01(b), 8.01(d)(ii), 8.01(f) or 8.01(g) and (C) at the
time of such termination the Minimum Condition shall not have been satisfied.
Notwithstanding the foregoing, the Securities Option may not be exercised
until: (i) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), required for the
purchase of the Securities upon such exercise shall have expired or been
waived and any other conditions under the other Antitrust Laws shall have
been satisfied and (ii) there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Securities Option pursuant to this Agreement; provided that
if (i) all HSR Act waiting periods shall not have expired or been terminated
or (ii) there shall be in effect any such injunction or order, in each case
on the expiration of the 10 Day Period, the 10 Day Period shall be extended
until five (5) business days after the later of (A) the date of expiration or
termination of all HSR Act waiting periods, and (B) the date of removal or
lifting of such injunction or order.
(b) In the event that Purchaser wishes to exercise the Securities
Option, Purchaser shall send a written notice (the "NOTICE") to Stockholder
identifying the date (not less than two (2) nor more than five (5) business days
from the date of the Notice) for the closing of such purchase, which closing
shall be held at the executive offices of the Company (or such other place as
the parties may agree). At the closing, Stockholder shall deliver to Purchaser
appropriate and effective instruments of transfer of the Option Securities,
against payment to Stockholder of the Purchase Price, in same day funds, by wire
transfer to such account as Stockholder shall designate.
(c) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option (the "ACQUIRED SECURITIES")
and, either before or at any time within the one-year period following such
acquisition, Parent, Purchaser or any affiliate of Parent or Purchaser shall
acquire Common Stock (other than from the Company) at a price in excess of the
Purchase Price, then the Purchase Price hereunder shall be increased to such
higher price. If the purchase of the Acquired Securities has been completed at
the time of such increase, Stockholder shall be entitled to receive, and
Purchaser shall promptly (and in no event more than 48 hours following such
increase) pay to Stockholder, by wire transfer of same day funds to such account
as Stockholder shall designate, the amount of the increase.
(d) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option, Stockholder shall be entitled
to receive, and Purchaser shall promptly (and in no event more than 48 hours
following such Sale) pay to Stockholder, upon any subsequent disposition,
transfer or sale to an unaffiliated third party ("SALE") of all or any portion
of the Acquired Securities within the one-year period following such
acquisition, an amount per share in cash equal to the excess, if any, of the net
proceeds received per share in the Sale over the Purchase Price. Any such
payment shall be made by wire transfer of same day funds to such account as
Stockholder shall designate.
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4. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Stockholder shall, at any meeting of the
stockholders of the Company, however called, or in connection with any written
consent of the stockholders of the Company, vote (or cause to be voted) all
Securities then held of record or Beneficially Owned by Stockholder (and, in the
case of Securities not held of record by Stockholder, subject to Stockholder's
voting direction), (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the Company Option Agreement and the
approval of the terms of each thereof and each of the other actions contemplated
by the Merger Agreement, the Company Option Agreement and this Agreement and any
actions required in furtherance thereof and hereof; and (ii) against any
proposal relating to an Acquisition Transaction and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement, or
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
the Company Option Agreement or which would result in any of the conditions set
forth in Exhibit A to the Merger Agreement or set forth in Article VII of the
Merger Agreement not being fulfilled.
(b) NO INCONSISTENT ARRANGEMENTS. Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
Stockholder shall not (i) offer to transfer (which term shall include, without
limitation, any sale, tender, gift, pledge (other than a pledge which does not
impair Stockholder's ability to perform under this Agreement), assignment or
other disposition), transfer or consent to any transfer of, any or all of the
Securities or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Securities or any interest therein, (iii) grant any proxy, power-of-attorney
or other authorization or consent in or with respect to the Securities, (iv)
deposit the Securities into a voting trust or enter into a voting agreement or
arrangement with respect to the Securities or (v) take any other action that
would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement or the Company Option Agreement (including, without limitation, any
action that would cause the Merger to be subject to Section 1101 of the CGCL).
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OR PROXY.
(i) Stockholder hereby irrevocably grants to, and appoints,
Parent and Petra Hammerlein and Ernest G. Szoke, or either of them, in
their respective capacities as officers or representatives of Parent,
and any individual who shall hereafter succeed to any such office or
representation of Parent, and each of them individually, Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Stockholder, to vote the Securities,
or grant a consent or approval in respect of the Securities, in favor
of the various transactions contemplated by the Merger Agreement and
the Company Option Agreement and against any proposal relating to an
Acquisition Transaction.
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(ii) Stockholder represents that any proxies heretofore given in
respect of Stockholder's Securities are not irrevocable, and that any
such proxies are hereby revoked.
(iii) Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4(c) is given in connection with the execution
of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Stockholder under this
Agreement. Stockholder hereby further affirms that the irrevocable
proxy is coupled with an interest and may under no circumstances be
revoked. Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212 of the
DGCL. A legend reflecting the foregoing irrevocable proxy shall be
placed on the certificate or certificate representing the Securities.
(d) NO SOLICITATION. Stockholder hereby agrees, in the capacity as a
stockholder of the Company, that neither Stockholder nor any affiliates,
representatives or agents shall (and, if Stockholder is a corporation,
partnership, trust or other entity, Stockholder shall cause its officers,
directors, partners, and employees, representatives and agents, including, but
not limited to, investment bankers, attorneys and accountants, not to), directly
or indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, Purchaser or any of their
respective affiliates or representatives) concerning any proposal relating to an
Acquisition Transaction. Stockholder will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any proposal relating to an Acquisition Transaction.
Stockholder will immediately communicate to Parent, to the same extent as is
required by the Company pursuant to Section 6.02 of the Merger Agreement, the
terms, and other information concerning, any proposal, discussion, negotiation
or inquiry and the identity of the party making such proposal or inquiry which
Stockholder may receive in respect of any such Acquisition Transaction. Any
action taken by the Company or any member of the Board of Directors of the
Company, including any action taken by Stockholder in Stockholder's capacity as
a Director or officer of the Company, in accordance with Section 6.02 of the
Merger Agreement shall be deemed not to violate this Section 4(d).
(e) REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party
shall promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(f) WAIVER OF APPRAISAL RIGHTS. Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that Stockholder may have.
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5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder hereby
represents and warrants to Parent and Purchaser as follows:
(a) OWNERSHIP OF SECURITIES. Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by Stockholder. Stockholder has sole voting power
and sole power to issue instructions with respect to the matters set forth in
Sections 2, 3 and 4 hereof, sole power of disposition, sole power to demand
appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Existing Securities with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Stockholder has the power and
authority to enter into and perform all of Stockholder's obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which Stockholder is a trustee, or any party to any other agreement or
arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by Stockholder of the transactions contemplated
hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and delivery
of this Agreement by Stockholder, the consummation by Stockholder of the
transactions contemplated hereby and the compliance by Stockholder with the
provisions hereof and (ii) none of the execution and delivery of this Agreement
by Stockholder, the consummation by Stockholder of the transactions contemplated
hereby or compliance by Stockholder with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Stockholder to perform Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to Stockholder, (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
modification or acceleration) under, any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind, including, without limitation, any voting agreement,
proxy arrangement, pledge agreement, shareholders agreement or voting trust, to
which Stockholder is a party or by which Stockholder or any of its properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to Stockholder or any of
Stockholder's properties or assets.
(d) NO LIENS. Except as permitted by this Agreement, the Existing
Securities and the certificates representing such securities are now, and at all
times during the term hereof will
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be, held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of all liens, proxies, voting trusts or
agreements, understandings or arrangements or any other rights whatsoever,
except for any such liens or proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
(f) RELIANCE BY PARENT. Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon Stockholder's execution and delivery of, and
representations and warranties contained in, this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER. Each of
Parent and Purchaser hereby represents and warrants to Stockholder as follows:
(a) POWER; BINDING AGREEMENT. Parent and Purchaser each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by each of Parent and Purchaser and constitutes a valid and binding
agreement of each of Parent and Purchaser, enforceable against each of Parent
and Purchaser in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity.
(b) NO CONFLICTS. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and Purchaser,
the consummation by each of Parent and Purchaser of the transactions
contemplated hereby and the compliance by Parent and Purchaser with the
provisions hereof and (ii) none of the execution and delivery of this Agreement
by each of Parent and Purchaser, the consummation by each of Parent and
Purchaser of the transactions contemplated hereby or compliance by each of
Parent and Purchaser with any of the provisions hereof, except in cases in which
any conflict, breach, default or violation described below would not interfere
with the ability of Parent or Purchaser to perform their respective obligations
hereunder, shall (A) conflict with or result in any breach of any organizational
documents applicable to either of Parent or Purchaser, (B) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
modification or acceleration) under, any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which either of Parent or Purchaser is a party or by
which either of Parent or Purchaser or any of their properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to either of Parent or Purchaser or any
of their properties or assets.
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7. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. STOP TRANSFER. Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "SECURITIES" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
9. INDEMNIFICATION. For a period of four years from and after the
Effective Time, Parent shall indemnify Stockholder and hold Stockholder harmless
against any loss, cost or expense (including without limitation reasonable
attorneys' fees) in the event of any claim against Stockholder relating to the
actions of Stockholder, as stockholder, in connection with the Merger Agreement,
this Agreement and any of the transactions contemplated thereby; PROVIDED that
Stockholder shall have first sought indemnification from the Company pursuant to
insurance, the Company's charter or by-laws and any indemnification agreement or
other arrangement between the Company and Stockholder; PROVIDED FURTHER,
HOWEVER, that the obligations of Parent hereunder shall be limited to the
excess, if any, of Stockholder's loss, cost or expense over the sum of (x)
amounts actually recovered from the Company in accordance with the preceding
proviso plus (y) an aggregate amount for Stockholder and all other stockholders
executing agreements substantially the same as this Agreement in connection with
the Merger Agreement of $100,000. In the event of any claim for which
indemnification is provided herein, Stockholder shall promptly notify Parent,
PROVIDED that the failure to give such notice shall not relieve Parent from its
obligations hereunder except if, and to the extent that, it suffers actual
prejudice thereby. Parent shall have the right to undertake, with counsel of
its choice (subject to the reasonable approval of Stockholder and which counsel
may be counsel to Parent), the defense of such claim. Stockholder shall have
the right to employ its own counsel to participate (but not to control the
defense) in any such action, but the fees and expenses of such counsel shall be
at the sole expense of Stockholder unless (i) Parent or the Company shall have
failed to employ counsel to assume the defense of such claim within a reasonable
time after receiving notice thereof, or (ii) a conflict of interest shall
prevent the same counsel from representing Parent or the Company and the
Stockholder. Parent shall not be liable hereunder for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld).
