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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Schedule 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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O'Sullivan Corporation
(Name of Subject Company)
O'Sullivan Corporation
(Name of Persons Filing Statement)
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Common Stock, par value $1.00 per share
(Title of Class of Securities)
688605104
(CUSIP Number of Class of Securities)
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John S. Campbell
President and Chief Executive Officer
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
(540) 667-6666
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of the Person(s) Filing
Statement)
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Copy to:
Joseph C. Carter, III, Esq.
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
(804) 775-1000
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Item 1. Security and Subject Company.
The name of the subject company is O'Sullivan Corporation, a Virginia
corporation (the "Company"), and the address of the principal executive
offices of the Company is 1944 Valley Avenue, Winchester, Virginia 22601. The
title of the class of equity securities to which this
solicitation/recommendation statement (the "Statement") relates is the common
stock, par value $1.00 per share (the "Common Stock"), of the Company.
Item 2. Tender Offer of the Bidder.
This Statement relates to the tender offer by TGC Acquisition Corporation, a
Virginia corporation (the "Purchaser") and a wholly owned subsidiary of The
Geon Company, a Delaware corporation ("Geon"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated June 8, 1999 (the "Schedule 14D-1"), to
purchase all of the outstanding shares of Common Stock (the "Shares") at a
price of $12.25 per Share, net to the seller in cash (the "Offer Price"), upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated June 8, 1999 (the "Offer to Purchase") and the related Letter
of Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer"). The Offer is scheduled to expire at 12:00 midnight (Eastern Daylight
Savings Time) on July 7, 1999, unless extended in accordance with applicable
law and the terms of the Merger Agreement (as hereinafter defined).
The Offer is made pursuant to an Agreement and Plan of Merger dated as of
June 2, 1999 (the "Merger Agreement") among Geon, the Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
all remaining conditions to the Merger, Purchaser will be merged with and into
the Company (the "Merger"), and the Company will continue as the surviving
corporation.
As set forth in the Schedule 14D-1, each of the Purchaser and Geon has its
principal executive offices at One Geon Center, Avon Lake, Ohio 44012.
Item 3. Identity and Background.
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Except as described or incorporated by reference herein, to the
knowledge of the Company, as of the date hereof, there exists no material
contract, agreement, arrangement or understanding and no actual or potential
conflict of interest between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) the Purchaser or
its executive officers, directors or affiliates.
The Company has historically purchased mass suspension PVC resin and
dispersion PVC resin from Geon. During its past three fiscal years, the
Company has purchased between approximately $11-13 million of such resins per
year from Geon. As of April 30, 1999, more than 95% of such purchases,
consisting solely of mass suspension PVC resin purchases, will be made from
Oxy Vinyls, L.P., a joint venture in which Geon has a 24% ownership interest.
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors and executive officers are described in
the Company's Proxy Statement dated March 26, 1999 relating to its 1999 annual
meeting of shareholders (the "1999 Proxy Statement"). A copy of the 1999 Proxy
Statement is attached hereto as exhibit (a) and the portions thereof referred
to above are incorporated herein by reference. Reference is also made to
Schedule I of this Statement for additional information in response to this
Item.
Limitation of Liability
The Company's Amended and Restated Articles of Incorporation, as amended
(the "Articles"), require indemnification of each person who was or is a party
or is threatened to be made a party to any proceeding by reason of the fact
that he is serving as a director or officer of any legal entity or a position
held by a director, officer or employee of such legal entity serving at the
Company's request in any capacity relating to the establishment,
administration or termination of an employee benefit plan which, under any
federal or state law
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regulating or pertaining to such plan, does or might constitute him a
fiduciary with respect to such plan, against expenses (including attorneys'
fees and costs of investigation and litigation), judgments, fines and amounts
paid in settlement actual and reasonably incurred by him in connection with
any such proceeding unless (i) such person has been guilty of gross negligence
or willful misconduct in the performance of the duties of his office, or
services rendered in his qualified position, or (ii) in the case of a criminal
proceeding, such person had reasonable cause to believe that his conduct was
unlawful.
In addition, the Articles authorize the Company's Board of Directors to
cause the Company to indemnify, or agree to indemnify in advance, to the same
extent any person who was or is a party or is threatened to be made a party to
any proceeding by reason of the fact that he is serving in any capacity with
respect to the Company or with respect to any other legal entity at the
request of the Company.
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement, a copy of
which is filed herewith as exhibit (b).
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser may modify the terms of the Offer, except that, without the consent
of the Company, the Purchaser will not reduce the Offer Price, reduce the
number of Shares sought in the Offer, waive the condition that there be
validly tendered and not properly withdrawn prior to expiration of the Offer a
number of shares equal to at least 70% of the outstanding Shares calculated on
a fully diluted basis (the "Minimum Condition"), change the form of
consideration payable in the Offer, or modify or add to the conditions of the
Offer. In addition, the Offer may not be extended beyond any scheduled
expiration date unless any of the conditions to the Offer have not been
satisfied; provided, however, (i) even if the conditions to the Offer have not
been satisfied, the Offer may not be extended beyond the three month
anniversary of the date of commencement of the Offer and (ii) if the
conditions to the Offer have been satisfied, then the offer may be extended
for an additional five business days so long as at the time of such extension,
all conditions to Purchaser's obligations to purchase Shares pursuant to the
Offer are irrevocably waived.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with the Virginia Stock Corporation Act
(the "VSCA"), the Purchaser shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of the
Purchaser will cease and the Company will continue as the surviving
corporation (the "Surviving Corporation").
The Merger Agreement provides that at the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares which
are held by the Company as treasury shares or otherwise or, directly or
indirectly, by Geon or any direct or indirect subsidiary of Geon (including
Purchaser)) shall be converted into the right to receive $12.25 cash per
Share, without interest (the "Merger Consideration").
Pursuant to the Merger Agreement, each issued and outstanding share of
common stock, par value $1.00 per share, of the Purchaser shall be converted
into one fully paid and non-assessable share of common stock, $1.00 par value,
of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that,
promptly upon the acceptance for payment, and payment by the Purchaser, in
accordance with the Offer for at least 70% of the outstanding Shares (on a
fully diluted basis), the Purchaser will be entitled to designate such number
of directors on the Board of Directors of the Company, rounded up to the next
whole number, as will give the Purchaser, subject to compliance with Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the
Board of Directors (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that such number of Shares so accepted
for payment and paid for or otherwise acquired or owned by the Purchaser or
Geon bears to the number of Shares outstanding and the Company and its Board
of Directors shall, at such time, take any and all such action needed to cause
the
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Purchaser's designees to be appointed to the Company's Board of Directors
(including to cause directors to resign). At all times before the Effective
Time, Geon, the Purchaser and the Company shall use their reasonable efforts
to ensure that at least two members of the Company's Board of Directors, as
constituted on the date of the Merger Agreement, remain on the Company's Board
of Directors, except to the extent that no such individuals or their
appointees agree to serve as directors (the "Continuing Directors"). In the
event that one or more Continuing Directors resign from the Company's Board of
Directors, Geon, the Purchaser and the Company shall permit the remaining, or
in the case of the resignation of all Continuing Directors, the resigning,
Continuing Director or Continuing Directors to appoint his or their successors
in his or their reasonable discretion. In addition, the Company will, if
requested by Geon or the Purchaser, use its reasonable efforts to cause
persons designated by the Purchaser to constitute the same percentage of each
committee of the Company's Board of Directors, each board of directors of each
subsidiary of the Company and each committee of each such board (in each case
to the extent of the Company's ability to elect such persons). In furtherance
of the foregoing, the Company has agreed to increase the size of the Company's
Board of Directors, or use its reasonable efforts to secure resignations of
directors, or both, to permit the Purchaser's designees to be elected to the
Company's Board of Directors.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company, through
its Board of Directors, will, if required by applicable law or the Articles in
order to consummate the Merger, duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of voting upon the Merger
Agreement and the Merger. The Merger Agreement provides that the Company will,
if required by applicable law or the Articles in order to consummate the
Merger, prepare and file with the Securities and Exchange Commission (the
"Commission") a preliminary proxy/information statement relating to the Merger
and the Merger Agreement and use (i) its best efforts to respond to the
comments of the Commission in connection therewith and cause a definitive
proxy/information statement (the "Proxy/Information Statement") to be mailed
to its stockholders and (ii) its reasonable efforts to obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders. If the
Purchaser acquires at least 70% of the outstanding Shares, the Purchaser will
have sufficient voting power to approve the Merger, even if no other
stockholder votes in favor of the Merger. The Company has agreed, subject to
the limitations described below under the heading "No Solicitation," to
include in the Proxy/Information Statement the recommendation of the Board of
Directors that stockholders of the Company vote in favor of the approval of
the Merger and the adoption of the Merger Agreement.
Interim Operations. In the Merger Agreement, the Company has agreed that,
except as expressly contemplated by the Merger Agreement or agreed to in
advance by Geon in writing, prior to the closing of the Merger, the business
of the Company and its subsidiaries shall be conducted only according to their
ordinary and usual course of business and consistent with past practice, and
that they will use their reasonable best efforts to preserve intact their
respective business organizations, keep available the services of their
officers and employees and maintain satisfactory relationships with licensors,
suppliers, distributors, clients and others having business relationships with
them. In addition, each of the Company and its subsidiaries will not (i) make
any change in or amendment to its articles of incorporation or by-laws (or
comparable governing documents); (ii) issue or sell any shares of its capital
stock (other than in connection with the exercise of Options (as hereinafter
defined) outstanding on the date of the Merger Agreement) or any of its other
securities, or issue any securities convertible into, or options, warrants or
rights to purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of, any shares of its capital stock or
any of its other securities, or make any other changes in its capital
structure; (iii) sell or pledge or agree to sell or pledge any stock owned by
it in any of its subsidiaries; (iv) except for regular quarterly dividends,
declare, pay, set aside or make any dividend or other distribution or payment
with respect to, or split, combine, redeem or reclassify, any shares of its
capital stock; (v) enter into any contract or commitment with respect to
capital expenditures in excess of $1,000,000 or enter into any other material
contract except contracts in the ordinary course of business, it being
understood that the Company shall be permitted to make all capital
expenditures contemplated in its 1999 capital expenditure budget, (vi) release
or relinquish any material contract rights other than in the ordinary course
of business; (vii) adopt, enter into or amend in any material respect any
employee or non-employee benefit plan or
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program, employment agreement, severance agreement, stay-in-place bonus
agreement, license agreement or retirement agreement, or, except in the
ordinary course of business and consistent with past practice or except as
required under any employee plan, contract, agreement or arrangement listed on
the disclosure letter to the Merger Agreement, pay or commit to pay any bonus
or contingent or other extraordinary compensation to any employee or director
or increase in any manner the compensation or fringe benefits payable to any
employee or director; (viii) merge, consolidate or enter into a share exchange
with any other person, acquire a material amount of capital stock or assets of
any other person, or sell, lease, license, mortgage, pledge or otherwise
dispose of a material amount of assets to any other person, except for the
purchase or sale of inventory in the ordinary course of business, consistent,
in all material respects, with past practice; (ix) other than in the ordinary
course of business, transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of, encumber or subject to any lien, any assets or incur or
modify any indebtedness or other liability or issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become
responsible for the obligations of any person; (x) agree to the settlement of
any material claim or litigation; (xi) make any material tax election or settle
or comprise any material tax liability; (xii) make any material change in its
method of accounting or (xiii) agree, in writing or otherwise, to take any of
the foregoing actions.
No Solicitation. In the Merger Agreement, the Company has agreed that neither
the Company nor any of its subsidiaries or affiliates will, directly or
indirectly, take (and the Company will not authorize or permit its or its
subsidiaries officers, directors, employees, representatives, consultants,
investment bankers, attorneys, accountants or other agents or affiliates, to so
take) any action to (i) solicit, initiate, encourage or take any other action
to facilitate the submission of any proposal or offer from any person relating
to any direct or indirect acquisition or purchase of a substantial amount of
assets of the Company or any of its subsidiaries (other than inventory in the
ordinary course of business) or of over 20% of any class of equity securities
of the Company or any of its subsidiaries or any tender offer or exchange offer
that if consummated would result in any person beneficially owning more than
20% of any class of equity securities of the Company or any of its
subsidiaries, or any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company and taken as a whole its subsidiaries (an
"Acquisition Proposal"), or (ii) participate in any way in discussions or
negotiations with, or, furnish any information, (whether public or nonpublic)
to any person (other than Geon or the Purchaser) in connection with an
Acquisition Proposal; provided, however, that the Company may take any action
described in clause (ii) above, if (A) such action is taken in connection with
an unsolicited Acquisition Proposal, (B) the Board of Directors believes in its
good faith judgment (based on the advice of its financial and legal advisors)
that failing to take such action would constitute a breach of its fiduciary
duties and (C) in the case of the disclosure of nonpublic information relating
to the Company in connection with an Acquisition Proposal, the disclosure of
such information is covered by a confidentiality agreement that provides
substantially the same protection to the Company as is afforded by the
confidentiality agreement executed by Geon. In addition, neither the Board of
Directors of the Company nor any committee thereof will withdraw or modify in a
manner adverse to Geon or Purchaser the approval and recommendation of the
Offer and the Merger Agreement or approve or recommend any Acquisition
Proposal, provided that the Board of Directors of the Company or any committee
thereof may, prior to the acceptance for payment of Shares pursuant to the
Offer, recommend to its stockholders an unsolicited Acquisition Proposal and in
connection therewith withdraw or modify its approval or recommendation of the
Offer or the Merger if (i) the Board of Directors of the Company has determined
in its good faith judgment (based on the advice of its financial and legal
advisors) that the unsolicited Acquisition Proposal is more favorable to the
Company and its stockholders than the transactions contemplated by the Merger
Agreement (a "Superior Proposal") and (ii) simultaneously with such withdrawal,
modification or recommendation, the Company terminates the Merger Agreement and
pays within two business days thereof to Geon the break-up fee. The parties
have agreed in the Merger Agreement that for purposes of the non-solicitation
provision any actions taken by the Company or its subsidiaries or their
officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants or other agents or affiliates prior to the date
of the Merger Agreement in soliciting, encouraging, initiating, facilitating or
participating in any discussions relating to any Acquisition Proposal shall not
be construed to render an Acquisition Proposal received after the date hereof a
solicited Acquisition Proposal. The Company has agreed to promptly notify Geon
orally and in writing of any Acquisition Proposal or any inquiries
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with respect thereto. Any such written notification will include the identity
of the Person making such inquiry or Acquisition Proposal and a description of
the material terms of such Acquisition Proposal (or the nature of the inquiry)
and will indicate whether the Company is providing or intends to provide the
Person making the Acquisition Proposal with access to nonpublic information
relating to the Company or any of its subsidiaries. The Company will, to the
extent reasonably practicable, also promptly inform Geon of any material change
in the details (including amendments or proposed amendments) of any such
request or Acquisition Proposal. In the event that the Board of Directors of
the Company determines that an Acquisition Proposal is a Superior Proposal and
desires to terminate the Merger Agreement, it will give Geon written notice of
its intention to terminate the Merger Agreement no later than three business
days in advance of any date that it intends to terminate the Merger Agreement.
During that three business day period, Geon will have the right, by giving
written notice to the Company, to match the terms of such Superior Proposal. If
Geon notifies the Company within such three business day period that it agrees
to match the terms of the Superior Proposal, the Company will forthwith cease
any discussion with the person making the Superior Proposal and Geon and the
Company will promptly incorporate the terms of the Superior Proposal in the
Merger Agreement.
Directors' and Officers' Insurance and Indemnification. The Merger Agreement
provides that the articles of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Articles and by-laws on
the date of the Merger Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company ("Indemnified Parties"), unless such
modification is required by law.
The Merger Agreement provides that Geon shall either (i) maintain in effect
the Company's current directors' and officers' liability insurance covering
those persons who are currently covered on the date of the Merger Agreement by
the Company's directors' and officers' liability insurance policy for a period
of six years after the Effective Time, except that the Company may substitute
for such Company policies, policies with at least the same coverage containing
terms no less advantageous and provided that said substitution does not result
in any gaps or lapses in coverage with respect to matters occurring prior to
the Effective Time, provided that in no event shall Geon be required to expend
in any one year an amount in excess of 200% of the annual premiums currently
paid by the Company for such insurance and that if the annual premiums of such
insurance coverage exceed that amount, Geon shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount and to give prompt written notice of any reduction in the amount or
scope of coverage resulting therefrom to the directors and officers affected
thereby, or (ii) cause Geon's directors' and officers' liability insurance then
in effect to cover those persons who are covered on the date of the Merger
Agreement by the Company's directors' and officers' liability insurance policy
with respect to those matters covered by the Company's directors' and officers'
liability policy.
In the Merger Agreement, Geon has agreed, from and after the date of purchase
of Shares pursuant to the Offer, to indemnify all Indemnified Parties to the
fullest extent permitted by applicable law, including, subject to certain
limitations, indemnification for reasonable legal and other expenses, with
respect to all acts and omissions arising out of such individuals' services as
officers, directors, employees or agents of the Company or any of its
subsidiaries, or as trustees or fiduciaries of any plan for the benefit of
employees, or otherwise on behalf of, the Company or any of its subsidiaries,
occurring prior to the Effective Time including, without limitation, the
transactions contemplated by the Merger Agreement. If such indemnity will not
be available with respect to any Indemnified Party, then the Company and the
Indemnified Party shall contribute to the amount payable in such proportion as
is appropriate to reflect relative faults and benefits.
Compensation and Benefits. Pursuant to the Merger Agreement, Geon has agreed
that, during the period commencing at the Effective Time and ending on the
second anniversary thereof, the employees (and former employees) of the Company
and its subsidiaries will continue to be provided with employee benefits and
benefit plans no less favorable than those in the aggregate provided by the
Company and its subsidiaries as of the Effective Time. Geon will, and will
cause the Surviving Corporation to, honor employee (or former employee)
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benefit obligations and contractual rights existing as of the Effective Time
and all employment, incentive and deferred compensation or severance
agreements, plans or policies adopted by the Board of Directors of the Company
(or any committee or subcommittee thereof) prior to the date hereof in
accordance with their terms, in each case to the extent disclosed in the
disclosure letter to the Merger Agreement. Geon will provide employees of the
Company and its subsidiaries with credit for service with the Company or any
of its subsidiaries or predecessors prior to the Effective Time for purposes
of determining eligibility to participate, vesting, benefits and benefit
accrual under any employee benefit plans of Geon or its subsidiaries.
Employees of the Company and its subsidiaries shall not be subject to pre-
existing condition limitations, proof of insurability requirements, or any
similar conditions or requirements under health benefit plans maintained by
Geon or its subsidiaries that would delay commencement of an employee's
participation in or limit an employee's level of coverage under, any of the
health benefit plans of Geon or its subsidiaries. As a result of the action
taken by the Board of Directors which eliminated the requirement under the
Trust Agreement for O'Sullivan Corporation Salary Continuation Agreements
dated as of November 18, 1997, as amended (the "Salary Continuation Agreements
Trust") that the Salary Continuation Agreements Trust be fully funded for all
current benefit obligations upon a change of control of the Company, the
Surviving Corporation shall assume and fully discharge, and Geon shall
guarantee the performance of, all obligations of the Company (and the
Surviving Corporation) under the salary continuation agreements listed on
Appendix A of the Salary Continuation Agreements Trust (the "Salary
Continuation Agreements"). In addition, the Company, Geon and its subsidiaries
(including the Surviving Corporation) have agreed in the Merger Agreement not
to amend or terminate any one of the Salary Continuation Agreements at any
time, to continue to make sufficient cash deposits into the Salary
Continuation Agreements Trust to permit the trustee to pay all premiums
required to be paid pursuant to life insurance contracts held in the Salary
Continuation Agreements Trust and to not, directly or indirectly, take any
action that would in any way diminish or reduce the cash surrender value of
such life insurance contracts (including, but not limited to, borrowing
against the cash surrender value of the life insurance contracts).
Stock Options. Each outstanding stock option to purchase Common Stock (the
"Options") heretofore granted under the Company's 1995 Stock Option Plan, 1995
Outside Directors Stock Option Plan or 1985 Incentive Stock Option Plan or any
other employee, director or other stock option plan now or formerly maintained
by the Company (collectively, the "Option Plans") whether or not vested or
exercisable, shall be deemed to be cancelled immediately prior to the
Effective Time and shall no longer be exercisable for the purchase of Shares.
The holder of each Option shall receive a payment in cash (subject to any
applicable withholding taxes) at the Effective Time (the "Cash Payment") equal
to the product of (x) the total number of Shares subject to such Option,
whether or not then vested or exercisable, and (y) the excess, if any, of the
Merger Consideration over the exercise price per Share subject to such Option.
Such Cash Payment will be paid to each holder of an outstanding Option at the
Effective Time. Prior to the Effective Time, the Board of Directors of the
Company (or, if appropriate, any committee or subcommittee thereof) shall take
such further action as may be necessary or appropriate to provide for the
cancellation of the Options and payment of the Cash Payment. The Option Plans
and 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 shall be terminated by the Company effective as of the Effective
Time. The Company will take all steps to ensure that neither the Company nor
any of its subsidiaries is or will be bound by any Options or other options,
warrants, rights or agreements which would entitle any person, other than Geon
or its affiliates, to own any capital stock of the Company or any of its
subsidiaries or to receive any payment in respect thereof. The Company will
use its best efforts to obtain all necessary consents to ensure that as of the
Effective Time, the only rights of the holders of Options in respect of such
Options will be to receive the Cash Payment in cancellation and settlement
thereof.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Geon and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, employee benefit plans, permits, compliance with
laws, litigation, tax matters, action with respect to certain state takeover
laws, environmental matters, consents and approvals, opinions of financial
advisors, undisclosed liabilities, the absence of certain changes with respect
to the Company since December 31, 1998, material contracts, real and personal
property, intellectual property matters, insurance, inventory and computer
software and databases.
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Confidentiality. The Merger Agreement provides that the information obtained
by Geon and the Purchaser pursuant to the Merger Agreement will be subject to
the Confidentiality Agreement, dated December 16, 1998, between the Company
and Geon (the "Confidentiality Agreement") pursuant to which Geon has agreed,
among other things, to keep confidential certain non-public confidential or
proprietary information of the Company furnished to Geon by or on behalf of
the Company. The Confidentiality Agreement is filed herewith as exhibit (c)
and is incorporated herein by reference.
Conditions of the Offer. Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1c
under the Exchange Act, pay for any Shares tendered and may terminate or amend
the Offer in accordance with the Merger Agreement and may postpone the
acceptance of, and payment for, Shares, if (i) the Minimum Condition has not
been met, (ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated or (iii) at any time on or after the date of the
Merger Agreement and at or before the expiration date of the Offer (as the
same may be extended from time to time) any of the following shall occur:
(a) any court or domestic government or governmental authority or agency
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, executive order, decree or injunction or other order or
the Antitrust Division or the Federal Trade Commission has indicated to
Geon and the Company that it may seek to obtain a decree, injunction or
other order which (i) makes illegal, materially delays or otherwise
directly or indirectly materially restrains or prohibits the Offer or the
Merger, (ii) prohibits or materially limits the ownership or operation by
Geon or Purchaser of all or any material portion of the business or assets
of the Company or compels Geon or Purchaser to dispose of all or any
material portion of the business or assets of Geon or Purchaser or the
Company, or imposes any limitations on the ability of Geon or Purchaser to
conduct its business or own such assets, (iii) imposes limitations on the
ability of Geon or Purchaser effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
any Shares acquired or owned by Purchaser or Geon on all matters properly
presented to the Company's stockholders, (iv) requires divestiture by Geon
or Purchaser of any Shares, or (v) otherwise materially adversely affects
the business, properties, assets, liabilities, operations, results of
operations, condition (financial or otherwise) or prospects (the
"Condition") of the Company and its subsidiaries taken as a whole;
(b) there shall have occurred (i) any general suspension greater than 24
hours of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market, (ii) any
material change in United States or any other currency exchange rates or a
suspension of, or limitation on, the markets therefor, (iii) a declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States, or (iv) a declaration of war by the United States
having a material adverse effect on the Company or materially adversely
affecting (or materially delaying) the consummation of the Offer, or (v) in
the case of any of the situations described in clauses (i) through (iii)
inclusive existing at the date of commencement of the Offer, a material
acceleration or worsening thereof;
(c) all consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be obtained or made by the
Company, Parent or Purchaser with or from any governmental or regulatory
entity in connection with the execution, delivery and performance of the
Merger Agreement, the Offer and the consummation of the transactions
contemplated by the Merger Agreement shall not have been made or obtained
and such failure could reasonably be expected to have a material adverse
effect on the Condition of the Company and any of its subsidiaries, taken
as a whole or could be reasonably likely to prevent or materially delay
consummation of the transactions contemplated by the Merger Agreement;
(d) any representation or warranty made by the Company in the Merger
Agreement (i) (A) was untrue or incorrect in any material respect when made
or (B) has become untrue or incorrect in any material respect and (ii) at
the time of termination or amendment remains untrue or incorrect in any
material respect;
(e) there shall have been a breach by the Company of any of its covenants
or agreements in any material respect contained in the Merger Agreement;
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(f) the Company's Board of Directors shall have withdrawn, modified or
amended in any respect adverse to Geon or Purchaser its recommendation of
the Offer or the Merger, or shall have resolved to do so; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
which, in the reasonable judgment of Purchaser, in any such case and
regardless of the circumstances giving rise to any such condition, would make
it inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser, or may be waived by Purchaser, in whole or in part at
any time and from time to time in its sole discretion; provided, however,
that, without the consent of the Company, Geon and Purchaser shall not waive
the Minimum Condition.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to effect the Merger is subject to the satisfaction
or waiver, at or prior to the Effective Time, of the following conditions: (i)
to the extent required by applicable law or the Articles, the Merger Agreement
and the Merger shall have been approved and adopted by holders of at least 70%
of the Shares in accordance with applicable law (if required by applicable
law) and the Company's Articles; (ii) any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger shall have expired or been
terminated; (iii) no preliminary or permanent injunction or other order shall
have been issued by any court or by any governmental or regulatory agency,
body or authority which prohibits the consummation of the Offer or the Merger
and the transactions contemplated by the Merger Agreement and which is in
effect on the closing date, provided, however, that, in the case of a decree,
injunction or other order, each of the parties shall have used reasonable
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any decree, injunction or other order that may
be entered; (iv) no statute, rule, regulation, executive order, decree or
order of any kind shall have been enacted, entered, promulgated or enforced by
any court or governmental authority which prohibits the consummation of the
Offer or the Merger or has the effect of making the purchase of the Shares
illegal; and (v) Purchaser shall have accepted for payment and paid for the
Shares tendered pursuant to the Offer. The obligation of the Company to effect
the Merger is subject to the satisfaction or waiver of the condition that each
of Geon and the Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants and conditions, relating to the composition of the Board of
Directors of the Company after the closing of the Offer as set forth in the
Merger Agreement and payment for the Shares in the Merger to be performed or
complied with by them prior to the closing date.
Termination; Fees. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company, (a) by mutual written consent of the Company, on the one hand,
and of Geon and the Purchaser, on the other hand; (b) by either Geon, on the
one hand, or the Company, on the other hand, if any governmental or regulatory
agency shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger and
such order, decree or ruling or other action shall have become final and
nonappealable; (c) by either Geon, on the one hand, or the Company, on the
other hand, if the Effective Time shall not have occurred within six months
after commencement of the Offer unless the Effective Time shall not have
occurred because of a material breach of any representation, warranty,
obligation, covenant, agreement or condition set forth in the Merger Agreement
on the part of the party seeking to terminate the Merger Agreement; (d) by
Geon, on the one hand, or the Company, on the other hand, if the Offer is
terminated or expires in accordance with its terms without Purchaser having
purchased any Shares thereunder due to a failure to satisfy any of the
conditions of the Offer, unless such termination or expiration has been caused
by or results from the failure of the party seeking to terminate the Merger
Agreement to perform in any material respect any of its respective covenants
or agreements contained in the Merger Agreement; (e) by either Geon, on the
one hand, or the Company, on the other hand, if the Board of Directors of the
Company determines that an Acquisition Proposal will result in a Superior
Proposal and the Board of Directors believes (and has been advised by counsel)
that a failure to terminate the Merger Agreement and enter into an agreement
to effect such Superior Proposal would constitute a breach of its fiduciary
duties; (f)
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prior to the consummation of the Offer, by the Company, if (i) any of the
representations and warranties of Geon or Purchaser contained in the Merger
Agreement were untrue or incorrect in any material respect when made or have
since become, and at the time of termination remain, incorrect in any material
respect, or (ii) Geon or Purchaser shall have breached or failed to comply in
any material respect with any of their respective obligations, covenants or
agreements under the Merger Agreement, including, without limitation, their
obligation to commence the Offer within five business days after the public
announcement of the execution of the Merger Agreement; and (g) by the Company,
if Geon or the Purchaser have terminated the Offer prior to the closing of the
Offer, the Offer is terminated or expires without the Purchaser having
purchased any Shares or if the Purchaser or Geon fails to purchase validly
tendered Shares in violation of the terms and conditions of the Offer or the
Merger Agreement.
In addition, (i) if the Merger Agreement is terminated by the Company in
accordance with paragraph (e) above, (ii) if the Board of Directors of the
Company fails to recommend, withdraws, modifies or changes its recommendation
of the Offer or the Merger in any respect adverse to Geon or the Purchaser, or
has resolved to do so, for any reason other than a breach by Geon or the
Purchaser in any material respect of its representations or warranties
contained in the Merger Agreement or a failure by Geon or the Purchaser to
perform in any material respect any of its covenants or agreements contained
in the Merger Agreement; or (iii) if, prior to the purchase of Shares by the
Purchaser, the Company violates its obligations under the non-solicitation
provision in the Merger Agreement in any material respect and thereafter the
Company enters into an agreement to effect a Superior Proposal, then the
Company shall pay to Geon in same day funds a fee of $5,000,000, in the case
of clause (i), within two business days after the termination of the Merger
Agreement, in the case of clause (ii), within two business days after the
withdrawal, modification or change of the recommendation and, in the case of
clause (iii), within two business days after the execution of an agreement
referred to in such clause. Payment of the $5,000,000 fee by the Company shall
be Geon's and the Purchaser's exclusive remedy against the Company for any of
the matters referred to in clauses (i), (ii) or (iii) above.
Share Tender Agreements
In connection with the execution of the Merger Agreement, Geon and the
Purchaser entered into the Share Tender Agreements with Arthur H. Bryant II,
Magalen O. Bryant and John C. O. Bryant (the "Bryants"), who together control
approximately 26% of the Shares, pursuant to which the Bryants have agreed to,
among other things, tender all of the Shares controlled by them into the
Offer.
Tender of Shares. The Bryants have agreed to validly tender (and not
withdraw), or cause the record owner of such Shares to validly tender (and not
withdraw), and sell pursuant to and in accordance with the terms of the Offer
all of the Shares controlled by them, subject to the terms and conditions of
the Merger Agreement.
Transfer of Shares. The Bryants have agreed that during the term of the
Share Tender Agreements they will not (a) tender into any tender or exchange
offer (other than the Offer) or otherwise sell, transfer, pledge, assign,
hypothecate or otherwise dispose of, or encumber with any encumbrance, any of
the Shares controlled by them, (b) exercise any of the options to acquire
Shares held by them (except to the extent permitted under the Merger
Agreement), (c) deposit the Shares controlled by them into a voting trust,
enter into a voting agreement or arrangement with respect to such Shares or
grant any proxy or power of attorney with respect to such Shares, or (d) enter
into any contract, option or other arrangement or undertaking with respect to
the direct or indirect acquisition, sale, transfer, pledge, assignment,
hypothecation or other disposition of any interest in or the voting of any
Shares or any other securities of the Company.
Voting of Shares. The Bryants have agreed, so long as the Share Tender
Agreements remain in effect, to vote all of the Shares controlled by them (a)
in favor of the approval and adoption of the Merger Agreement and the approval
of the transactions contemplated thereby and (b) against any action or
agreement that would result in a breach of any representation, warranty,
covenant or agreement of the Company contained in the Merger Agreement or
would impede, interfere with, delay or prevent the consummation of the Merger
or the purchase of Shares pursuant to the Offer; provided that this provision
shall not prevent Arthur H. Bryant, II or John C. O. Bryant from exercising
their fiduciary duties as directors of the Company, including with respect to
the provisions of the Merger Agreement governing Acquisition Proposals.