10. TERMINATION. The covenants, agreements and proxy contained
herein with respect to the Securities shall terminate upon the earliest of (a)
the Effective Time, (b) the first anniversary of the date hereof, (c) the
termination of the Merger Agreement pursuant to Section 8.01(a), 8.01(c) or
8.01(d)(i) or, by the Company, pursuant to Section 8.01(f) thereof and (d) the
expiration of the 10 Day Period.
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11. NO LIMITATION. Nothing in this Agreement shall be construed to
prohibit Stockholder, or any officer or affiliate of Stockholder who is or has
designated a member of the Board of Directors of the Company, from taking any
action solely in his or her capacity as a member of the Board of Directors of
the Company or from exercising his or her fiduciary duties as a member of such
Board of Directors.
12. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement and
Company Option Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations hereunder
shall attach to the Securities and shall be binding upon the parties and any
person or entity to which legal or beneficial ownership of the Securities shall
pass, whether by operation of law or otherwise, including, without limitation,
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of Stockholder or Parent and
Purchaser, as the case may be, provided that Parent or Purchaser may assign, in
its respective sole discretion, its rights and obligations hereunder to any
direct or indirect subsidiary of Parent, but no such assignment shall relieve
Parent or Purchaser of its obligations hereunder if such assignee does not
perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or facsimile
transmission (with a confirmation copy sent for next day delivery via courier
service, such as Federal Express), or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Stockholder:
Robert H. Berglass
c/o DEP Corporation
2101 East Via Arado
Rancho Dominguez, CA 90220
Telephone No.: (310) 764-2207
Facsimile No.: (310) 537-2524
9
<PAGE>
Copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Andrew E. Bogen, Esq.
Telephone No.: (213) 229-7159
Facsimile No.: (213) 229-7520
If to Parent or Purchaser:
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
Attention: Petra U. Hammerlein
Telephone No.: (49) 211-797-3362
Facsimile No.: (49) 211-798-2470
Copy to:
Henkel Acquisition Corp. II
c/o Henkel Corporation
The Triad
2200 Renaissance Boulevard - Suite 200
Gulph Mills, PA 19406
Attention: Ernest G. Szoke
Telephone No.: (610) 270-8124
Facsimile No.: (610) 270-8219
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
Telephone No.: (212) 225-2000
Facsimile No.: (212) 225-3999
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
10
<PAGE>
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor Purchaser shall be deemed to be the owner, nor
shall Parent or Purchaser have the power to vote for the election of directors,
with respect to some or all of the Securities for purposes of the CGCL until the
purchase of, and payment for, such Securities is actually consummated. The
rights of Parent and Purchaser hereunder shall be limited as provided in the
preceding sentence.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by or confer any rights
upon, any person or entity who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) WAIVER OF JURY TRIAL. Each party hereto hereby waives any right
to a trial by jury in connection with any action, suit or proceeding brought in
connection with this Agreement.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used 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.
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<PAGE>
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
(o) EXPENSES. Except as otherwise provide herein, neither Parent and
Purchaser, on the one hand, nor Stockholder, on the other hand, shall be
required to pay the expenses incurred by the other party in connection with this
Agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
HENKEL KGaA
By: /s/ Uwe Specht
------------------------------------
Name: Dr. Uwe Specht
Title: Executive Vice President
By: /s/ Petra Hammerlein
------------------------------------
Name: Dr. Petra Hammerlein
Title: Senior Counsel
HENKEL ACQUISITION CORP. II
By: /s/ John E. Knudson
------------------------------------
Name: John E. Knudson
Title: Vice President and Treasurer
ROBERT H. BERGLASS, AS TRUSTEE OF
THE BERGLASS CHARITABLE
REMAINDER TRUST UDT 7/8/98
By: /s/ Robert H. Berglass
-----------------------------------
Name: Robert H. Berglass
Title: Trustee
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<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF
STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED
- ----------------------------------------------------------------------------
<S> <C>
Robert H.
Berglass, as 761,905
Trustee of the
Berglass
Charitable
Remainder Trust
UDT 7/8/98
</TABLE>
<PAGE>
Exhibit 99.8
STOCKHOLDER OPTION AGREEMENT
AGREEMENT, dated July 13, 1998, among Henkel KGaA, a
Kommanditgesellschaft auf Aktien (a partnership limited by shares), organized
under the laws of the Federal Republic of Germany ("PARENT"), Henkel Acquisition
Corp. II, a Delaware corporation and a wholly-owned subsidiary of Parent
("PURCHASER"), and Judith R. Berglass, as Trustee of the Berglass 1995
Irrevocable Trust UDT 6/27/95 ("STOCKHOLDER").
W I T N E S S E T H :
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Purchaser and DEP Corporation, a Delaware corporation (the
"COMPANY"), are entering into an Agreement and Plan of Merger (as such agreement
may hereafter be amended from time to time, the "MERGER AGREEMENT"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "OFFER") by Purchaser for all outstanding
shares of Common Stock (as defined in Section 1 hereof) and for the subsequent
merger of Purchaser with and into the Company (the "MERGER"), all on the terms
and subject to the conditions set forth in the Merger Agreement; and
WHEREAS, in accordance with the Merger Agreement, as soon as
practicable (and not later than five business days) after the announcement of
the execution of the Merger Agreement, Purchaser shall commence the Offer at the
Offer Price (as defined in Section 1 hereof); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that Stockholder agree, and
Stockholder agrees, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person (as hereinafter defined) shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a "group" within the
meaning of Section 13(d)(3) of the Exchange Act.
(b) "COMMON STOCK" shall mean the shares of Common Stock, par value
$0.01 per share, of the Company.
<PAGE>
(c) "OFFER PRICE" shall mean cash in the amount of $5.25 per share of
Common Stock or, if greater, the price per share paid by Purchaser in the Offer.
(d) "PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement.
2. TENDER OF SHARES.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and in
accordance with the terms of the Offer, not later than the fifth business day
after commencement of the Offer pursuant to Section 1.01 of the Merger Agreement
and Rule 14d-2 under the Exchange Act, the number of shares of Common Stock set
forth opposite Stockholder's name on Schedule I hereto (the "EXISTING
SECURITIES" and, together with any shares of Common Stock acquired by
Stockholder (whether beneficially or of record) after the date hereof and prior
to the termination of this Agreement by means of purchase, dividend,
distribution, exercise of options or other rights to acquire Common Stock or in
any other way, the "SECURITIES"), all of which are Beneficially Owned by
Stockholder. If Stockholder acquires Securities after the date hereof,
Stockholder shall tender (or cause the record holder to tender) such Securities
on or before such fifth business day or, if later, on or before the second
business day after such acquisition. Stockholder hereby acknowledges and agrees
that Parent's and Purchaser's obligation to accept for payment, purchase and pay
for the Securities in the Offer, including the Securities Beneficially Owned by
Stockholder, is subject to the terms and conditions of the Offer.
(b) Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Merger by the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) Stockholder's identity and
ownership of the Securities and the nature of Stockholder's commitments,
arrangements and understandings under this Agreement; provided that Stockholder
shall have a right to review and comment on such disclosure a reasonable time
before it is publicly disclosed.
3. OPTION.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, Stockholder hereby grants to Purchaser an irrevocable option (a
"SECURITIES OPTION") to purchase the Securities (the "OPTION SECURITIES") at the
Offer Price, subject to increase as set forth below (the "PURCHASE PRICE"). The
Securities Option may be exercised, in whole but not in part, by written notice
to Stockholder (as set forth below), for a period of ten (10) business days (the
"10 DAY PERIOD") following termination of the Merger Agreement or termination of
the Offer, whichever shall first occur; PROVIDED that, prior to such
termination, either (i) a Trigger Event shall have occurred or (ii) (A) the
Company shall have received a written proposal from any
2
<PAGE>
person other than Parent, Purchaser or any affiliate of Parent or Purchaser
for an Acquisition Transaction, which proposal shall not have expired or been
withdrawn, (B) the Merger Agreement shall have been terminated by Parent
pursuant to Section 8.01(b), 8.01(d)(ii), 8.01(f) or 8.01(g) and (C) at the
time of such termination the Minimum Condition shall not have been satisfied.
Notwithstanding the foregoing, the Securities Option may not be exercised
until: (i) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), required for the
purchase of the Securities upon such exercise shall have expired or been
waived and any other conditions under the other Antitrust Laws shall have
been satisfied and (ii) there shall not be in effect any preliminary
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Securities Option pursuant to this Agreement; provided that
if (i) all HSR Act waiting periods shall not have expired or been terminated
or (ii) there shall be in effect any such injunction or order, in each case
on the expiration of the 10 Day Period, the 10 Day Period shall be extended
until five (5) business days after the later of (A) the date of expiration or
termination of all HSR Act waiting periods, and (B) the date of removal or
lifting of such injunction or order.
(b) In the event that Purchaser wishes to exercise the Securities
Option, Purchaser shall send a written notice (the "NOTICE") to Stockholder
identifying the date (not less than two (2) nor more than five (5) business days
from the date of the Notice) for the closing of such purchase, which closing
shall be held at the executive offices of the Company (or such other place as
the parties may agree). At the closing, Stockholder shall deliver to Purchaser
appropriate and effective instruments of transfer of the Option Securities,
against payment to Stockholder of the Purchase Price, in same day funds, by wire
transfer to such account as Stockholder shall designate.
(c) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option (the "ACQUIRED SECURITIES")
and, either before or at any time within the one-year period following such
acquisition, Parent, Purchaser or any affiliate of Parent or Purchaser shall
acquire Common Stock (other than from the Company) at a price in excess of the
Purchase Price, then the Purchase Price hereunder shall be increased to such
higher price. If the purchase of the Acquired Securities has been completed at
the time of such increase, Stockholder shall be entitled to receive, and
Purchaser shall promptly (and in no event more than 48 hours following such
increase) pay to Stockholder, by wire transfer of same day funds to such account
as Stockholder shall designate, the amount of the increase.
(d) In the event the Option Securities are acquired by Purchaser
pursuant to the exercise of the Securities Option, Stockholder shall be entitled
to receive, and Purchaser shall promptly (and in no event more than 48 hours
following such Sale) pay to Stockholder, upon any subsequent disposition,
transfer or sale to an unaffiliated third party ("SALE") of all or any portion
of the Acquired Securities within the one-year period following such
acquisition, an amount per share in cash equal to the excess, if any, of the net
proceeds received per share in the Sale over the Purchase Price. Any such
payment shall be made by wire transfer of same day funds to such account as
Stockholder shall designate.
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<PAGE>
4. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Stockholder shall, at any meeting of the
stockholders of the Company, however called, or in connection with any written
consent of the stockholders of the Company, vote (or cause to be voted) all
Securities then held of record or Beneficially Owned by Stockholder (and, in the
case of Securities not held of record by Stockholder, subject to Stockholder's
voting direction), (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the Company Option Agreement and the
approval of the terms of each thereof and each of the other actions contemplated
by the Merger Agreement, the Company Option Agreement and this Agreement and any
actions required in furtherance thereof and hereof; and (ii) against any
proposal relating to an Acquisition Transaction and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement, or
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
the Company Option Agreement or which would result in any of the conditions set
forth in Exhibit A to the Merger Agreement or set forth in Article VII of the
Merger Agreement not being fulfilled.
(b) NO INCONSISTENT ARRANGEMENTS. Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
Stockholder shall not (i) offer to transfer (which term shall include, without
limitation, any sale, tender, gift, pledge (other than a pledge which does not
impair Stockholder's ability to perform under this Agreement), assignment or
other disposition), transfer or consent to any transfer of, any or all of the
Securities or any interest therein, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Securities or any interest therein, (iii) grant any proxy, power-of-attorney
or other authorization or consent in or with respect to the Securities, (iv)
deposit the Securities into a voting trust or enter into a voting agreement or
arrangement with respect to the Securities or (v) take any other action that
would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement or the Company Option Agreement (including, without limitation, any
action that would cause the Merger to be subject to Section 1101 of the CGCL).
(c) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OR PROXY.
(i) Stockholder hereby irrevocably grants to, and appoints,
Parent and Petra Hammerlein and Ernest G. Szoke, or either of them, in
their respective capacities as officers or representatives of Parent,
and any individual who shall hereafter succeed to any such office or
representation of Parent, and each of them individually, Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Stockholder, to vote the Securities,
or grant a consent or approval in respect of the Securities, in favor
of the various transactions contemplated by the Merger Agreement and
the Company Option Agreement and against any proposal relating to an
Acquisition Transaction.
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<PAGE>
(ii) Stockholder represents that any proxies heretofore given in
respect of Stockholder's Securities are not irrevocable, and that any
such proxies are hereby revoked.
(iii) Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4(c) is given in connection with the execution
of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of Stockholder under this
Agreement. Stockholder hereby further affirms that the irrevocable
proxy is coupled with an interest and may under no circumstances be
revoked. Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212 of the
DGCL. A legend reflecting the foregoing irrevocable proxy shall be
placed on the certificate or certificate representing the Securities.
(d) NO SOLICITATION. Stockholder hereby agrees, in the capacity as a
stockholder of the Company, that neither Stockholder nor any affiliates,
representatives or agents shall (and, if Stockholder is a corporation,
partnership, trust or other entity, Stockholder shall cause its officers,
directors, partners, and employees, representatives and agents, including, but
not limited to, investment bankers, attorneys and accountants, not to), directly
or indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, Purchaser or any of their
respective affiliates or representatives) concerning any proposal relating to an
Acquisition Transaction. Stockholder will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any proposal relating to an Acquisition Transaction.
Stockholder will immediately communicate to Parent, to the same extent as is
required by the Company pursuant to Section 6.02 of the Merger Agreement, the
terms, and other information concerning, any proposal, discussion, negotiation
or inquiry and the identity of the party making such proposal or inquiry which
Stockholder may receive in respect of any such Acquisition Transaction. Any
action taken by the Company or any member of the Board of Directors of the
Company, including any action taken by Stockholder in Stockholder's capacity as
a Director or officer of the Company, in accordance with Section 6.02 of the
Merger Agreement shall be deemed not to violate this Section 4(d).
(e) REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party
shall promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(f) WAIVER OF APPRAISAL RIGHTS. Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that Stockholder may have.
5
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder hereby
represents and warrants to Parent and Purchaser as follows:
(a) OWNERSHIP OF SECURITIES. Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by Stockholder. Stockholder has sole voting power
and sole power to issue instructions with respect to the matters set forth in
Sections 2, 3 and 4 hereof, sole power of disposition, sole power to demand
appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Existing Securities with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Stockholder has the power and
authority to enter into and perform all of Stockholder's obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which Stockholder is a trustee, or any party to any other agreement or
arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by Stockholder of the transactions contemplated
hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and delivery
of this Agreement by Stockholder, the consummation by Stockholder of the
transactions contemplated hereby and the compliance by Stockholder with the
provisions hereof and (ii) none of the execution and delivery of this Agreement
by Stockholder, the consummation by Stockholder of the transactions contemplated
hereby or compliance by Stockholder with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Stockholder to perform Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to Stockholder, (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
modification or acceleration) under, any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind, including, without limitation, any voting agreement,
proxy arrangement, pledge agreement, shareholders agreement or voting trust, to
which Stockholder is a party or by which Stockholder or any of its properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to Stockholder or any of
Stockholder's properties or assets.
(d) NO LIENS. Except as permitted by this Agreement, the Existing
Securities and the certificates representing such securities are now, and at all
times during the term hereof will
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<PAGE>
be, held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of all liens, proxies, voting trusts or
agreements, understandings or arrangements or any other rights whatsoever,
except for any such liens or proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
(f) RELIANCE BY PARENT. Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the Merger
Agreement in reliance upon Stockholder's execution and delivery of, and
representations and warranties contained in, this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER. Each of
Parent and Purchaser hereby represents and warrants to Stockholder as follows:
(a) POWER; BINDING AGREEMENT. Parent and Purchaser each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by each of Parent and Purchaser and constitutes a valid and binding
agreement of each of Parent and Purchaser, enforceable against each of Parent
and Purchaser in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity.
(b) NO CONFLICTS. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and Purchaser,
the consummation by each of Parent and Purchaser of the transactions
contemplated hereby and the compliance by Parent and Purchaser with the
provisions hereof and (ii) none of the execution and delivery of this Agreement
by each of Parent and Purchaser, the consummation by each of Parent and
Purchaser of the transactions contemplated hereby or compliance by each of
Parent and Purchaser with any of the provisions hereof, except in cases in which
any conflict, breach, default or violation described below would not interfere
with the ability of Parent or Purchaser to perform their respective obligations
hereunder, shall (A) conflict with or result in any breach of any organizational
documents applicable to either of Parent or Purchaser, (B) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
modification or acceleration) under, any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which either of Parent or Purchaser is a party or by
which either of Parent or Purchaser or any of their properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to either of Parent or Purchaser or any
of their properties or assets.
7
<PAGE>
7. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. STOP TRANSFER. Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "SECURITIES" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
9. INDEMNIFICATION. For a period of four years from and after the
Effective Time, Parent shall indemnify Stockholder and hold Stockholder harmless
against any loss, cost or expense (including without limitation reasonable
attorneys' fees) in the event of any claim against Stockholder relating to the
actions of Stockholder, as stockholder, in connection with the Merger Agreement,
this Agreement and any of the transactions contemplated thereby; PROVIDED that
Stockholder shall have first sought indemnification from the Company pursuant to
insurance, the Company's charter or by-laws and any indemnification agreement or
other arrangement between the Company and Stockholder; PROVIDED FURTHER,
HOWEVER, that the obligations of Parent hereunder shall be limited to the
excess, if any, of Stockholder's loss, cost or expense over the sum of (x)
amounts actually recovered from the Company in accordance with the preceding
proviso plus (y) an aggregate amount for Stockholder and all other stockholders
executing agreements substantially the same as this Agreement in connection with
the Merger Agreement of $100,000. In the event of any claim for which
indemnification is provided herein, Stockholder shall promptly notify Parent,
PROVIDED that the failure to give such notice shall not relieve Parent from its
obligations hereunder except if, and to the extent that, it suffers actual
prejudice thereby. Parent shall have the right to undertake, with counsel of
its choice (subject to the reasonable approval of Stockholder and which counsel
may be counsel to Parent), the defense of such claim. Stockholder shall have
the right to employ its own counsel to participate (but not to control the
defense) in any such action, but the fees and expenses of such counsel shall be
at the sole expense of Stockholder unless (i) Parent or the Company shall have
failed to employ counsel to assume the defense of such claim within a reasonable
time after receiving notice thereof, or (ii) a conflict of interest shall
prevent the same counsel from representing Parent or the Company and the
Stockholder. Parent shall not be liable hereunder for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld).