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No Solicitation. The Bryants have agreed that they will not, directly or
indirectly, through any agent, financial advisor, attorney, accountant or
other representative or otherwise, (a) solicit, initiate or take any other
action to facilitate any inquiries or the making of any proposal which
constitutes an Acquisition Proposal, (b) participate in any discussions or
negotiations regarding any Acquisition Proposal, (c) in connection with an
Acquisition Proposal, disclose any nonpublic information relating to the
Company or afford access to the properties, books or records of the Company to
any person or (d) otherwise cooperate in any way with, assist, participate in,
facilitate or encourage any effort or attempt by any other person or entity to
make an Acquisition Proposal; provided that this provision shall not prevent
Arthur H. Bryant II or John C. O. Bryant from exercising their fiduciary
duties as directors of the Company, including with respect to the provisions
of the Merger Agreement governing Acquisition Proposals.
Termination. The Share Tender Agreements will automatically, without any
notice to or action by any party, terminate (a) upon the earlier to occur of
(i) the purchase of all of the Shares controlled by the Bryants pursuant to
the Offer or (ii) the termination of the Merger Agreement in accordance with
its terms, or (b) by the mutual written consent of the Bryants and Geon.
Copies of the Merger Agreement and the Share Tender Agreements are filed
herewith as exhibits (b) and (d), respectively, and are incorporated herein by
reference, and the foregoing summary is qualified in its entirety by reference
thereto.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Board of Directors.
The Company's Board of Directors unanimously has determined that the Offer
and the Merger are fair to and in the best interests of the stockholders of
the Company, has approved the Merger Agreement, the Share Tender Agreements,
the Offer, the Merger and the consummation of the transactions contemplated
thereby and recommends that all stockholders of the Company accept the Offer
and tender all of their Shares pursuant to the Offer.
As set forth in the Purchaser's Offer to Purchase, the Purchaser will
purchase Shares tendered prior to the close of the Offer if the Minimum
Condition shall have been satisfied by that time and if all other conditions
to the Offer have been satisfied (or waived). Stockholders considering not
tendering their Shares in order to wait for the Merger should note that the
Purchaser is not obligated to purchase any Shares, and can terminate the Offer
and the Merger Agreement and not proceed with the Merger, if the Minimum
Condition is not satisfied or any of the other conditions to the Offer are not
satisfied. Under the Company's Articles and the VSCA, the approval of the
Board and the affirmative vote of the holders of at least 70% of the
outstanding Shares are required to approve and adopt the Merger. Accordingly,
if the Minimum Condition is satisfied, Purchaser will have sufficient voting
power to cause the approval and adoption of the Merger Agreement and the
transactions contemplated thereby without the affirmative vote of any other
stockholder.
A copy of the press release issued jointly by Geon and the Company
announcing the Offer and the Merger is filed as exhibit (e) to this Schedule
14D-9 and is incorporated herein by reference in its entirety.
(b) Background of the Offer; Reasons for the Recommendation.
On July 29, 1998, the Company announced it would hire an investment bank to
assist it in exploring various strategic alternatives for the Company to
enhance shareholder value. On August 19, 1998, the Board of Directors of the
Company engaged Bowles Hollowell Conner ("BHC"), a division of First Union
Capital Markets Corp., to act as financial advisor to the Company in this
regard. Beginning in August 1998, BHC conducted detailed due diligence on the
Company and, together with the Company's management, conducted an analysis of
various strategic alternatives available to the Company.
BHC presented a detailed review of strategic alternatives to the Board of
Directors at its regularly scheduled meeting on October 27, 1998. At this
meeting and based on the review of strategic alternatives, the Board of
Directors authorized BHC to work with management to explore whether there
existed a strategic merger/sale
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transaction that would be in the best interests of the Company's stockholders.
During the months of November and December 1998, representatives of Geon and
the Company met twice, at Geon's request, to discuss developments in the
business and whether a combination of the two companies might be possible. On
December 16, 1998, the Company and Geon signed a confidentiality agreement and
began preliminary discussions regarding the merits of a potential merger/sale
transaction. Shortly thereafter the Company sent Geon a confidential
information memorandum. During January 1999, Geon submitted through BHC a non-
binding indication of interest and a follow-up letter regarding the possible
acquisition of the Company. BHC discussed Geon's interest with the Company.
At the Board of Directors' regularly scheduled meeting held on January 25,
1999, BHC reported on Geon's indication of interest, the Board of Directors
directed BHC to expand its discussions to include additional parties
potentially interested in pursuing a transaction with the Company and the
Board of Directors empowered its Executive Committee, composed of Messrs.
Arthur H. Bryant II, Chapman, Holland and Burrus, to oversee the process
relating to a potential strategic merger/sale transaction, subject ultimately
to approval of any possible transaction by the full Board of Directors.
Beginning in February 1999, BHC contacted 66 strategic and financial parties
regarding their possible interest in a potential transaction with the Company.
As a result of these contacts, the Company supplied 21 qualified potential
parties non-public information, all of which was subject to various
confidentiality and nondisclosure agreements. Based on a continued interest in
acquiring the Company and further qualification, four interested parties
submitted preliminary indications of interest and were invited to conduct
detailed due diligence, including meetings with Company management, review of
additional non-public information and tours of the Company's facilities. Such
due diligence occurred during April and early May 1999. These parties were
then asked to submit written proposals setting forth the definitive terms and
conditions of an offer to acquire all of the outstanding Shares and to provide
comments on a proposed form of merger agreement. Two parties submitted formal
qualifying proposals.
Following the receipt of written proposals, BHC advised the Executive
Committee (which had previously met 6 times by phone between January and May
1999 to discuss the solicitation process with BHC) that all qualified parties
expressing an interest in acquiring the Company had been afforded an equal
opportunity to evaluate the Company and submit a proposal. At the direction of
the Executive Committee, BHC held discussions with the two parties that
submitted proposals to ascertain, among other things, (i) the level of
additional due diligence required prior to executing a merger agreement, (ii)
what, if any, material contingencies remained prior to executing a merger
agreement, (iii) the timing necessary to resolve any remaining issues on the
merger agreement or otherwise in connection with a transaction, and (iv) the
willingness to increase the value of the proposal. Based on these discussions,
the Executive Committee approved further negotiations with Geon in an effort
to modify Geon's $11.00 per Share cash proposal to a price that would be
acceptable to the Company. On May 21, 1999, Geon indicated that, subject to
various conditions, including approvals of both Boards of Directors, it would
increase the value of its proposal to $12.25 per Share. On May 24, 1999, the
Executive Committee indicated to Geon through BHC that it would submit Geon's
proposal to the Company's entire Board of Directors, subject to the
negotiation of a definitive merger agreement. Shortly thereafter, the parties
began to negotiate the Merger Agreement and Geon conducted confirmatory due
diligence on several matters.
The Board of Directors of the Company met on June 1, 1999 and considered
Geon's proposal and the proposed Merger Agreement. At the meeting, the Board
of Directors reviewed the terms of the Merger Agreement and representatives of
BHC reviewed the transaction process. In addition, BHC provided an opinion to
the Board of Directors, based on various analyses and subsequently confirmed
in writing on June 2, 1999, that the consideration to be received by the
Company's stockholders was fair to the Company's stockholders from a financial
point of view. The Board of Directors thereupon, among other things, (i)
determined by unanimous vote that the proposed acquisition of the Company by
Geon was fair to and in the best interests of the Company and its
stockholders, (ii) authorized and approved the Merger Agreement and the Share
Tender Agreements and (iii) recommended by unanimous vote that the
stockholders of the Company accept the Offer and tender their shares pursuant
to the Offer.
On June 2, 1999, Geon and the Company executed the Merger Agreement and
Arthur H. Bryant II, Magalen O. Bryant and John C. O. Bryant entered into the
Share Tender Agreements.
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In reaching its conclusions described in paragraph (a) above, the Board of
Directors of the Company considered a number of factors, including, without
limitation, the following:
(i) the opinion of BHC that as of the date of its opinion the $12.25 per
Share in cash to be received by the holders of the Shares pursuant to the
Offer and the Merger is fair to such holders from a financial point of
view. The full text of the fairness opinion received by the Company from
BHC is attached hereto as exhibit (f). Stockholders are urged to read such
opinion in its entirety;
(ii) the presentation of BHC in connection with such opinion, as to
various financial and other considerations deemed relevant to the Board of
Directors' evaluation of the Offer and the Merger including: (A) a review
of financial and other information that was publicly available or furnished
to BHC by the Company's management; (B) a review and analysis of current
and historical market prices of the Shares; (C) a comparison of the
financial position and operating results of the Company with those of
certain publicly traded companies which BHC deemed relevant; (D) a
comparison of the proposed financial terms of the Offer and the Merger with
those of certain other mergers and acquisitions which BHC deemed relevant;
(E) a discounted cash flow analysis of the financial forecasts furnished to
BHC by the Company's management; and (F) a premiums paid analysis of
similar public company transactions completed over the past several years;
(iii) the results of the extensive transaction process undertaken by BHC
to solicit proposals from third parties to acquire the Company and, in
light of the process, the Company's belief that the Offer represented the
best means available under the circumstances to provide stockholders with
attractive value and immediate liquidity for their shares;
(iv) information with respect to the financial condition, results of
operations and business of the Company, on both a historical and
prospective basis, and current industry, economic and market conditions;
(v) the merits of the Offer relative to other strategic alternatives
available to the Company; and
(vi) the terms and conditions of the Offer and the Merger, including,
without limitation, the fact that, to the extent required by fiduciary
obligations of the Board of Directors to the stockholders under the VSCA,
but subject to certain terms and conditions including the payment of a $5
million break-up fee, the Company may terminate the Merger Agreement in
order to approve a tender offer or exchange offer for the Shares by a third
party, or another type of business combination, on terms more favorable to
the Company's stockholders than the Offer and the Merger.
The Board of Directors did not assign weights to the individual factors and
viewed their position and recommendation as being based on the totality of the
information presented to and considered by them.
Item 5. Persons Retained, Employed or to be Compensated.
BHC is acting as the Company's financial advisor in connection with the
Offer and the Merger. Pursuant to its agreement with the Company, BHC is
entitled to a transaction fee of approximately $1.9 million in cash at the
closing (less $100,000 previously paid by the Company in connection with the
Company's retention of BHC and less $250,000 to be paid by the Company in
connection with the delivery by BHC of its fairness opinion to the Board). In
addition, whether or not the Offer or the Merger is completed, the Company has
agreed to reimburse BHC periodically for its reasonable travel and out-of-
pocket expenses, including the fees and disbursements of its counsel, and to
indemnify BHC against certain expenses and liabilities incurred in connection
with its engagement.
In the ordinary course of business, BHC and its affiliates may trade the
equity securities of the Company for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. BHC or its affiliates have in the past provided investment
banking, commercial banking and financial advisory services to the Company for
which services they have received compensation.
BHC, a division of First Union Capital Markets Corp. and an affiliate of
First Union Corporation, is an investment banking firm engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated primary and secondary underwritings, private
placements and valuations for corporate and other purposes. The Company
selected BHC as its financial advisor based upon its experience, ability and
reputation with respect to mergers and acquisitions.
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Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to shareholders of the Company concerning the
Offer.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) To the best of the Company's knowledge, during the past sixty days no
transaction in the Shares has been effected by the Company or any subsidiary
or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company except that, in connection
with the Company's Stock Purchase Plan, the Company purchased for its
employees on the open market 1,200 Shares.
(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 (other than
Shares issuable upon exercise of Options and Shares, if any, which if tendered
could cause such persons to incur liability under the provisions of Section
16(b) of the Exchange Act).
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as described under Item 3, no negotiation is being undertaken or
is under way by the Company 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 under Items 3 and 4, 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.
(a) Dissenter's Rights.
No dissenter's rights are available in connection with the Offer. Holders of
Shares may be entitled to dissenter's rights in connection with the Merger if,
at the record date with respect to the meeting at which the Merger Agreement
and the Merger will be acted upon, certain requirements are satisfied.
Section 13.1-730 of the VSCA provides that no dissenter's rights are
available for the shares of any class or series of stock which, at the record
date fixed to determine the shareholders entitled to receive notice of and to
vote at the meeting of shareholders to act upon the agreement or plan of
merger, were either (i) listed on a national securities exchange or on the
National Association of Securities Dealers Automated Quotation System or (ii)
held of record by at least 2,000 shareholders, unless, among other things, in
either case (i) the holders of such class or series of shares are required by
the terms of such agreement or plan to accept for such shares anything except
cash or (ii) the transaction to be voted on is an "affiliated transaction"
that has not been approved by a majority of "disinterested directors." See
paragraph (b) below.
If the conditions of Section 13.1-730 of the VSCA are not met and if the
Merger or a similar business combination is consummated, the holders of Shares
not purchased pursuant to the Offer would have certain rights to dissent and
demand to be paid the "fair value" of their Shares under the VSCA. Under the
VSCA, dissenting shareholders who comply with applicable statutory procedures
would be entitled to payment of the "fair value" of the Shares as to which
dissenter's rights are properly claimed as of the time immediately before the
effectuation of the Merger (excluding any appreciation or depreciation in
anticipation of the Merger, unless such exclusion would be inequitable). In
the first instance, the "fair value" estimation is made by the corporation.
Dissatisfied dissenters may then notify the corporation of their own "fair
value" estimation. If the corporation and the dissatisfied shareholder cannot
settle on the amount owed, the shareholder will ultimately be entitled to a
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judicial determination of "fair value." Any such judicial determination of
"fair value" of the Shares could be based upon considerations other than or in
addition to the price paid in the Offer and the market value of the Shares,
including asset values, the investment value of the Shares and any other
valuation considerations generally accepted in the investment community. The
"fair value" of the Shares so determined could be more or less than the price
per Share to be paid pursuant to the Offer and the Merger.
The foregoing summary of the rights of dissenting shareholders does not
purport to be complete. The exercise and preservation of dissenter's rights
require strict adherence to the applicable provisions of the VSCA.
(b) Certain Corporate Governance Provisions of the VSCA.
The Company is subject to the "affiliated transactions" and "control share
acquisitions" statutes of the VSCA, which are summarized below.
The "affiliated transactions" statute restricts certain transactions
("Affiliated Transactions") between a Virginia corporation having more than
300 shareholders of record and any person (an "Interested Shareholder") who
beneficially owns more than 10% of any class of the corporation's voting
securities. These restrictions, which are described below, do not apply to an
Affiliated Transaction with an Interested Shareholder who has been such
continuously since the date the corporation first had 300 shareholders of
record or whose acquisition of shares making such person an Interested
Shareholder was previously approved by a majority of the corporation's
Disinterested Directors. "Disinterested Director" means, with respect to a
particular Interested Shareholder, a member of the corporation's board of
directors who was (i) a member on the date on which an Interested Shareholder
became an Interested Shareholder or (ii) recommended for election by, or was
elected to fill a vacancy and received the affirmative vote of, a majority of
the Disinterested Directors then on the Board of Directors. Affiliated
Transactions include mergers, share exchanges, material dispositions of
corporate assets not in the ordinary course of business, any dissolution of
the corporation proposed by or on behalf of an Interested Shareholder, or any
reclassification, including reverse stock splits, recapitalization or merger
of the corporation with its subsidiaries, which increases the percentage of
voting shares owned beneficially by an Interested Shareholder by more than 5%.
The "affiliated transactions" statute prohibits a corporation from engaging in
an Affiliated Transaction with an Interested Shareholder for a period of three
years after the Interested Shareholder became such unless the transaction is
approved by the affirmative vote of a majority of the Disinterested Directors
and by the affirmative vote of the holders of two-thirds of the voting shares
other than those shares beneficially owned by the Interested Shareholder.
Following the three-year period, in addition to any other vote required by law
or by the corporation's articles of incorporation, an Affiliated Transaction
must be approved either by a majority of the Disinterested Directors or by the
shareholder vote described in the preceding sentence unless the transaction
satisfies the fair-price or certain other provisions of the statute. These
fair price provisions require, in general, that the consideration to be
received by shareholders in the Affiliated Transaction (a) be in cash or in
the form of consideration used by the Interested Shareholder to acquire the
largest number of its shares and (b) not be less, on a per share basis, than
an amount determined in the manner specified in the statute by reference to
the highest price paid by the Interested Shareholder for shares it acquired
and the fair market value of the shares on specified dates.
The "control share acquisitions" statute provides that shares of a Virginia
corporation having 300 or more shareholders of record which are acquired in a
"Control Share Acquisition" have no voting rights unless such rights are
granted by a shareholders' resolution approved by the holders of a majority of
the votes entitled to be cast on the election of directors by persons other
than the acquiring person or any officer or employee-director of the
corporation. A "Control Share Acquisition" is an acquisition of voting shares
which, when added to all other voting shares beneficially owned by the
acquiring person, would cause such person's voting strength with respect to
the election of directors to meet or exceed any of the following thresholds:
(i) one-fifth, (ii) one-third or (iii) a majority. An acquiring person is
entitled, before or after a Control Share Acquisition, to file a disclosure
statement with the corporation and demand a special meeting of shareholders to
be called for the purpose of considering whether to grant voting rights for
the shares acquired or proposed to be acquired. If authorized in
14
<PAGE>
the corporation's articles of incorporation or bylaws before a Control Share
Acquisition has occurred, the corporation may, during specified periods,
redeem the shares so acquired if no disclosure statement is filed or if the
shareholders have failed to grant voting rights to such shares. In the event
full voting rights are granted to an acquiring person who then has majority
voting power, those shareholders who did not vote in favor of such grant are
entitled to dissent and demand payment of the fair value of their shares from
the corporation. The control share acquisitions statute does not apply to an
actual or proposed Control Share Acquisition if the corporation's articles of
incorporation or bylaws are amended, within the time limits specified in the
statute, to so provide.
The Board of Directors of the Company has taken all action necessary to
exempt the Company from coverage under these statutes with respect to the
Offer, the Merger, the Share Tender Agreements and the transactions related
thereto.
(c) Antitrust.
Under the HSR Act, and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of Shares by the Purchaser pursuant to the Offer is
subject to such requirements.
Pursuant to the requirements of the HSR Act, Geon and the Company have filed
the required Notification and Report Forms (the "Forms") with the Antitrust
Division and the FTC on June 3, 1999 and June 4, 1999, respectively. The
statutory waiting period applicable to the purchase of Shares pursuant to the
Offer is to expire at 11:59 P.M., Eastern time, on June 18, 1999. However,
prior to such date, the Antitrust Division or the FTC may extend the waiting
periods by requesting additional information or documentary material relevant
to the acquisition. If such a request is made, the waiting period will be
extended until 11:59 P.M., Eastern time, on the tenth day after substantial
compliance by the Purchaser with such request. Thereafter, such waiting
periods can be extended only by court order. A request is being made pursuant
to the HSR Act for early termination of the applicable waiting period. There
can be no assurance, however, that the waiting period will be terminated
early.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC
could, notwithstanding termination of the waiting period, take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of the Purchaser or the Company. Private parties may also
bring legal actions under the antitrust laws. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
(a) The Company's Proxy Statement dated March 26, 1999
(b) Agreement and Plan of Merger dated as of June 2, 1999
(c) Confidentiality Agreement dated December 16, 1998
(d)(1) Share Tender Agreement with Arthur H. Bryant II dated June 2, 1999
(d)(2) Share Tender Agreement with Magalen O. Bryant dated June 2, 1999
(d)(3) Share Tender Agreement with John C.O. Bryant dated June 2, 1999
(e) Press Release dated June 2, 1999, with respect to Merger Agreement and
Offer
(f) Opinion of Bowles Hollowell Conner, a Division of First Union Capital
Markets Corp. dated June 2, 1999*
- --------
* Included in copies mailed to stockholders
15
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
O'Sullivan Corporation
/s/ John S. Campbell
By: _________________________________
Name: John S. Campbell
Title: President and Chief
Executive Officer
Date: June 8, 1999
16
<PAGE>
SCHEDULE I
O'SULLIVAN CORPORATION
1944 Valley Avenue
Winchester, Virginia 22601
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This information statement is being mailed on or about June 8, 1999 as part
of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to holders of the Common Stock, par value $1.00 per share ("Common
Stock"), of O'Sullivan Corporation (the "Company"). Capitalized terms used and
not otherwise defined herein shall have the respective meanings set forth in
the Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by TGC Acquisition
Corporation (the "Purchaser"), a wholly-owned subsidiary of The Geon Company
("Geon"), to a majority of the seats on the Board of Directors of the Company.
Pursuant to the Agreement and Plan of Merger, dated as of June 2, 1999,
among the Company, Geon and the Purchaser (the "Merger Agreement"), on June 8,
1999, the Purchaser commenced the Offer. The Offer is scheduled to expire at
12:00 midnight (Eastern Daylight Savings Time) on July 7, 1999, unless
extended in accordance with applicable law and the provisions of the Merger
Agreement.
The information contained in this Information Statement (including
information incorporated by reference) concerning Geon and the Purchaser and
the Geon Designees (as defined below) has been furnished to the Company by
Geon and the Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
General
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote. As of June 2, 1999 there
were 15,594,687 shares of Common Stock outstanding and 301,242 shares of
Common Stock reserved for issuance upon the exercise of options outstanding.
The Board of Directors of the Company currently consists of 11 members and
there are currently no vacancies on the Board of Directors. Each Director
serves until the next annual meeting or until his or her successor is duly
elected and qualified or until his or her earlier death, resignation or
removal.
Geon Designees
The Merger Agreement provides that, promptly upon the acceptance for payment
and payment by the Purchaser, in accordance with the Offer of at least 70% of
the outstanding Shares (on a fully diluted basis), the Purchaser will be
entitled to designate such number of directors (the "Geon Designees") on the
Board of Directors of the Company, rounded up to the next whole number, as
will give the Purchaser representation on such Board of Directors equal to at
least that number of directors which equals the product of the total number of
directors on the Board of Directors (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
Shares so accepted for payment and paid for or otherwise acquired or owned by
the Purchaser or Geon bears to the number of Shares outstanding and the
Company and its Board of Directors shall, at such time, take any and all such
action needed to cause the Purchaser's designees to be appointed to the
Company's Board of Directors (including to cause directors to resign). At all
times before the effective time of the merger, Geon, the Purchaser and the
Company shall use their reasonable efforts to ensure that at least two members
of the Company's Board of Directors, as constituted on the date of the Merger
<PAGE>
Agreement, remain on the Company's Board of Directors, except to the extent
that no such individuals or their appointees agree to serve as directors (the
"Continuing Directors"). In the event that one or more Continuing Directors
resign from the Company's Board of Directors, Geon, the Purchaser and the
Company shall permit the remaining, or in the case of the resignation of all
Continuing Directors, the resigning, Continuing Director or Continuing
Directors to appoint his or their successors in his or their reasonable
discretion. In addition, the Company will, if requested by Geon or the
Purchaser, use its reasonable efforts to cause persons designated by the
Purchaser to constitute the same percentage of each committee of the Company's
Board of Directors, each board of directors of each subsidiary of the Company
and each committee of each such board (in each case to the extent of the
Company's ability to elect such persons). In furtherance of the foregoing, the
Company has agreed to increase the size of the Company's Board of Directors,
or use its reasonable efforts to secure resignations of directors, or both, to
permit the Geon Designees to be elected to the Company's Board of Directors.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You
are not, however, required to take any action.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 3, 1999, certain information with
respect to the beneficial ownership of Common Stock (the only class of the
Company's securities entitled to voting rights) by each director of the
Company as well as certain information concerning their business experience
and other matters.
<TABLE>
<CAPTION>
Name, Age, Company Positions,
Principal Occupation and Common Stock
Directorships in Public Director Beneficially Owned as of Percent of
Corporations Since June 3, 1999 Class
- ----------------------------- -------- ------------------------ ----------
<S> <C> <C> <C>
C. Hugh Bloom, Jr. 66............ 1990 18,403(3) *
Easton, Pennsylvania
Retired, Vice President, C. F.
Martin & Co., Inc.
Arthur H. Bryant II 56........... 1967 2,410,084(1)(2)(3) 15.5%
Winchester, Virginia
Chairman of the Board; Chairman
and Chief Executive Officer of
the Company, 1986-1995
John C.O. Bryant 32.............. 1999 823,549(1)(3) 5.3%
Nokesville, Virginia
President and Chief Executive
Officer, Atlantic Computing
Services
Robert L. Burrus, Jr. 64......... 1995 15,000(3) *
Richmond, Virginia
Partner, McGuire, Woods, Battle
& Boothe LLP, a law firm
retained by the Company for a
number of years; Director, CSX
Corporation, Concepts Direct,
Inc., Heilig-Meyers Company, S&K
Famous Brands, Inc. and
Smithfield Foods, Inc.
John S. Campbell 48.............. 1998 76,953(3) *
Winchester, Virginia
President and Chief Executive
Officer of the Company, 1998-
Present; Vice President, 1986-
1998
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Company Positions,
Principal Occupation and Common Stock
Directorships in Public Director Beneficially Owned as of Percent of
Corporations Since June 3, 1999 Class
- ----------------------------- -------- ------------------------ ----------
<S> <C> <C> <C>
Max C. Chapman, Jr. 55........... 1989 142,002(1)(3) *
Scarborough, New York
Retired Chairman, Nomura Holding
America Inc.
James T. Holland 59.............. 1984 116,015(1)(3) *
Winchester, Virginia
President and Chief Executive
Officer of the Company, 1995-
1998; President and Chief
Operating Officer, 1986-1995;
Executive Vice President, 1984-
1986; Vice President and
Treasurer, 1979-1984
R. Michael McCullough 60......... 1995 14,000(3) *
McLean, Virginia
Retired Chairman and CEO, Booz
Allen & Hamilton; Director, Host
Marriott Services Corp.,
Interstate Hotel Corporation,
Charles E. Smith REIT and
Watson-Wyatt Worldwide Corp.
Stephen P. Munn 56............... 1995 14,000(3) *
Syracuse, New York
Chairman, Chief Executive
Officer and Director, Carlisle
Companies Incorporated; Trustee,
Prudential Securities Mutual
Funds
Timothy J. Sandker 51............ 1997 12,000(3) *
Madison, Indiana
President, Rotary Lift Division
of Dover Corporation
Leighton W. Smith, Jr. 59........ 1997 12,000(3) *
Fairfax, Virginia
Admiral, United States Navy,
Retired, Director, Vanguard
Airlines Inc.
All Executive Officers and
Directors as a group
(15 persons).................... 3,718,167(1)(2)(3) 23.8%
</TABLE>
In addition to Mr. Holland and Mr. J.S. Campbell, the remaining executive
officers named in the summary compensation table beneficially owned the
following shares of Common Stock at June 3, 1999:
<TABLE>
<CAPTION>
Common Stock Beneficially Percent of
Name, Title and Age Owned as of June 3, 1999 Class
- ------------------- ------------------------- ----------
<S> <C> <C>
John P. Crowther 49........................ 14,059(1) *
Vice President
C. Bryant Nickerson 52..................... 22,510(1)(3) *
Secretary, Treasurer
and Chief Financial
Officer
Ewen A. Campbell 51........................ 11,616(3) *
Vice President
James L. Tremoulis 45...................... 15,976(3) *
Vice President
</TABLE>
- --------
* Less than 1%
3
<PAGE>
(1) Includes the following shares held by the spouses, children or associates
of the following directors and officers, which shares may be deemed held
subject to shared voting and investment powers: Arthur H. Bryant II,
16,466 shares; Max C. Chapman, Jr., 5,000 shares; James T. Holland, 18,119
shares; John C.O. Bryant, 2,810 shares; John P. Crowther, 1,000 shares;
and C. Bryant Nickerson, 100 shares.
(2) Includes 1,129,860 shares held by The Bryant Foundation, of which Mr.
Bryant is President and a Trustee.
(3) Includes the following shares that may be acquired under stock options
which are exercisable on June 3, 1999 or within 60 days thereafter: John
S. Campbell, 76,802 shares; John P. Crowther, 2,310 shares; C. Bryant
Nickerson, 21,560 shares; Ewen A. Campbell, 11,116 shares; James L.
Tremoulis, 15,700 shares and all executive officers and directors as a
group, 247,488 shares. Also includes for each director (other than Mr.
Campbell) the following shares which may be acquired under currently
exercisable stock options granted under the Company's 1995 Outside
Directors Stock Option Plan: Messrs. Bloom, A.H. Bryant, Burrus, Chapman,
McCullough and Munn, 14,000 shares each; Messrs. Smith and Sandker, 12,000
shares each and Messrs. Holland and John C. O. Bryant, 11,000 shares each.
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock by any person known to the Company to
be the beneficial owner of more than five percent of such stock as of June 3,
1999 or such earlier date as may be referred to in any footnote to the table.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned of Class
- ------------------- ------------------ --------
<S> <C> <C>
Arthur H. Bryant II(1).............................. 2,410,084(2) 15.5%
P.O. Box 2929
Winchester, VA 22604
Magalen O. Bryant(3)................................ 940,148 6.0%
Locust Hill Farm
Middleburg, VA 22117
Tweedy Browne Co. L.L.C.(4)......................... 905,813 5.8%
52 Vanderbilt Avenue
New York, New York 10017
Dimension Fund Advisors, Inc.(5).................... 853,278 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
John C.O. Bryant(1)................................. 823,549(6) 5.3%
P. O. Box 247
Middleburg, VA 20118-0247
Hansjakob Muller(7)................................. 796,100 5.1%
Holderlinweg 40
D-61350
Bad Homburg, Germany
</TABLE>
- --------
(1) To the best knowledge of the Company, and except as described in the
footnotes to the table of ownership of Common Stock by directors set forth
below, Mr. Arthur H. Bryant II and Mr. John C.O. Bryant have sole voting
and investment powers with respect to shares shown as owned by them. The
information in this table relating to beneficial ownership of shares of
Common Stock by Mr. Arthur H. Bryant II and Mr. John C.O. Bryant is based
solely on a review of filings by them with the Securities and Exchange
Commission (the "Commission").
(2) Includes 14,000 shares that may be acquired under stock options which are
exercisable on June 3, 1999 or within 60 days thereafter.
(3) To the best knowledge of the Company, Mrs. Bryant has sole voting and
investment powers with respect to 231,287 shares of Common Stock and
shared voting and investment powers with respect to 708,861 shares of
Common Stock (which shares are held in a trust of which Mrs. Bryant is co-
trustee). This information is
4
<PAGE>
based on a review of filings by Mrs. Bryant with the Commission and on
certain other information provided by Mrs. Bryant.
(4) Tweedy Browne Co. L.L.C., a registered investment advisor, is deemed to
have beneficial ownership of the shares of Common Stock set forth above,
all of which shares are held in the accounts of various customers of
Tweedy Browne Co. L.L.C., with respect to which accounts Tweedy Browne Co.
L.L.C. has investment discretion (the "TBC Accounts"), and with respect to
certain of which it has obtained sole or shared voting power. The Company
has also been advised that Tweedy Browne Co. L.L.C. disclaims beneficial
ownership of the shares of Common Stock held in the TBC Accounts. The
foregoing is based on a review of a filing with the Commission dated as of
March 31, 1999.
(5) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership as of March 31, 1999 of
the shares of Common Stock set forth above, all of which shares are held
in portfolios of DFA Investment Dimensions Group Inc., a registered open-
end investment company, in series of the DFA Investment Trust Company, a
Delaware business trust, or by the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit plans,
with respect to all of which Dimensional serves as investment manager. The
Company has also been advised that Dimensional disclaims beneficial
ownership of all such shares. The foregoing is based on a review of a
filing with the Commission and on certain other information provided by
Dimensional to the Company.
(6) Includes 11,000 shares that may be acquired under stock options which are
exercisable on June 3, 1999 or within 60 days thereafter.
(7) To the best knowledge of the Company, Mr. Muller has sole voting and
investment powers with respect to shares shown as owned by him. The
information is based solely on a review of filings with the Commission.
On June 3, 1999, there were approximately 1,200 shareholders of record of
the Company's Common Stock.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Company's directors, see "Beneficial
Ownership of Certain Beneficial Owners and Management." Except for Arthur H.
Bryant II and John C.O. Bryant who are half brothers, there are no other
family relationships among the directors or among the directors and the
executive officers.
The names, ages and positions of the Company's executive officers are listed
below. All executive officers are elected by the Board of Directors for a one
year term. There are no family relationships among officers or any other
arrangement or understanding between any executive officer and any other
person pursuant to which the officer was elected.
<TABLE>
<CAPTION>
Name Age Office Officer Since
---- --- ------ -------------
<S> <C> <C> <C>
John S. Campbell........ 48 President and Chief Executive Officer 1986
C. Bryant Nickerson..... 52 Chief Financial Officer, Secretary and Treasurer 1986
Ewen A. Campbell........ 51 Vice President 1993
John P. Crowther........ 48 Vice President 1998
James L. Tremoulis...... 45 Vice President 1986
</TABLE>
Mr. John S. Campbell was appointed as President and Chief Executive Officer
in August, 1998 succeeding James T. Holland. Mr. Campbell previously served as
a Vice President beginning in 1986. He has been employed by the Company since
1973 and has been involved in both the sales and manufacturing operations of
the calendered plastics products business of the Company.
Mr. Nickerson has been employed by the Company since 1973 serving in various
capacities within the corporate financial area. He served as Controller and
Treasurer and Chief Accounting Officer before being elected as Secretary,
Treasurer and Chief Financial Officer in 1995.
5
<PAGE>
Mr. Bauserman has been employed by the Company since 1968 and has served as
a Vice President since 1987. Mr. Bauserman has been employed in various
capacities within the data processing and management information services
areas during his tenure with the Company.
Mr. Ewen A. Campbell has an extensive background in chemistry and plastics
compounding. He has been employed by the Company since 1991 in the areas of
compounding and research and development activities. He has served as a Vice
President since 1993. Mr. Ewen Campbell and Mr. John Campbell are not related.
Mr. Crowther has been employed by the Company since 1995 as a sales
representative to automotive-related customers of the Company. Prior to that
time he was employed by a business that served as a manufacturer's
representative to the automotive industry for the Company. He was elected as a
Vice President in January, 1998.
Mr. Tremoulis has served in various capacities in the sales area for
calendered plastics products since his employment by the Company in 1980. He
was elected as a Vice President in 1986.
Mr. Westfall has been employed by the Company since 1965. He was a chemist,
the Quality Control Director and a Plant Manager for the Company prior to
being elected as a Vice President of Research and Development in 1979.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors, certain
officers, and any persons holding more than ten percent of the Company's
Common Stock are required to report their ownership of the Common Stock and
any changes in that ownership to the Commission. Specific due dates for these
reports are established by the Commission, and the Company is required to
report in this Information Statement any failure to file such reports on a
timely basis for the last completed fiscal year. Mr. John C.O. Bryant failed
to timely file a Form 3 with the Commission following his election to the
Board of Directors. He filed a Form 3 thirty-one days late. There were no
other known failures of any officer, director or greater than ten percent
shareholder to file in a timely manner the required reports. In making this
statement, the Company has relied on the written representations of its
directors, such officers and greater than ten percent shareholders, and on
copies of the reports that they have filed with the Commission.
COMMITTEES OF THE BOARD OF DIRECTORS
AND MEETING ATTENDANCE
During 1998, four regular quarterly Board of Directors meetings were held.
Each of the incumbent directors attended at least 75% of the meetings of the
Board of Directors and any of the committees on which they served.
The Board of Directors has an Audit Committee which consists of Messrs.
Burrus, McCullough, Bloom, Sandker and Smith. All members of the Audit
Committee are outside directors. Mr. Burrus serves as Chairman of the Audit
Committee. The Committee met two times during 1998. The principal
responsibilities of the Audit Committee are to direct the activity of the
external audit functions, recommend the selection of external auditors to the
Board of Directors, provide for the continuing review of the underlying
internal controls of the Company, and review published financial reports of
the Company.
There is a Compensation and Stock Option Committee of the Board of Directors
which consisted during 1998 of Messrs. A.H. Bryant, Chapman, McCullough and
Munn. No member of the Compensation and Stock Option Committee is an employee
of the Company. Mr. McCullough serves as Chairman of this Committee. The
Committee met three times during 1998. The Committee is responsible for
reviewing and making recommendations to the Board of Directors with respect to
compensation of executive officers and directors. Mr. Holland was appointed to
the Committee in January of 1999. The Stock Option Plan Subcommittee of the
6
<PAGE>
Committee, which consists of Messrs. Chapman and Munn, administers the 1995
Stock Option Plan and determines the key employees who should receive awards
under the 1995 Stock Option Plan and the number of shares to be granted under
such awards.
There is a Nominating Committee of the Board of Directors which consists of
Messrs. A.H. Bryant, Chapman and Holland. No member of the Nominating
Committee is an employee of the Company, except that Mr. Holland served as
President and Chief Executive Officer of the Company until July 31, 1998. Mr.
Chapman serves as Chairman of this Committee. The Committee, if so requested
by the Board of Directors, recommends to the Board of Directors candidates for
election as directors. The Committee did not meet in 1998. The Nominating
Committee will consider nominations from stockholders. Any stockholder who
wishes to make a nomination for director must advise the Secretary of the
Company in writing, mailed no later than ten days before the date of the
stockholders' meeting, of the name, address and business background of the
nominee.
COMPENSATION OF DIRECTORS
A fee of $2,500 per quarter is currently paid to each outside director as a
retainer. An additional $2,500 attendance fee is paid to each outside director
for attendance at regularly scheduled meetings of the Board of Directors,
which are held four times a year. Non-employee directors who are committee
members are paid $500 for each committee meeting held on the date of a
regularly scheduled Board of Directors meeting and $750 for each meeting held
on a date other than the date of a regularly scheduled Board of Directors
meeting. Expenses incurred in connection with attending meetings are normally
borne by the directors. Each non-employee director automatically receives in
the first year that he becomes a non-employee director an option to purchase
10,000 shares of Common Stock of the Company under the 1995 Outside Directors
Stock Option Plan. On every April 25th thereafter, each non-employee director
receives an option to purchase an additional 1,000 shares of the Common Stock.
The price of each option is equal to the fair market value of the Common Stock
on the date the option is granted. All options awarded under the plan are
nonstatutory stock options.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain information concerning annual and long-
term compensation paid to or accrued on behalf of the President and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers") for the years 1998, 1997, and 1996.
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
----------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary($) Bonus($) Options(#) Compensation($)
------------------ ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
John S. Campbell,........ 1998 $ 255,367 $44,707 50,000 $ 16,856(1)
President and Chief
Executive Officer 1997 190,100 13,178 7,521 14,603
1996 190,100 -- 4,000 12,980
James T. Holland,........ 1998 $ 229,894 $ -- -- $ 25,043(2)
Retired President and
Chief Executive Officer 1997 345,390 -- 13,636 1,949,453
1996 345,390 -- 5,000 87,197
John P. Crowther,........ 1998 $ 194,600 $25,000 -- $ 16,261(3)
Vice President 1997 181,257 40,000 2,107 14,200
1996 175,648 37,200 -- 13,349
C. Bryant Nickerson,..... 1998 $ 160,426 $25,000 -- $ 17,006(4)
Secretary, Treasurer and 1997 153,100 -- 5,922 14,442
Chief Financial
Officer 1996 153,100 -- 3,000 14,062
Ewen A. Campbell,........ 1998 $ 149,850 $25,000 -- $ 15,263(5)
Vice President 1997 143,100 15,000 5,579 12,756
1996 138,100 -- 2,000 12,980
James L. Tremoulis,...... 1998 $ 143,100 $ 9,053 -- $ 13,034(6)
Vice President 1997 143,100 -- 5,579 13,101
1996 143,100 -- 2,000 12,112
</TABLE>
- --------
(1) This amount consists of Company contributions under the Retirement Savings
Plan ($7,998) and amounts accrued under the Company's deferred
compensation program ($8,858).
(2) This amount consists of Company contributions under the Retirement Savings
Plan ($6,777) and the portion of the cash surrender value of a split
dollar life insurance policy that was paid to Mr. Holland's designated
beneficiary under the policy when the policy was terminated ($18,266).
(3) This amount consists of Company contributions under the Retirement Savings
Plan ($7,995) and amounts accrued under the Company's deferred
compensation program ($8,266).
(4) This amount consists of Company contributions under the Retirement Savings
Plan ($7,061) and amounts accrued under the Company's deferred
compensation program ($9,945).
(5) This amount consists of Company contributions under the Retirement Savings
Plan ($6,957) and amounts accrued under the Company's deferred
compensation program ($8,306).
(6) This amount consists of Company contributions under the Retirement Savings
Plan ($6,222) and amounts accrued under the Company's deferred
compensation program ($6,812).
Deferred Compensation Program
The Company maintains a deferred compensation program for key employees of
the Company. Under this program, the Company has agreed to pay to each covered
employee a certain sum annually for fifteen years upon his retirement or, in
the event of his death, to his designated beneficiary. The annual amount
payable to each of the Named Executive Officers upon retirement at age 65 is
as follows: Mr. J.S. Campbell, $60,000, Mr. Holland,
8
<PAGE>
$150,000, Mr. Crowther, $40,000, Mr. Nickerson, $50,000, Mr. E.A. Campbell
$40,000 and Mr. Tremoulis, $46,000. A benefit is also paid if the employee
terminates employment (other than by the executive's voluntary action or
discharge for cause) after at least 10 years of employment with the Company.
The program provides that benefits in specified amounts may be paid to
executives who retire after reaching the age of 50 and completing at least 20
years of service with the Company. In each event, the amount of the benefit
depends on the employee's years of service with the Company (with the full
benefit paid only if the employee has completed 25 years of service). For
purposes of these provisions, Mr. E. A. Campbell will be deemed to have
completed 10 years of service with the Company until his actual completed
years of service with the Company exceeds 10 years.
The Company has purchased individual life insurance contracts with respect
to each employee covered by this program. The Company is the owner and
beneficiary of these insurance contracts. The employees are general creditors
of the Company with respect to these benefits.
Retirement and Employment Continuity Agreements
Retirement Agreement
The Company and Mr. Holland entered into a retirement agreement in 1997.
Under the terms of the agreement, Mr. Holland retired as an officer and
employee of the Company, and as director, officer and employee of all
affiliates of the Company, on July 31, 1998. He continues to serve as a
director of the Company. The Company has purchased a commercial annuity in the
principal amount of $974,724, which provides for 180 equal monthly payments to
the Company. The Company has begun to pay Mr. Holland 180 monthly payments,
each equal in amount to the amount of the monthly annuity payments that the
Company receives under the commercial annuity. The annuity is owned
exclusively by the Company. Mr. Holland has no claims in or rights against the
annuity or the payments made from the annuity.
Mr. Holland was treated upon his retirement as having completed 25 years of
service with the Company for purposes of the Company's deferred compensation
program, and is entitled to receive the full benefit payable under the
deferred compensation program. The Company made a lump sum payment to Mr.
Holland of his accrued and unused vacation pay when he retired, and paid him a
$25,000 retainer to be available to provide consulting services to the
Company. Mr. Holland is released under the retirement agreement for any claims
relating to his employment.
Employment Continuity Agreements
The Company has entered into employment continuity agreements with key
management executives, including Messrs. J.S. Campbell, Crowther, Nickerson,
E.A. Campbell and Tremoulis, which provide certain compensation and benefits
in the event of a change of control. Each agreement is effective for three
years and is automatically extended for an additional three-year period,
unless the Company notifies the executive that the agreement will not be
extended. Mr. Holland's employment continuity agreement was terminated when he
entered into the retirement agreement described above.
The agreements provide that, in the event of a change of control of the
Company, each executive will continue to be employed by the Company for a one-
year period following the change of control and will continue to receive a
salary and annual bonus at least equal to twelve times the highest monthly
salary and bonus that were paid or are payable to the executive for the
twelve-month period immediately preceding the change of control. The executive
will also be entitled during this one-year period to employee benefits, fringe
benefits, expense reimbursements, vacation, and office support that are at
least as favorable as were provided to the executive during the 90-day period
immediately preceding the change of control. If, during the one-year
employment period following the change of control (the "Employment Period"),
the Company terminates the executive's employment without cause or the
executive voluntarily terminates employment "for good reason", the Company
will pay to the executive a lump sum cash amount equal to the sum of the
following amounts: (i) any salary, elective nonqualified deferred
compensation, and accrued vacation that have not yet been paid to the
executive, (ii) the largest annual salary paid or payable to the executive for
the Employment Period as annualized,
9
<PAGE>
and (iii) the greater of the largest bonus paid or payable to the executive
for the Employment Period (as annualized) or the bonus paid to the executive
for the twelve-month period immediately preceding the change of control. In
addition, the Company will continue the executive's automobile allowance for
twelve months following his termination of employment. An executive shall be
deemed to have terminated employment "for good reason" if he is assigned
duties inconsistent with his position, authority or responsibilities, the
Company fails to provide him with the salary, bonus, benefits, support staff
and vacation to which he is entitled during the Employment Period, he is
assigned to an office or location that is located more than 35 miles from the
office where he was assigned at the time of the change of control, or the
Company attempts to terminate his employment other than as permitted under the
agreement or fails to require a successor to assume the agreement.
If the executive's employment is terminated on account of his disability or
death, or he voluntarily terminates employment other than "for good reason"
during the Employment Period, the executive (or his legal representative) will
be paid any salary which has not yet been paid, any elective nonqualified
deferred compensation and accrued vacation that has not yet been paid, and a
pro-rated bonus. In the event the executive is terminated for cause during the
Employment Period, he will be paid any base salary that has not yet been paid
and any compensation previously deferred by the executive. If the executive
continues in employment with the Company through the last day of the
Employment Period, the executive will receive a lump sum payment equal to the
largest annual salary (as annualized) that was paid or payable to the
executive during the Employment Period.
A change of control is deemed to have occured under the agreement if (i) any
individual, entity or group acquires, other than from the Company, 20% or more
of the outstanding shares of common stock of the Company or the combined
voting power of the Company's voting securities (subject to certain
exceptions), (ii) the individuals who constitute the Board as of the date of
the agreement cease to constitute at least a majority of the Board, other than
as a result of an election of a director by the stockholders, whose election
or nomination for election was approved by a majority of the members of the
Board (unless in connection with an actual or threatened election contest),
(iii) the Company's stockholders approve a reorganization, merger, share
exchange, or consolidation in which all or substantially all of the
individuals or entities who were stockholders immediately prior to such
transaction cease to own (directly or indirectly) more than 60% of the
outstanding shares of common stock or the combined voting power of the voting
securities of the corporation resulting from such transaction in substantially
the same proportion as their ownership in the Company before the transaction,
or (iv) a complete liquidation of the Company, or a sale or disposition of all
or substantially all of the assets of the Company occurs (other than to a
corporation of which more than 60% of the outstanding shares of common stock
and the combined voting power following such sale or disposition is owned by
all or substantially all of the stockholders of the outstanding shares of
common stock or combined voting power of the Company before the sale in
substantially the same proportion as their ownership in the Company
immediately before the sale or disposition).
Retirement Savings Plan
The Company maintains a Retirement Savings Plan (the "Plan") that covers all
employees of the Company and its subsidiaries who are not covered under a
collective bargaining agreement and who satisfy certain minimum age and
service requirements. The Plan permits participants to make pre-tax
contributions of a portion of their annual compensation pursuant to the
provisions of Section 401(k) of the Internal Revenue Code. The Company may, in
its discretion, make a matching contribution for those participants who make
pre-tax contributions. Such matching contributions may equal up to 100% of a
participant's pre-tax contributions, but may not exceed 2% of each
participant's compensation for the year. The Company may also make, in its
discretion, a contribution equal to 3% of a participant's compensation for the
year, without regard to whether the participant made a contribution to the
Plan. The Plan permits participants to make after-tax contributions of a
portion of their annual compensation.
During 1998, total Company contributions to the Plan for eligible employees
consisted of a contribution of 3% of each eligible participant's annual
compensation, plus a matching contribution on each participant's pre-tax or
after-tax contributions of up to 2% of the participant's annual compensation.
10
<PAGE>
Stock Option Plans
The Company maintains a 1995 Stock Option Plan. The following tables provide
information with respect to stock options that were granted to the Named
Executive Officers under the 1995 Stock Option Plan during 1998. No stock
appreciation rights ("SARS") were granted to the Named Executive Officers
during 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants For Option Term (2)
----------------------------------------------------------- -----------------------
Percent of
Number of Total Options
Securities Granted To
Underlying Employees in Exercise Price Expiration
Name Options Granted (#) Fiscal Year ($/Share) Date 5%$ 10%$
---- ------------------- ------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John S. Campbell........ 50,000(1) 100% 7.785 10/26/08 641,377 1,021,286
James T. Holland........ -- -- -- -- -- --
John P. Crowther........ -- -- -- -- -- --
C. Bryant Nickerson..... -- -- -- -- -- --
Ewen A. Campbell........ -- -- -- -- -- --
James L. Tremoulis...... -- -- -- -- -- --
</TABLE>
- --------
(1) The option granted to Mr. Campbell became fully exercisable as of October
27, 1998. The option will cease to be exercisable upon the earlier of (i)
the date on which the option holder terminates employment for any reason
other than death or disability, (ii) one year from his termination of
employment on account of disability, (iii) three months from termination
of his employment on account of death, or (iv) October 26, 2008. The
option is not transferable by the option holder other than by will or by
the laws of descent and distribution.
(2) The amounts disclosed as the potential realizable value are the result of
calculations at the 5% and 10% assumed rates of appreciation for the full
ten year term of the option, as permitted by the Commission. These amounts
are not intended to forecast potential future appreciation of the price of
the Common Stock.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) At FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable (3)
---- ------------------------- -----------------------------
<S> <C> <C>
John S. Campbell........ 79,302 / -- 112,758 / --
James T. Holland(2)..... -- / -- -- / --
John P. Crowther........ 2,310 / -- 20 / --
C. Bryant Nickerson..... 24,060 / -- 10,201 / --
Ewen A. Campbell........ 11,116 / -- 3,118 / --
James L. Tremoulis...... 18,200 / -- 12,751 / --
</TABLE>
- --------
(1) No stock options were exercised by any of the Named Executive Officers
during 1998. The Company has not granted any stock appreciation rights to
the Named Executive Officers.
(2) Mr. Holland's options ceased to be exercisable when he terminated
employment on July 31, 1998.
(3) Value calculated on the difference between the market price of the Common
Stock on December 31, 1998 and the exercise price.
11
<PAGE>
Report of Compensation and Stock Option Committee on Executive Compensation
The Compensation and Stock Option Committee (the "Committee") is composed
solely of Directors who are not employees of the Company. The Committee
reviews and recommends to the Board of Directors actions to implement a
compensation structure that is intended to enhance the profitability of the
Company. The compensation of the Company's senior executives is structured as
a combination of salary, annual cash bonuses dependent on profitability and
other objective and subjective performance-based criteria, stock options, and
a deferred compensation program. This compensation structure is intended to
allow the Company to attract and retain qualified senior executives and align
the financial interests of senior executives with those of the Company's
shareholders.
At the beginning of 1998, the Committee reviewed proposals submitted by
management for annual salaries and bonus opportunities for the Company's
senior executives. The Committee determined the amount of the salary and
projected bonuses to be paid to the Company's senior executives for the year
based on management's recommendations and subjective factors. In making its
determination, the Committee reviewed a report prepared for the Company by a
compensation consulting firm. The report analyzed market cash compensation
levels for executive positions identical or comparable to the positions held
by the Company's senior executives. The analysis was based on executive
compensation data for companies in the chemicals, plastics and non-durable
goods manufacturing industries which have annual revenues similar to the
Company's annual revenues and which also have a national recruiting base for
executive talent. The data used by the compensation consulting firm to prepare
its report was obtained from several national executive compensation surveys.
In addition to reviewing the compensation consulting firm's report, the
Committee reviewed publicly available information concerning executive
compensation for a principal competitor and an executive compensation survey.
The Committee considered the composite compensation data used by the
compensation consulting firm and the executive compensation survey as
appropriate bases for analyzing the compensation levels of the Company's
executives because many of the Company's peers are not public companies and
thus do not publicly disclose information concerning the compensation of their
executives, other than through voluntary participation in surveys. The
Committee also considered the compensation information for the principal
competitor a relevant basis for reviewing the compensation levels of the
Company's executives because such competitor is a peer company that compares
its cumulative total shareholder return to that of the S&P Chemicals
(Specialty) Index, as does the Company. The Company does not use the companies
in the S&P Chemicals (Specialty) Index for comparison of executive
compensation because the Company's most direct business competitors and its
competitors for executive talent are not the same as the companies included in
that index.
Mr. Holland's salary for 1998 was set at the same level as his salary for
1997 and he was not included in any bonus program because of his scheduled
retirement under terms of the retirement agreement that he and the Company
entered into in 1997. The 1998 salaries for the Company's other senior
executives were set at levels generally consistent with the median salary
levels derived from the comparative compensation data described above. The
1998 bonus program for the Company's senior executives (excluding Mr. Holland)
was structured to give each executive the opportunity to receive a bonus based
on the Company's 1998 net profit before bonuses and income taxes (PBT), the
Company's attainment of target cost savings goals and the executive's
achievement of performance objectives specifically related to his
responsibilities and duties. Executives were not entitled to receive any bonus
under the program unless more than 75% of the PBT target for the year was
achieved.
The threshold PBT target established under the 1998 bonus program was
achieved. As a result, bonuses were paid to the Company's senior executives
(excluding Mr. Holland) in accordance with the terms of the program. In
addition, the bonuses for three of the Company's senior executives were
increased to recognize outstanding individual performance during the year.
Mr. Campbell was chosen by the Board of Directors to succeed Mr. Holland as
President of the Company in July of 1998. After Mr. Campbell became President,
the Committee reviewed his then current compensation and benefits to determine
what adjustments should be made in light of his new position and
responsibilities. The
12
<PAGE>
Committee also requested that Mr. Holland provide recommendations as to what
adjustments would be appropriate. Based on recommendations received by the
Committee from Mr. Holland, Mr. Campbell's salary for 1998 was increased to
$250,000. No change was made to his bonus opportunity under the 1998 bonus
program, other than to reflect the increase in his salary. As a result, Mr.
Campbell's bonus under the 1998 bonus program was computed based on his new
salary. Mr. Campbell's salary and bonus will be reviewed by the Committee in
subsequent years based on comparative compensation data similar to data used
to set senior executives' salaries and bonus opportunities for 1998.
The Company has traditionally granted long-term incentive compensation in
the form of stock options. The Committee considers stock options to be an
important means of compensating executives for their efforts and insuring that
executives are provided with an incentive to increase the profitability of the
Company and the market value of the Company's stock. Mr. Campbell was granted
50,000 stock options under the Company's 1995 Stock Option Plan after he was
appointed President to further align his interests with those of the Company's
shareholders and to create an incentive for him to increase the profitability
of the Company.
The Company maintains a deferred compensation program that provides benefits
in specified amounts to the Company's senior executives upon their retirement
at age 65 or death, or upon their termination of employment (other than by the
executive's voluntary action or discharge for cause) after at least ten years
of employment with the Company. The program also provides that benefits in
specified amounts may be paid to executives who retire after reaching age 50
and completing at least 20 years of service with the Company. The deferred
compensation program is intended to provide executives with an additional
incentive to remain with the Company. Each of the Company's senior executives
participates in the deferred compensation program.
During 1998, the Committee reviewed the projected annual benefits payable
under the deferred compensation program to senior executives other than Mr.
Holland (whose deferred compensation benefit had been fixed under the terms of
his retirement agreement). The Committee considered whether the deferred
compensation program, when combined with the other available sources of
postretirement income (such as the Company's Retirement Savings Plan),
provided a level of postretirement income comparable to the level of
postretirement income typically provided by other companies. The Committee
reviewed income replacement targets recommended by the Company's compensation
consulting firm, other available sources of postretirement income for senior
executives and the relative financial impact on the Company of increasing the
benefits payable under the deferred compensation program. The Committee
concluded that the annual deferred compensation benefit payable to each senior
executive should be increased by $10,000 this year, and reviewed for possible
increases in subsequent years.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1,000,000 limit on the amount of compensation that will be deductible by the
Company each year with respect to each of the President and the four other
most highly compensated executive officers. The cash compensation level of the
Company's executives is currently below the $1,000,000 limit. The Company's
1995 Stock Option Plan is structured to comply with an exemption from the
Section 162(m) limitation for performance-based compensation.
When setting compensation, the Committee takes into account the complexity
of the Company's business and the need for strong, involved management. The
Committee also takes into account the substantial changes that have occurred
during recent years in the Company's business and the business environment in
which the Company competes, and the special efforts made by senior management
to continue the Company's profitability despite significant economic pressures
and competition. In light of these considerations, the Company has entered
into employment continuity agreements with certain key executives, including
Mr. Campbell. The employment continuity agreements are designed to insure that
the Company's business and operations continue to be managed with a minimum of
disruption in the event of a change of control of the Company.
13
<PAGE>
The foregoing report was furnished by the Compensation and Stock Option
Committee.
R. Michael McCullough, Chairman
Arthur H. Bryant II
Max C. Chapman, Jr.
Stephen P. Munn
INFORMATION WITH RESPECT TO GEON DESIGNEES
As of the date of this Information Statement, Geon has not determined who
will be the Geon Designees. The Geon Designees shall be selected from among
the following persons.
The following table sets forth the name, business address, principal
occupation or employment and material positions and occupations within the
past five years of the persons who may be the Geon Designees. Unless otherwise
specified, each person listed below is a citizen of the United States and has
his or her principal address at the offices of Geon or the Purchaser, One Geon
Center, Avon Lake, Ohio 44012. None of the persons listed below owns any
Common Stock; or rights to acquire any Common Stock; is a director of or holds
any position with the Company; or has been involved in any transactions with
the Company or any of its directors or executive officers that are required to
be disclosed pursuant to the rules and regulations of the Securities Exchange
Commission. Present directors of Geon are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupation or Employment;
Name 5 - Year Employment History
---- -----------------------------------
<S> <C>
William F. Patient*.... Mr. Patient (age 64) is Chairman of the Board of Directors and
Chief Executive Officer of Geon, and has served in this
capacity since Geon's initial public offering in April 1993.
Mr. Patient served as Chief Executive Officer of Geon from
April 1993 to May 1999, as President of Geon from April 1993
to February 1998 and as Senior Vice President of The B.F.
Goodrich Company and as President of its Geon Vinyl Division
from May 1989 to April 1993. Prior to joining The B.F.
Goodrich Company, Mr. Patient held various positions with
Borg-Warner Chemicals from 1962 to 1989. He serves on the
Boards of Directors of National City Bank and Navistar
International Corporation.
Thomas A. Waltermire*.. Mr. Waltermire (age 49) is President, since February 1998, and
Chief Executive Officer, since May 1999, of Geon. From May
1997 to February 1998, Mr. Waltermire served as Executive
Vice President and Chief Operating Officer and from October
1993 until May 1997 as Chief Financial Officer of Geon. Mr.
Waltermire joined Geon as Senior Vice President and Treasurer
in March 1993 just prior to Geon's initial public offering in
April 1993. Prior to joining Geon, Mr. Waltermire held
various positions with The B.F. Goodrich Company.
Donald P. Knechtges.... Mr. Knechtges (age 57) is Senior Vice President, Business and
Technology Development of Geon, and has served in this
capacity since August 1995. Mr. Knechtges joined The B.F.
Goodrich Company as an engineer in June 1965 and became
Senior Vice President, Commercial in December 1991.
V. Lance Mitchell...... Mr. Mitchell (age 39) is Vice President and General Manager,
Compounds of Geon, and has served in this capacity since May
1997. Mr. Mitchell joined The B.F. Goodrich Company as a
Product Manager in 1989. Since then he has served as a Market
Development Manager, Regional Sales Manager, Extrusion
Business Director and Compound Business Director.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment;
Name 5 - Year Employment History
---- -----------------------------------
<S> <C>
Clarence J. Nosal..... Mr. Nosal (age 61) is Vice President and General Manager,
Resin and Intermediates of Geon, and has served in this
capacity since Geon's initial public offering in April 1993.
Mr. Nosal joined The B.F. Goodrich Company in 1967 as a
Project Manager. In 1987 he was named Vice President of
Operations for the Geon Vinyl Division of The B.F. Goodrich
Company.
Gregory L. Rutman..... Mr. Rutman (age 56) is Vice President, General Counsel,
Secretary and Assistant Treasurer of Geon, and has served in
this capacity since Geon's initial public offering in April
1993. Mr. Rutman joined The B.F. Goodrich Company in October
1974. From 1985 until Geon's initial public offering in April
1993, he functioned as Staff Vice President of The B.F.
Goodrich Company and Counsel to its Geon Vinyl Division.
W. David Wilson....... Mr. Wilson (age 45) is Vice President and Chief Financial
Officer of Geon and has served in this capacity since May
1997. Mr. Wilson joined The B.F. Goodrich Company in 1978 and
served in a variety of financial management positions within
its Chemical Group. He was named Controller of the Geon Vinyl
Division in 1985 and later became Director of Marketing. He
served as General Manager for Auseon Limited, Geon's wholly-
owned Australian subsidiary, and Director of Business
Management for Geon's Resin Division before being named Vice
President and Chief Financial Officer in May 1997. Mr. Wilson
received an A.B. in history from DePauw University in 1975,
and a Masters Degree in International Management from The
American Graduate School of International Management
(Thunderbird) in 1977.
James K. Baker*....... Mr. Baker (age 67) served as Vice Chairman of Arvin
Industries, Inc., an auto parts supplier to the original
equipment and replacement markets, until his retirement in
April 1998. Mr. Baker served as Chief Executive Officer of
Arvin Industries, Inc. from 1981 to 1993 and as Chairman from
1986 to February 1996. Mr. Baker serves on the Boards of
Directors of Cinergy Corp., Tokheim Corp., Amcast Industrial
Corp. and Veridian Corp., and served as Chairman of the
United States Chamber of Commerce.
Gale Duff-Bloom*...... Ms. Bloom (age 59) is President of Marketing and Company
Communications of J.C. Penney Company, Inc., a major
retailer. Ms. Bloom has served in her current position since
February 1996. Ms. Bloom joined J.C. Penney in 1969 and was
elected Vice President and Director of Investor Relations in
1988. In 1990, Ms. Bloom was appointed to the positions of
Senior Vice President and Associate Director of
Merchandising. In 1993, she was appointed Executive Vice
President and Director of Administration and, in 1995, Senior
Executive Vice President and Director of Personnel and
Company Communications. Ms. Bloom serves on the Boards of
Directors of Chase Bank of Texas and several professional and
civic organizations. She is the most recent past Chair of The
National Council of the Better Business Bureau.
J. Douglas Campbell*.. Mr. Campbell (age 57) served as President and Chief Executive
Officer and a Director of Arcadian Corporation, a nitrogen
chemicals and fertilizer manufacturer, until his retirement
in 1997. Mr. Campbell joined Arcadian Corporation as
President and Chief Executive Officer in December 1992. Prior
to joining Arcadian Corporation, he held various positions
with Standard Oil (Ohio) and British Petroleum since 1966,
most recently as Deputy Chief Executive Officer of BP
Chemicals.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Employment;
Name 5 - Year Employment History
---- -----------------------------------
<S> <C>
D. Larry Moore*...........Mr. Moore (age 62) served as President and Chief Operating
Officer of Honeywell, Inc., a multinational manufacturer of
controls for use in homes, buildings, industry, and space and
aviation, until his retirement in 1997. In 1987, Mr. Moore
became Vice President of Honeywell's Commercial Flight
Systems Group, and in 1989 he became President of Honeywell's
Space and Aviation business. In 1990, he became Executive
Vice President and Chief Operating Officer of Honeywell's
Industrial and Space and Aviation businesses. In April 1993,
he was elected President and Chief Operating Officer. Mr.
Moore serves on the Boards of Directors of Reynolds Metals
Company, Cordant Technologies Inc. and Howmet Corporation.
R. Geoffrey P. Styles*....Mr. Styles (age 68) served as Vice Chairman of the Royal Bank
of Canada until his retirement in December 1987. He is
currently Chairman and a Director of Grosvenor International
Holdings Ltd. Mr. Styles is also a Director of several
Canadian corporations, including The Royal Trust Company,
Echo Bay Mines Ltd. and Onex Corporation.
Farah M. Walters*.........Ms. Walters (age 54) is President and Chief Executive Officer
of University Hospitals and has served in this capacity since
1992. Ms. Walters joined University Hospitals in 1986. She
held positions of increasing responsibility until her
appointment as Chief Executive Officer in 1992. In 1993, she
was appointed to Hillary Rodham Clinton's National Health
Care Reform Task Force. Ms. Walters is a Director of LTV
Corporation, Kerr-McGee Corporation, University HealthSystem
Consortium in Chicago, Illinois, Cleveland Tomorrow, the
Greater Cleveland Hospital Association and University Circle,
Inc., and is also on the visiting committee of Case Western
Reserve University's Weatherhead School of Management.
John L. Rastetter.........Mr. Rastetter (age 52) is Vice President, Chief Financial
Officer and a Director of the Purchaser. Mr. Rastetter is
Director, Planning and Business Development of Geon, and has
served in this capacity since June 1997. Mr. Rastetter joined
The B.F. Goodrich Company in September 1970, and held a
variety of financial management positions with its Tire
Division before joining the Geon Vinyl Division in 1989.
Prior to his present position with Geon, Mr. Rastetter served
as Operations Controller, BFG Intermediates of Geon.