10. TERMINATION. The covenants, agreements and proxy contained
herein with respect to the Securities shall terminate upon the earliest of (a)
the Effective Time, (b) the first anniversary of the date hereof, (c) the
termination of the Merger Agreement pursuant to Section 8.01(a), 8.01(c) or
8.01(d)(i) or, by the Company, pursuant to Section 8.01(f) thereof and (d) the
expiration of the 10 Day Period.
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<PAGE>
11. NO LIMITATION. Nothing in this Agreement shall be construed to
prohibit Stockholder, or any officer or affiliate of Stockholder who is or has
designated a member of the Board of Directors of the Company, from taking any
action solely in his or her capacity as a member of the Board of Directors of
the Company or from exercising his or her fiduciary duties as a member of such
Board of Directors.
12. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement and
Company Option Agreement constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations hereunder
shall attach to the Securities and shall be binding upon the parties and any
person or entity to which legal or beneficial ownership of the Securities shall
pass, whether by operation of law or otherwise, including, without limitation,
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of Stockholder or Parent and
Purchaser, as the case may be, provided that Parent or Purchaser may assign, in
its respective sole discretion, its rights and obligations hereunder to any
direct or indirect subsidiary of Parent, but no such assignment shall relieve
Parent or Purchaser of its obligations hereunder if such assignee does not
perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or facsimile
transmission (with a confirmation copy sent for next day delivery via courier
service, such as Federal Express), or by any courier service, such as Federal
Express, providing proof of delivery. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Stockholder:
Robert H. Berglass
c/o DEP Corporation
2101 East Via Arado
Rancho Dominguez, CA 90220
Telephone No.: (310) 764-2207
Facsimile No.: (310) 537-2524
9
<PAGE>
Copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Andrew E. Bogen, Esq.
Telephone No.: (213) 229-7159
Facsimile No.: (213) 229-7520
If to Parent or Purchaser:
Henkel KGaA
Henkelstrasse 67
D-40191 Dusseldorf
Germany
Attention: Petra U. Hammerlein
Telephone No.: (49) 211-797-3362
Facsimile No.: (49) 211-798-2470
Copy to:
Henkel Acquisition Corp. II
c/o Henkel Corporation
The Triad
2200 Renaissance Boulevard - Suite 200
Gulph Mills, PA 19406
Attention: Ernest G. Szoke
Telephone No.: (610) 270-8124
Facsimile No.: (610) 270-8219
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
Telephone No.: (212) 225-2000
Facsimile No.: (212) 225-3999
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
10
<PAGE>
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor Purchaser shall be deemed to be the owner, nor
shall Parent or Purchaser have the power to vote for the election of directors,
with respect to some or all of the Securities for purposes of the CGCL until the
purchase of, and payment for, such Securities is actually consummated. The
rights of Parent and Purchaser hereunder shall be limited as provided in the
preceding sentence.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore in the event
of any such breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled, at
law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by or confer any rights
upon, any person or entity who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) WAIVER OF JURY TRIAL. Each party hereto hereby waives any right
to a trial by jury in connection with any action, suit or proceeding brought in
connection with this Agreement.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used 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.
11
<PAGE>
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
(o) EXPENSES. Except as otherwise provide herein, neither Parent and
Purchaser, on the one hand, nor Stockholder, on the other hand, shall be
required to pay the expenses incurred by the other party in connection with this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
HENKEL KGaA
By: /s/ Uwe Specht
------------------------------------
Name: Dr. Uwe Specht
Title: Executive Vice President
By: /s/ Petra Hammerlein
------------------------------------
Name: Dr. Petra Hammerlein
Title: Senior Counsel
HENKEL ACQUISITION CORP. II
By: /s/ John E. Knudson
------------------------------------
Name: John E. Knudson
Title: Vice President and Treasurer
JUDITH R. BERGLASS, AS TRUSTEE OF
THE BERGLASS 1995 IRREVOCABLE
TRUST UDT 6/27/95
By: /s/ Judith R. Berglass
-------------------------------------
Name: Judith R. Berglass
Title: Trustee
13
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF
STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED
- ------------------------------------------------------------------------------
<S> <C>
Judith R.
Berglass, as 400,000
Trustee of the
Berglass 1995
Irrevocable
Trust UDT
6/27/95
</TABLE>
<PAGE>
Exhibit 99.9
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated July 13, 1998, among Henkel KGaA, a
Kommanditgesellschaft auf Aktien (a partnership limited by shares) organized
under the laws of the Federal Republic of Germany ("PARENT"), Henkel Acquisition
Corp. II, a Delaware corporation and a wholly owned subsidiary of Parent
("PURCHASER"), and DEP Corporation, a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Purchaser and the Company are
entering into an Agreement and Plan of Merger (the "MERGER AGREEMENT");
WHEREAS, as a condition and inducement to Parent's and Purchaser's
execution of the Merger Agreement and pursuit of the transactions contemplated
thereby and in consideration therefor, the Company agrees to grant Purchaser an
option to purchase Common Stock (as hereinafter defined), upon the terms and
subject to the conditions of this Agreement; and
WHEREAS, the Board of Directors of the Company has approved the grant of
such option and the Merger Agreement prior to the execution hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. THE TOP-UP OPTION. The Company hereby grants to Purchaser an
irrevocable option (the "TOP-UP OPTION") to purchase, subject to the terms
hereof, that number of shares of common stock, $0.01 par value per share
("COMMON STOCK"), of the Company (the "TOP-UP OPTION SHARES") equal to the
lowest number of shares of Common Stock that, when added to the number of shares
of Common Stock owned by Purchaser at the time of such exercise, shall
constitute one share more than 90% of the shares of Common Stock then
outstanding (assuming the issuance of the Top-Up Option Shares) at a price per
share equal to $5.25 (the "OPTION PRICE"); PROVIDED, HOWEVER, that the Top-Up
Option shall not be exercisable unless immediately after such exercise Purchaser
would own more than 90% of the shares of Common Stock then outstanding.
2. EXERCISE OF TOP-UP OPTION. (a) Purchaser may exercise the Top-Up
Option, in whole but not in part, at any one time after the occurrence of a
Top-Up Exercise Event (as defined below) and prior to the occurrence of a
Top-Up Termination Event (as defined below).
(b) A "TOP-UP EXERCISE EVENT" shall occur for purposes of this Agreement
upon Purchaser's acceptance for payment pursuant to the Offer (as defined in the
Merger Agreement) of shares of Common Stock constituting more than 85% but less
than 90% of the shares of Common Stock then outstanding.
<PAGE>
(c) Each of the following shall be a "TOP-UP TERMINATION EVENT":
(i) the Effective Time;
(ii) the date which is ten (10) business days after the occurrence
of the Top-Up Exercise Event (or such later date on which the
closing of a purchase may be consummated, as set forth in
Section 3(a) below); and
(iii) the termination of the Merger Agreement.
3. CLOSING. (a) In the event Purchaser is entitled to and wishes to
exercise the Top-Up Option, it shall send to the Company a written notice (the
date of which being herein referred to as the "NOTICE DATE") specifying a place
and date not earlier than three business days nor later than ten business days
from the Notice Date for the closing of such purchase (the "CLOSING DATE");
PROVIDED, that if the closing of such purchase cannot be consummated by reason
of any applicable judgment, injunction, decree, order, law or regulation, the
period of time that would otherwise run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired or
been terminated; and PROVIDED, further, that if prior notification to or
approval of any regulatory or antitrust agency is required in connection with
such purchase, Purchaser shall promptly file the required notice or application
for approval, shall promptly notify the Company of such filing, and shall
expeditiously process the same and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Top-Up Option shall be deemed to occur on the Notice Date
relating thereto.
(b) At the closing referred to in subsection (a) of this Section 3,
Purchaser shall (i) pay to the Company the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Top-Up Option
in immediately available funds by wire transfer to a bank account designated by
the Company (PROVIDED that failure or refusal of the Company to designate such a
bank account shall not preclude Purchaser from exercising the Top-Up Option by
delivery of a certified check or bank draft) and (ii) present and surrender this
Agreement to the Company.
(c) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (b) of this Section 3, the Company
shall deliver to Purchaser a certificate or certificates representing the number
of shares of Common Stock purchased by Purchaser.
(d) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by
this certificate is subject to resale
restrictions arising under applicable
securities laws (including the Securities Act
of 1933, as amended)."
It is understood and agreed that the reference to the resale
restrictions arising under applicable securities laws, including the
Securities Act of 1933, as amended (the "SECURITIES ACT"), in the
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<PAGE>
above legend shall be removed by delivery of substitute certificate(s)
without such reference if Purchaser shall have delivered to the Company a
copy of a letter from the staff of the Securities and Exchange Commission, or
an opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that such legend is not required for purposes of the
Securities Act or other applicable securities laws. In addition, such
certificates shall bear any other legend as may be required by law.
(e) Upon the giving by Purchaser to the Company of the
written notice of exercise of the Top-Up Option provided for under
subsection (a) of this Section 3 and the tender of the applicable purchase
price in immediately available funds, Purchaser shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall
not then be actually delivered to Purchaser. The Company shall pay all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 3 in the name of
Purchaser or its assignee, transferee or designee.
4. COVENANTS OF THE COMPANY. In addition to its other agreements and
covenants herein, the Company agrees:
(a) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company; and
(b) promptly to take all action as may from time to time be required
(including complying with all applicable notification, filing reporting and
waiting period requirements under HSR or otherwise, and cooperating fully with
Purchaser in preparing any applications or notices and providing such
information to any regulatory authority as it may require) in order to permit
Purchaser to exercise the Top-Up Option and the Company duly and effectively to
issue shares of Common Stock pursuant hereto.