</TABLE>
16
<PAGE>
Exhibit (a)
March 26, 1999
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Wednesday, April 28, 1999
To The Holders of O'Sullivan Corporation Common Stock:
Notice is hereby given that the annual meeting of stockholders of O'Sullivan
Corporation will be held on Wednesday, April 28, 1999, at 11:00 a.m., at the
Winchester Country Club, 1300 Senseny Road, County of Frederick, Virginia, for
the purpose of:
(a) Election of directors for the ensuing year;
(b) Approval of the appointment of Yount, Hyde & Barbour, P.C.
of Winchester, Virginia as auditors for 1999; and
(c) Transaction of such other business as may properly come before the
meeting.
Enclosed you will find a proxy form, a proxy statement and the Company's
1998 annual report.
Only stockholders of record at the close of business on March 8, 1999 will
be entitled to notice of and to vote at the meeting and any adjournments
thereof.
The Board of Directors would like to have as many stockholders as possible
attend the meeting in person. However, whether or not you plan to be present,
please date, sign and mail the enclosed proxy promptly in the enclosed stamped
return envelope.
If you plan to attend the meeting in person this year, please complete and
return the enclosed Annual Meeting Registration card so that we may better
plan the necessary arrangements for the meeting.
/s/ C. Bryant Nickerson
-----------------------
C. BRYANT NICKERSON
Secretary, Treasurer and
Chief Financial Officer
1
<PAGE>
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
The enclosed proxy is solicited by and on behalf of the Board of Directors
of O'Sullivan Corporation (the "Company") for the 1999 annual meeting of
stockholders of the Company to be held on April 28, 1999, or any adjournments
thereof, for the purposes set forth in the attached notice of annual meeting.
This proxy statement and enclosed proxy are being mailed to stockholders on
or about March 26, 1999.
Any stockholder executing a proxy may revoke it at any time before it is voted
by delivering another proxy or written notice of revocation to the Company's
Secretary. The giving of this proxy will not affect the right of the stockholder
to attend the meeting and vote in person. However, attendance at the meeting
will not, without notice of revocation, revoke a proxy for the meeting.
Each holder of record of the Common Stock of the Company, $1.00 par value (the
"Common Stock"), at the close of business on March 8, 1999, will be entitled to
one vote for each share registered in his or her name on each matter brought
before the meeting. At the close of business on March 8, 1999, 15,594,952 shares
of the Common Stock were outstanding and entitled to vote.
The enclosed proxy, if executed and not revoked, will be voted for the election
of the nominees for director named herein and for the appointment of Yount, Hyde
& Barbour, P.C. as auditors, unless it contains specific instructions to the
contrary, in which event it will be voted in accordance with such instructions.
At this time, management is not aware of any matters (other than those
specified) that are expected to come before the meeting. If any other matters
are properly presented to the meeting for action, the proxy holders will vote
the proxies, which confer discretionary authority to vote on such matters, in
accordance with their best judgement.
Except for the election of directors, action on a matter submitted to the
stockholders at the meeting will be approved if a quorum is present at the
meeting and the votes cast in favor of the action exceed the votes cast against
it. With respect to the election of directors, the eleven nominees receiving the
greatest number of votes cast for the election of directors will be elected,
assuming a quorum is present at the meeting. Presence in person or by proxy of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the meeting will constitute a quorum. Shares for which the holder has
elected to abstain or to withhold the proxies' authority to vote (including
broker non-votes) on a matter will count toward a quorom but will have no effect
on the action taken with respect to such matter.
2
<PAGE>
In addition to the solicitation of proxies by mail, the Company's officers and
employees may solicit proxies by telephone, facsimile transmission or personal
interview. The Company will bear the cost of all solicitation.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to the beneficial
ownership of the Company's Common Stock by any person known to the Company
to be the beneficial owner of more than five percent of such stock as of
January 31, 1999.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
<S> <C> <C>
Arthur H. Bryant II (1) 2,409,084 15.4%
P. O. Box 2929
Winchester, VA 22604
Magalen O. Bryant (2) 940,148 6.0%
Locust Hill Farm
Middleburg, VA 22117
John C. O. Bryant (1) 822,549 5.3%
P. O. Box 247
Middleburg, VA 20118-0247
Dimensional Fund (3) 840,178 5.4%
Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Tweedy Browne Co. L.L.C.(4) 858,330 5.5%
52 Vanderbilt Avenue
New York, NY 10017
</TABLE>
(1) To the best knowledge of the Company, and except as described in the
footnotes to the table of ownership of Common Stock by directors set forth
below, Mr. Arthur H. Bryant II and Mr. John C. O. Bryant have sole voting
and investment powers with respect to shares shown as owned by them. The
information in this table relating to beneficial ownership of shares of
Common Stock by Mr. Arthur H. Bryant II and Mr. John C. O. Bryant is based
solely on a review of filings with the Securities and Exchange Commission
(the "Commission").
(2) To the best knowledge of the Company, Mrs. Bryant has sole voting and
investment powers with respect to 231,287 shares of Common Stock and shared
voting and investment powers with respect to 708,861 shares of Common Stock
(which shares are held in a trust of which Mrs. Bryant is co-trustee). This
information is based on a review of filings by Mrs. Bryant with the
Commission and on certain other information provided by Mrs. Bryant.
(3) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership as of December, 31, 1998 of
the shares of Common Stock set forth above, all of which shares are
3
<PAGE>
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, in series of the DFA Investment Trust Company,
a Delaware business trust, or by the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit plans, with
respect to all of which Dimensional serves as investment manager. The
Company has also been advised that Dimensional disclaims beneficial
ownership of all such shares. The foregoing is based on a review of a filing
with the Commission and on certain other information provided by Dimensional
to the Company.
(4) Tweedy Browne Co. L.L.C., a registered investment advisor, is deemed to have
beneficial ownership of the shares of Common Stock set forth above, all of
which shares are held in the accounts of various customers of Tweedy Browne
Co. L.L.C., with respect to which accounts Tweedy Browne Co. L.L.C. has
investment discretion (the "TBC Accounts"), and with respect to certain of
which it has obtained sole or shared voting power. The Company has also been
advised that Tweedy Browne Co. L.L.C. disclaims beneficial ownership of the
shares of Common Stock held in the TBC Accounts. The foregoing is based on
review of a filing with the Commission dated as of April 3, 1998.
ITEM ONE-ELECTION OF DIRECTORS
A Board of eleven directors of the Company is to be elected at the meeting to
serve until the next annual meeting or until their successors are elected. On
January 12, 1999, Mrs. Magalen O. Bryant resigned from the Board of Directors.
She will not seek reelection in 1999. The Board of Directors elected Mr. John C.
O. Bryant, Mrs. Bryant's son, to fill the vacancy created by Mrs. Bryant's
resignation. Each of the nominees listed below is presently a director of the
Company. Each nominee was elected by the stockholders at the last annual meeting
for a term expiring at the 1999 annaul meeting, except for Mr. John C. O. Bryant
who was appointed by the Board of Directors on January 12, 1999, and John S.
Campbell, President and Chief Executive Officer of the Company, who was
appointed as a director by the Board of Directors on October 27, 1998.
Each director nominee has agreed to serve if elected. If any nominee is unable
or unavailable to serve, a circumstance which is not expected, the proxy may be
voted for the election of other persons that may be nominated during the
meeting, except that any proxy that is marked to withhold authority to vote for
election of directors will not be voted for any nominee.
The names of the nominees and certain information concerning their business
experience and other matters are set forth below.
<TABLE>
<CAPTION>
NAME, AGE, COMPANY POSITIONS, DIRECTOR COMMON STOCK PERCENT
PRINCIPAL OCCUPATION AND SINCE BENEFICIALLY OF CLASS
DIRECTORSHIPS IN PUBLIC OWNED AS OF
CORPORATIONS 1/31/99
<S> <C> <C> <C>
C. Hugh Bloom, Jr., 65 1990 17,403(3) 0.1%
Easton, Pennsylvania,
Retired
Vice President, C.F. Martin & Co., Inc.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C>
Arthur H. Bryant, II, 56 1967 2,409,804(1)(2) 15.4%
Winchester, Virginia, (3)
Chairman of the Board;
Chairman and Chief Executive Officer of the
Company, 1986-1995
John C. O. Bryant, 32 1999 822,549(1)(3) 5.3%
Nokesville, Virginia,
President and Chief Executive Officer,
Atlantic Computing Services
Robert L. Burrus, Jr., 64 1995 14,000(3) 0.1%
Richmond, Virginia,
Partner, McGuire, Woods, Battle
& Boothe, LLP, a law firm
retained by the Company for a number
of years; Director, CSX Corporation, Concepts
Direct, Inc., Heilig-Meyers Company,
S & K Famous Brands, Inc. and
Smithfield Foods, Inc.
John S. Campbell, 48 1998 76,953(1)(3) 0.5%
Winchester, Virginia,
President and Chief Executive Officer
of the Company, 1998 - present;
Vice President, 1986-1998
Max C. Chapman, Jr., 55 1989 141,002(1)(3) 0.9%
Scarborough, New York,
Chairman, Nomura Holding
America Inc.; Director,
The Nomura Securities Co., Ltd.
James T. Holland, 58 1984 115,015(1)(3) 0.7%
Winchester, Virginia,
President and Chief Executive Officer
of the Company, 1995-1998;
President and Chief Operating
Officer, 1986-1995; Executive Vice President,
1984-1986; Vice President and Treasurer,
1979-1984
R. Michael McCullough, 60 1995 13,000(3) 0.1%
McLean, Virginia,
Retired Senior Chairman,
Booz Allen & Hamilton,
Director, Host Marriott Services Corp.,
Interstate Hotel Corporation and
Watson-Wyatt Worldwide, Corp.
Stephen P. Munn, 56 1995 13,000(3) 0.1%
Syracuse, New York,
Chairman, Chief Executive Officer and
Director, Carlisle Companies
Incorporated; Trustee, Prudential Securities
Mutual Funds
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C>
Timothy J. Sandker, 50 1997 11,000(3) 0.1%
Madison, Indiana,
President, Rotary Lift Division
of Dover Corporation
Leighton W. Smith, Jr., 59 1997 11,000(3) 0.1%
Fairfax, Virginia,
Admiral, United States Navy,
Retired
All Executive Officers and Directors as a
group (17 persons) 3,737,773(1)(2) 24.0%
(3)
</TABLE>
In addition to Mr. Holland and Mr. J.S. Campbell, the remaining executive
officers named in the summary compensation table beneficially owned the
following shares of Common Stock at January 31, 1999:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND TITLE 1/31/99 OF CLASS
<S> <C> <C>
John P. Crowther,
Vice President 14,059(1)(3) 0.1%
C.Bryant Nickerson,
Secretary, Treasurer and 22,510(1)(3) 0.1%
Chief Financial Officer
Ewen A. Campbell,
Vice President 11,616(3) 0.1%
James L. Tremoulis,
Vice President 15,976(3) 0.1%
</TABLE>
(1) Includes the following shares held by the spouses, children or associates of
the following directors and officers, which shares may be deemed held
subject to shared voting and investment powers: Arthur H. Bryant,II, 16,466
shares; Max C. Chapman, Jr., 5,000 shares; James T. Holland, 18,119 shares;
John C. O. Bryant, 2,810 shares; John P. Crowther, 1,000 shares; C. Bryant
Nickerson, 100 shares.
(2) Includes 1,129,860 shares held by the Bryant Foundation, of which Mr.
Bryant is President and a Trustee.
(3) Includes the following shares that may be acquired under stock options which
are exercisable on January 31, 1999 or within 60 days thereafter: John S.
Campbell, 76,802 shares; all executive officer and directors as a group,
264,988 shares; John P. Crowther, 2,310 shares; C. Bryant Nickerson, 21,560
shares; Ewen A. Campbell, 11,116 shares; and James L. Tremoulis, 15,700
shares. Also includes for each director (other than Mr. Campbell) the
following shares which may be acquired under currently exercisable stock
options granted under the Company's 1995 Outside Directors Stock Option
Plan: Messrs. Bloom, A.H. Bryant, Burrus,
6
<PAGE>
Chapman, McCullough and Munn, 13,000 shares each; Messrs. Smith and
Sandker, 11,000 shares each and Messrs. Holland and John C. O. Bryant,
10,000 shares each.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, certain officers, and any persons holding more than ten percent of
the Company's Common Stock are required to report their ownership of the Common
Stock and any changes in that ownership to the Commission. Specific due dates
for these reports are established by the Commission, and the Company is required
to report in this proxy statement any failure to file such reports on a timely
basis for the last completed fiscal year. Mr. John C. O. Bryant failed to timely
file a Form 3 with the Commission following his election to the Board of
Directors. He filed a Form 3 thirty-one days late. There were no other known
failures of any officer, director or greater than ten percent shareholder to
file in a timely manner the required reports. In making this statement, the
Company has relied on the written representations of its directors, such
officers and greater than ten percent shareholders, and on copies of the reports
that they have filed with the Commission.
COMMITTEES OF THE BOARD OF DIRECTORS
AND MEETING ATTENDANCE
During 1998, four regular quarterly Board of Directors meetings were held.
Each of the incumbent directors attended at least 75% of the meetings of the
Board of Directors and any of the committees on which they served.
The Board of Directors has an Audit Committee which consists of Messrs. Burrus,
McCullough, Bloom, Sandker and Smith. All members of the Audit Committee are
outside directors. Mr. Burrus serves as Chairman of the Audit Committee. The
Committee met two times during 1998. The principal responsibilities of the Audit
Committee are to direct the activity of the external audit functions, recommend
the selection of external auditors to the Board of Directors, provide for the
continuing review of the underlying internal controls of the Company, and review
published financial reports of the Company.
There is a Compensation and Stock Option Committee of the Board of Directors
which consists of Messrs. A.H. Bryant, Chapman, McCullough and Munn. No member
of the Compensation and Stock Option Committee is an employee of the Company.
Mr. McCullough serves as Chairman of this Committee. The Committee met three
times during 1998. The Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to compensation of
executive officers and directors. Mr. Holland was appointed to the Committee in
January of 1999. The Stock Option Plan Subcommittee of the Committee, which
consists of Messrs. Chapman and Munn, administers the 1995 Stock Option Plan and
determines the key employees who should receive awards under the 1995 Stock
Option Plan and the number of shares to be granted under such awards.
There is a Nominating Committee of the Board of Directors which consists of
Messrs. A. H. Bryant, Chapman and Holland. No member of the Nominating Committee
is an employee of the Company, except that Mr. Holland served as President and
Chief Executive Officer of the Company until July 31, 1998.
7
<PAGE>
Mr. Chapman serves as Chairman of this Committee. The Committee, if so requested
by the Board of Directors, recommends to the Board of Directors candidates for
election as directors. The Committee did not meet in 1998. The Nominating
Committee will consider nominations from stockholders. Any stockholder who
wishes to make a nomination for a director must advise the Secretary of the
Company in writing, mailed no later than ten days before the date of the
stockholders' meeting, of the name, address and business background of the
nominee.
COMPENSATION OF DIRECTORS
A fee of $2,500 per quarter is currently paid to each outside director as a
retainer. An additional $2,500 attendance fee is paid to each outside director
for attendance at regularly scheduled meetings of the Board of Directors, which
are held four times a year. Non-employee directors who are committee members are
paid $500 for each committee meeting held on the date of a regularly scheduled
Board of Directors meeting and $750 for each meeting held on a date other than
the date of a regularly scheduled Board of Directors meeting. Expenses incurred
in connection with attending meetings are normally borne by the directors. Each
non-employee director automatically receives in the first year that he becomes a
non-employee director an option to purchase 10,000 shares of Common Stock of the
Company under the 1995 Outside Directors Stock Option Plan. On every April 25th
thereafter, each non-employee director receives an option to purchase an
additional 1,000 shares of the Common Stock. The price of each option is equal
to the fair market value of the Common Stock on the date the option is granted.
All options awarded under the plan are nonstatutory stock options.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain information concerning annual and
long-term compensation paid to or accrued on behalf of the President and the
four other most highly compensated executive officers of the Company (the
"Named Executive Officers") for the years 1998, 1997, and 1996.
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Underlying
Name and Principal Options All Other
Position Year Salary($) Bonus($) (#) Compensation($)
<S> <C> <C> <C> <C> <C>
John S. 1998 $255,367 $44,707 50,000 $ 16,856(1)
Campbell 1997 190,100 13,178 7,521 14,603
President and Chief 1996 190,100 -- 4,000 12,980
Executive Officer
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
James T. 1998 $229,894 $ - - - - $ 25,043(2)
Holland 1997 345,390 - - 13,636 1,949,453
Retired President 1996 345,390 - - 5,000 87,197
And Chief Executive
Officer
John P. 1998 $194,600 $ 25,000 - - $ 16,261(3)
Crowther 1997 181,257 40,000 2,107 14,200
Vice President 1996 175,648 37,200 - - 13,349
C. Bryant 1998 $160,426 $ 25,000 - - $ 17,006(4)
Nickerson 1997 153,100 - - 5,922 14,442
Secretary, 1996 153,100 - - 3,000 14,062
Treasurer and Chief
Financial Officer
Ewen A. 1998 $149,850 $25,000 - - $ 15,263(5)
Campbell 1997 143,100 15,000 5,579 12,756
Vice President 1996 138,100 - - 2,000 12,980
James L. 1998 $143,100 $ 9,053 - - $ 13,034(6)
Tremoulis 1997 143,100 - - 5,579 13,101
Vice President 1996 143,100 - - 2,000 12,112
</TABLE>
(1) This amount consists of Company contributions under the Retirement
Savings Plan ($7,998) and amounts accured under the Company's deferred
compensation program ($8,858).
(2) This amount consists of Company contributions under the Retirement Savings
Plan ($6,777) and the portion of the cash surrender value of a split dollar
life insurance policy that was paid to Mr. Holland's designated beneficiary
under the policy when the policy was terminated ($18,266).
(3) This amount consists of Company contributions under the Retirement
Savings Plan ($7,995) and amounts accrued under the Company's deferred
compensation program ($8,266).
(4) This amount consists of Company contributions under the Retirement
Savings Plan ($7,061) and amounts accrued under the Company's deferred
compensation program ($9,945).
(5) This amount consists of Company contributions under the Retirement
Savings Plan ($6,957) and amounts accrued under the Company's deferred
compensation program ($8,306).
(6) This amount consists of Company contributions under the Retirement
Savings Plan ($6,222) and amounts accrued under the Company's deferred
compensation program ($6,812).
Deferred Compensation Program
The Company maintains a deferred compensation program for key employees of the
Company. Under this program, the Company has agreed to pay to each covered
employee a certain sum annually for fifteen years upon his retirement or, in the
event of his death, to his designated beneficiary. The annual amount payable to
each of the Named Executive Officers upon retirement at
9
<PAGE>
age 65 is as follows: Mr. J.S. Campbell, $60,000, Mr. Holland, $150,000, Mr.
Crowther, $40,000, Mr. Nickerson, $50,000, Mr. E.A. Campbell, $40,000, and Mr.
Tremoulis, $46,000. A benefit is also paid if the employee terminates employment
(other than by the executive's voluntary action or discharge for cause) after at
least 10 years of employment with the Company. The program provides that
benefits in specified amounts may be paid to executives who retire after
reaching the age of 50 and completing at least 20 years of service with the
Company. In each event, the amount of the benefit depends on the employee's
years of service with the Company (with the full benefit paid only if the
employee has completed 25 years of service).
The Company has purchased individual life insurance contracts with respect to
each employee covered by this program. The Company is the owner and beneficiary
of these insurance contracts. The employees are general creditors of the Company
with respect to these benefits.
Retirement and Employment Continuity Agreements
Retirement Agreement
The Company and Mr. Holland entered into a retirement agreement in 1997. Under
the terms of the agreement, Mr. Holland retired as an officer and employee of
the Company, and as director, officer and employee of all affiliates of the
Company, on July 31, 1998. He continues to serve as a director of the Company.
The Company has purchased a commercial annuity in the principal amount of
$974,724, which provides for 180 equal monthly payments to the Company. The
Company has begun to pay Mr. Holland 180 monthly payments, each equal in amount
to the amount of the monthly annuity payments that the Company receives under
the commercial annuity. The annuity is owned exclusively by the Company. Mr.
Holland has no claims in or rights against the annuity or the payments made from
the annuity.
Mr. Holland was treated upon his retirement as having completed 25 years of
service with the Company for purposes of the Company's deferred compensation
program, and is entitled to receive the full benefit payable under the deferred
compensation program. The Company made a lump sum payment to Mr. Holland of his
accrued and unused vacation pay when he retired, and paid him a $ 25,000
retainer to be available to provide consulting services to the Company. Mr.
Holland is released under the retirement agreement for any claims relating to
his employment.
Employment Continuity Agreements
The Company has entered into employment continuity agreements with key
management executives, including Messrs. J.S. Campbell, Crowther, Nickerson,
E.A. Campbell and Tremoulis, which provide certain compensation and benefits in
the event of a change of control. Each agreement is effective for three years
and is automatically extended for an additional three-year period, unless the
Company notifies the executive that the agreement will not be extended. Mr.
Holland's employment continuity agreement was terminated when he entered into
the retirement agreement described above.
The agreements provide that, in the event of a change of control of the Company,
each executive will continue to be employed by the Company for a one-year period
following the change of control and will continue to receive a salary and annual
bonus at least equal to twelve times the highest monthly salary and bonus that
were paid or are payable to the executive for the
10
<PAGE>
twelve-month period immediately preceding the change of control. The executive
will also be entitled during this one-year period to employee benefits, fringe
benefits, expense reimbursements, vacation, and office support that are at least
as favorable as were provided to the executive during the 90-day period
immediately preceding the change of control. If, during the one-year employment
period following the change of control (the "Employment Period"), the Company
terminates the executive's employment without cause or the executive voluntarily
terminates employment "for good reason", the Company will pay to the executive a
lump sum cash amount equal to the sum of the following amounts: (i) any salary,
elective nonqualified deferred compensation, and accrued vacation that have not
yet been paid to the executive, (ii) the largest annual salary paid or payable
to the executive for the Employment Period as annualized, and (iii) the greater
of the largest bonus paid or payable to the executive for the Employment Period
(as annualized) or the bonus paid to the executive for the twelve-month period
immediately preceding the change of control. In addition, the Company will
continue the executive's automobile allowance for twelve months following his
termination of employment. An executive shall be deemed to have terminated
employment "for good reason" if he is assigned duties inconsistent with his
position, authority or responsibilities, the Company fails to provide him with
the salary, bonus, benefits, support staff and vacation to which he is entitled
during the Employment Period, he is assigned to an office or location that is
located more than 35 miles from the office where he was assigned at the time of
the change of control, or the Company attempts to terminate his employment other
than as permitted under the agreement or fails to require a sucessor to assume
the agreement.
If the executive's employment is terminated on account of his disability or
death, or he voluntarily terminates employment other than "for good reason"
during the Employment Period, the executive (or his legal representative) will
be paid any salary which has not yet been paid, any elective nonqualified
deferred compensation and accrued vacation that has not yet been paid, and a
pro-rated bonus. In the event the executive is terminated for cause during the
Employment Period, he will be paid any base salary that has not yet been paid
and any compensation previously deferred by the executive. If the executive
continues in employment with the Company through the last day of the Employment
Period, the executive will receive a lump sum payment equal to the largest
annual salary (as annualized) that was paid or payable to the executive during
the Employment Period.
A change of control is deemed to have occured under the agreement if (i) any
individual, entity or group acquires, other than from the Company, 20% or more
of the outstanding shares of common stock of the Company or the combined voting
power of the Company's voting securities (subject to certain exceptions), (ii)
the individuals who constitute the Board as of the date of the agreement cease
to constitute at least a majority of the Board, other than as a result of an
election of a director by the stockholders, whose election or nomination for
election was approved by a majority of the members of the Board (unless in
connection with an actual or threatened election contest), (iii) the Company's
stockholders approve a reorganization, merger, share exchange, or consolidation
in which all or substantially all of the individuals or entities who were
stockholders immediately prior to such transaction cease to own (directly or
indirectly) more than 60% of the outstanding shares of common stock or the
combined voting power of the voting securities of the corporation resulting from
such transaction in substantially the same proportion as their ownership in the
Company before the transaction, or (iv) a complete liquidation of the Company,
or a sale or disposition of all or substantially all of the assets of the
Company occurs
11
<PAGE>
(other than to a corporation of which more than 60% of the outstanding shares
of common stock and the combined voting power following such sale or
disposition is owned by all or substantially all of the stockholders of the
outstanding shares of common stock or combined voting power of the Company
before the sale in substantially the same proportion as their ownership in
the Company immediately before the sale or disposition).
Retirement Savings Plan
The Company maintains a Retirement Savings Plan (the "Plan") that covers all
employees of the Company and its Subsidiaries who are not covered under a
collective bargaining agreement and who satisfy certain minimum age and service
requirements. The Plan permits participants to make pre-tax contributions of a
portion of their annual compensation pursuant to the provisions of Section
401(k) of the Internal Revenue Code. The Company may, in its discretion, make a
matching contribution for those participants who make pre-tax contributions.
Such matching contributions may equal up to 100% of a participant's pre-tax
contributions, but may not exceed 2% of each participant's compensation for the
year. The Company may also make, in its discretion, a contribution equal to 3%
of a participant's compensation for the year, without regard to whether the
participant made a contribution to the Plan. The Plan permits participants to
make after-tax contributions of a portion of their annual compensation.
During 1998, total Company contributions to the Plan for eligible employees
consisted of a contribution of 3% of each eligible participant's annual
compensation, plus a matching contribution on each participant's pre-tax or
after-tax contributions of up to 2% of the participant's annual compensation.
Stock Option Plans
The Company maintains a 1995 Stock Option Plan. The following tables provide
information with respect to stock options that were granted to the Named
Executive Officers under the 1995 Stock Option Plan during 1998. No stock
appreciation rights ("SARS") were granted to the Named Executive Officers during
1998.
12
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants For Option Term (2)
----------------- ----------------------
Percent
Number of Of Total
Securities Options
Underlying Granted To
Options Employee Exercise Expir-
Granted In Fiscal Price ation
Name (#) Year ($/Share) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
John S. Campbell 50,000 (1) 100% 7.87 10-26-08 641,377 1,021,286
James T. Holland -- -- -- -- -- -- -- -- ---- -- --
John P. Crowther -- -- -- -- -- -- -- -- -- -- -- --
C. Bryant Nickerson -- -- -- -- -- -- -- -- -- -- -- --
Ewen A. Campbell -- -- -- -- -- -- -- -- -- -- -- --
James L. Tremoulis -- -- -- -- -- -- -- -- -- -- -- --
</TABLE>
(1) The option granted to Mr. Campbell became fully exercisable as of October
27, 1998. The option will cease to be exercisable upon the earlier of (i)
the date on which the option holder terminates employment for any reason
other than death or disability, (ii) one year from his termination of
employment on account of disability, (iii) three months from termination of
his employment on account of death, or (iv) October 26, 2008. The option is
not transferable by the option holder other than by will or by the laws of
descent and distribution.
(2) The amounts disclosed as the potential realizable value are the result of
calculations at the 5% and 10% assumed rates of appreciation for the full
ten year term of the option, as permitted by the Commission. These amounts
are not intended to forecast potential future appreciation of the price of
the Common Stock.
13
<PAGE>
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FY-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number Of
Securities
Underlying Value Of
Unexercised Unexercised In-
Options the-Money Options
At FY-End (#) At FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
John S. Campbell 79,302 / -- 112,758 / --
James T. Holland (2) -- / -- -- / --
John P. Crowther 2,310 / -- 20 / --
C. Bryant Nickerson 24,060 / -- 10,201 / --
Ewen A. Campbell 11,116 / -- 3,118 / --
James L. Tremoulis 18,200 / -- 12,751 / --
</TABLE>
(1) No stock options were exercised by any of the Named Executive Officers
during 1998. The Company has not granted any stock appreciation rights to
the Named Executive Officers.
(2) Mr. Holland's options ceased to be exercisable when he terminated employment
on July 31, 1998.
Report of Compensation and Stock Option Committee on Executive Compensation
The Compensation and Stock Option Committee (the "Committee") is composed solely
of Directors who are not employees of the Company. The Committee reviews and
recommends to the Board of Directors actions to implement a compensation
structure that is intended to enhance the profitability of the Company. The
compensation of the Company's senior executives is structured as a combination
of salary, annual cash bonuses dependent on profitability and other objective
and subjective performance-based criteria, stock options, and a deferred
compensation program. This compensation structure is intended to allow the
Company to attract and retain qualified senior executives and align the
financial interests of senior executives with those of the Company's
shareholders.
At the beginning of 1998, the Committee reviewed proposals submitted by
management for annual salaries and bonus opportunities for the Company's senior
executives. The Committee determined the amount of the salary and projected
bonuses to be paid to the Company's senior executives for the year based on
management's recommendations and subjective factors. In making its
determination, the Committee reviewed a report prepared for the Company by a
compensation consulting firm. The report analyzed market cash compensation
levels for executive positions identical or comparable to the positions held by
the Company's senior executives. The analysis was based on executive
compensation data for companies in the chemicals, plastics and non-durable
14
<PAGE>
goods manufacturing industries which have annual revenues similar to the
Company's annual revenues and which also have a national recruiting base for
executive talent. The data used by the compensation consulting firm to prepare
its report was obtained from several national executive compensation surveys. In
addition to reviewing the compensation consulting firm's report, the Committee
reviewed publicly available information concerning executive compensation for a
principal competitor and an executive compensation survey.
The Committee considered the composite compensation data used by the
compensation consulting firm and the executive compensation survey as
appropriate bases for analyzing the compensation levels of the Company's
executives because many of the Company's peers are not public companies and thus
do not publicly disclose information concerning the compensation of their
executives, other than through voluntary participation in surveys. The Committee
also considered the compensation information for the principal competitor a
relevant basis for reviewing the compensation levels of the Company's executives
because such competitor is a peer company that compares its cumulative total
shareholder return to that of the S&P Chemicals (Specialty) Index, as does the
Company. The Company does not use the companies in the S&P Chemicals (Specialty)
Index for comparison of executive compensation because the Company's most direct
business competitors and its competitors for executive talent are not the same
as the companies included in that index.
Mr. Holland's salary for 1998 was set at the same level as his salary for 1997
and he was not included in any bonus program because of his scheduled retirement
under terms of the retirement agreement that he and the Company entered into in
1997. The 1998 salaries for the Company's other senior executives were set at
levels generally consistent with the median salary levels derived from the
comparative compensation data described above. The 1998 bonus program for the
Company's senior executives (excluding Mr. Holland) was structured to give each
executive the opportunity to receive a bonus based on the Company's 1998 net
profit before bonuses and income taxes (PBT), the Company's attainment of target
cost savings goals and the executive's achievement of performance objectives
specifically related to his responsibilities and duties. Executives were not
entitled to receive any bonus under the program unless more than 75% of the PBT
target for the year was achieved.
The threshold PBT target established under the 1998 bonus program was achieved.
As a result, bonuses were paid to the Company's senior executives (excluding Mr.
Holland) in accordance with the terms of the program. In addition, the bonuses
for three of the Company's senior executives were increased to recognize
outstanding individual performance during the year.
Mr. Campbell was chosen by the Board of Directors to succeed Mr. Holland as
President of the Company in July of 1998. After Mr. Campbell became President,
the Committee reviewed his then current compensation and benefits to determine
what adjustments should be made in light of his new position and
responsibilities. The Committee also requested that Mr. Holland provide
recommendations as to what adjustments would be appropriate. Based on
recommendations received by the Committee from Mr. Holland, Mr. Campbell's
salary for 1998 was increased to $250,000. No change was made to his bonus
opportunity under the 1998 bonus program, other than to reflect the increase in
his salary. As a result, Mr. Campbell's bonus under the 1998 bonus program was
computed based on his new salary. Mr. Campbell's salary and bonus will be
reviewed by the Committee in subsequent years based on comparative compensation
data similar to data used to set senior executives'
15
<PAGE>
salaries and bonus opportunities for 1998.
The Company has traditionally granted long-term incentive compensation in the
form of stock options. The Committee considers stock options to be an important
means of compensating executives for their efforts and insuring that executives
are provided with an incentive to increase the profitability of the Company and
the market value of the Company's stock. Mr. Campbell was granted 50,000 stock
options under the Company's 1995 Stock Option Plan after he was appointed
President to further align his interests with those of the Company's
shareholders and to create an incentive for him to increase the profitability of
the Company.
The Company maintains a deferred compensation program that provides benefits in
specified amounts to the Company's senior executives upon their retirement at
age 65 or death, or upon their termination of employment (other than by the
executive's voluntary action or discharge for cause) after at least ten years of
employment with the Company. The program also provides that benefits in
specified amounts may be paid to executives who retire after reaching age 50 and
completing at least 20 years of service with the Company. The deferred
compensation program is intended to provide executives with an additional
incentive to remain with the Company. Each of the Company's senior executives
participates in the deferred compensation program.
During 1998, the Committee reviewed the projected annual benefits payable under
the deferred compensation program to senior executives other than Mr. Holland
(whose deferred compensation benefit had been fixed under the terms of his
retirement agreement). The Committee considered whether the deferred
compensation program, when combined with the other available sources of
postretirement income (such as the Company's Retirement Savings Plan), provided
a level of postretirement income comparable to the level of postretirement
income typically provided by other companies. The Committee reviewed income
replacement targets recommended by the Company's compensation consulting firm,
other available sources of postretirement income for senior executives and the
relative financial impact on the Company of increasing the benefits payable
under the deferred compensation program. The Committee concluded that the annual
deferred compensation benefit payable to each senior executive should be
increased by $10,000 this year, and reviewed for possible increases in
subsequent years.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a
$1,000,000 limit on the amount of compensation that will be deductible by the
Company each year with respect to each of the President and the four other most
highly compensated executive officers. The cash compensation level of the
Company's executives is currently below the $1,000,000 limit. The Company's 1995
Stock Option Plan is structured to comply with an exemption from the Section
162(m) limitation for performance-based compensation.
When setting compensation, the Committee takes into account the complexity of
the Company's business and the need for strong, involved management. The
Committee also takes into account the substantial changes that have occurred
during recent years in the Company's business and the business environment in
which the Company competes, and the special efforts made by senior management to
continue the Company's profitability despite significant economic pressures and
competition. In light of these considerations, the Company has entered into
employment continuity agreements with certain key executives, including Mr.
Campbell. The employment continuity agreements are designed to insure that the
Company's business and operations continue
16
<PAGE>
to be managed with a minimum of disruption in the event of a change of control
of the Company.
The foregoing report was furnished by the Compensation and Stock Option
Committee.
R. Michael McCullough, Chairman
Arthur H. Bryant, II
Max C. Chapman, Jr.
Stephen P. Munn
COMPARATIVE PERFORMANCE
The following graph compares the yearly percentage change in the cumulative
total stockholder return of the Common Stock against the cumulative total return
of (i) the S&P Composite 500 Stock Index and (ii) the S&P Chemicals (Specialty)
Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
O'SULLIVAN CORPORATION, S&P 500 AND S&P CHEMICALS-SPECIALTY
<TABLE>
<CAPTION>
Measurement Period O'Sullivan S&P Chemicals-
(Fiscal Year Covered) Corporation S&P 500 Specialty
- --------------------- ----------- ------- --------------
<S> <C> <C> <C>
December 1993 100.00 100.00 100.00
December 1994 107.18 101.32 87.30
December 1995 121.99 139.40 114.75
December 1996 133.11 171.40 117.69
December 1997 132.95 228.59 145.74
December 1998 127.86 293.91 124.11
</TABLE>
ITEM TWO-SELECTION OF AUDITORS
Yount, Hyde & Barbour, P.C., a firm of certified public accountants in
Winchester, Virginia, has served as auditors of the Company for several years.
The Board of Directors recommends their appointment for 1999 and will ask the
stockholders to approve such appointment. Representatives of the auditing firm
are expected to be present at the stockholders' meeting and will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to make a proposal to be acted upon at the 2000 Annual
Meeting tentatively scheduled for Wednesday, April 26, 2000, must present such
proposal to the Company at its principal office in Winchester, Virginia not
later than November 26, 1999, in order for the proposal to be considered for
inclusion in the Company's proxy statement. Additionally,
17
<PAGE>
any stockholder who wishes to make a proposal from the floor at the 1999 annual
stockholders' meeting must advise the Secretary of the Company in writing,
mailed no later than April 17, 1999, of the nature of the proposal.
MISCELLANEOUS
The 1998 annual report to stockholders, containing financial statements and
pertinent footnotes thereto, is included with the mailing of this proxy
statement.
/s/ C. Bryant Nickerson
-----------------------
C. BRYANT NICKERSON
Secretary, Treasurer and
Chief Financial Officer
18
<PAGE>
Exhibit (b)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 2, 1999, (the "Agreement"),
by and among THE GEON COMPANY, a Delaware corporation ("Parent"), TGC
ACQUISITION CORPORATION, a Virginia corporation and a wholly-owned subsidiary of
Parent ("Sub"), and O'SULLIVAN CORPORATION, a Virginia corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, in contemplation thereof it is proposed that Sub will make a
tender offer (the "Offer") to purchase all the issued and outstanding shares of
common stock, $1.00 par value, of the Company ("Common Stock"), subject to the
terms and conditions of this Agreement, at a price per share of Common Stock of
$12.25 net to the seller in cash (the "Offer Price") and, if less than all of
the issued and outstanding shares of Common Stock are tendered and the Offer is
completed, Sub will merge with the Company in the manner hereinafter described;
WHEREAS, the Directors of the Company have unanimously determined that each
of the Offer and the Merger (as hereinafter defined) are fair to, and in the
best interests of, the holders of Common Stock, approved the Offer and the
Merger and recommended the acceptance of the Offer and approval and adoption of
this Agreement by the stockholders of the Company;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
the Company's Board of Directors has taken action to eliminate any requirement
under the Trust Agreement for O'Sullivan Corporation Salary Continuation
Agreements, with First Union National Bank as trustee and dated as of November
18, 1997 (the "Salary Continuation Agreements Trust") that the Salary
Continuation Agreements Trust be fully funded for all current benefit
obligations upon a change of control of the Company; and
WHEREAS, as a further inducement for Parent and Sub to enter into this
Agreement, Arthur H. Bryant II, Magalen O. Bryant and John C. O. Bryant have,
simultaneously with the execution of this Agreement, entered into share tender
agreements with Parent and Sub (the "Share Tender Agreements"), pursuant to
which they have agreed to tender into the Offer all of the shares of Common
Stock held by them.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer. Provided that (a) this Agreement shall not have been
---------
terminated in accordance with Article VI hereof, (b) the Share Tender Agreements
shall have been executed
<PAGE>
simultaneously with this Agreement and (c) the Board of Directors has taken
action to eliminate any requirement that the Salary Continuation Agreements
Trust be fully funded for all current benefit obligations upon a change of
control of the Company, and so long as none of the events set forth in Annex A
hereto (the "Tender Offer Conditions") shall have occurred and are continuing,
as promptly as practicable, but in no event later than the fifth business day
after the public announcement of the execution of this Agreement, Sub shall
commence the Offer. The obligations of Sub to accept for payment and promptly to
pay for any shares of Common Stock tendered shall be subject only to the Tender
Offer Conditions, any of which may be waived by Parent and Sub; provided,
--------
however, that, without the consent of the Company, Sub shall not waive the
- -------
condition that there shall have been validly tendered and not validly withdrawn
prior to the expiration of the Offer a number of shares of Common Stock which
represent at least 70% of the total voting power of all shares of capital stock
of the Company outstanding on a fully diluted basis (the "Minimum Condition").
The Tender Offer Conditions are for the sole benefit of Parent and Sub and may
be asserted by Parent and Sub regardless of the circumstances giving rise to any
such Tender Offer Condition and, subject to the preceding sentence, may be
waived by Parent and Sub in whole or in part. Sub expressly reserves the right
to modify the terms of the Offer, including, without limitation, except as
provided below, to extend the Offer beyond any scheduled expiration date;
provided, however, without the consent of the Company Sub shall not (i) reduce
- -------- -------
the number of shares of Common Stock to be purchased in the Offer, (ii) reduce
the Offer Price, (iii) modify or add to the conditions set forth in Annex A or
(iv) change the form of consideration payable in the Offer. Notwithstanding the
foregoing, the Offer may not be extended beyond any scheduled expiration date
unless any of the Tender Offer Conditions shall not have been satisfied;
provided, however, (i) even if the Tender Offer Conditions have not been
- -------- -------
satisfied, the Offer may not be extended beyond the three month anniversary of
the date of commencement of the Offer and (ii) if the Tender Offer Conditions
have been satisfied, then the Offer may be extended for an additional five
business days so long as at the time of such extension, all conditions to Sub's
obligations to purchase shares of Common Stock pursuant to the Offer are
irrevocably waived.
1.2 Company Actions. The Company hereby consents to the Offer and the
---------------
Merger and represents that (a) its Board of Directors (at a meeting duly called
and held) has (i) determined by the unanimous vote of the Directors that each of
the Offer and the Merger is fair to, and in the best interests of, the holders
of Common Stock, (ii) approved the Offer, the Merger, this Agreement and the
Share Tender Agreements, (iii) recommended acceptance of the Offer and approval
and adoption of this Agreement by the stockholders of the Company and (iv) taken
all other action necessary to render Articles 14 and 14.1 of the Virginia Stock
Corporation Act (the "VSCA") inapplicable to the Offer and the Merger; and (b)
Bowles Hollowell Conner, a Division of First Union Capital Markets Corp.
("Bowles Hollowell Conner"), has delivered to the Board of Directors of the
Company its opinion that the consideration to be received by the holders of
Common Stock pursuant to the Offer and the Merger is fair to the holders of
Common Stock from a financial point of view, subject to the usual and customary
assumptions and qualifications contained in such opinion. The Company shall
file with the Securities and Exchange Commission (the "Commission"), as soon as
practicable on the date of the commencement of the Offer a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
containing the recommendations referred to in clause (a) of the preceding
sentence; provided, however, that such recommendations may be withdrawn,
-------- -------
modified or
2
<PAGE>
amended in accordance with Section 4.7. Parent, Sub and their counsel shall be
given a reasonable opportunity to review and comment upon the Schedule 14D-9
prior to its filing with the Commission. The Company agrees to provide Parent
and its counsel with any comments the Company or its counsel may receive from
the Commission or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments and shall provide Parent and its counsel an
opportunity to participate, including by way of discussions with the Commission
or its staff, in the response of the Company to such comments. The Schedule 14D-
9 will comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the Commission and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or Sub for inclusion in the Schedule 14D-9. The Company,
Parent and Sub each agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the Commission and disseminated to the Company's stockholders, in each case
as and to the extent required by applicable federal securities laws. In
connection with the Offer, the Company will promptly furnish (or cause to be
furnished) Sub with mailing labels, security position listings and any available
listing or computer list containing the names and addresses of the record
holders of the Common Stock as of the most recent practicable date and shall
furnish (or cause to be furnished) Sub with such additional information
(including, but not limited to, updated lists of holders of Common Stock and
their addresses, mailing labels and lists of security positions) and such other
assistance as Sub or its agents may reasonably request in communicating the
Offer to the Company's stockholders. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Merger, Parent and
Sub and their agents shall hold in confidence the information contained in any
such labels, listings and files, will use such information only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, will,
upon request, deliver, and will use their best efforts to cause their agents to
deliver, to the Company all copies of such information then in their possession
or control.
1.3 Composition of the Board of Directors. Promptly upon the acceptance
-------------------------------------
for payment of, and payment by Sub in accordance with the Offer for, at least
70% of the outstanding shares of common Stock pursuant to the Offer (the "Offer
Closing"), Sub shall be entitled to designate such number of directors on the
Board of Directors of the Company, rounded up to the next whole number, as will
give Sub, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), representation on such Board of
Directors equal to at least that number of directors which equals the product of
the total number of directors on the Board of Directors (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
such number of shares of Common Stock so accepted for payment and paid for or
otherwise acquired or owned by Sub or Parent bears to the number of shares of
Common Stock outstanding and the Company and its Board of Directors shall, at
such time, take any and all such action needed to cause Sub's designees to be
appointed to the Company's Board of Directors (including to cause directors to
resign). At all
3
<PAGE>
times before the Effective Time, Parent, Sub and the Company shall use their
reasonable efforts to ensure that at least two members of the Company's Board of
Directors, as constituted on the date hereof, remain on the Company's Board of
Directors, except to the extent that no such individuals or their appointees
agree to serve as directors (the "Continuing Directors"). In the event that one
or more Continuing Directors resign from the Company's Board of Directors,
Parent, Sub and the Company shall permit the remaining, or in the case of the
resignation of all Continuing Directors, the resigning, Continuing Director or
Continuing Directors to appoint his or their successors in his or their
reasonable discretion. The Company shall take all action requested by Parent
which is reasonably necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company agrees to make such mailing with the mailing of the Schedule 14D-9
so long as Sub shall have provided to the Company on a timely basis all
information required to be included in the Information Statement with respect to
Sub's designees. In furtherance thereof, the Company will increase the size of
the Company's Board of Directors, or use its reasonable efforts to secure the
resignation of directors, or both, as is necessary to permit Sub's designees to
be elected to the Company's Board of Directors. As of the Offer Closing, the
Company, if so requested by Parent or Sub, will use its reasonable efforts to
cause persons designated by Sub to constitute the same percentage of each
committee of such board, each board of directors of each subsidiary of the
Company and each committee of each such board (in each case to the extent of the
Company's ability to elect such persons).
1.4 Action by Directors. Following the election or appointment of the
-------------------
Parent's designees pursuant to Section 1.3 and prior to the Effective Time,
and, so long as there shall be at least one Continuing Director, if requested by
a majority of the Continuing Directors, such designees shall abstain from acting
upon, and the approval of a majority of the Continuing Directors shall be
required to authorize, 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 of Sub under this Agreement and any waiver of compliance
with any of the covenants, agreements or conditions under this Agreement for the
benefit of the Company, unless no such individuals or their appointees agree to
serve as Continuing Directors.
1.5 Offer Documents, Schedule 14D-1 and Proxy/Information Statement. The
---------------------------------------------------------------
Offer will be conducted in accordance with the applicable provisions, and rules
and regulations of the Commission, under the Exchange Act. The documents
pursuant to which the Offer will be made, including a Tender Offer Statement on
Schedule 14D-1 and Offer to Purchase and related letter of transmittal
(collectively, the "Offer Documents"), will comply in all material respects with
the Exchange Act, and the rules and regulations thereunder and any other
applicable laws. If at any time prior to the expiration or termination of the
Offer any event occurs which should be described in an amendment or supplement
thereto, Sub will file and disseminate, as required, an amendment or supplement
which complies in all material respects with the Exchange Act and the rules and
regulations thereunder and any other applicable laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents prior to their filing with the Commission. The Company agrees
that any information supplied by the Company for inclusion in the Offer
Documents will not, at the time the Offer
4
<PAGE>
Documents are first published, sent or given to the Company's stockholders,
contain an 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 were made, not misleading. The
Company will promptly correct any information provided by it for inclusion in
the Offer Documents if and to the extent that such information becomes false or
misleading in any material respect, and Parent and Sub will take all steps
necessary to cause the Offer Documents as so corrected to be filed with the
Commission and as so corrected to be disseminated to the Company's stockholders,
in each case as and to the extent required by the Exchange Act. The information
supplied or to be supplied by Parent and Sub for inclusion in the proxy or
information statement, as applicable, to be prepared in connection with the
Merger, if required (the "Proxy/Information Statement") and the Schedule 14D-9
of the Company will not, as of the date of such Proxy/Information Statement or
Schedule 14D-9, as applicable, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading.
Parent and Sub each agrees to promptly correct any information provided by it in
the Proxy/Information Statement and the Schedule 14D-9 of the Company, as
applicable, if and to the extent that such information becomes false or
misleading in any material respect.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 The Merger. (a) Subject to the terms and conditions of this
----------
Agreement, at the time of the Closing (as defined in Section 2.10 hereof),
Articles of Merger (the "Articles of Merger") shall be duly prepared, executed
and acknowledged by Sub and the Company in accordance with the VSCA and shall be
filed on the Closing Date (as defined in Section 2.10 hereof). The Merger of
Sub and the Company (the "Merger") shall become effective upon the issuance of
the Certificate of Merger by the State Corporation Commission of the
Commonwealth of Virginia in accordance with the provisions and requirements of
the VSCA. The date and time when the Merger shall become effective is
hereinafter referred to as the "Effective Time".
(b) At the Effective Time, Sub shall be merged with and into the
Company and the separate corporate existence of Sub shall cease, and the Company
shall continue as the surviving corporation under the laws of the Commonwealth
of Virginia under the name of "O'Sullivan Corporation" (the "Surviving
Corporation").
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 13.1-721 of the VSCA.
2.2 Conversion of Stock. At the Effective Time:
-------------------
(a) Each share of Common Stock then issued and outstanding (other
than any shares of Common Stock which are held by the Company as treasury shares
or otherwise or, directly or indirectly, by Parent or any direct or indirect
subsidiary of Parent (including Sub), all
5
<PAGE>
of which shall be cancelled and none of which shall receive any payment with
respect thereto) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and represent the right to
receive an amount in cash, without interest, equal to the price paid for each
share of Common Stock pursuant to the Offer (the "Merger Consideration").
(b) Each share of common stock, par value $1.00 per share of Sub then
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holder thereof, become one fully paid and nonassessable share of
common stock, $1.00 par value, of the Surviving Corporation.
2.3 Surrender of Certificates. (a) Concurrently with or prior to the
-------------------------
Effective Time, Parent shall designate a bank or trust company located in the
United States to act as paying agent (the "Paying Agent") for purposes of making
the cash payments contemplated hereby. As soon as practicable after the
Effective Time, Parent shall cause the Paying Agent to mail and/or make
available to each holder of a certificate theretofore evidencing shares of
Common Stock (other than those which are held by the Company as treasury shares
or otherwise or, directly or indirectly by Parent or any direct or indirect
subsidiary of Parent (including Sub)) a notice and letter of transmittal
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Paying Agent such certificate or certificates which
immediately prior to the Effective Time represented outstanding Common Stock
(the "Certificates") in exchange for the Merger Consideration deliverable in
respect thereof pursuant to this Article II. Upon the surrender for
cancellation to the Paying Agent of such Certificates, together with a letter of
transmittal, duly executed and completed in accordance with the instructions
thereon, and any other items specified by the letter of transmittal, the Paying
Agent shall promptly pay to the Person (as defined in Section 7.13 hereof)
entitled thereto the Merger Consideration deliverable in respect thereof. Until
so surrendered, each Certificate shall be deemed, for all corporate purposes, to
evidence only the right to receive upon such surrender the Merger Consideration
deliverable in respect thereof to which such Person is entitled pursuant to this
Article II. No interest shall be paid or accrued in respect of such cash
payments.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefore are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with Article II,
provided that the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, give the Surviving Corporation a
bond in such sum as it may direct or otherwise indemnify the Surviving
Corporation in a manner satisfactory to it against
6
<PAGE>
any claim that may be made against the Surviving Corporation with respect to the
Certificate claimed to have been lost, stolen or destroyed.
2.4 Payment. Concurrently with or immediately prior to the Effective Time,
-------
Parent or Sub shall deposit in trust with the Paying Agent cash in United States
dollars in an aggregate amount equal to the product of (i) the number of shares
of Common Stock outstanding immediately prior to the Effective Time on a fully
diluted basis (other than shares of Common Stock which are held by the Company
as treasury shares or otherwise or, directly or indirectly by Parent or any
direct or indirect subsidiary of Parent (including Sub)) and (ii) the Merger
Consideration (such amount being hereinafter referred to as the "Payment Fund").
The Payment Fund shall be invested by the Paying Agent as directed by Parent in
direct obligations of the United States, obligations for which the full faith
and credit of the United States is pledged to provide for the payment of
principal and interest, commercial paper rated of the highest quality by Moody's
Investors Services, Inc. or Standard & Poor's Ratings Group or certificates of
deposit, bank repurchase agreements or bankers' acceptances of a commercial bank
having at least $100,000,000 in assets (collectively, "Permitted Investments")
or in money market funds which are invested in Permitted Investments, and any
net earnings with respect thereto shall be paid to Parent as and when requested
by Parent. The Paying Agent shall, pursuant to irrevocable instructions, make
the payments referred to in Section 2.2(a) hereof out of the Payment Fund. The
Payment Fund shall not be used for any other purpose except as otherwise agreed
to by Parent. Promptly following the date which is three months after the
Effective Time, the Paying Agent shall return to Parent all cash, certificates
and other instruments in its possession that constitute any portion of the
Payment Fund (other than net earnings on the Payment Fund which shall be paid to
Parent) and the Paying Agent's duties shall terminate. Thereafter, each holder
of a Certificate may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws) receive in
exchange therefor the Merger Consideration, without interest, but shall have no
greater rights against the Surviving Corporation or Parent than may be accorded
to general creditors of the Surviving Corporation or Parent under applicable
law. Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of shares of Common Stock for any Merger
Consideration delivered to a public official pursuant to applicable property,
escheat and similar laws.
2.5 No Further Rights of Transfers. At and after the Effective Time, each
------------------------------
holder of a Certificate shall cease to have any rights as a stockholder of the
Company, except for, in the case of a holder of a Certificate (other than shares
to be cancelled pursuant to Section 2.2(a) hereof), the right to surrender his
or her Certificate in exchange for payment of the Merger Consideration, and no
transfer of shares of Common Stock shall be made on the stock transfer books of
the Surviving Corporation. Certificates presented to the Surviving Corporation
after the Effective Time shall be cancelled and exchanged for cash as provided
in this Article II. At the close of business on the day of the Effective Time
the stock ledger of the Company with respect to Common Stock shall be closed.
2.6 Stock Option and Other Plans. Each outstanding stock option to
----------------------------
purchase Common Stock (an "Option") heretofore granted under the Company's 1995
Stock Option Plan, 1995 Outside Directors Stock Option Plan or 1985 Incentive
Stock Option Plan or any other employee, director or other stock option plan now
or formerly maintained by the Company
7
<PAGE>
(collectively, the "Option Plans"), whether or not vested or exercisable, shall
be deemed to be cancelled immediately prior to the Effective Time and shall no
longer be exercisable for the purchase of shares of Common Stock. The holder of
each Option shall receive a payment in cash (subject to any applicable
withholding taxes) at the Effective Time (the "Cash Payment") equal to the
product of (x) the total number of shares of Common Stock subject to such
Option, whether or not then vested or exercisable, and (y) the excess, if any,
of the Merger Consideration over the exercise price per share of Common Stock
subject to such Option. Prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, any committee or subcommittee thereof) shall
take such further action as may be necessary or appropriate for the cancellation
of the Options and payment of the Cash Payment. The Option Plans and 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
(collectively, with the Option Plans, referred to as the "Stock Plans") shall be
terminated by the Company effective as of the Effective Time. The Company will
take all steps to ensure that neither the Company nor any of its subsidiaries is
or will be bound by any Options or other options, warrants, rights or agreements
which would entitle any Person, other than Parent or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof. The Company will use its best efforts to
obtain all necessary consents to ensure that as of the Effective Time, the only
rights of the holders of Options in respect of such Options will be to receive
the Cash Payment in cancellation and settlement thereof.
2.7 Articles of Incorporation of the Surviving Corporation. Subject to
------------------------------------------------------
Section 4.11(a), the articles of incorporation of Sub in effect immediately
prior to the Effective Time, shall be the articles of incorporation of the
Surviving Corporation after the consummation of the Merger until amended in
accordance with applicable law.
2.8 By-Laws of the Surviving Corporation. Subject to Section 4.11(a), the
------------------------------------
by-laws of Sub in effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation after the consummation of the Merger until
amended in accordance with applicable law.
2.9 Directors and Officers of the Surviving Corporation. At the Effective
---------------------------------------------------
Time, the directors of Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, until their successors are duly elected
or appointed and qualified in accordance with applicable law. At the Effective
Time, the officers of Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, until their successors are duly elected
or appointed and qualified in accordance with applicable law.
2.10 Closing. The closing of the Merger (the "Closing") shall take place
-------
at the offices of Thompson Hine & Flory LLP, Cleveland, Ohio, as soon as
practicable after the last of the conditions set forth in Article V hereof is
fulfilled or waived (subject to applicable law) but in no event later than the
fifth business day thereafter, or at such other time and place and on such other
date as Parent and the Company shall mutually agree (the "Closing Date").
8
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to Parent and Sub as follows:
(a) Due Organization, Good Standing and Corporate Power. Each of the
---------------------------------------------------
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
each such corporation has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such jurisdictions
where the failure to be so qualified or licensed and in good standing is not
reasonably likely to have a material adverse effect on the business, properties,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects (the "Condition") of the Company and its subsidiaries
taken as a whole. The Company has made available to Parent and Sub complete and
correct copies of the Articles of Incorporation and By-Laws of the Company and
its subsidiaries, in each case as amended to the date of this Agreement.
(b) Authorization and Validity of Agreement. The Company has the
---------------------------------------
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Company, and the consummation by it of the transactions contemplated hereby,
have been duly authorized and approved by its Board of Directors and no other
corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby (other than the approval of
this Agreement and the Merger by the holders of at least 70% of the shares of
Common Stock). This Agreement has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and general equitable principles.
(c) Capitalization.
--------------
(i) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock. As of the date of this Agreement,
15,594,687 shares of Common Stock are issued and outstanding and 301,242
shares of Common Stock are reserved for issuance pursuant to outstanding
Options granted under the Stock Plans. All issued and outstanding shares of
Common Stock have been validly issued and are fully paid and nonassessable,
9
<PAGE>
and are not subject to, nor were they issued in violation of, any
preemptive rights. Except as set forth in this Section 3.1(c) or on
Schedule 3.1(c) (i) of the disclosure letter to this Agreement (the
"Disclosure Letter"), (i) there are no shares of capital stock of the
Company authorized, issued or outstanding and (ii) there are not as of the
date hereof, and at the Effective Time there will not be, any outstanding
or authorized options, warrants, rights, subscriptions claims of any
character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to Common Stock or
any other shares of capital stock of the Company, pursuant to which the
Company is or may become obligated to issue shares of Common Stock, any
other shares of its capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
the capital stock of the Company. The Company has no authorized or
outstanding bonds, debentures, notes or other indebtedness with respect to
which the holders thereof have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote)
with the stockholders of the Company or any of it subsidiaries on any
matter ("Voting Debt"). As of the Effective Time, the Surviving Corporation
will have no obligation to issue, transfer or sell any shares of Common
Stock of the Surviving Corporation pursuant to any Employee Plan (as
hereinafter defined) or otherwise. Schedule 3.1(c)(i) of the Disclosure
Letter lists, as of the date of this Agreement, the number of shares of
Common Stock subject to, and the exercise price of, each outstanding
Option. The Company has made available to Parent and Sub complete and
correct copies of the Stock Plans and the forms of option agreement used
with respect to each Option Plan.
(ii) Schedule 3.1 (c) (ii) of the Disclosure Letter lists all
of the Company's subsidiaries. All of the outstanding shares of capital
stock of each of the Company's subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to, nor
were they issued in violation of, any preemptive rights, and are owned, of
record and beneficially, by the Company, free and clear of all liens,
claims, security interests, charges, encumbrances, options or claims
whatsoever ("Encumbrances"). No shares of capital stock of any of the
Company's subsidiaries are reserved for issuance and there are no
outstanding or authorized options, warrants, rights, subscriptions, claims
of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of any subsidiary of the Company, pursuant to which such
subsidiary is or may become obligated to issue any shares of capital stock
of such subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such subsidiary.
Except for the subsidiaries listed on Schedule 3.1(c)(ii) of the Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock
or other equity interest in any Person or have any direct or indirect
equity or ownership interest in any Person and neither the Company nor any
of its subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital
10
<PAGE>
contribution or otherwise) to or in any Person. The Company's subsidiaries
have no Voting Debt.
(d) Consents and Approvals; No Violations. Except as disclosed in
-------------------------------------
Schedule 3.1(d) of the Disclosure Letter and assuming (i) the filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), are made and the waiting period thereunder has been terminated or
has expired, (ii) the requirements of the Exchange Act relating to the
Proxy/Information Statement and the Offer are met, (iii) the filing of the
Articles of Merger and other appropriate merger documents, if any, as required
by the VSCA, is made and (iv) approval of this Agreement and the Merger by the
holders of at least 70% of the outstanding shares of Common Stock is obtained,
the execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby will not: (1) violate any
provision of the articles of incorporation or by-laws of the Company or any of
its subsidiaries, each as amended; (2) violate any statute, ordinance, rule,
regulation, order or decree of any court or of any governmental or regulatory
body, agency or authority applicable to the Company or any of its subsidiaries
or by which any of their respective properties or assets may be bound; (3)
require any filing with, or permit, consent or approval of, or the giving of any
notice to, any governmental or regulatory body, agency or authority; or (4)
result in a violation or breach of, conflict with, constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any Encumbrance upon any of the properties or assets of the Company or any of
its subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound except, in the case of clauses (2), (3) and
(4) above, for any such filing, permit, consent, approval or violation, which is
not reasonably likely to have a material adverse effect on the Condition of the
Company and its subsidiaries, taken as a whole, and is not reasonably likely to
prevent or materially delay consummation of the transactions contemplated by
this Agreement.
(e) Company Reports and Financial Statements.
----------------------------------------
(i) Since January 1, 1998, the Company has filed all material
forms, reports, statements and other documents required to be filed by it
with the Commission, including without limitation (a) all Annual Reports on
Form 10-K, (b) all Quarterly Reports on Form 10-Q, (c) all proxy statements
relating to meetings of stockholders (whether annual or special), (d) all
Current Reports on Form 8-K and (e) all other reports, schedules,
registration statements and other documents required to be filed with the
Commission. All of the documents filed by the Company with the Commission
during such period, including all exhibits contained or incorporated by
reference in such documents, are collectively referred to as the
"Commission Filings." The Commission Filings, as amended to date, (i) were
prepared in all material respects in accordance with the requirements of
the Securities Act of 1933, as amended, or the Exchange Act, as the case
may be, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to
be stated
11
<PAGE>
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
Company has, prior to the date of this Agreement, made available to Parent
true and complete copies of all Commission Filings.
(ii) Each of the consolidated balance sheets of the Company
and its consolidated subsidiaries as of the end of the fiscal years ended
December 31, 1998 and 1997 and the consolidated statements of operations,
consolidated statement of stockholders' equity and consolidated statements
of cash flows for the fiscal years ended December 31, 1998 and 1997
included in the Commission Filings, were prepared in accordance with
generally accepted accounting principles (as in effect when prepared)
applied on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the results of operations and
changes in financial position for the periods then ended.
(f) Absence of Certain Changes.
--------------------------
(i) Except as previously disclosed in the Commission Filings
or as otherwise disclosed in Schedule 3.1(f) or Schedule 3.1(k) of the
Disclosure Letter or as otherwise contemplated by this Agreement, since
December 31, 1998 (i) there has not been any material adverse change in the
Condition of the Company and its subsidiaries taken as a whole; (ii) the
businesses of the Company and each of its subsidiaries have been conducted
only in the ordinary course, the Company and its subsidiaries have not
engaged in any material transaction or entered into any material agreement
outside of the ordinary course of business and, to the knowledge of the
Company, neither the Company nor any of its subsidiaries has incurred any
material liabilities (direct, contingent or otherwise) ; (iii) there has
been no declaration, setting aside or payment of any dividend or other
distribution with respect to the Common Stock or any other capital stock of
the Company (except for regular quarterly dividends) or any repurchase,
redemption or other acquisition by the Company of any shares of Common
Stock or other capital stock of the Company; (iv) there has not been any
material amendment of any term of any outstanding security of the Company;
and (v) there has not been any change in any method of accounting or
accounting practice by the Company, except for any such change required
because of a concurrent change in generally accepted accounting principles.
(ii) Furthermore, except as disclosed in Schedule 3.1(f) of
the Disclosure Letter, since December 31, 1998, there has not been any (a)
grant of any severance or termination pay or stay-in-place bonus to any
director or officer of the Company or any of its subsidiaries, (b) entering
into of any employment, deferred compensation or other similar agreement
(or any material amendment to any such existing agreement) with any
director or officer of the Company or any of its subsidiaries, (c) increase
in benefits payable under any existing severance or
12
<PAGE>
termination pay or stay-in-place bonus policies or agreements
with any director or officer of the Company or any of its
subsidiaries, except as provided under any Employee Plan,
contract, agreement or arrangement, or (d) increase in
compensation, bonus or other benefits payable to any director or
officer of the Company or any of its subsidiaries, except for
normal annual adjustments that are not unusual in nature or
amount or except as provided under any Employee Plan, contract,
agreement or arrangement listed in the Disclosure Letter.
(g) Permits; Compliance. Except as is disclosed in Schedule 3.1(g)
-------------------
of the Disclosure Letter, the Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business in substantially the manner as now
being conducted, other than those of which the failure of the Company to be in
possession is not reasonably likely to have a material adverse effect on the
Condition of the Company and its subsidiaries taken as a whole (collectively,
the "Company Permits"). Except as set forth in Schedule 3.1(g) of the Disclosure
Letter, the Company is not in conflict with, or in default or violation of, (a)
any federal, state or foreign law applicable to the Company or by which any of
its properties are bound or subject or (b) any of the Company Permits, other
than conflicts, defaults or violations that are not reasonably likely to have a
material adverse effect on the Condition of the Company and its subsidiaries
taken as a whole. Except as set forth in Schedule 3.1(g) of the Disclosure
Letter, since January 1, 1999, the Company has not received any notification
with respect to possible material conflicts, defaults or violations of any
federal, state, local or foreign law applicable to the Company or by which any
of its properties are bound or subject that have not been cured without any
further material liability or obligation.