5. REPRESENTATIONS AND WARRANTIES. (a) The Company hereby
represents and warrants to Purchaser as follows:
(i) The Company has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a
3
<PAGE>
valid and legally binding obligation of the Company enforceable
in accordance with its terms.
(ii) All shares, upon issuance pursuant to the Top-Up Option, will
be duly authorized, validly issued, fully paid, nonassessable,
and will be delivered free and clear of all claims, liens,
encumbrances and security interests (other than those created
by this Agreement) and not subject to any preemptive rights.
(iii) The execution, delivery and performance of this Agreement does
not and will not, and the consummation by the Company of any
of the transactions contemplated hereby will not, constitute
or result in (i) a breach or violation of or a default under,
its articles or certificate of incorporation or by-laws, or
the comparable governing instruments of any of its
subsidiaries, or (ii) a breach or violation of or a default
under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse
of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental
or non-governmental permit or license to which it or any of
its subsidiaries is subject.
(b) Purchaser hereby represents and warrants to the Company that
Purchaser has full corporate power and authority to enter into this Agreement
and, subject to obtaining the approvals referred to in this Agreement, to
consummate the transactions contemplated by this Agreement; the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the party
of Purchaser; and this Agreement has been duly executed and delivered by
Purchaser and constitutes a valid and legally binding obligation of Purchaser
enforceable in accordance with its terms.
6. ASSIGNMENT. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Top-Up Option created
hereunder to any other person, without the express written consent of the other
party, except that Purchaser may assign its rights and obligations hereunder to
another wholly owned subsidiary of Parent.
7. FILINGS; OTHER ACTIONS. Each of Purchaser and the Company will
use its best efforts to make all filings with, and to obtain consents of, all
third parties and regulatory and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including,
without limitation, notices and filings under HSR.
8. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
4
<PAGE>
9. SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated.
10. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
11. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
12. 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.
13. EXPENSES. Except as otherwise expressly provided herein, each of
the parties hereto 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 consultants, investment
bankers, accountants and counsel.
14. ENTIRE AGREEMENT. Except as otherwise expressly provided herein
or in the Merger Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
15. CAPTIONS; CAPITALIZED TERMS. The Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
5
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
HENKEL KGaA
By: /s/ Uwe Specht
-------------------------
Name: Dr. Uwe Specht
Title: Executive Vice President
By: /s/ Petra Hammerlein
-------------------------
Name: Dr. Perta Hammerlein
Title: Senior Counsel
HENKEL ACQUISITION CORP. II
By: /s/ John E. Knudson
-------------------------
Name: John E. Knudson
Title: Vice President and Treasurer
DEP CORPORATION
By: /s/ Robert H. Berglass
-------------------------
Name: Robert H. Berglass
Title: Chairman and President
<PAGE>
Exhibit 99.10
EMPLOYMENT AGREEMENT
AGREEMENT made as of July 8 , 1998, by and between ROBERT BERGLASS
("Employee"), and DEP Corporation ("Employer") to be effective as provided in
paragraph 3 below.
1. EMPLOYMENT. As of the effective date, Employer agrees to employ
Employee, and Employee agrees to serve as an employee of Employer,
pursuant to the terms and conditions of this Employment Agreement
("Agreement").
2. DUTIES. Employee's title shall be President and Chief Executive
Officer. In such capacity, Employee shall be the senior executive
officer of Employer, with general supervisory authority over its
business and operations, subject to the direction of Employer's Board
of Directors. Employee's principal place of business shall be in Los
Angeles, California, or its neighboring communities, subject to normal
and reasonable requirements for business travel. Employee shall
devote all of his business time and attention to the business and
affairs of Employer, and shall perform such duties consistent with his
position as shall, from time-to-time, be designated by the Employer,
which duties shall consist of, but not be limited to achieving
sustainable competitive financial long-term success in the
marketplace, creating a corporate environment which fosters high
standards of leadership, cooperation and teamwork, and promoting
systems conducive to excellence in product quality, customer service,
and community relations. During the term of this Agreement, Employee
promises to render loyal and diligent service to Employer.
3. TERM. Employee's term of employment, under this Agreement, shall
commence as of the effective date of this Agreement and shall continue
for a three-year period, unless terminated at an earlier date pursuant
to paragraph 7 of this Agreement. The effective date of this
Agreement shall be the first date on which Henkel Corporation or its
affiliates ("Henkel") becomes the beneficial owner of a majority of
the outstanding stock of Employer. As of such date, this Agreement
shall supersede in its entirety the Employment Agreement between
Employee and Employer dated as of March 23, 1998, and any other
agreement relating to the subject matter of this Agreement between
Employer and Employee. If Henkel does not become the beneficial owner
of a majority of the outstanding stock of Employer by December 31,
1998, this Agreement shall be null and void.
4. COMPENSATION. In consideration of the performance by Employee of his
duties, and promise not to disclose (paragraph 14) and promise not to
compete (paragraph 15), Employer shall pay to Employee during the term
of his employment the following compensation:
<PAGE>
a) SALARY. A base salary at the rate of not less than
$565,000 per year. Such amount is referred to as "Base
Salary". In the event that the Company, in its sole
discretion, from time to time determines to increase the
Base Salary, such amount shall constitute "Base Salary" for
purposes of this Agreement. Employee's Base Salary shall be
payable in monthly or bi-monthly installments, subject to
all applicable federal, state and local withholding, social
security, and other taxes or charges required by law to be
withheld by an employer.
b) OTHER BENEFITS. Employee shall be entitled to receive all
other employee benefits currently existing, on a basis not
less favorable than those provided to Employee immediately
prior to the effective date of this Agreement.
c) INCENTIVE COMPENSATION. In lieu of the current equity
opportunity enjoyed by Employee, Employer shall offer the
following cash alternative:
During the term of Employee's employment, Employee shall receive
incentive compensation pursuant to the:
- Henkel Corporation Management Incentive Plan (MIP)
- Henkel Corporation Long-Term Incentive Plan (LTI)
Employee shall be eligible for participation as of the year 1999
for the following participation as a function of his Base Salary:
- MIP maximum opportunity of 45% of Base Salary defined in 4a.
- LTI maximum opportunity of 67% of Base Salary defined in 4a.
The 1999 MIP and LTI incentive payment shall be paid in April of
2000. Employee shall be entitled to receive not less than
$250,000 as the aggregate guaranteed minimum incentive payment
for 1999 under the MIP and LTI Plans. The 2000 MIP and LTI
incentive payment shall be paid in April of 2001. Employee shall
be entitled to receive not less than $250,000 as the aggregate
guaranteed minimum incentive payment for 2000 under the MIP and
LTI Plans.
For 1998, Employee shall be entitled to a fixed incentive payment
equal to $250,000 payable in April 1999.
2
<PAGE>
5. PERQUISITES. During the term of Employee's employment, Employee shall
be entitled to the following perquisites:
a) AUTOMOBILE. In accordance with established policy, Employer
shall provide Employee with the use of an automobile
(including insurance, maintenance, and gas) which shall be
leased or owned by Employer.
b) VACATION. Employee shall be entitled to at least 20 days
vacation per year plus customary holidays.
In the event that any of the aforesaid benefits are considered items of
taxable income to Employee, Employer will not provide any monies to mitigate or
"gross up" any such tax impact.
6. EXPENSES. Employee shall be entitled to reimbursement for all
reasonable and necessary, travel, and other business expenses,
incurred by Employee during the performance of his duties, subject to
the usual and customary requirements of substantiation and
documentation.
7. TERMINATION. Employee's term of employment is subject to termination
upon the occurrence of any of the following:
a) Upon the death of Employee, effective as of the date of
Employee's death.
b) Upon Employee being permanently and totally disabled, as
defined pursuant to the terms of the Employee's then current
disability insurance coverage.
c) For convenience of Employee, effective thirty (30) days
after the date of delivery to Employer of such notice in
writing.
d) For convenience of Employer or Henkel, effective thirty (30)
days after the date of delivery to Employee of such notice
in writing.
e) By Employee, for Good Reason effective thirty (30) days
after date of delivery to Employer of such notice in
writing. "GOOD REASON" shall mean any of the following
events during Employee's employment with Employer: (a) the
assignment of the Employee, without the Employee's consent,
to a position other than President and Chief Executive
Officer of the Employer, or having authority,
3
<PAGE>
responsibilities or duties that are substantially less than
his authority, responsibilities or duties as of the
effective date of this Agreement (The parties recognize
that Employer may not remain as a separate legal entity and
that there may be other reasons why Employee's
responsibilities, including but not limited to reporting
responsibilities, may change as a result of Employer's
integration into the Henkel organization or why Employee's
title may change. By themselves, these changes shall not be
deemed to constitute "Good Reason" for purposes of this
Agreement, provided that the substance of Employee's
authority, responsibility or duties are not substantially
reduced from those in effect as of the effective date of
this Agreement.); (b) the relocation, without the Employee's
consent, of the Employer's principal executive offices
outside of Los Angeles, California or its neighboring
communities; (c) a material breach by the Employer of any
provision of this Agreement; (d) the reduction, without
Employee's consent, of Employee's Base Salary or incentive
compensation opportunity; (e) any substantial reduction of
fringe benefits provided to Employee; (f) the Employer's
failure to obtain an agreement from any successor or assign
of the Employer to assume and agree to perform this
Agreement or (d) a Change of Control of the Employer.