(h) Litigation. Except as disclosed in the Commission Filings or
----------
in Schedule 3.1(h) of the Disclosure Letter, there is no action, suit,
proceeding at law or in equity, or any arbitration or any administrative or
other proceeding by or before (or to the best knowledge of the Company any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the best knowledge of the Company, threatened, against or affecting the
Company or any of its subsidiaries, or any of their properties or rights which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Condition of the Company and its subsidiaries taken as a
whole. Except as disclosed in the Commission Filings or in Schedule 3.1(h) of
the Disclosure Letter, neither the Company nor any of its subsidiaries is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its subsidiaries taken as a whole or on the ability of the Company or any
subsidiary to conduct its business as presently conducted or are reasonably
likely to prevent or delay consummation of the Offer or the Merger.
(i) Employee Benefit Plans.
----------------------
(i) Schedule 3.1(i) of the Disclosure Letter lists all
"employee benefit plans" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder ("ERISA"), including,
without limitation, all retirement, savings and other pension
plans, all health, severance, insurance, disability and other
13
<PAGE>
employee welfare plans and all incentive, vacation, accrued leave, sick
pay, sick leave and other similar plans, all bonus, stock option, stock
purchase, restricted stock, incentive, profit-sharing, deferred
compensation, supplemental retirement, unemployment benefit, severance and
other employee benefit plans, programs or arrangements (whether or not
insured) and all material employment, termination, severance, stay-in-place
bonus or compensation agreements, in each case for the benefit of, or
relating to current or former employees or current or former directors of
the Company, whether or not in writing or exempt from the provisions of
ERISA, that the Company or any of its subsidiaries maintain, contribute to
or are otherwise a party to ("Employee Plans"). For purposes of all of the
representations contained in this Section 3.1 (i), the term "subsidiaries"
shall include all employers (whether or not incorporated) that are by
reason of common control treated together with the Company or any of its
subsidiaries as a single employer within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder (the "Code").
(ii) All Employee Plans have been maintained and operated in
all material respects in compliance with their terms and the requirements
prescribed by all applicable statutes, orders or governmental rules or
regulations with respect thereto, and the Company and its subsidiaries have
performed all material obligations required to be performed by them under,
and are not in any material respect in default under or in violation of,
any of the Employee Plans.
(iii) Except as set forth in Schedule 3.1(i) of the Disclosure
Letter, each Employee Plan intended to be qualified under Section 401(a) of
the Code has heretofore been determined by the Internal Revenue Service to
so qualify, and each trust created thereunder has heretofore been
determined by the Internal Revenue Service to so qualify, and each trust
created thereunder has heretofore been determined by the Internal Revenue
Service to be exempt from tax under the provisions of Section 501(a) of the
Code and, to the best knowledge of the Company and its subsidiaries,
nothing has occurred since the date of the most recent determination that
would be reasonably likely to cause any such Employee Plan or trust to fail
to qualify under Section 401(a) or 501(a) of the Code.
(iv) Neither the Company nor any of its subsidiaries have
incurred any material liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4001 et seq. of ERISA, and no condition exists that
-- ----
could reasonably be expected to result in the Company or any of its
subsidiaries incurring material liability under Title IV of ERISA, either
singly or as a member of any trade or business, whether or not
incorporated, under common control of or affiliated with the Company,
within the meaning of Section 414(b), (c), (m) or (o) of the Code. All
premiums payable to the PBGC have been paid when due.
(v) The Company has made available to Parent copies of all
material documents in connection with each Employee Plan including, without
14
<PAGE>
limitation (where applicable), (a) all Employee Plans as in effect on the
date hereof, together with all amendments thereto; (b) all current summary
plan descriptions, if applicable; (c) all current trust agreements,
declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial
statements thereof); (d) the most recent Internal Revenue Service
determination letter, if applicable; (e) annual reports required to be
filed within the last year pursuant to ERISA or the Code with respect to
the Employee Plans; and (f) the most recently prepared financial
statements.
(vi) Neither the Company nor any of its subsidiaries has
engaged in any non-exempt prohibited transaction (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) with respect to any
Employee Plan that would subject any of them to a material tax, penalty or
liability under ERISA or the Code.
(vii) Full payment has been made of all amounts which the
Company or any of its subsidiaries is required, under applicable law or
under any Employee Plan, to have paid as contributions thereto as of the
last day of the most recent fiscal year of such Employee Plan ended prior
to the date hereof and as of the date hereof.
(viii) There are no actions, suits or claims pending, or to the
best knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) with respect to any Employee Plan.
(ix) Except as set forth on Schedule 3.1(i) of the Disclosure
Letter, no Employee Plan provides for the payment of severance or any other
benefits upon the termination of an employee's employment.
(j) Taxes. The Company has filed or caused to be filed, within the
-----
times and in the manner prescribed by law, all United Stated federal, state,
local and foreign tax returns and tax reports ("Tax Returns") which are required
to be filed by, or with respect to, and are material to, the Company or any of
its subsidiaries. Such Tax Returns reflect accurately all material liability for
taxes of the Company and its subsidiaries for the periods covered thereby. All
material federal, state, local and foreign income, profits, franchise, sales,
use, occupancy and excise taxes and other material taxes, assessments, duties,
fees, levies, imports or other governmental charges (including any interest and
penalties thereon) ("Taxes") payable by, or due from, the Company or any of its
subsidiaries have been fully paid or adequately disclosed and fully provided for
on the financial statements of the Company and its subsidiaries in accordance
with generally accepted accounting principles. No audit or other examination,
pending or, to the best knowledge of the Company, threatened litigation or
appeal of any Tax Return or Tax liability of the Company or any of its
subsidiaries is currently in progress (or to the best knowledge of the Company
scheduled to be conducted as of the date hereof). There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any Tax Return of the Company or any of its subsidiaries. Except as provided in
Schedule 3.1(j) of
15
<PAGE>
the Disclosure Letter, neither the Company nor any of its subsidiaries has been
included in any "consolidated", "unitary" or "combined" Tax Return provided for
under the laws of the United States, any foreign jurisdiction or any state or
locality for any taxable period for which the statute of limitations has not
expired. All material Taxes which the Company or any of its subsidiaries were
required by law to withhold in connection with amounts paid or owing to any
employee or independent contractor have been timely paid over to the proper
authorities to the extent due and payable. Except as provided in Schedule 3.1(j)
of the Disclosure Letter, there are no tax sharing, allocation, indemnification
or similar agreements in effect as between the Company or any predecessor or
affiliate thereof and any other party (including any of their predecessors or
affiliates) under which the Company or any of the Company's subsidiaries are
liable or could be liable for any Taxes or other claims of any party.
(k) Liabilities. Except as set forth in the Commission Filings or
-----------
as disclosed in Schedule 3.1(k) of the Disclosure Letter or as otherwise
contemplated by this Agreement, neither the Company nor any of its subsidiaries
has any material outstanding claims, liabilities or indebtedness, contingent or
otherwise, that would be required to be disclosed in the Company's consolidated
financial statements prepared in accordance with generally accepted accounting
principles applied on a consistent basis, other than liabilities incurred
subsequent to December 31, 1998 in the ordinary course of business. Neither the
Company nor any of its subsidiaries is in default in respect of the material
terms and conditions of any indebtedness or other agreement.
(l) Broker's or Finder's Fee. Except for Bowles Hollowell Conner
------------------------
(whose fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm, a true and correct copy of which has been
provided to Parent), no agent, broker, Person or firm acting on behalf of the
Company is, or will be, entitled to any fee, commission or broker's or finder's
fees from any of the parties hereto, or from any Person controlling, controlled
by, or under common control with any of the parties hereto, in connection with
this Agreement or any of the transactions contemplated hereby.
(m) Environmental Laws and Regulations. Except as disclosed in the
----------------------------------
Commission Filings or in Schedule 3.1(m) of the Disclosure Letter or as would
not, individually or in the aggregate, have a material adverse effect on the
Condition of the Company and its subsidiaries taken as a whole, (i) the Company
and its subsidiaries are in compliance with all Environmental Laws; (ii)
Hazardous Substances requiring remediation under any Environmental Law have not
been released or disposed of on any real property owned or operated by the
Company or any subsidiary of the Company; (iii) the Company and its subsidiaries
are not subject to liability for any notice of off-site disposal or
contamination; (iv) the Company and its subsidiaries have not received notice of
any Environmental Claims under any Environmental Law; and (v) there are no
facts, conditions, occurrences or circumstances regarding the Company, its
subsidiaries or any property owned or operated by the Company or its
subsidiaries that could reasonably be expected (a) to form the basis of any
Environmental Claim against the Company, its subsidiaries or any property owned
or operated by the Company or its subsidiaries, or (b) to cause such property to
be subject to any restrictions on the ownership, use, or transferability of any
such property under any Environmental Law. "Environmental Law" means any
applicable law, regulation, order or decree relating to Hazardous Substances or
the protection of human health or the environment. "Hazardous Substance" means
any hazardous or
16
<PAGE>
toxic material, substance, waste, pollutant or contaminant as defined under any
Environmental Law, in any concentration, including, without limitation, any
petroleum or petroleum products, friable asbestos or polychlorinated biphenyls.
"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demand letters, claims, liens, notices of noncompliance or
violation of, investigations or proceedings relating in any way to any
Environmental Law (hereinafter "claims"), including without limitation, (i) any
and all Claims by governmental or regulatory authorities for enforcement, clean-
up, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to human health, safety or the environment.
(n) State Takeover Statutes; No Stockholder Rights Plan. The Board
---------------------------------------------------
of Directors of the Company has approved the Offer, the Merger, this Agreement
and the Share Tender Agreements and such approval is sufficient to render
inapplicable to the Offer, the Merger, this Agreement and the Share Tender
Agreements the provisions of Articles 14 and 14.1 of the VSCA. The Company does
not have a stockholder rights plan or "poison pill," but the Company's Amended
and Restated Articles of Incorporation, as amended, contain a provision (which
the Company does not believe constitutes such a plan or "poison pill") requiring
a super-majority stockholder vote to approve certain matters such as the Merger.
(o) Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of Bowles Hollowell Conner to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's stockholders is fair to the Company's stockholders from a financial
point of view, subject to the usual and customary assumptions and qualifications
contained in such opinion, and a complete and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, delivered to Parent.
(p) Material Contracts. Except as set forth in Schedule 3.1(p) of
------------------
the Disclosure Letter or as disclosed in the Commission Filings, neither the
Company nor any of its subsidiaries is a party to, or is bound by (a) any
material agreement, indenture or other instrument relating to the borrowing of
money by the Company or any of its subsidiaries or the guarantee by the Company
or any of its subsidiaries of any such obligation relating to the borrowing of
money or (b) any other contract or agreement or amendment thereto that (i)
should be or should have been filed as an exhibit to a Form 10-K filed by the
Company with the Commission or (ii) places any material restrictions on the
right of the Company or any of its subsidiaries to engage in any material
business activity currently conducted (collectively, the "Company Contracts").
Neither the Company nor any of its subsidiaries is in material default under any
of the Company Contracts, and, to the 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 under any of the Company Contracts.
(q) Labor. Except as set forth on Schedule 3.1(q) of the
-----
Disclosure Letter, the Company is not a party to or bound by any collective
bargaining agreement respecting its employees, nor, to the knowledge of the
Company, is there existing or contemplated any threat
17
<PAGE>
of any strike, organized walkout or other organized work stoppage or labor
organizational effort by any employees of the Company.
(r) Vote Required. The only vote of the holders of any class or
-------------
series of capital stock of the Company necessary to approve the Merger is the
affirmative vote of the holders of at least 70% of the outstanding shares of
Common Stock. There is no vote of the holders of any class or series of capital
stock of the Company necessary in order for Sub to commence and consummate the
Offer.
(s) Real and Personal Property.
--------------------------
(i) Schedule 3.1(s) of the Disclosure Letter lists all material
real property owned (the "Owned Real Property") or leased (the "Leased Real
Property") by the Company or any of its subsidiaries. Except as set forth
on Schedule 3.1(s) of the Disclosure Letter, the Company has (i) good and
valid title to all of the Owned Real Property, (ii) good and valid title to
all of the tangible personal property recorded as an asset in the
consolidated financial statements of the Company as of December 31, 1998,
and not disposed of since that date in the ordinary course of business, and
(iii) a valid and existing leasehold interest in all of the Leased Real
Property, that, in the case of each of clauses (i), (ii) and (iii) above,
is free and clear of any Encumbrance other than Permitted Encumbrances.
For purposes of this Section 3.1(s), "Permitted Encumbrances" means all (A)
Encumbrances that do not materially interfere with the use of, or
materially diminish the value of, the property subject thereto, (B) liens
for taxes not yet due and payable, (C) such Encumbrances as are shown in
title policies or surveys made available to Parent or Sub and (D) capital
lease obligations entered into in the ordinary course of business.
(ii) Except as set forth on Schedule 3.1(s) of Disclosure Letter,
the Owned Real Property and the Leased Real Property are, considering the
age of such property, in reasonably good condition, normal wear and tear
excepted, and are suitable in all material respects for their present
purposes. Except as set forth on Schedule 3.1(s) of the Disclosure Letter,
to the knowledge of the Company, none of the buildings or improvements
owned or leased by the Company or any of it subsidiaries is subject to any
material structural defect. The primary business operations currently
conducted on the owned Real Property and the Leased Real Property are not
in violation of applicable zoning laws and regulations, except for
violations that could not have a material adverse effect on the Condition
of the Company and its subsidiaries taken as a whole. To the knowledge of
the Company, the buildings and other structures located on the Owned Real
Property do not encroach on the real property of any other Person, and, to
the knowledge of the Company, no building or structure of any other Person
encroaches on any of the Owned Real Property, except for encroachments that
could not have a material adverse effect on the Condition of the Company
and its subsidiaries taken as a whole. The buildings and structures on the
Owned Real Property have direct vehicular access (or indirect vehicular
access through valid and enforceable
18
<PAGE>
easements) to public roads and all appropriate utilities necessary for the
conduct of the business thereon as it is presently conducted. The Company
has made available to Parent all owner's policies of title insurance as to
Owned Real Property, lessee's policies of title insurance as to Leased Real
Property, and related surveys that are in its possession.
(t) Intellectual Property Rights.
----------------------------
(i) Schedule 3.1(t) of the Disclosure Letter lists each of the
following items: (i) material patents and applications therefor,
registrations of material trademarks (including service marks) and
applications therefor, and registration of material copyrights and
applications therefor that are owned by the Company or any of its
subsidiaries, (ii) unexpired material licenses relating to Intellectual
Property Rights that have been granted to or by the Company or any of its
subsidiaries, and (iii) all other material agreements of the Company or any
of its subsidiaries relating to Intellectual Property Rights. As used in
this Agreement, the term "Intellectual Property Rights" includes patents,
patent applications, trademarks, trademark applications, service marks,
service mark applications, copyrights, copyright applications, and
proprietary trade names, publication rights, computer programs (including
source codes and object codes), inventions, know how, trade secrets,
technology, processes and formulae.
(ii) Except as set forth in Section 3.1(t) of the Disclosure
Letter, the Company and its subsidiaries own or have the right to use all
of the material Intellectual Property Rights that are used in the conduct
of the business of the Company or its subsidiaries. Except as set forth in
Schedule 3.1(t) of the Disclosure Letter and to the knowledge of the
Company, such ownership and right to use are free and clear of all
Encumbrances and claims or rights to use of third parties. The Company has
no knowledge of any material allegations or claims that any product or
process manufactured, used, sold or under development by or for the Company
or its subsidiaries infringes on the Intellectual Property Rights of any
third party. Neither the Company nor any of its subsidiaries has knowledge
of any material challenge to the validity, ownership or right to use or
license by the Company of any of the Intellectual Property Rights owned,
used or licensed by the Company.
(u) Insurance. Schedule 3.1(u) of the Disclosure Letter lists, and
---------
the Company has made available to Parent for review, current and complete copies
of, all insurance policies, binders and surety and fidelity bonds relating to
the Company and its subsidiaries (including, without limitation, all policies or
binders of casualty, general liability and workers' compensation insurance, but
excluding the owner's and lessee's policies of title insurance referred to in
Section 3.1(s)), all of which are currently in full force and effect. To the
knowledge of the Company, all premiums and other amounts due and payable under
each such policy, binder and bond have been timely paid. To the knowledge of the
Company, neither the Company nor any of its subsidiaries is in default with
respect to any material provision contained in any such policy, binder or bond
and has not failed to give any notice of or present any material
19
<PAGE>
claim thereunder as required under the terms of the policy. Except for claims
set forth on Schedule 3.1(u) of the Disclosure Letter, there are no material
outstanding unpaid claims under any such policy, binder or bond, and neither the
Company nor any of its subsidiaries has received any written notice of
cancellation or non-renewal of any such policy, binder or bond. Except as set
forth on Schedule 3.1(u) of the Disclosure Letter, neither the Company nor any
of its subsidiaries has received any written notice from any of its insurance
carriers that any insurance premiums paid by it will be materially increased in
the future as a result of the claims experience of the Company or such
subsidiary.
(v) Inventory. Since December 31, 1998, the inventory of the
---------
Company and its subsidiaries has been maintained in the ordinary course of
business and consistent with the past practices of the Company and its
subsidiaries.
(w) Computer Software and Databases. The Company owns or has the
-------------------------------
right to use pursuant to valid and existing licenses all of the material
computer software and databases necessary for the conduct of its business as
presently conducted ("Computer Software and Databases"). The Company has
undertaken a program to determine that the Computer Software and Databases, and
all computer hardware used by the Company and its subsidiaries, will process
dates correctly prior to, during, and after the calendar year 2000, including
but not limited to century recognition and calculations that accommodate same
century and multi-century formulas, date values, and interface values and that
reflect century changes ("Year 2000 Compliant"). The Company believes that it
has taken reasonable steps to determine that its vendors, customers and other
Persons with whom it does a material amount of business are Year 2000 Compliant.
3.2 Representations and Warranties of Parent and Sub. Each of Parent
------------------------------------------------
and Sub represents and warrants to the Company as follows:
(a) Due Organization; Good Standing and Corporate Power. Each of
---------------------------------------------------
Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which each is incorporated and
has the requisite corporate power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
material adverse effect on the Condition of Parent and its subsidiaries taken as
a whole. Parent has delivered to the Company complete and correct copies of its
certificate of incorporation and by-laws and the articles of incorporation and
by-laws of Sub, in each case as amended, to the date of this Agreement.
(b) Authorization and Validity of Agreement. Each of Parent and
---------------------------------------
Sub has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub, and the consummation by each of them of the
transactions contemplated hereby, have been duly authorized by the Boards of
Directors of Parent and Sub. No other corporate action on the part of either of
Parent or Sub is necessary to
20
<PAGE>
authorize the execution, delivery and performance of this Agreement by each of
Parent and Sub and the consummation of the transactions contemplated hereby
(other than the approval of this Agreement by the sole stockholder of Sub, if
required by the VSCA). This Agreement has been duly executed and delivered by
each of Parent and Sub and is a valid and binding obligation of each of Parent
and Sub, enforceable against each of Parent and Sub in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and general equitable principles.
(c) Consents and Approvals; No Violations. Assuming (i) the
-------------------------------------
filings required under the HSR Act are made and the waiting period thereunder
has been terminated or has expired, (ii) the requirements of the Exchange Act
relating to the Proxy/Information Statement and the Offer are met, (iii) the
filing of the Articles of Merger and other appropriate merger documents, if any,
as required by the laws of the VSCA is made and (iv) approval of the Merger by
the sole stockholder of Sub if required by the VSCA is received, the execution
and delivery of this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated hereby will not: (1) violate any
provision of the articles of incorporation or by-laws of Parent or Sub, each as
amended; (2) violate any statute, ordinance, rule, regulation, order or decree
of any court or of any governmental or regulatory body, agency or authority
applicable to Parent or Sub or by which any of their respective properties or
assets may be bound; (3) require any filing with, or permit, consent or approval
of, or the giving of any notice to any governmental or regulatory body, agency
or authority; or (4) result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, or
result in the creation of any Encumbrance upon any of the properties or assets
of the Parent, Sub or any of their subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
Parent or Sub or any of their subsidiaries is a party, or by which they or their
respective properties or assets may be bound except in the case of clauses (2),
(3) and (4) above for any such filing, permit, consent, approval or violation,
which is not reasonably likely to have a material adverse effect on the
Condition of the Parent and Sub, taken as a whole, and is not reasonably likely
to prevent or materially delay consummation of the transactions contemplated by
this Agreement.
(d) Broker's or Finder's Fee. No agent, broker, Person or firm
------------------------
acting on behalf of Parent or Sub is, or will be, entitled to any broker's or
finder's fees or similar fee or commission from any of the parties hereto, or
from any Person controlling, controlled by, or under common control with any of
the parties hereto, in connection with this Agreement or any of the transactions
contemplated hereby.
(e) Financing. Parent has sufficient funds available to purchase
---------
on a fully diluted basis all the outstanding shares of Common Stock pursuant to
the Offer and the Merger and to pay all fees and expenses related to the
transactions contemplated by this Agreement.
21
<PAGE>
(f) Common Stock Ownership. As of the date hereof, none of Parent
----------------------
or its subsidiaries beneficially owns (within the meaning of Rule 13d-3 under
the Exchange Act) any shares of Common Stock.
(g) Interim Operations of Sub. Sub was formed solely for the
-------------------------
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
ARTICLE IV
TRANSACTIONS PRIOR TO CLOSING DATE
4.1 Access to Information Concerning Properties and Records. During the
-------------------------------------------------------
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its subsidiaries to, upon reasonable notice,
afford Parent and Sub, and their respective counsel, accountants, consultants
and other authorized representatives, reasonable access during normal business
hours to the employees, properties, books and records of the Company and its
subsidiaries in order that they may have the opportunity to make such
investigations as they shall reasonably request of the affairs of the Company
and its subsidiaries. The Company shall furnish as promptly as reasonably
practicable to Parent (a) a copy of each report, schedule, registration
statement and other document filed by it or its subsidiaries during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its or its subsidiaries' business, properties and
personnel as Parent and Sub may reasonably request.
4.2 Confidentiality. Information obtained by Parent and Sub pursuant to
---------------
Section 4.1 hereof shall be subject to the provisions of the Confidentiality
Agreement between the Company and Parent dated December 16, 1998 (the "Parent
Confidentiality Agreement").
4.3 Conduct of the Business of the Company Pending the Closing Date. The
---------------------------------------------------------------
Company agrees that, except as permitted, required or specifically contemplated
by, or otherwise described in, this Agreement or otherwise consented to or
approved in writing in advance by Parent, during the period commencing on the
date hereof and ending on the Closing Date:
(a) The Company and each of its subsidiaries will conduct their
respective operations only according to their ordinary and usual course of
business consistent with past practice and will use their reasonable best
efforts to preserve intact their respective business organizations, keep
available the services of their officers and employees and maintain satisfactory
relationships with licensors, suppliers, distributors, clients and others having
business relationships with them;
(b) Neither the Company nor any of its subsidiaries shall (i) make
any change in or amendment to its articles of incorporation or by-laws (or
comparable governing documents); (ii) issue or sell any shares of its capital
stock (other than in connection with the exercise of Options outstanding on the
date hereof) or any of its other securities, or issue any securities convertible
into, or options, warrants or rights to purchase or subscribe to, or enter into
22
<PAGE>
any arrangement or contract with respect to the issuance or sale of, any shares
of its capital stock or any of its other securities, or make any other changes
in its capital structure; (iii) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries; (iv) except for regular quarterly
dividends, declare, pay, set aside or make any dividend or other distribution or
payment with respect to, or split, combine, redeem or reclassify, any shares of
its capital stock; (v) enter into any contract or commitment with respect to
capital expenditures in excess of $1,000,000 or enter into any other material
contract except contracts in the ordinary course of business, it being
understood that the Company shall be permitted to make all capital expenditures
contemplated in its 1999 capital expenditure budget, (vi) release or relinquish
any material contract rights other than in the ordinary course of business;
(vii) adopt, enter into or amend in any material respect any Employee Plan or
non-employee benefit plan or program, employment agreement, severance agreement,
stay-in-place bonus agreement, license agreement or retirement agreement, or,
except in the ordinary course of business and consistent with past practice or
except as required under any Employee Plan, contract, agreement or arrangement
listed on Schedule 3.1(i) of the Disclosure Letter, pay or commit to pay any
bonus or contingent or other extraordinary compensation to any employee or
director or increase in any manner the compensation or fringe benefits payable
to any employee or director; (viii) merge, consolidate or enter into a share
exchange with any other Person, acquire a material amount of capital stock or
assets of any other Person, or sell, lease, license, mortgage, pledge or
otherwise dispose of a material amount of assets to any other Person, except for
the purchase or sale of inventory in the ordinary course of business consistent,
in all material respects, with past practice; (ix) other than in the ordinary
course of business, transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of, encumber or subject to any lien, any assets or incur or modify any
indebtedness or other liability or issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become responsible for the
obligations of any Person; (x) agree to the settlement of any material claim or
litigation; (xi) make any material tax election or settle or comprise any
material tax liability; (xii) make any material change in its method of
accounting or (xiii) agree, in writing or otherwise, to take any of the
foregoing actions; and
(c) The Company shall not, and shall not permit any of its
subsidiaries to, (i) take any action, engage in any transaction or enter into
any agreement which would cause any of the representations or warranties set
forth in Section 3.1 hereof to be untrue as of the Closing Date or (ii) purchase
or acquire, or offer to purchase or acquire, any shares of capital stock of the
Company.
4.4 Proxy/Information Statement. If stockholder approval of the Merger is
---------------------------
required by law or the Company's Amended and Restated Articles of Incorporation
(as amended), as promptly as practicable, the Company will prepare and file a
preliminary Proxy/Information Statement with the Commission and will use its
best efforts to respond to the comments of the Commission in connection
therewith and to furnish all information required to prepare the definitive
Proxy/Information Statement (including, without limitation, financial statements
and supporting schedules and certificates and reports of independent public
accountants). Promptly after the expiration or termination of the Offer, if
required by the VSCA or the Company's Amended and Restated Articles of
Incorporation (as amended) in order to consummate the Merger, the Company will
cause the definitive Proxy/Information Statement to be mailed to the
stockholders of the Company and, if necessary, after the definitive
Proxy/Information Statement
23
<PAGE>
shall have been so mailed, promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company will not use any proxy materials in connection with the
meeting of its stockholders without Parent's prior approval, which approval
shall not be unreasonably withheld. The Proxy/Information Statement will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the Commission and on the date first sent to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent and Sub for
inclusion in the Proxy/Information Statement.
4.5 Stockholder Approval. Promptly after the expiration or termination of
--------------------
the Offer, if required by the VSCA or the Company's Amended and Restated
Articles of Incorporation (as amended) in order to consummate the Merger, the
Company, acting through its Board of Directors shall, in accordance with
applicable law, call a special meeting of the holders of Common Stock for the
purpose of voting upon this Agreement and the Merger and the Company agrees that
this Agreement and the Merger shall be submitted at such special meeting. The
Company shall use its reasonable efforts to solicit from its stockholders
proxies, and shall take all other action necessary and advisable, to secure the
vote of stockholders required by applicable law or the Company's Amended and
Restated Articles of Incorporation (as amended) to obtain the approval for this
Agreement. Subject to Section 4.7 of this Agreement, the Company agrees that it
will include in this Proxy/Information Statement the recommendation of its Board
of Directors that holders of Common Stock approve and adopt this Agreement and
approve the Merger. Parent will cause all shares of Common Stock owned by
Parent and its subsidiaries to be voted in favor of the Merger.
4.6 Reasonable Best Efforts. Subject to the terms and conditions provided
-----------------------
herein, each of the Company, Parent and Sub shall, and the Company shall cause
each of its subsidiaries to, cooperate and use their respective reasonable best
efforts to take, or cause to be taken, all appropriate action, and to make, or
cause to be made, all filings necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, their respective
reasonable best efforts to obtain, prior to the Closing Date, all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company and its
subsidiaries as are necessary for consummation of the transactions contemplated
by this Agreement and to fulfill the conditions to the Offer and the Merger.
The Company, Parent and Sub shall use their reasonable efforts to consummate the
Merger as promptly as practicable after the Offer Closing.
4.7 No Solicitation of Other Offers. (a) From the date of this Agreement
-------------------------------
until the Effective Time or the earlier termination of this Agreement in
accordance with Article VI, neither the Company nor any of its subsidiaries,
shall, directly or indirectly, take (and the Company shall not authorize or
permit its or its subsidiaries' officers, directors, employees, representatives,
consultants, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to (i) solicit, initiate, encourage or take
any other action to
24
<PAGE>
facilitate the submission of any Acquisition Proposal, or (ii) participate in
any way in discussions or negotiations with, or, furnish any information
(whether public or nonpublic), to any Person (other than Parent or Sub) in
connection with an Acquisition Proposal; provided, however, that the Company may
-------- -------
take any action described in clause (ii) above, if (A) such action is taken in
connection with an unsolicited Acquisition Proposal, (B) the Board of Directors
believes in its good faith judgment (based on the advice of its financial and
legal advisors) that failing to take such action would constitute a breach of
its fiduciary duties and (C) in the case of the disclosure of nonpublic
information relating to the Company in connection with an Acquisition Proposal,
the disclosure of such information is covered by a confidentiality agreement
that provides substantially the same protection to the Company as is afforded by
the Parent Confidentiality Agreement.
In addition, neither the Board of Directors of the Company nor any
committee thereof shall withdraw or modify in a manner adverse to Parent or Sub
the approval and recommendation of the Offer and this Agreement or approve or
recommend any Acquisition Proposal, provided that the Board of Directors (or a
committee thereof) may, prior to the acceptance for payment of shares of Common
Stock pursuant to the Offer, recommend to its stockholders an unsolicited
Acquisition Proposal and in connection therewith withdraw or modify its approval
or recommendation of the Offer or the Merger if (i) the Board of Directors of
the Company has determined in its good faith judgment (based on the advice of
its financial and legal advisors) that the unsolicited Acquisition Proposal is a
Superior Proposal, and (ii) simultaneously with such withdrawal, modification or
recommendation, the Company terminates this Agreement in accordance with Section
6.1(e) and pays to Parent the break-up fee in accordance with Section 6.3. Any
actions permitted under, and taken in compliance with, this Section 4.7 shall
not be deemed a breach of any other covenant or agreement of such party
contained in this Agreement. It is understood and agreed that for all purposes
of this Section 4.7 any actions taken by the Company or its subsidiaries or
their officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants or other agents or affiliates prior to the date
hereof in soliciting, encouraging, initiating, facilitating or participating in
any discussions relating to any Acquisition Proposal shall not be construed to
render an Acquisition Proposal received after the date hereof a solicited
Acquisition Proposal.
The Company will promptly notify Parent orally and in writing of any
Acquisition Proposal or any inquiries with respect thereto. Any such written
notification will include the identity of the Person making such inquiry or
Acquisition Proposal and a description of the material terms of such Acquisition
Proposal (or the nature of the inquiry) and will indicate whether the Company is
providing or intends to provide the Person making the Acquisition Proposal with
access to nonpublic information relating to the Company or any of its
subsidiaries. The Company will, to the extent reasonably practicable, also
promptly inform Parent of any material change in the details (including
amendments or proposed amendments) of any such request or Acquisition Proposal.
In the event that the Board of Directors of the Company determines that an
Acquisition Proposal is a Superior Proposal and desires to terminate this
Agreement pursuant to Section 6.1(e), it will give Parent written notice of its
intention to terminate this Agreement no later than three business days in
advance of any date that it intends to terminate this Agreement. During that
three business day period, Parent will have the right, by giving written notice
to the Company, to match the terms of such Superior Proposal. If Parent
25
<PAGE>
notifies the Company within such three business day period that it agrees to
match the terms of the Superior Proposal, the Company will forthwith cease any
discussion with the Person making the Superior Proposal, and Parent and the
Company will promptly incorporate the terms of the Superior Proposal in this
Agreement. Except for such amendments, the provisions of this Agreement
(including the provisions of this Section 4.7) will remain in full force and
effect.
"Acquisition Proposal" shall mean any proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company or any of its subsidiaries (other
than investors in the ordinary course of business) or of over 20% of any class
of equity securities of the Company or any of its subsidiaries or any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning more than 20% of any class of equity securities of the
Company or any of its subsidiaries, or any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company and taken as a whole
its subsidiaries other than the transactions contemplated by this Agreement.
"Superior Proposal" shall mean a bona fide Acquisition Proposal on terms which a
majority of the members of the Board of Directors of the Company determines in
its good faith judgment (based on the advice of its financial and legal
advisors) to be more favorable to the Company and its stockholders than the
transactions contemplated hereby.
(b) Immediately following the purchase of shares of Common Stock
pursuant to the Offer, the Company will request each Person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any portion thereof other than Parent to return all
confidential information heretofore furnished to such Person by or on behalf of
the Company.
(c) Nothing contained in this Section 4.7 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the opinion of the Board of Directors of the
Company, after consultation with counsel, failure to so disclose would be
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law; provided that the Company does not, except as permitted by this
--------
Section 4.7, withdraw or modify, or propose to withdraw or modify, its position
with respect to the Offer or the Merger or approve or recommend, or propose to
approve or recommend, any Acquisition Proposal.
4.8 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to Parent of: (a) any notice of, or other communication relating to, a material
default or event that, with notice or lapse of time or both, would become a
material default, received by the Company or any of its subsidiaries subsequent
to the date of this Agreement and prior to the Closing Date, under any material
contract to which the Company or any of its subsidiaries is a party or is
subject; (b) any material notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; (c) any action, suit, claim or proceeding commenced against
or, to the knowledge of the Company, any material threat of an action, suit,
claim or proceeding made against, or any pending investigation of the Company
that, if pending on the date of this Agreement, would have been required to be
26
<PAGE>
disclosed in Schedule 3.1(h) of the Disclosure Letter or that relates to the
transactions contemplated by this Agreement; and (d) any material adverse change
in the Condition of the Company and its subsidiaries taken as a whole or the
occurrence of any event which is reasonably likely to result in any such change.
Each of the Company and Parent shall give prompt notice to the other party of
any notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
4.9 HSR Act. The Company and Parent shall, within five business days from
-------
the date of this Agreement, file Notification and Report Forms under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and shall use their best
efforts to respond as promptly as practicable to all inquiries received from the
FTC or the Antitrust Division for additional information or documentation.
4.10 Employee Benefits. Parent agrees that, during the period commencing at
-----------------
the Effective Time and ending on the second anniversary thereof, the employees
(and former employees) of the Company and its subsidiaries will continue to be
provided with employee benefits and benefit plans no less favorable than those
in the aggregate provided by the Company and its subsidiaries as of the
Effective Time. Parent will, and will cause the Surviving Corporation to, honor
employee (or former employee) benefit obligations and contractual rights
existing as of the Effective Time and all employment, incentive and deferred
compensation or severance agreements, plans or policies adopted by the Board of
Directors of the Company (or any committee or subcommittee thereof) prior to the
date hereof in accordance with their terms, in each case to the extent disclosed
in the Disclosure Letter. Parent will provide employees of the Company and its
subsidiaries with credit for service with the Company or any of its subsidiaries
or predecessors prior to the Effective Time for purposes of determining
eligibility to participate vesting, benefits and benefit accrual under any
employee benefit plans of Parent or its subsidiaries. Employees of the Company
and its subsidiaries shall not be subject to pre-existing condition limitations,
proof of insurability requirements, or any similar conditions or requirements
under health benefit plans maintained by Parent or its subsidiaries that would
delay commencement of an employee's participation in or limit an employee's
level of coverage under, any of the health benefit plans of Parent or its
subsidiaries. Subject to the action taken by the Board of Directors with respect
to the Salary Continuation Agreements Trust as set forth in Section 1.1.(c) and
from and after the Effective Time, the Surviving Corporation shall assume and
fully discharge, and Parent shall guarantee the performance of, all obligations
of the Company (and the Surviving Corporation) under the salary continuation
agreements listed on Appendix A of the Salary Continuation Agreements Trust or
on Schedule 3.1(i) of the Disclosure Letter (the "Salary Continuation
Agreements"). The Company, Parent and its subsidiaries (including the Surviving
Corporation) shall not amend or terminate any of the Salary Continuation
Agreements at any time, shall continue to make sufficient cash deposits into the
Salary Continuation Agreements Trust to permit the trustee to pay all premiums
required to be paid pursuant to life insurance contracts held in the Salary
Continuation Agreements Trust and shall not directly or indirectly take any
action that would in any way diminish or reduce the cash surrender value of such
life insurance contracts (including, but not limited to, borrowing against the
cash surrender value of the life insurance contracts).
27
<PAGE>
4.11 Directors' and Officers' Insurance; Indemnification. (a) The articles
---------------------------------------------------
of incorporation and the by-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Amended and Restated Articles of Incorporation (as
amended) and By-Laws on the date of this Agreement, which provisions shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by law.
(b) For six years from the Effective Time, Parent shall either (x)
maintain in effect the Company's current directors' and officers' liability
insurance covering those persons who are currently covered on the date of this
Agreement by the Company's directors' and officers' liability insurance policy
(a copy of which has been heretofore delivered to Parent) (the "Indemnified
Parties"); provided, however, that in no event shall Parent be required to
-------- -------
expend in any one year an amount in excess of 200% of the annual premiums
currently paid by the Company for such insurance which the Company represents to
be $107,000 for the twelve month period ending December 31, 1999; and, provided,
--------
further, that if the annual premiums of such insurance coverage exceed such
- -------
amount, Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount and to give prompt written notice
of any reduction in the amount or scope of coverage resulting therefrom to the
directors and officers affected thereby; provided further, that Parent may
-------- -------
substitute for such Company policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous and provided that
said substitution does not result in any gaps or lapses in coverage with respect
to matters occurring prior to the Effective Time or (y) cause the Parent's,
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy.
(c) Parent agrees, from and after the date of purchase of shares of Common
Stock pursuant to the Offer, to indemnify all Indemnified Parties to the fullest
extent permitted by applicable law with respect to all acts and omissions
arising out of such individuals' services as officers, directors, employees or
agents of the Company or any of its subsidiaries or as trustees or fiduciaries
of any plan for the benefit of employees, or otherwise on behalf of, the Company
or any of its subsidiaries, occurring prior to the Effective Time including,
without limitation, the transactions contemplated by this Agreement. Without
limitation of the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter, including without limitation, the transactions
contemplated by this Agreement, occurring prior to, and including, the Effective
Time, Parent, from and after the date of purchase of shares of Common Stock
pursuant to the Offer, will pay as incurred such Indemnified Party's legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. Parent shall pay all expenses, including
attorneys' fees, that may be incurred by any Indemnified Party in enforcing this
Section 4.11 or any action involving an Indemnified Party resulting from the
transactions contemplated by this Agreement. If for any reason the
indemnification provided for in this Section 4.11 is unavailable with respect to
any Indemnified Party or insufficient to hold him or her harmless with respect
to any such loss, claim, damage or liability, then Parent shall contribute to
the
28
<PAGE>
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect (i)
the relative economic interests of the Company and its affiliates on the one
hand and Parent on the other in connection with the Offer and the Merger to
which such loss, claim, damage or liability relates, (ii) the relative fault of
the Company and its affiliates on the one hand and Parent on the other with
respect to such loss, claim, damage or liability, and (iii) any other relevant
equitable considerations.
(d) This Section 4.11 shall survive the consummation of the Merger,
is intended to benefit the Company, Parent, the Surviving Corporation and the
Indemnified Parties, and shall be binding on all successors and assigns of
Parent and the Surviving Corporation.
4.12 Financing. Parent shall provide Sub with the funds necessary to
---------
consummate the Offer and the Merger and the transactions contemplated hereby in
accordance with the terms hereof.
4.13 Parent Guarantee. Parent hereby guarantees the performance of all of
----------------
Sub's obligations under this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO MERGER
5.1 Conditions Precedent to Obligation of Parent, Sub and the Company. The
-----------------------------------------------------------------
respective obligations of Parent and Sub, on the one hand, and the Company, on
the other hand, to effect the Merger are subject to the satisfaction or waiver
(subject to applicable law) at or prior to the Closing Date of each of the
following conditions:
(a) Approval of Company's Stockholders. To the extent required by
----------------------------------
applicable law or the Company's Amended and Restated Articles of Incorporation
(as amended), this Agreement and the Merger shall have been approved and adopted
by holders of at least 70% of the Common Stock of the Company in accordance with
applicable law (if required by applicable law) or the Company's Amended and
Restated Articles of Incorporation (as amended);
(b) HSR Act. Any waiting period (and any extension thereof) under
-------
the HSR Act applicable to the Merger shall have expired or been terminated;
(c) Injunctions. No preliminary or permanent injunction or other
-----------
shall have been issued by any court or any governmental or regulatory agency,
body or authority which prohibits the consummation of the Offer or the
Merger and the transactions contemplated by this Agreement and which is in
effect on the Closing Date; provided, however, that, in the case of a decree,
-------- -------
injunction or other order, each of the parties shall have used reasonable
efforts to prevent the entry of any such injunction or other order and to appeal
as promptly as possible any decree, injunction or other order that may be
entered;
29
<PAGE>
(d) Payment for Common Stock. Sub shall have accepted for payment
------------------------
and paid for the shares of Common Stock tendered pursuant to the Offer; and
(e) Statutes. No statute, rule, regulation, executive order, decree
--------
or order of any kind shall have been enacted, entered, promulgated or enforced
by any court or governmental authority which prohibits the consummation of the
Offer or the Merger or has the effect of making the purchase of Common Stock
illegal.
5.2 Conditions Precedent to Obligation of the Company. The obligation of
-------------------------------------------------
the Company to effect the Merger is also subject to the satisfaction or waiver,
at or prior to the Closing Date, of the following condition:
(a) Performance by Parent and Sub. Each of the Parent and Sub shall
-----------------------------
have performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions, contained
in Sections 1.3 and 2.4 of this Agreement to be performed or complied with by it
prior to the Closing Date.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval of the Merger by the Company's stockholders:
(a) by mutual written consent of the Company, on the one hand, and of
Parent and Sub, on the other hand;
(b) by either Parent, on the one hand, or the Company, on the other
hand, if any governmental or regulatory agency shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, shares of
Common Stock pursuant to the Offer or the Merger and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by either Parent, on the one hand, or the Company, on the other
hand, if the Effective Time shall not have occurred within six months after
commencement of the Offer unless the Effective Time shall not have occurred
because of a material breach of any representation, warranty, obligation,
covenant, agreement or condition set forth in this Agreement on the part of the
party seeking to terminate this Agreement;
(d) by Parent, on the one hand, or the Company, on the other hand, if
the Offer is terminated or expires in accordance with its terms without Sub
having purchased any Common Stock thereunder due to a failure of any of the
conditions set forth in Annex A hereto to be satisfied, unless such termination
or expiration has been caused by or results from the
30
<PAGE>
failure of the party seeking to terminate this Agreement to perform in any
material respect any of its respective covenants or agreements contained in this
Agreement;
(e) subject to the provisions of Section 6.3, by either Parent, on
the one hand, or the Company, on the other hand, if the Board of Directors of
the Company determines that an Acquisition Proposal will result in a Superior
Proposal and the Board believes (and has been advised by counsel) that a failure
to terminate this Agreement and enter into an agreement to effect the Superior
Proposal would constitute a breach of its fiduciary duties;
(f) prior to the consummation of the Offer, by the Company, if (i)
any of the representations and warranties of Parent or Sub contained in this
Agreement were untrue or incorrect in any material respect when made or have
since become, and at the time of termination remain, incorrect in any material
respect, or (ii) Parent or Sub shall have breached or failed to comply in any
material respect with any of their respective obligations, covenants or
agreements under this Agreement, including, without limitation, their obligation
to commence the Offer within the time period required by Section 1.1 of this
Agreement; and
(g) by the Company, if Parent or Sub shall have terminated the Offer
prior to the Offer Closing, the Offer is terminated or expires without Sub
having purchased any shares of Common Stock or if Sub or Parent fails to
purchase validly tendered shares of Common Stock in violation of the terms and
conditions of the Offer or this Agreement.
6.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 6.1 hereof by Parent or Sub, on the one hand, or
the Company, on the other hand, written notice thereof shall forthwith be given
to the other party or parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Company, except that Section 4.2, 6.3, 7.1 and this Section 6.2 hereof shall
survive any termination of this Agreement. Nothing in this Section 6.2 shall
relieve any part to this Agreement of liability for breach of this Agreement.
6.3 Break-up Fee. (i) If this Agreement is terminated by the Company in
------------
accordance with Section 6.1 (e); (ii) if the Board of Directors of the Company
fails to recommend, withdraws, modifies or changes its recommendation of the
Offer or the Merger in any respect adverse to Parent or Sub, or has resolved to
do so, for any reason other than a breach by Parent or Sub in any material
respect of its representations or warranties contained in this Agreement or a
failure by Parent or Sub to perform in any material respect any of its covenants
or agreements contained in this Agreement; or (iii) if, prior to the purchase of
shares of Common Stock by Sub, the Company violates its obligations under
Section 4.7 in any material respect and thereafter the Company enters into an
agreement to effect a Superior Proposal, then the Company shall pay to Parent in
same day funds a fee of $5,000,000, in the case of clause (i), within two
business days after the termination of this Agreement, in the case of clause
(ii), within two business days after the withdrawal, modification or change of
the recommendation and, in the case of clause (iii), within two business days
after the execution of an agreement referred to in such clause. Payment of the
$5,000,000 fee by the Company shall be Parent and Sub's
31
<PAGE>
exclusive remedy against the Company for any of the matters referred to in
clauses (i), (ii) or (iii) above.
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses. All costs and expenses incurred in connection with
-----------------
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses.
7.2 Representations and Warranties. The respective representations and
------------------------------
warranties of the Company, on the one hand, and Parent and Sub, on the other
hand, contained herein or in any certificates or other documents delivered prior
to or at the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party. Each and every such representation and warranty
shall expire with, and be terminated and extinguished by, the Closing and
thereafter none of the Company, Parent or Sub shall be under any liability
whatsoever with respect to any such representation or warranty. This Section 7.2
shall have no effect upon any other obligation, covenant or agreement of the
parties hereto, whether to be performed before or after the Effective Time.
7.3 Extension; Waiver. Subject to the provisions of Section 1.1 hereof, 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 or Sub,
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.
7.4 Public Announcements. The Company, on the one hand, and Parent and
--------------------
Sub, on the other hand, agree to consult promptly with each other prior to
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated hereby, and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law. The Company will not issue any press release or make any public
statement that might constitute the commencement of the Offer without the prior
written consent of Parent.
7.5 Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
32
<PAGE>
(a) if to the Company to it at:
O'Sullivan Corporation
1944 Valley Avenue
Winchester, VA 22601
Attention: Chief Financial Officer
with a copy to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, VA 23219
Attention: Robert L. Burrus, Jr., Esq.
(b) if to either Parent or Sub, to it at:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012-0122
Attention: Chief Executive Officer
with a copy to:
The Geon Company
One Geon Center
Avon Lake, Ohio 44012-0122
Attention: General Counsel
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof, except for a notice of a change of address, which shall be
effective only upon receipt thereof.
7.6 Entire Agreement. This Agreement, the Disclosure Letter, the Parent
----------------
Confidentiality Agreement and the Annex and other documents referred to herein
or delivered pursuant hereto, collectively contain the entire understanding of
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings, oral and written, with
respect thereto.
7.7 Binding Effect; Benefit; Assignment. This Agreement shall inure to the
-----------------------------------
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, which
consent shall not be unreasonably withheld in the case of an assignment to
another direct or indirect
33
<PAGE>
wholly-owned subsidiary of Parent for purposes of avoiding recognition of
taxable gain or loss for federal income tax purposes by either Sub or the
Company in connection with the Merger. It is understood and agreed that any
permitted assignment will not cause Parent or Sub to be relieved of its
obligations under this Agreement and that the Surviving Corporation (whether the
Surviving Corporation is Sub or any other direct or indirect wholly-owned
subsidiary) shall have all the obligations of the Surviving Corporation
specified in this Agreement. Nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, expect for Sections 4.10
and 4.11, which are intended to be for the benefit of the persons referred to
therein, and may be enforced by such persons.
7.8 Further Actions. Each of the parties hereto agrees that, subject to
---------------
legal obligations, it will use its reasonable best efforts to fulfill all
conditions precedent specified herein, to the extent that such conditions are
within its control, and to do all things reasonably necessary to consummate the
transactions contemplated hereby.
7.9 Headings. The descriptive headings of the several Articles and
--------
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement.
7.10 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original, and all of which together shall
be deemed to be one and the same instrument.
7.11 Applicable Law. This Agreement and the legal relations between the
--------------
parties hereto shall be governed by and construed in accordance with the laws of
the Commonwealth of Virginia, without regard to the conflict or choice of laws
rules thereof.
7.12 Severability. If any term, provision, covenant or restriction
------------
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7.13 "Person" Defined. "Person" shall mean and include an individual, a
----------------
partnership, a joint venture, a corporation, a trust, a limited liability
company, an unincorporated organization, a group and a government or other
department or agency thereof.
34
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company has caused this
Agreement to be executed by its respective officers thereunto duly authorized,
all as of the date first above written.
THE GEON COMPANY
By: /s/ Gregory L. Rutman
----------------------------------
Name: Gregory L. Rutman
Title: Vice President, General Counsel
and Secretary
TGC AQUISITION CORPORATION
By: /s/ Donald P. Knechtges
----------------------------------
Name: Donald P. Knechtges
Title: Chairman, President and Chief
Executive Officer
O'SULLIVAN CORPORATION
By: /s/ John S. Campbell
----------------------------------
Name: John S. Campbell
Title: President and Chief Executive
Officer
35
<PAGE>
ANNEX A
-------
to
Agreement and Plan of Merger
----------------------------
The capitalized terms used in this Annex A shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex A is
appended and "Purchaser" shall be deemed to refer to Sub.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1c under the Exchange Act, pay
for any shares of Common Stock tendered and may terminate or amend the Offer in
accordance with the Merger Agreement and may postpone the acceptance of, and
payment for, shares of Common Stock, if (i) there shall not have been validly
tendered and not withdrawn prior to the expiration of the Offer a number of
shares of Common Stock which represent at least 70% of the total voting power of
all shares of capital stock of the Company outstanding on a fully diluted basis
(the "Minimum Condition"), (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated or (iii) at any time on or after the
date of the Merger Agreement and at or before the expiration date of the Offer
(as the same may be extended from time to time) any of the following shall
occur:
(a) any court or domestic government or governmental authority or agency
shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree or injunction or
other order or the Antitrust Division or the Federal Trade Commission
has indicated to Parent and the Company that it may seek to obtain a
decree, injunction or other order which (i) makes illegal, materially
delays or otherwise directly or indirectly materially restrains or
prohibits the Offer or the Merger, (ii) prohibits or materially limits
the ownership or operation by Parent or Purchaser of all or any
material portion of the business or assets of the Company or compels
Parent or Purchaser to dispose of all or any material portion of the
business or assets of Parent or Purchaser or the Company, or imposes
any limitations on the ability of Parent or Purchaser to conduct its
business or own such assets, (iii) imposes limitations on the ability
of Parent or Purchaser effectively to exercise full rights of
ownership of the shares of Common Stock, including, without
limitation, the right to vote any shares of Common Stock acquired or
owned by Purchaser or Parent on all matters properly presented to the
Company's stockholders, (iv) requires divestiture by Parent or
Purchaser of any shares of Common Stock, or (v) otherwise materially
adversely affects the Condition of the Company and its subsidiaries
taken as a whole;
(b) there shall have occurred (i) any general suspension greater than 24
hours of trading in, or limitation on prices for, securities on any
national securities exchange or in the over the-counter market, (ii)
any material change in United States or any other currency exchange
rates or a suspension of, or limitation on, the markets therefor,
(iii) a declaration of a banking moratorium or any
36
<PAGE>
suspension of payments in respect of banks in the United States, or
(iv) a declaration of war by the United States having a material
adverse effect on the Company or materially adversely affecting (or
materially delaying) the consummation of the Offer, or (v) in the case
of any of the situations described in clauses (i) through (iii)
inclusive existing at the date of commencement of the Offer, a
material acceleration or worsening thereof;
(c) all consents, registrations, approvals, permits, authorizations,
notices, reports or other filings required to be obtained or made by
the Company, Parent or Purchaser with or from any governmental or
regulatory entity in connection with the execution, delivery and
performance of the Merger Agreement, the Offer and the consummation of
the transactions contemplated by the Merger Agreement shall not have
been made or obtained and such failure could reasonably be expected to
have a material adverse effect on the Condition of the Company and its
subsidiaries taken as a whole or could be reasonably likely to prevent
or materially delay consummation of the transactions contemplated by
the Merger Agreement;
(d) any representation or warranty made by the Company in the Merger
Agreement (i) (A) was untrue or incorrect in any material respect when
made or (B) has become untrue or incorrect in any material respect and
(ii) at the time of termination or amendment remains untrue or
incorrect in any material respect;
(e) there shall have been a breach by the Company of any of its covenants
or agreements in any material respect contained in the Merger
Agreement;
(f) the Company's Board of Directors shall have withdrawn, modified or
amended in any respect adverse to Parent or Purchaser its
recommendation of the Offer or the Merger, or shall have resolved to
do so; or
(g) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Purchaser, in any such case and regardless
of the circumstances giving rise to any such condition, would make it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and may
be asserted by Purchaser, or may be waived by Purchaser, in whole or in part at
any time and from time to time in its sole discretion; provided, however, that
-------- -------
without the consent of the Company, Parent and Purchaser shall not waive the
Minimum Condition.
37
<PAGE>
Exhibit (c)
[LETTERHEAD OF GEON COMPANY APPEARS HERE]
December 16, 1998
CONFIDENTIAL
C. Bryant Nickerson
Treasurer, CFO and Secretary
O'Sullivan Corporation
P.O. Box 3510
Winchester, VA 22604-2547
Dear Mr. Nickerson:
The Geon Company (Geon), a Delaware corporation with offices at One Geon Center,
Avon Lake, Ohio 44012, and O'Sullivan Corporation (O'Sullivan), a corporation
with offices at 1944 Valley Avenue, Winchester, Virginia 22601, wish to discuss
possible synergistic combinations and/or relationships between our two companies
(the "Scope"). One or both of the parties may consider all or some portion of
the information which the parties will exchange in discussing the Scope (whether
in the form of oral communication, written documents, data storage media,
things, plant or facility visits, or any other suitable or customary form) to
have a confidential, proprietary, or trade secret nature (all such hereafter
referred to as "Proprietary Information"). For purposes of administrative
convenience, each party will regard all information disclosed by the other party
in discussing the Scope as constituting the disclosing party's Proprietary
Information except to the extent that a disclosing party identifies information
(or particular elements thereof) when conveyed as not constituting Proprietary
Information.
With respect to all such Proprietary Information disclosed by a party, the
receiving party shall:
(a) use at least the same efforts to maintain the confidentiality of the
disclosed Proprietary Information as the receiving party uses with its
own information of similar import and sensitivity;
<PAGE>
(b) not disclose the Proprietary Information to any third party without
the consent of the disclosing party;
(c) use the disclosed Proprietary Information only for the purposes within
the Scope and not for any other purpose; and
(d) limit access to the disclosed Proprietary Information to those of the
receiving party's employees and agents who have a need-to-know, who
have agreed to honor and/or have received instructions to honor the
terms of this letter agreement, and who will safeguard such disclosed
Proprietary Information against further disclosure with the duty of
care set forth in subparagraph (a) above.
The receiving party assumes all responsibility for a failure by a receiving
party's employee to maintain confidentiality of such Proprietary Information.
The duties of confidentiality hereunder shall expire ten (10) years after the
date of last disclosure hereunder.
The foregoing obligations shall not apply however, to any such Proprietary
Information which;
(v) the receiving party demonstrates it possessed prior to disclosure by
the disclosing party;
(w) now or hereafter constitutes information generally available to the
public, so long as such public availability results from a cause other than
a violation of the provisions of this letter agreement by the receiving
party;
(x) a third party discloses to the receiving party, so long as the
receiving party, upon diligent inquiry, has no reasonable basis to believe
the third party has an existing obligation of confidentiality to the
disclosing party, directly or indirectly with respect to such Proprietary
Information;
<PAGE>
(y) the receiving party develops information equivalent to the Proprietary
Information without reference in any manner to the disclosed Proprietary
Information; or
(z) the receiving party must disclose pursuant to a valid order of a court
of competent jurisdiction or an administrative agency; provided that the
-------------
receiving party must give the disclosing party as much advance notice of
the order as reasonably possible and co-operate with the disclosing party,
at the disclosing party's expense, in lawful actions the disclosing party
takes to resist or restrict disclosure under such order or to obtain
confidential treatment of Proprietary Information made available pursuant
to the order.
Simply because more general information otherwise available to the public or to
the receiving party embraces, but does not specifically disclose, a particular
aspect of, or some item or portion of, the Proprietary Information, shall not
operate to relieve the receiving party of the confidentiality obligations in
this letter agreement.
Upon request of a disclosing party, the party receiving a particular item of
Proprietary Information will return to the disclosing party the originals of the
Proprietary Information provided to the receiving party, together with all
copies of the same made by or for the receiving party, and together with all
documents generated by the receiving party which reflect the disclosed
Proprietary Information, or in the alternative, destroy all such material and
certify the destruction in wiring to the disclosing party; provided that the
-------------
receiving party may retain one copy thereof for legal defense purposes only.
Nothing in this letter shall operate to grant, expressly or by implication, any
rights under a disclosing party's patents, technical information, know-how, or
other intellectual property, not operate as an independent undertaking on the
part of either party to do or perform duties or obligations not falling within
the purview of the terms of this letter, nor operate to require the disclosure
of any particular item(s) of information.
<PAGE>
Each party acknowledges the possible inadequate nature of remedies at law for
any breach by it of the provisions of this letter, and agrees that a disclosing
party, with respect to a particular item(s) of Proprietary Information, will
have a right to seek equitable relief in the event of a breach or threatened
breach by a receiving party.
Each party understands that the other does not make any representation of
warranty as to the accuracy or completeness of the Proprietary Information and
that only such representations and warranties as may be contained in a
definitive written agreement regarding the Scope shall be binding upon the
parties. Each party further understands that the other is under no obligation to
negotiate an agreement regarding the Scope of to enter into a definitive
agreement regarding the Scope.
In addition, each party agrees that, without the prior written consent of the
other, none of its directors, officers, employees or agents who had access,
directly or indirectly, to the Proprietary Information, will, for period of
three years from the date hereof, directly or indirectly solicit for employment
any person employed by the other party with whom any of such persons have had
contact or who became known to any such persons during the evaluation of the
other party. Each party also agrees that neither it nor its directors, officers,
employees, agents, financing sources, advisors and representatives will contact
any employee or shareholder of the other party in connection with its evaluation
of the other party without the prior written consent of the other party.
The parties may terminate the agreement embodied by this letter at any time upon
the giving of written notice from one party to the other, but both the duties of
confidentiality undertaken as to Proprietary Information disclosed prior to any
such termination and the rights of the parties to enforce such confidentiality
duties nonetheless shall survive such termination for the duration set forth in
this letter.
The laws of the state of Ohio and the United States shall govern the
interpretation of the terms of this letter.
This letter comprises the entire agreement and understanding between the parties
hereto relating to the Proprietary Information referred to in this letter, and
supersedes and cancels any and all prior oral and written understandings (if any
<PAGE>
such existed) respecting the same. No modification, amendment or waiver of this
letter agreement or any provision(s) thereof shall have validity unless reduced
to a writing executed on behalf of both parties.
Both Geon and O'Sullivan must agree to the foregoing terms before any exchange
of information may occur. Please indicate O'Sullivan's agreement by executing an
original of this letter and returning the executed original to me.
Very truly yours,
/s/ Don Knechtges, 12/16/98
Accepted and agreed to for
O'Sullivan Corporation:
By /s/ C. Bryant Nickerson
--------------------------------
C. Bryant Nickerson
Title Treasurer, CFO and Secretary
-----------------------------
Date December 16, 1998
------------------------------
<PAGE>
Exhibit (d)(1)
SHARE TENDER AGREEMENT
This SHARE TENDER AGREEMENT (this "Agreement"), dated as of June 2, 1999,
is made and entered into by and among THE GEON COMPANY, a Delaware corporation
(the "Parent"), TGC ACQUISITION CORPORATION, a Virginia corporation and wholly-
owned subsidiary of the Parent (the "Sub"), and ARTHUR H. BRYANT II
individually and in the capacities indicated on the signature page (the
"Shareholder"), a shareholder of O'SULLIVAN CORPORATION, a Virginia corporation
(the "Company").
WHEREAS, the Shareholder is the beneficial owner or as set forth on Exhibit
A is authorized to act as the representative of such beneficial owner, of the
shares listed and described on Exhibit A attached hereto (the "Shares"), of
Common Stock, $1.00 par value per share, of the Company (the "Common Stock"),
and holds options (the "Options") to acquire 14,000 shares of Common Stock
granted pursuant to the Company's 1995 Outside Directors Stock Option Plan;
WHEREAS, the Parent, the Sub and the Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, that the Sub will commence a tender offer for all
of the Common Stock (the "Offer") at a price of $12.25 per share net to the
seller in cash (the "Offer Price") and thereafter, subject to certain
conditions, be merged with and into the Company; and
WHEREAS, as a condition to the willingness of the Parent and the Sub to
enter into the Merger Agreement, the Parent and the Sub have requested that the
Shareholder agree, and in order to induce the Parent and the Sub to enter into
the Merger Agreement, the Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms used but not otherwise defined
-------------------
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
represents and warrants to the Parent and the Sub as follows:
(a) The Shareholder is the beneficial owner of, or as set forth on
Exhibit A is authorized to act as the representative of such beneficial owner,
and has, or such beneficial owner has, as the case may be, good and marketable
title to, all of the Shares, free and clear of any mortgage, pledge,
hypothecation, claim, security interest, charge, encumbrance, title defect,
title retention agreement, voting trust agreement, interest, option, call,
demand, subscription, lien, charge or similar restriction or limitation or any
other rights of others, including any restriction on the right to vote, sell or
otherwise dispose of the Shares (each, an "Encumbrance"), except as set forth in
this Agreement.
<PAGE>
(b) Except for the Shares and the Options, the Shareholder does not,
directly or indirectly, beneficially own or have any option, warrant or other
right to acquire any securities of the Company that are or may by their terms
become entitled to vote on any securities that are convertible or exchangeable
into or exercisable for any securities of the Company that are or may by their
terms become entitled to vote, nor, except as set forth on Exhibit A, is the
Shareholder subject to any contract, commitment, arrangement, understanding or
relationship, other than this Agreement, that allows or obligates him to vote or
acquire any shares of Common Stock or other securities of the Company. Except
as set forth on Exhibit A, the Shareholder holds power to vote the Shares and
has not granted a proxy to any Person to vote the Shares, except as provided in
this Agreement.
(c) The Shareholder is competent to and has sufficient capacity to
execute and deliver this Agreement and to perform the Shareholder's obligations
hereunder. This Agreement has been duly executed and delivered by the
Shareholder and, assuming the due authorization, execution and delivery of this
Agreement by the Parent and the Sub, is a valid and binding obligation of the
Shareholder enforceable against the Shareholder in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
(d) Neither the execution and delivery of this Agreement by the
Shareholder nor the performance by the Shareholder of the Shareholder's
obligations hereunder will conflict with, result in a violation or breach of, or
constitute a default (or an event that, with notice or lapse of time or both,
would result in a default) or give rise to any right of termination, amendment,
cancellation or acceleration or result in the creation of any Encumbrance on any
of the Shares under (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Shareholder is a party or by
which the Shareholder is bound or (ii) any injunction, judgment, writ, decree,
order or ruling applicable to the Shareholder.
3. Representations and Warranties of the Parent and the Sub. The Parent
--------------------------------------------------------
and the Sub represent and warrant to the Shareholder as follows:
(a) Each of the Parent and the Sub is a corporation duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation, has the requisite corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement has been duly executed and delivered by the Parent
and the Sub and, assuming the due execution and delivery of this Agreement by
the Shareholder, is a valid and binding obligation of each of the Parent and the
Sub, enforceable against each of them in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
2
<PAGE>
creditors' rights generally and (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will conflict with, result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would result in a
default) or give rise to any right of termination, amendment, cancellation or
acceleration under, (i) their respective charter or by-laws, (ii) any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which the Parent or the Sub is a party or by which the Parent or the Sub is
bound or (iii) any injunction, judgment, writ, decree, order or ruling
applicable to the Parent or the Sub.
(d) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will violate any law, decree, statute, rule or regulation applicable to the
Parent or the Sub or require any order, consent, authorization or approval of,
filing or registration with, or declaration or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act or federal or state
securities laws.