"CHANGE OF CONTROL" shall mean a transaction where (i) the
Employer sells all or substantially all of its assets,
except if such sale is to Henkel or an affiliate of Henkel
(ii) the Employer participates in a merger, consolidation or
other similar type of transaction in which it is not the
surviving corporation, unless such transaction is with
Henkel or an affiliate of Henkel or (iii) Henkel and its
affiliates cease to own a majority of the common stock in
the Employer.
f) By Employer in the event that Employee's employment is
terminated by Employer for Good Cause immediately upon
notice to Employee of the circumstances leading to such
termination for Good Cause. "GOOD CAUSE" shall mean the
occurrence of any of the following events during Employee's
employment with Employer: (a) Employee's commission of a
felony or embezzlement of money or other property of
Employer; (b) a wilful and material breach by Employee of
any provisions of this Agreement; (c) Employee's wilful and
material failure to observe the reasonable directives of
Employer's Board of Directors; or (d) willful gross neglect
or willful gross misconduct in carrying out Employee's
duties.
4
<PAGE>
8. SEVERANCE BENEFITS. If Employee's employment is terminated pursuant
to paragraph 7d or 7e, Employee shall receive the greater of (a) or
(b), where (a) and (b) are as follows:
a) Severance payments and continuation of other employment
related benefits in an amount and in a form which Employee
would receive as a participant in the Henkel Corporation
Severance Pay Plan (pursuant to the provisions of such plan
or successor plan which is in effect on the date Employee's
employment is terminated) or,
b) A one-time lump sum payment in an amount equal to the sum,
as of date Employee's employment is terminated, of
Employee's Base Salary, guaranteed minimum incentive
payments and fringe benefits specified in paragraphs 4a, 4b
and 4c for the remainder of the three (3) year initial term
of this Agreement. In addition, Employee shall have the
right to participate in all medical, dental,
hospitalization, insurance and other benefits which were
provided by Employer during the term of his employment
hereunder pursuant to paragraph 4(b), until such time as he
is eligible for Medicare benefits.
.
9. TERMINATION FOR GOOD CAUSE, CONVENIENCE OF EMPLOYEE, DEATH OR
DISABILITY. In the event that Employee's employment is terminated
pursuant to paragraph 7(a), 7(b), 7(c) or 7(f), Employee will receive
payment for all accrued Base Salary, accrued and vested benefits and
vacation time through the date of his termination of employment.
Except as set forth in this paragraph 9, Employer will have no further
obligation to pay severance or benefits of any kind whether under this
Agreement or otherwise.
10. ARBITRATION.
a) Any disputes or claims arising out of or concerning
Employee's employment or termination by Employer whether
arising under theories of liability or damages based upon
contract, tort or statute will be determined exclusively by
arbitration before a single arbitrator in accordance with
the employment arbitration rules of the American Arbitration
Association, except as modified by this Agreement. The
arbitrator's decision will be final and binding on both
parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction. In
recognition of the fact that resolution of any disputes or
claims in the courts is rarely timely or cost effective for
either party, the parties enter this mutual agreement to
arbitrate in order to gain the benefits of a speedy,
impartial and cost-effective dispute resolution procedure.
5
<PAGE>
b) Any arbitration will be held in Employee's place of
employment with Employer. The arbitrator must be an
attorney with substantial experience in employment matters,
selected by mutual agreement of the parties. If the parties
are unable to agree to an arbitrator within thirty (30) days
following a demand for arbitration hereunder, an arbitrator
meeting the foregoing experience requirement shall be
selected by alternately striking names from a list of five
(5) such persons provided by the American Arbitration
Association (AAA) office located nearest to the place of
employment, following a request by the party seeking
arbitration for a list of five (5) such attorneys. If
either party fails to strike any of the names from the list,
the arbitrator will be selected from the list by the other
party.
c) Each party will have the right to take the deposition of one
(1) individual and any expert witness designated by the
other party. Each party will also have the right to
propound requests for production of documents to any party
and the right to subpoena documents and witnesses for the
arbitration. Additional discovery may be made only where
the arbitrator selected so orders upon a showing of
substantial need. The arbitrator will have the authority to
entertain a motion to dismiss and/or a motion for summary
judgment by any party and will apply the standards governing
such motions under the Federal Rules of Civil Procedure.
d) The parties agree that they will attempt, and they intend
that they and the arbitrator should use their best efforts
in that attempt, to conclude the arbitration proceeding and
have a final decision from the arbitrator within 120 days
from the date of selection of the arbitrator; provided,
however, that the arbitrator will be entitled to extend such
120-day period for one additional 120-day period. The
arbitrator will deliver a written award with respect to the
dispute to each of the parties, who must promptly act in
accordance therewith.
e) Employer will pay any and all reasonable fees and expenses
incurred by Employee in seeking to obtain or enforce any
rights or benefits provided by this Agreement, including all
reasonable attorneys' and experts' fees and expenses,
accountants' fees and expenses, and court costs (if any)
that may be incurred by Employee in pursuing a claim for
payment of compensation or benefits or other right or
entitlement under this Agreement, except that Employee shall
not be entitled to such payment unless the Arbitrator shall
award Employee in excess of twenty-five thousand dollars
($25,000.00).
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<PAGE>
f) The arbitrator must act in accordance with the terms and
provisions of this Agreement and applicable legal principles
and will have no authority to add, delete or modify any term
or provision of this Agreement.
11. AMENDMENT. This Agreement may be amended only by writing, and no
modification or waiver of any provision of this Agreement shall be
valid, unless in writing, and signed by both parties.
12. ASSIGNMENT. This Agreement shall be binding and enforceable against
the successors and assigns of Employer.
13. GOVERNING LAW. The terms and provisions of this Agreement shall be
governed by the laws of the Sate of California.
14. NONDISCLOSURE COVENANT.
a) Employee hereby agrees and acknowledges that all information
pertaining to the prior, current or contemplated conduct and
details of Employer, and Henkel ("Confidential
Information"), whether generated by Employee or otherwise,
and whether generated during regular working hours or
otherwise, is the sole property and a valuable and
confidential asset of Employer and Henkel. Confidential
Information shall include, without limitation, information
related to trade secrets, supplier lists, customer lists and
needs, identities of customer representatives, contracts,
machinery, equipment, computer software, design techniques,
credit sources and information, technical know-how, research
and development activities and data, inventions,
discoveries, distribution, packaging, advertising and
selling methods, administrative procedures, private
processes, techniques and formulae, as well as other aspects
of the affairs and business operations of Employer and
Henkel as they may exist from time to time. Confidential
Information shall not include (i) information and knowledge
that Employee possessed independently of or prior to his
employment or association with Employer, and Henkel and (ii)
publicly available information in substantially the form in
which it is publicly available unless such information is
publicly available by reason of unauthorized disclosure or
(iii) information of a general nature not pertaining
exclusively to Employer and Henkel which could generally be
acquired in similar employment with another company.
Employee hereby covenants and agrees that during the term of
this Agreement and thereafter, whether terminated by
Employee or by Employer or Henkel, he shall keep
7
<PAGE>
confidential Information inviolate and confidential and
shall not reveal it to any competitor or other person or
apply it for his own purpose or that of a third party of
otherwise publicize or use Confidential Information without
the prior written consent of Employer and Henkel.
b) Upon any termination of this Agreement or upon demand of
Employer or Henkel, Employee shall deliver or cause to be
delivered to Employer or Henkel all records, papers,
notebooks, memoranda, letters and other repositories of
Confidential Information, whether prepared by him or others,
including all copies thereof, then in his possession or
control, without retaining any copies thereof. During the
term of this Agreement, employee shall keep such records,
papers, notebooks, memoranda, letters and other repositories
of Confidential Information in such a manner so as to deny
any unauthorized persons all access thereto.
15. NON-COMPETITION COVENANTS.
a) Employee covenants and agrees that during the term of this
Agreement and for a period of six (6) months from the date
of termination of this Agreement, he shall not, directly or
indirectly, render services for or enter employment with,
any competitor doing business in the fields related to
Employer's businesses, or such other business segments as
Employee may have responsibility for or close involvement
in, as a member of the management team. If Employee is
offered employment by a company engaged in such competitive
business and also doing substantial business in other
fields, Employee may accept employment with such competitor
provided Henkel is given written assurance by such company
that Employee will not be required to provide any services
to the market segments referred to above.
b) Employee further covenants and agrees that during the term
of this Agreement and for a period of six (6) months from
the date of termination of this Agreement he shall not,
directly, or indirectly, influence or attempt to influence
any employee, agent, distributor or supplier of Employer or
Henkel to terminate or otherwise impair Employer's or
Henkel's relationship with such employee, agent, distributor
or supplier.
c) Henkel may elect to extend the non-competition and
non-solicitation restrictions contained in paragraphs 15(a)
and 15(b) for an additional, consecutive six (6) month
period upon payment of $10 to Employee.
8
<PAGE>
Henkel may make such election at any time prior to
expiration of the initial six (6) month period.
d) Employee may solicit the prior written consent of Employer
or Henkel to conduct otherwise proscribed by this Agreement
by submitting a written request therefore. Employer or
Henkel will promptly advise Employee whether it will waive
the requirements of this Agreement with respect to such
request.
16. LIMITED EFFECT OF WAIVER BY COMPANY. If the Employer and Henkel
waives a breach of any provision of this Agreement by the employee,
that waiver will not operate or be construed as a waiver of later
breaches by the Employee.
17. SEVERABILITY. If, for any reason, any provision of this Agreement
is held invalid, the other provisions of this Agreement will remain in
effect, insofar as is consistent with law. If this Agreement is held
invalid or cannot be enforced, then to the full extent permitted by
law any prior agreement between the Employer (or any predecessor
thereof) and the Employee will be deemed reinstated as if this
Agreement has not been executed.
18. CONSIDERATION. The compensation package as outlined in paragraph 4
shall be considered as direct, consideration for Employee's commitment
and promise contained in paragraphs 14, 15(a) and 15(b) (as well as
for Employee's performance of his duties).
/s/ Robert Berglass Date: July 8, 1998
- ------------------------------------- ----------------------------------
ROBERT BERGLASS
DEP CORPORATION
By: /s/ Philip A. Wilber Date: July 8, 1998
- ------------------------------------- ----------------------------------
Title: Chairman, Compensation &
Management Stock Option
Committee
9
<PAGE>
Exhibit 99.11
EMPLOYMENT AGREEMENT
AGREEMENT made as of July 8 , 1998, by and between GRANT JOHNSON
("Employee"), and DEP Corporation ("Employer") to be effective as provided in
paragraph 3 below.
1. EMPLOYMENT. As of the effective date, Employer agrees to employ
Employee, and Employee agrees to serve as an employee of Employer,
pursuant to the terms and conditions of this Employment Agreement
("Agreement").
2. DUTIES. Employee's title shall be a Sr. Vice President and CFO.
Employee's principal place of business shall be in Los Angeles,
California, or its neighboring communities, subject to normal and
reasonable requirements for business travel. Employee shall devote
all of his business time and attention to the business and affairs of
Employer, and shall perform such duties consistent with his position
as shall, from time-to-time, be designated by the Employer, which
duties shall consist of, but not be limited to achieving sustainable
competitive financial long-term success in the marketplace, creating a
corporate environment which fosters high standards of leadership,
cooperation and teamwork, and promoting systems conducive to
excellence in product quality, customer service, and community
relations. During the term of this Agreement, Employee promises to
render loyal and diligent service to Employer.
3. TERM. Employee's term of employment, under this Agreement, shall
commence as of the effective date of this Agreement and shall continue
for a three-year period, unless terminated at an earlier date pursuant
to paragraph 7 of this Agreement. The effective date of this
Agreement shall be the first date on which Henkel Corporation or its
affiliates ("Henkel") becomes the beneficial owner of a majority of
the outstanding stock of Employer. As of such date, this Agreement
shall supersede in its entirety the Employment Agreement between
Employee and Employer dated as of March 23, 1998, and any other
agreement relating to the subject matter of this Agreement between
Employer and Employee. If Henkel does not become the beneficial owner
of a majority of the outstanding stock of Employer by December 31,
1998, this Agreement shall be null and void.
4. COMPENSATION. In consideration of the performance by Employee of his
duties, and promise not to disclose (paragraph 14) and promise not to
compete (paragraph 15), Employer shall pay to Employee during the term
of his employment the following compensation:
a) SALARY. A salary at the rate of not less than $227,000 base per
year. Such amount is referred to as "Base Salary". In the event
that the Company, in its sole discretion, from time to time
determines to increase the Base Salary, such amount shall
constitute "Base Salary" for purposes of this Agreement.
<PAGE>
Employee's Base Salary shall be payable in monthly or bi-monthly
installments, subject to all applicable federal, state and local
withholding, social security, and other taxes or charges required
by law to be withheld by an employer.
b) OTHER BENEFITS. Employee shall be entitled to receive all
other employee benefits currently existing, on a basis not
less favorable than those provided to Employee immediately
prior to the effective date of this Agreement.
c) INCENTIVE COMPENSATION. In lieu of the current equity
opportunity enjoyed by Employee, Employer shall offer the
following cash alternative:
During the term of Employee's employment, Employee shall receive
incentive compensation pursuant to the:
- Henkel Corporation Management Incentive Plan (MIP)
- Henkel Corporation Long-Term Incentive Plan (LTI)
Employee shall be eligible for participation as of the year 1999
for the following participation as a function of his Base Salary:
- MIP maximum opportunity of 45% of Base Salary defined in 4a.
- LTI maximum opportunity of 67% of Base Salary defined in 4a.
The 1999 MIP and LTI incentive payment shall be paid in April of
2000. Employee shall be entitled to receive not less than
$100,000 as the aggregate guaranteed minimum incentive payment
for 1999 under the MIP and LTI Plans. The 2000 MIP and LTI
incentive payment shall be paid in April of 2001. Employee shall
be entitled to receive not less than $100,000 as the aggregate
guaranteed minimum incentive payment for 2000 under the MIP and
LTI Plans.
For 1998, Employee shall be entitled to a fixed incentive payment
equal to $100,000 payable in April 1999.
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<PAGE>
5. PERQUISITES. During the term of Employee's employment, Employee
shall be entitled to the following perquisites:
a) AUTOMOBILE. Henkel shall provide Employee a monthly car
allowance of $575.00.
b) VACATION. Employee shall be entitled to at least 15 days
vacation per year plus customary holidays.
In the event that any of the aforesaid benefits are considered items of
taxable income to Employee, Employer will not provide any monies to mitigate or
"gross up" any such tax impact.
6. EXPENSES. Employee shall be entitled to reimbursement for all
reasonable and necessary, travel, and other business expenses,
incurred by Employee during the performance of his duties, subject to
the usual and customary requirements of substantiation and
documentation.
7. TERMINATION. Employee's term of employment is subject to termination
upon the occurrence of any of the following:
a) Upon the death of Employee, effective as of the date of
Employee's death.
b) Upon Employee being permanently and totally disabled, as
defined pursuant to the terms of the Employee's then current
disability insurance coverage.
c) For convenience of Employee, effective thirty (30) days
after the date of delivery to Employer of such notice in
writing.
d) For convenience of Employer or Henkel, effective thirty (30)
days after the date of delivery to Employee of such notice
in writing.
e) By Employee, for Good Reason effective thirty (30) days
after date of delivery to Employer of such notice in
writing. "GOOD REASON" shall mean any of the following
events during Employee's employment with Employer: (a) the
assignment of the Employee, without the Employee's consent,
to a position other than Sr. Vice President and CFO of the
Employer, or having authority, responsibilities or duties
that are substantially less than his authority,
responsibilities or duties as of the effective date of this
Agreement
3
<PAGE>
(The parties recognize that Employer may not remain as a
separate legal entity and that there may be other reasons
why Employee's responsibilities, including but not limited
to reporting responsibilities, may change as a result of
Employer's integration into the Henkel organization or why
Employee's title may change. By themselves, these changes
shall not be deemed to constitute "Good Reason" for purposes
of this Agreement, provided that the substance of Employee's
authority, responsibility or duties are not substantially
reduced from those in effect as of the effective date of
this Agreement.); (b) the relocation, without the Employee's
consent, of the Employer's principal executive offices
outside of Los Angeles, California or its neighboring
communities; (c) a material breach by the Employer of any
provision of this Agreement; (d) the reduction, without
Employee's consent, of Employee's Base Salary or incentive
compensation opportunity; (e) any substantial reduction of
fringe benefits provided to Employee; (f) the Employer's
failure to obtain an agreement from any successor or assign
of the Employer to assume and agree to perform this
Agreement or (d) a Change of Control of the Employer.
"CHANGE OF CONTROL" shall mean a transaction where (i) the
Employer sells all or substantially all of its assets,
except if such sale is to Henkel or an affiliate of Henkel
(ii) the Employer participates in a merger, consolidation or
other similar type of transaction in which it is not the
surviving corporation, unless such transaction is with
Henkel or an affiliate of Henkel or (iii) Henkel and its
affiliates cease to own a majority of the common stock in
the Employer.
f) By Employer in the event that Employee's employment is
terminated by Employer for Good Cause immediately upon
notice to Employee of the circumstances leading to such
termination for Good Cause. "GOOD CAUSE" shall mean the
occurrence of any of the following events during Employee's
employment with Employer: (a) Employee's commission of a
felony or embezzlement of money or other property of
Employer; (b) a wilful and material breach by Employee of
any provisions of this Agreement; (c) Employee's wilful and
material failure to observe the reasonable directives of
Employer's Board of Directors; or (d) willful gross neglect
or willful gross misconduct in carrying out Employee's
duties.
8. SEVERANCE BENEFITS. If Employee's employment is terminated pursuant
to paragraph 7d or 7e, Employee shall receive the greater of (a) or
(b), where (a) and (b) are as follows:
4
<PAGE>
a) Severance payments and continuation of other employment
related benefits in an amount and in a form which Employee
would receive as a participant in the Henkel Corporation
Severance Pay Plan (pursuant to the provisions of such plan
or successor plan which is in effect on the date Employee's
employment is terminated) or,
b) A one-time lump sum payment in an amount equal to the sum,
as of date Employee's employment is terminated, of
Employee's Base Salary, guaranteed minimum incentive
payments and fringe benefits specified in paragraphS 4a, 4b,
and 4c for the remainder of the three (3) year initial term
of this Agreement. In addition, Employee shall have the
right to participate in all medical, dental,
hospitalization, insurance and other benefits which were
provided by Employer during the term of his employment
hereunder pursuant to paragraph 4(b), until such time as he
is eligible for Medicare benefits.
9. TERMINATION FOR GOOD CAUSE, CONVENIENCE OF EMPLOYEE, DEATH OR
DISABILITY. In the event that Employee's employment is terminated
pursuant to paragraph 7(a), 7(b), 7(c) or 7(f), Employee will receive
payment for all accrued Base Salary, accrued and vested benefits and
vacation time through the date of his termination of employment.
Except as set forth in this paragraph 9, Employer will have no further
obligation to pay severance or benefits of any kind whether under this
Agreement or otherwise.
10. ARBITRATION.
a) Any disputes or claims arising out of or concerning
Employee's employment or termination by Employer whether
arising under theories of liability or damages based upon
contract, tort or statute will be determined exclusively by
arbitration before a single arbitrator in accordance with
the employment arbitration rules of the American Arbitration
Association, except as modified by this Agreement. The
arbitrator's decision will be final and binding on both
parties. Judgment upon the award rendered by the arbitrator
may be entered in any court of competent jurisdiction. In
recognition of the fact that resolution of any disputes or
claims in the courts is rarely timely or cost effective for
either party, the parties enter this mutual agreement to
arbitrate in order to gain the benefits of a speedy,
impartial and cost-effective dispute resolution procedure.
b) Any arbitration will be held in Employee's place of
employment with Employer. The arbitrator must be an
attorney with substantial experience in employment matters,
selected by mutual agreement of
5
<PAGE>
the parties. If the parties are unable to agree to an
arbitrator within thirty (30) days following a demand for
arbitration hereunder, an arbitrator meeting the foregoing
experience requirement shall be selected by alternately
striking names from a list of five (5) such persons provided
by the American Arbitration Association (AAA) office located
nearest to the place of employment, following a request by
the party seeking arbitration for a list of five (5) such
attorneys. If either party fails to strike any of the names
from the list, the arbitrator will be selected from the list
by the other party.
c) Each party will have the right to take the deposition of one
(1) individual and any expert witness designated by the
other party. Each party will also have the right to
propound requests for production of documents to any party
and the right to subpoena documents and witnesses for the
arbitration. Additional discovery may be made only where
the arbitrator selected so orders upon a showing of
substantial need. The arbitrator will have the authority to
entertain a motion to dismiss and/or a motion for summary
judgment by any party and will apply the standards governing
such motions under the Federal Rules of Civil Procedure.
d) The parties agree that they will attempt, and they intend
that they and the arbitrator should use their best efforts
in that attempt, to conclude the arbitration proceeding and
have a final decision from the arbitrator within 120 days
from the date of selection of the arbitrator; provided,
however, that the arbitrator will be entitled to extend such
120-day period for one additional 120-day period. The
arbitrator will deliver a written award with respect to the
dispute to each of the parties, who must promptly act in
accordance therewith.
e) Employer will pay any and all reasonable fees and expenses
incurred by Employee in seeking to obtain or enforce any
rights or benefits provided by this Agreement, including all
reasonable attorneys' and experts' fees and expenses,
accountants' fees and expenses, and court costs (if any)
that may be incurred by Employee in pursuing a claim for
payment of compensation or benefits or other right or
entitlement under this Agreement, except that Employee shall
not be entitled to such payment unless the Arbitrator shall
award Employee in excess of twenty-five thousand dollars
($25,000.00).
f) The arbitrator must act in accordance with the terms and
provisions of this Agreement and applicable legal principles
and will have no authority to add, delete or modify any term
or provision of this
6
<PAGE>
Agreement.
11. AMENDMENT. This Agreement may be amended only by writing, and no
modification or waiver of any provision of this Agreement shall be
valid, unless in writing, and signed by both parties.
12. ASSIGNMENT. This Agreement shall be binding and enforceable against
the successors and assigns of Employer.
13. GOVERNING LAW. The terms and provisions of this Agreement shall be
governed by the laws of the Sate of California.
14. NONDISCLOSURE COVENANT.
a) Employee hereby agrees and acknowledges that all information
pertaining to the prior, current or contemplated conduct and
details of Employer, and Henkel ("Confidential
Information"), whether generated by Employee or otherwise,
and whether generated during regular working hours or
otherwise, is the sole property and a valuable and
confidential asset of Employer and Henkel. Confidential
Information shall include, without limitation, information
related to trade secrets, supplier lists, customer lists and
needs, identities of customer representatives, contracts,
machinery, equipment, computer software, design techniques,
credit sources and information, technical know-how, research
and development activities and data, inventions,
discoveries, distribution, packaging, advertising and
selling methods, administrative procedures, private
processes, techniques and formulae, as well as other aspects
of the affairs and business operations of Employer and
Henkel as they may exist from time to time. Confidential
Information shall not include (i) information and knowledge
that Employee possessed independently of or prior to his
employment or association with Employer, and Henkel and (ii)
publicly available information in substantially the form in
which it is publicly available unless such information is
publicly available by reason of unauthorized disclosure or
(iii) information of a general nature not pertaining
exclusively to Employer and Henkel which could generally be
acquired in similar employment with another company.
Employee hereby covenants and agrees that during the term of
this Agreement and thereafter, whether terminated by
Employee or by Employer or Henkel, he shall keep
confidential Information inviolate and confidential and
shall not reveal it to any competitor or other person or
apply it for his own purpose or that of a third party of
otherwise publicize or use
7
<PAGE>
Confidential Information without the prior written consent
of Employer and Henkel.
b) Upon any termination of this Agreement or upon demand of
Employer or Henkel, Employee shall deliver or cause to be
delivered to Employer or Henkel all records, papers,
notebooks, memoranda, letters and other repositories of
Confidential Information, whether prepared by him or others,
including all copies thereof, then in his possession or
control, without retaining any copies thereof. During the
term of this Agreement, employee shall keep such records,
papers, notebooks, memoranda, letters and other repositories
of Confidential Information in such a manner so as to deny
any unauthorized persons all access thereto.
15. NON-COMPETITION COVENANTS.
a) Employee covenants and agrees that during the term of this
Agreement, he shall not, directly or indirectly, render
services for or enter employment with, any competitor doing
business in the fields related to Employer's businesses, or
such other business segments as Employee may have
responsibility for or close involvement in, as a member of
the management team. If Employee is offered employment by a
company engaged in such competitive business and also doing
substantial business in other fields, Employee may accept
employment with such competitor provided Henkel is given
written assurance by such company that Employee will not be
required to provide any services to the market segments
referred to above.
b) Employee further covenants and agrees that during the term
of this Agreement and for a period of one (1) year from the
date of termination of this Agreement he shall not,
directly, or indirectly, influence or attempt to influence
any employee, agent, distributor or supplier of Employer or
Henkel to terminate or otherwise impair Employer's or
Henkel's relationship with such employee, agent, distributor
or supplier.
c) Employee may solicit the prior written consent of Employer
or Henkel to conduct otherwise proscribed by this Agreement
by submitting a written request therefore. Employer or
Henkel will promptly advise Employee whether it will waive
the requirements of this Agreement with respect to such
request.
8
<PAGE>
16. LIMITED EFFECT OF WAIVER BY COMPANY. If the Employer and Henkel
waives a breach of any provision of this Agreement by the employee,
that waiver will not operate or be construed as a waiver of later
breaches by the Employee.
17. SEVERABILITY. If, for any reason, any provision of this Agreement
is held invalid, the other provisions of this Agreement will remain in
effect, insofar as is consistent with law. If this Agreement is held
invalid or cannot be enforced, then to the full extent permitted by
law any prior agreement between the Employer (or any predecessor
thereof) and the Employee will be deemed reinstated as if this
Agreement has not been executed.
18. CONSIDERATION. The compensation package as outlined in paragraph 4
shall be considered as direct, consideration for Employee's commitment
and promise contained in paragraphs 14 and 15 (as well as for
Employee's performance of his duties).
/s/ Grant Johnson Date: July 18, 1998
- ------------------------------------- ----------------------------
GRANT JOHNSON
DEP CORPORATION
By: /s/ Robert Bergless Date: July 18, 1998
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Title: Chairman and President
9
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[LOGO]
July 20, 1998
Dear Stockholder:
We are pleased to inform you that on July 13, 1998, DEP Corporation (the
"Company") entered into an Agreement and Plan of Merger (the "Merger Agreement")
by and among Henkel KGaA ("Parent"), Henkel Acquisition Corp. II ("Purchaser"),
a wholly-owned subsidiary of Parent, and the Company, pursuant to which
Purchaser has commenced a tender offer (the "Offer") to purchase all of the
outstanding shares of the Company's common stock, par value $.01 per share (the
"Shares"), for a cash price of $5.25 per Share.
The Merger Agreement provides that, following the successful completion of
the Offer, Purchaser will be merged (the "Merger") with and into the Company,
and those Shares of the Company which are not acquired in the Offer will be
converted into the right to receive $5.25 per Share in cash.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9 which is being filed
with the Securities and Exchange Commission. Among other things, the Board
considered the opinion of Houlihan Lokey Howard & Zukin to the effect that the
consideration to be received by the public stockholders in the Offer and the
Merger is fair to such stockholders from a financial point of view. The enclosed
Schedule 14D-9 describes the Board's decision and contains other important
information relating to that decision. We urge you to read it carefully.
On behalf of the Board of Directors, we thank you for the support you have
given to the Company over the years.
Sincerely,
/s/ Robert Berglass
Robert Berglass
Chairman and President
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[LOGO]
July 13, 1998
To: The Board of Directors
DEP Corporation
2101 East Via Arado
Rancho Dominguez, California 90220
Gentlemen:
We understand that Henkel KGaA ("Henkel") has proposed to purchase all of
the outstanding stock of DEP Corporation ("DEP" or the "Company") from the
public stockholders (the "Public Stockholders") at a price of $5.25 per share,
payable in cash. Such transaction and all related transactions are referred to
collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports to shareholders and on Form 10-K
for the fiscal years ended 1997 and 1996 and quarterly report on Form 10-Q for
the quarter ended April 30, 1998;
2. reviewed copies of the following agreements:
The Agreement and Plan of Merger between the Company and Henkel;
The Stockholder Option Agreements between Henkel and each of
Robert Berglass, The
Berglass Charitable Remainder Trust and The Berglass 1995
Irrevocable Trust;
The Stock Option Agreement between the Company and Henkel;
and other related agreements;
3. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and projected
operations and performance of the Company;
4. visited certain facilities and business offices of the Company;
5. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the years ended July 31, 1999 through
2003;
L o s A n g e l e s
1930 Century Park West
Los Angeles, California 90067-6802
Tel 310.553.8871 Fax 310.553.2173
Investment advisory services through Houlihan Lokey Howard & Zukin Financial
Advisors
N e w Y o r k C h i c a g o S a n
F r a n c i s c o M i n n e a p o l i s W a s h i n g t o n,
D. C. D a l l a s A t l a n t a T o r o n t o
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6. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
7. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company, and publicly available prices
and premiums paid in other transactions that we considered similar to the
Transaction;
8. reviewed drafts of certain documents to be delivered at the closing of
the Transaction; and
9. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the Public Stockholders of the Company in
connection with the Transaction is fair to them from a financial point of view.
/s/ HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