4. Transfer of the Shares. During the term of this Agreement, except as
----------------------
otherwise provided herein, the Shareholder will not (a) tender into any tender
or exchange offer (other than the Offer) or otherwise sell, transfer, pledge,
assign, hypothecate or otherwise dispose of, or encumber with any Encumbrance,
any of the Shares, (b) exercise any of the Options (except to the extent
permitted under Section 2.6 of the Merger Agreement), (c) deposit the Shares
into a voting trust, enter into a voting agreement or arrangement with respect
to the Shares or grant any proxy or power of attorney with respect to the
Shares, or (d) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition, sale, transfer,
pledge, assignment, hypothecation or other disposition of any interest in or the
voting of any shares of Common Stock or any other securities of the Company.
5. Adjustments. In the event of (a) any stock dividend, stock split,
-----------
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing the
Shareholder's ownership of the Common Stock or other securities of the Company
or (b) the Shareholder, or any other beneficial owner set forth in Exhibit A,
becoming the beneficial owner of any additional shares of Common Stock or other
securities of the Company, then the terms of this Agreement will apply to the
shares of capital stock held by the Shareholder, or such beneficial owner, as
the case may be, immediately following the effectiveness of the relevant event,
as though they were Shares hereunder. The Shareholder hereby agrees, while this
Agreement is in effect, to promptly notify the Parent of the number of any new
shares of Common Stock or other securities of the Company acquired by the
Shareholder, or such beneficial owner, as the case may be, if any, after the
date hereof.
6. Tender of the Shares. Subject to the terms and conditions of the
--------------------
Merger Agreement and provided that this Agreement is not terminated in
accordance with Section 9, the Shareholder will validly tender (and not
withdraw), or cause the record owner of such shares to
3
<PAGE>
validly tender (and not withdraw), and sell pursuant to and in accordance with
the terms of the Offer all of the Shares beneficially owned by the Shareholder
or the other beneficial owners set forth on Exhibit A. The Shareholder hereby
agrees and acknowledges that the Sub's obligation to accept for payment and pay
for the Shares in the Offer is subject to all the terms and conditions of the
Offer. Upon the purchase of all of the Shares by the Sub pursuant to the Offer,
this Agreement will terminate in accordance with Section 9.
7. Voting of the Shares. The Shareholder hereby agrees, so long as this
--------------------
Agreement remains in effect, to vote all of the Shares (a) in favor of the
approval and adoption of the Merger Agreement and the approval of the
transactions contemplated thereby and (b) against any action or agreement that
would result in a breach of any representation, warranty, covenant or agreement
of the Company contained in the Merger Agreement or would impede, interfere
with, delay or prevent the consummation of the Merger or the purchase of shares
of Common Stock pursuant to the Offer; provided, however, that the provisions of
this Section 7 will not prevent the Shareholder, acting in his capacity as a
director of the Company, to exercise his fiduciary duties, including with
respect to the matters set forth in Article 4.7 of the Merger Agreement.
8. No Solicitation. The Shareholder will not, directly or indirectly,
---------------
through any agent, financial advisor, attorney, accountant or other
representative or otherwise, (a) solicit, initiate or take any other action to
facilitate any inquiries or the making of any proposal which constitutes an
Acquisition Proposal, (b) participate in any discussions or negotiations
regarding any Acquisition Proposal, (c) in connection with an Acquisition
Proposal, disclose any nonpublic information relating to the Company or afford
access to the properties, books or records of the Company to any person or (d)
otherwise cooperate in any way with, assist, participate in, facilitate or
encourage any effort or attempt by any other Person to make an Acquisition
Proposal; provided, however, that the provisions of this Section 8 will not
prevent the Shareholder, acting in his capacity as a director of the Company, to
exercise his fiduciary duties, including with respect to the matters set forth
in Article 4.7 of the Merger Agreement.
9. Termination. This Agreement will automatically, without any notice to
-----------
or action by any party, terminate (a) upon the earlier to occur of (i) the
purchase of all the Shares pursuant to the Offer in accordance with Section 6 or
(ii) the date the Merger Agreement is terminated in accordance with its terms or
(b) by the mutual written consent of the Shareholder and the Parent.
10. Expenses. Except as otherwise expressly provided in this Agreement
--------
or the Merger Agreement, all costs and expenses incurred by any of the parties
hereto in connection with this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby will be borne by the party
incurring such costs and expenses.
11. Publicity. The Parent, the Sub and the Shareholder shall consult
---------
with each other before issuing any press release or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement before such consultation, except as may be required by applicable law
or stock exchange rules.
4
<PAGE>
12. Enforcement of the Agreement. The Shareholder acknowledges and agrees
----------------------------
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. Accordingly, the Parent and the Sub will be entitled
to an injunction, restraining order or other equitable remedy to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which the Parent or the Sub is entitled
at law or in equity.
13. Miscellaneous.
-------------
(a) The Shareholder hereby waives any rights of appraisal or rights
to dissent from the Merger that the Shareholder may have under applicable law.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver will be effective
unless in writing and signed by the party or parties sought to be bound thereby.
Any waiver by any party of a breach of any provision of this Agreement will not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement or one or
more sections hereof will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements among the parties with respect to such matters. This Agreement may
not be amended, changed, supplemented, waived or otherwise modified, except upon
the delivery of a written agreement executed by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, notwithstanding any conflict of
law provision to the contrary.
(e) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(f) All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered in accordance with Section
7.5 of the Merger Agreement, addressed, in the case of the Parent or the Sub, to
the address of the Parent set forth in Section 7.5 of the Merger Agreement and,
in the case of the Shareholder, to the address set forth on the signature page
of this Agreement.
(g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original but all of which shall together
constitute but one and the same agreement.
5
<PAGE>
(h) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties hereto
without the prior written consent of the other parties.
(i) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect and shall in no way be affected, impaired or
invalidated. Upon any such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
(j) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first written above.
THE GEON COMPANY
By: /s/ Gregory L. Rutman
--------------------------------------------
Name: Gregory L. Rutman
Title: Vice President, General Counsel
& Secretary
TGC ACQUISITION CORPORATION
By: /s/ Donald P. Knechtges
--------------------------------------------
Name: Donald P. Knechtges
Title: Chairman, President & CEO
ARTHUR H. BRYANT II
/s/ Arthur H. Bryant II
------------------------------------------------
Address: P.O. Box 810
---------------------------------------
Irvington, VA 22480
---------------------------------------
ARTHUR H. BRYANT II, as Custodian for
Gray Fairfax Bryant (minor)
/s/ Arthur H. Bryant II
------------------------------------------------
ARTHUR H. BRYANT II, as Custodian for
Taylor Carlyle Bryant (minor)
/s/ Arthur H. Bryant II
------------------------------------------------
ARTHUR H. BRYANT II, as Trustee of
The Bryant Foundation
/s/ Arthur H. Bryant II, President & Trustee
------------------------------------------------
7
<PAGE>
EXHIBIT A
---------
. 1,249,758 shares owned by Arthur H. Bryant II directly.
. 8,233 shares as Custodian for Gray Fairfax Bryant (minor).
. 8,233 shares as Custodian For Taylor Carlyle Bryant (minor).
. 1,129,860 shares in The Bryant Foundation for which Arthur H. Bryant is the
Trustee.
8
<PAGE>
Exhibit (d) (2)
SHARE TENDER AGREEMENT
This SHARE TENDER AGREEMENT (this "Agreement"), dated as of June 2, 1999,
is made and entered into by and among THE GEON COMPANY, a Delaware corporation
(the "Parent"), TGC ACQUISITION CORPORATION, a Virginia corporation (the "Sub"),
and MAGALEN O. BRYANT in her capacities as indicated on the signature page (the
"Shareholder"), a shareholder of O'SULLIVAN CORPORATION, a Virginia corporation
(the "Company").
WHEREAS, the Shareholder is the beneficial owner or, as set forth on
Exhibit A, is authorized to act as the representative of such beneficial owner,
of the shares, listed and described on Exhibit A attached hereto (the "Shares")
of Common Stock, $1.00 par value per share, of the Company (the "Common Stock");
WHEREAS, the Parent, the Sub and the Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, that the Sub will commence a tender offer for all
of the Common Stock (the "Offer") at a price of $12.25 per share net to the
seller in cash (the "Offer Price") and thereafter, subject to certain
conditions, be merged with and into the Company; and
WHEREAS, as a condition to the willingness of the Parent and the Sub to
enter into the Merger Agreement, the Parent and the Sub have requested that the
Shareholder agree, and in order to induce the Parent and the Sub to enter into
the Merger Agreement, the Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms used but not otherwise defined
-------------------
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
represents and warrants to the Parent and the Sub as follows:
(a) The Shareholder is the beneficial owner of, or, as set forth on
Exhibit A, is authorized to act as the representative of such beneficial owner,
and has, or such beneficial owner has, as the case may be, good and marketable
title to, all of the Shares, free and clear of any mortgage, pledge,
hypothecation, claim, security interest, charge, encumbrance, title defect,
title retention agreement, voting trust agreement, interest, option, call,
demand, subscription, lien, charge or similar restriction or limitation or any
other rights of others, including any restriction on the right to vote, sell or
otherwise dispose of the Shares (each, an "Encumbrance"), except as set forth in
this Agreement.
<PAGE>
(b) Except for the Shares, the Shareholder does not, directly or
indirectly, beneficially own or have any option, warrant or other right to
acquire any securities of the Company that are or may by their terms become
entitled to vote on any securities that are convertible or exchangeable into or
exercisable for any securities of the Company that are or may by their terms
become entitled to vote, nor, except as set forth on Exhibit A, is the
Shareholder subject to any contract, commitment, arrangement, understanding or
relationship, other than this Agreement, that allows or obligates her to vote or
acquire any shares of Common Stock or other securities of the Company. Except as
set forth on Exhibit A, the Shareholder holds power to vote the Shares and has
not granted a proxy to any Person to vote the Shares, except as provided in this
Agreement.
(c) The Shareholder is competent to and has sufficient capacity to
execute and deliver this Agreement and to perform the Shareholder's obligations
hereunder. This Agreement has been duly executed and delivered by the
Shareholder and, assuming the due authorization, execution and delivery of this
Agreement by the Parent and the Sub, is a valid and binding obligation of the
Shareholder enforceable against the Shareholder in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
(d) Neither the execution and delivery of this Agreement by the
Shareholder nor the performance by the Shareholder of the Shareholder's
obligations hereunder will conflict with, result in a violation or breach of, or
constitute a default (or an event that, with notice or lapse of time or both,
would result in a default) or give rise to any right of termination, amendment,
cancellation or acceleration or result in the creation of any Encumbrance on any
of the Shares under (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Shareholder is a party or by
which the Shareholder is bound or (ii) any injunction, judgment, writ, decree,
order or ruling applicable to the Shareholder.
3. Representations and Warranties of the Parent and the Sub. The Parent
--------------------------------------------------------
and the Sub represent and warrant to the Shareholder as follows:
(a) Each of the Parent and the Sub is a corporation duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation, has the requisite corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement has been duly executed and delivered by the Parent
and the Sub and, assuming the due execution and delivery of this Agreement by
the Shareholder, is a valid and binding obligation of each of the Parent and the
Sub, enforceable against each of them in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
2
<PAGE>
creditors' rights generally and (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will conflict with, result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would result in a
default) or give rise to any right of termination, amendment, cancellation or
acceleration under, (i) their respective charter or by-laws, (ii) any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which the Parent or the Sub is a party or by which the Parent or the Sub is
bound or (iii) any injunction, judgment, writ, decree, order or ruling
applicable to the Parent or the Sub.
(d) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will violate any law, decree, statute, rule or regulation applicable to the
Parent or the Sub or require any order, consent, authorization or approval of,
filing or registration with, or declaration or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act or federal or state
securities laws.
4. Transfer of the Shares. During the term of this Agreement, except as
----------------------
otherwise provided herein, the Shareholder will not (a) tender into any tender
or exchange offer (other than the Offer) or otherwise sell, transfer, pledge,
assign, hypothecate or otherwise dispose of, or encumber with any Encumbrance,
any of the Shares, (b) deposit the Shares into a voting trust, enter into a
voting agreement or arrangement with respect to the Shares or grant any proxy or
power of attorney with respect to the Shares, or (c) enter into any contract,
option or other arrangement or undertaking with respect to the direct or
indirect acquisition, sale, transfer, pledge, assignment, hypothecation or other
disposition of any interest in or the voting of any shares of Common Stock or
any other securities of the Company.
5. Adjustments. In the event of (a) any stock dividend, stock split,
-----------
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing the
Shareholder's ownership of the Common Stock or other securities of the Company
or (b) the Shareholder, or any other beneficial owner set forth on Exhibit A,
becoming the beneficial owner of any additional shares of Common Stock or other
securities of the Company, then the terms of this Agreement will apply to the
shares of capital stock held by the Shareholder, or such beneficial owner, as
the case may be, immediately following the effectiveness of the relevant event,
as though they were Shares hereunder. The Shareholder hereby agrees, while this
Agreement is in effect, to promptly notify the Parent of the number of any new
shares of Common Stock or other securities of the Company acquired by the
Shareholder, or such beneficial owner, as the case may be, if any, after the
date hereof.
6. Tender of the Shares. Subject to the terms and conditions of the
--------------------
Merger Agreement and provided that this Agreement is not terminated in
accordance with Section 9, the Shareholder will validly tender (and not
withdraw), or cause the record owner of such shares to validly tender (and not
withdraw), and sell pursuant to and in accordance with the terms of the
3
<PAGE>
Offer all of the Shares beneficially owned by the Shareholder or the other
beneficial owners set forth on Exhibit A. The Shareholder hereby agrees and
acknowledges that the Sub's obligation to accept for payment and pay for the
Shares in the Offer is subject to all the terms and conditions of the Offer.
Upon the purchase of all of the Shares by the Sub pursuant to the Offer, this
Agreement will terminate in accordance with Section 9.
7. Voting of the Shares. The Shareholder hereby agrees, so long as this
--------------------
Agreement remains in effect, to vote all of the Shares (a) in favor of the
approval and adoption of the Merger Agreement and the approval of the
transactions contemplated thereby and (b) against any action or agreement that
would result in a breach of any representation, warranty, covenant or agreement
of the Company contained in the Merger Agreement or would impede, interfere
with, delay or prevent the consummation of the Merger or the purchase of shares
of Common Stock pursuant to the Offer.
8. No Solicitation. The Shareholder will not, directly or indirectly,
---------------
through any agent, financial advisor, attorney, accountant or other
representative or otherwise, (a) solicit, initiate or take any other action to
facilitate any inquiries or the making of any proposal which constitutes an
Acquisition Proposal, (b) participate in any discussions or negotiations
regarding any Acquisition Proposal, (c) in connection with an Acquisition
Proposal, disclose any nonpublic information relating to the Company or afford
access to the properties, books or records of the Company to any person or (d)
otherwise cooperate in any way with, assist, participate in, facilitate or
encourage any effort or attempt by any other Person to make an Acquisition
Proposal.
9. Termination. This Agreement will automatically, without any notice to
-----------
or action by any party, terminate (a) upon the earlier to occur of (i) the
purchase of all the Shares pursuant to the Offer in accordance with Section 6 or
(ii) the date the Merger Agreement is terminated in accordance with its terms or
(b) by the mutual written consent of the Shareholder and the Parent.
10. Expenses. Except as otherwise expressly provided in this Agreement or
--------
the Merger Agreement, all costs and expenses incurred by any of the parties
hereto in connection with this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby will be borne by the party
incurring such costs and expenses.
11. Publicity. The Parent, the Sub and the Shareholder shall consult with
---------
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement before such consultation, except as may be required by applicable law
or stock exchange rules.
12. Enforcement of the Agreement. The Shareholder acknowledges and agrees
----------------------------
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. Accordingly, the Parent and the Sub will be entitled
to an injunction, restraining order or other equitable remedy to prevent
breaches of this Agreement and to enforce specifically the terms and
4
<PAGE>
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which the Parent or
the Sub is entitled at law or in equity.
13. Miscellaneous.
-------------
(a) The Shareholder hereby waives any rights of appraisal or rights
to dissent from the Merger that the Shareholder may have under applicable law.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver will be effective
unless in writing and signed by the party or parties sought to be bound thereby.
Any waiver by any party of a breach of any provision of this Agreement will not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement or one or
more sections hereof will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements among the parties with respect to such matters. This Agreement may
not be amended, changed, supplemented, waived or otherwise modified, except upon
the delivery of a written agreement executed by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, notwithstanding any conflict of
law provision to the contrary.
(e) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(f) All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered in accordance with Section
7.5 of the Merger Agreement, addressed, in the case of the Parent or the Sub, to
the address of the Parent set forth in Section 7.5 of the Merger Agreement and,
in the case of the Shareholder, to the address set forth on the signature page
of this Agreement.
(g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original but all of which shall together
constitute but one and the same agreement.
(h) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties hereto
without the prior written consent of the other parties.
5
<PAGE>
(i) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect and shall in no way be affected, impaired or
invalidated. Upon any such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
(j) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first written above.
THE GEON COMPANY
By: /s/ Gregory L. Rutman
--------------------------------------
Name: Gregory L. Rutman
Title: Vice President, General Counsel
& Secretary
TGC ACQUISITION CORPORATION
By: /s/ Donald P. Knechtges
-------------------------------------
Name: Donald P. Knechtges
Title: Chairman, President & CEO
MAGALEN O. BRYANT
/s/ Magalen O. Bryant
-----------------------------------------
Address: Lochnau
-------------------------------
P.O. Box 1050
-------------------------------
Middleburg, VA 20118
-------------------------------
MAGALEN O. BRYANT, as Co-Trustee of
The EJO Trust
/s/ Magalen O. Bryant
-----------------------------------------
7
<PAGE>
EXHIBIT A
---------
. 198,475 shares owned by Magalen O. Bryant directly.
. 708,861 shares in The EJO Trust for which Magalen O. Bryant is a co-trustee.
8
<PAGE>
Exhibit (d)(3)
SHARE TENDER AGREEMENT
This SHARE TENDER AGREEMENT (this "Agreement"), dated as of June 2, 1999,
is made and entered into by and among THE GEON COMPANY, a Delaware corporation
(the "Parent"), TGC ACQUISITION CORPORATION, a Virginia corporation (the "Sub"),
and JOHN C.O. BRYANT (the "Shareholder"), a shareholder of O'SULLIVAN
CORPORATION, a Virginia corporation (the "Company").
WHEREAS, the Shareholder is the beneficial owner of 809,739 shares (the
"Shares") of Common Stock, $1.00 par value per share, of the Company (the
"Common Stock"), and holds options (the "Options") to acquire 11,000 shares of
Common Stock granted pursuant to the Company's 1995 Outside Directors Stock
Option Plan;
WHEREAS, the Parent, the Sub and the Company have entered into an Agreement
and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which
provides, among other things, that the Sub will commence a tender offer for all
of the Common Stock (the "Offer") at a price of $12.25 per share net to the
seller in cash (the "Offer Price") and thereafter, subject to certain
conditions, be merged with and into the Company; and
WHEREAS, as a condition to the willingness of the Parent and the Sub to
enter into the Merger Agreement, the Parent and the Sub have requested that the
Shareholder agree, and in order to induce the Parent and the Sub to enter into
the Merger Agreement, the Shareholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto agree as follows:
1. Certain Definitions. Capitalized terms used but not otherwise defined
-------------------
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Representations and Warranties of the Shareholder. The Shareholder
-------------------------------------------------
represents and warrants to the Parent and the Sub as follows:
(a) The Shareholder is the beneficial owner of, and has good and
marketable title to, all of the Shares, free and clear of any mortgage, pledge,
hypothecation, claim, security interest, charge, encumbrance, title defect,
title retention agreement, voting trust agreement, interest, option, call,
demand, subscription, lien, charge or similar restriction or limitation or any
other rights of others, including any restriction on the right to vote, sell or
otherwise dispose of the Shares (each, an "Encumbrance"), except as set forth in
this Agreement.
(b) Except for the Shares and the Options, the Shareholder does not,
directly or indirectly, beneficially own or have any option, warrant or other
right to acquire any securities of the Company that are or may by their terms
become entitled to vote on any securities that are
<PAGE>
convertible or exchangeable into or exercisable for any securities of the
Company that are or may by their terms become entitled to vote, nor is the
Shareholder subject to any contract, commitment, arrangement, understanding or
relationship, other than this Agreement, that allows or obligates him to vote or
acquire any shares of Common Stock or other securities of the Company. The
Shareholder holds exclusive power to vote the Shares and has not granted a proxy
to any Person to vote the Shares, except as provided in this Agreement.
(c) The Shareholder is competent to and has sufficient capacity to
execute and deliver this Agreement and to perform the Shareholder's obligations
hereunder. This Agreement has been duly executed and delivered by the
Shareholder and, assuming the due authorization, execution and delivery of this
Agreement by the Parent and the Sub, is a valid and binding obligation of the
Shareholder enforceable against the Shareholder in accordance with its terms,
except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
(d) Neither the execution and delivery of this Agreement by the
Shareholder nor the performance by the Shareholder of the Shareholder's
obligations hereunder will conflict with, result in a violation or breach of, or
constitute a default (or an event that, with notice or lapse of time or both,
would result in a default) or give rise to any right of termination, amendment,
cancellation or acceleration or result in the creation of any Encumbrance on any
of the Shares under (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Shareholder is a party or by
which the Shareholder is bound or (ii) any injunction, judgment, writ, decree,
order or ruling applicable to the Shareholder.
3. Representations and Warranties of the Parent and the Sub. The Parent
--------------------------------------------------------
and the Sub represent and warrant to the Shareholder as follows:
(a) Each of the Parent and the Sub is a corporation duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation, has the requisite corporate power and authority to execute and
deliver this Agreement, to perform their respective obligations hereunder and to
consummate the transactions contemplated hereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement has been duly executed and delivered by the Parent
and the Sub and, assuming the due execution and delivery of this Agreement by
the Shareholder, is a valid and binding obligation of each of the Parent and the
Sub, enforceable against each of them in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) laws relating to the availability of
specific performance, injunctive relief or other equitable remedies.
(c) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will conflict with, result in a
2
<PAGE>
violation or breach of, or constitute a default (or an event that, with notice
or lapse of time or both, would result in a default) or give rise to any right
of termination, amendment, cancellation or acceleration under, (i) their
respective charter or by-laws, (ii) any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which the Parent or the
Sub is a party or by which the Parent or the Sub is bound or (iii) any
injunction, judgment, writ, decree, order or ruling applicable to the Parent or
the Sub.
(d) Neither the execution and delivery of this Agreement nor the
performance by the Parent and the Sub of their respective obligations hereunder
will violate any law, decree, statute, rule or regulation applicable to the
Parent or the Sub or require any order, consent, authorization or approval of,
filing or registration with, or declaration or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act or federal or state
securities laws.
4. Transfer of the Shares. During the term of this Agreement, except as
----------------------
otherwise provided herein, the Shareholder will not (a) tender into any tender
or exchange offer (other than the Offer) or otherwise sell, transfer, pledge,
assign, hypothecate or otherwise dispose of, or encumber with any Encumbrance,
any of the Shares, (b) exercise any of the Options (except to the extent
permitted under Section 2.6 of the Merger Agreement), (c) deposit the Shares
into a voting trust, enter into a voting agreement or arrangement with respect
to the Shares or grant any proxy or power of attorney with respect to the
Shares, or (d) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition, sale, transfer,
pledge, assignment, hypothecation or other disposition of any interest in or the
voting of any shares of Common Stock or any other securities of the Company.
5. Adjustments. In the event of (a) any stock dividend, stock split,
-----------
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing the
Shareholder's ownership of the Common Stock or other securities of the Company
or (b) the Shareholder becoming the beneficial owner of any additional shares of
Common Stock or other securities of the Company, then the terms of this
Agreement will apply to the shares of capital stock held by the Shareholder
immediately following the effectiveness of the relevant event, as though they
were Shares hereunder. The Shareholder hereby agrees, while this Agreement is in
effect, to promptly notify the Parent of the number of any new shares of Common
Stock or other securities of the Company acquired by the Shareholder, if any,
after the date hereof.
6. Tender of the Shares. Subject to the terms and conditions of the
--------------------
Merger Agreement and provided that this Agreement is not terminated in
accordance with Section 9, the Shareholder will validly tender (and not
withdraw), or cause the record owner of such shares to validly tender (and not
withdraw), and sell pursuant to and in accordance with the terms of the Offer
all of the Shares beneficially owned by the Shareholder. The Shareholder hereby
agrees and acknowledges that the Sub's obligation to accept for payment and pay
for the Shares in the Offer is subject to all the terms and conditions of the
Offer. Upon the purchase of all of the Shares by the Sub pursuant to the Offer,
this Agreement will terminate in accordance with Section 9.
3
<PAGE>
7. Voting of the Shares. The Shareholder hereby agrees, so long as this
--------------------
Agreement remains in effect, to vote all of the Shares (a) in favor of the
approval and adoption of the Merger Agreement and the approval of the
transactions contemplated thereby and (b) against any action or agreement that
would result in a breach of any representation, warranty, covenant or agreement
of the Company contained in the Merger Agreement or would impede, interfere
with, delay or prevent the consummation of the Merger or the purchase of shares
of Common Stock pursuant to the Offer; provided, however, that the provisions of
this Section 7 will not prevent the Shareholder, acting in his capacity as a
director of the Company, to exercise his fiduciary duties, including with
respect to the matters set forth in Article 4.7 of the Merger Agreement.
8. No Solicitation. The Shareholder will not, directly or indirectly,
---------------
through any agent, financial advisor, attorney, accountant or other
representative or otherwise, (a) solicit, initiate or take any other action to
facilitate any inquiries or the making of any proposal which constitutes an
Acquisition Proposal, (b) participate in any discussions or negotiations
regarding any Acquisition Proposal, (c) in connection with an Acquisition
Proposal, disclose any nonpublic information relating to the Company or afford
access to the properties, books or records of the Company to any person or (d)
otherwise cooperate in any way with, assist, participate in, facilitate or
encourage any effort or attempt by any other Person to make an Acquisition
Proposal; provided, however, that the provisions of this Section 8 will not
prevent the Shareholder, acting in his capacity as a director of the Company, to
exercise his fiduciary duties, including with respect to the matters set forth
in Article 4.7 of the Merger Agreement.
9. Termination. This Agreement will automatically, without any notice to
-----------
or action by any party, terminate (a) upon the earlier to occur of (i) the
purchase of all the Shares pursuant to the Offer in accordance with Section 6 or
(ii) the date the Merger Agreement is terminated in accordance with its terms or
(b) by the mutual written consent of the Shareholder and the Parent.
10. Expenses. Except as otherwise expressly provided in this Agreement or
--------
the Merger Agreement, all costs and expenses incurred by any of the parties
hereto in connection with this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby will be borne by the party
incurring such costs and expenses.
11. Publicity. The Parent, the Sub and the Shareholder shall consult with
---------
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement and the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement before such consultation, except as may be required by applicable law
or stock exchange rules.
12. Enforcement of the Agreement. The Shareholder acknowledges and agrees
----------------------------
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. Accordingly, the Parent and the Sub will be entitled to
an injunction, restraining order or other equitable remedy to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which the Parent or the Sub is entitled at law
or in equity.
4
<PAGE>
13. Miscellaneous.
-------------
(a) The Shareholder hereby waives any rights of appraisal or rights
to dissent from the Merger that the Shareholder may have under applicable law.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver will be effective
unless in writing and signed by the party or parties sought to be bound thereby.
Any waiver by any party of a breach of any provision of this Agreement will not
operate as or be construed to be a waiver of any other breach of such provision
or of any breach of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement or one or
more sections hereof will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements among the parties with respect to such matters. This Agreement may
not be amended, changed, supplemented, waived or otherwise modified, except upon
the delivery of a written agreement executed by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, notwithstanding any conflict of
law provision to the contrary.
(e) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(f) All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered in accordance with Section
7.5 of the Merger Agreement, addressed, in the case of the Parent or the Sub, to
the address of the Parent set forth in Section 7.5 of the Merger Agreement and,
in the case of the Shareholder, to the address set forth on the signature page
of this Agreement.
(g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original but all of which shall together
constitute but one and the same agreement.
(h) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties hereto
without the prior written consent of the other parties.
(i) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and
5
<PAGE>
provisions of this Agreement will nevertheless remain in full force and effect
and shall in no way be affected, impaired or invalidated. Upon any such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are consummated to the extent possible.
(j) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first written above.
THE GEON COMPANY
By: /s/ Gregory L. Rutman
-----------------------------------
Name: Gregory L. Rutman
Title: Vice President, General
Counsel & Secretary
TGC ACQUISITION CORPORATION
By: /s/ Donald P. Knechtges
-----------------------------------
Name: Donald P. Knechtges
Title: Chairman, President & CEO
JOHN C. O. BRYANT
/s/ John C. O. Bryant
----------------------------------------
Address: 13118 Aden Road
------------------------------
Nohesville, VA 20181
------------------------------
7
<PAGE>
Exhibit (e)
Wednesday June 2, 9:07 am Eastern Time
Company Press Release
SOURCE: The Geon Company
Geon Establishes New Growth Platform with Acquisition of O'Sullivan Corporation
CLEVELAND, and WINCHESTER, Va., June 2 /PRNewswire/ -- The Geon Company (NYSE:
GON - news) and O'Sullivan Corporation (Amex: OSL - news) jointly announced
- --- ---- --- ----
today an agreement by Geon to acquire O'Sullivan, a leading producer of
engineered polymer films for the automotive and industrial markets. The two
companies have signed a definitive merger agreement under which Geon will
commence a cash tender offer to acquire all of the outstanding shares of
O'Sullivan for $12.25 per share. The merger agreement has been unanimously
approved by the boards of directors of both companies. In addition, members of
the Bryant family who control more than 26 percent of the O'Sullivan shares have
committed themselves to tender their shares to Geon as contemplated by the
definitive agreement.
The tender offer of $12.25 in cash for each O'Sullivan share represents a total
transaction value of approximately $191 million. The objective of both companies
is to complete the acquisition of shares by Geon by the middle of July. The
tender offer is subject to normal regulatory review and satisfaction of
customary closing conditions, including the acquisition by Geon of at least 70
percent of the outstanding O'Sullivan stock. The tender offer is not conditioned
upon financing.
Geon plans to fund the purchase initially through existing lines of credit and
available cash. Geon expects this acquisition to be immediately accretive to
earnings by approximately $0.20 per share annually, before synergies and after
goodwill. O'Sullivan's cash balance of approximately $30 million will be used to
reduce the cost of the transaction.
O'Sullivan, with 1998 sales totaling $163 million, has developed particular
strength in vinyl film products and is recognized as the technology and quality
leader in the markets it serves.
"Our strategy is to become the leader in the value-added polymer services and
technology industry," said Thomas A. Waltermire, Geon president and chief
executive officer. "Acquiring O'Sullivan marks a milestone in positioning Geon
as a key player in the engineered film market and establishes a new growth
platform for us. The combination will create earnings leverage through raw
material, operating, and sales and marketing synergies."
Geon projects revenues in excess of $1 billion in 1999, before acquisitions, and
is committed to doubling its size during the next two years through a
combination of organic growth and acquisition.
"We have made it quite clear that we intend to create a multi-billion-dollar,
closely linked network of performance polymer businesses," Waltermire said.
"O'Sullivan is an excellent fit with Geon's recently acquired Burlington, New
Jersey, calendered film business. The two businesses, which serve complementary
markets, together will rank as the North American leader in value-added,
flexible vinyl films. Combining O'Sullivan's strengths in film technology with
Geon's strengths in polymer compounding and operations will create a stronger
company with enhanced value and growth opportunities."
<PAGE>
The agreement by O'Sullivan Corporation to enter into the transaction with Geon
is the culmination of a detailed process, started by O'Sullivan's board of
directors in August 1998, to explore the full range of strategic alternatives to
enhance shareholder value. An independent financial advisor provided
O'Sullivan's board with a fairness opinion in conjunction with the transaction.
"O'Sullivan's board believes that the transaction is in the best interest of its
stockholders, as it provides them with an attractive value and immediate
liquidity for their shares, while positioning our company with a strong base for
future growth," said J. Shep Campbell, O'Sullivan president and chief executive
officer. "Geon has been one of our most valued raw material suppliers over the
years. Its technology has enabled us to provide our customers world-class
products for their markets. Combining Geon's and O'Sullivan's technical and
operating strengths will create unique opportunities that will benefit our
customers."
Headquartered in Winchester, Virginia, O'Sullivan has approximately 940
employees and four manufacturing sites, located in Lebanon, Pennsylvania; Newton
Upper Falls, Massachusetts; Winchester; and Yerington, Nevada.
O'Sullivan has averaged 9.3 percent operating income to sales in the three-year
period from 1996 through 1998. The company had sales of $163.2 million and net
income of $11.6 million in 1998. Last month, O'Sullivan reported first quarter
net sales of $42.9 million and net income of $3.1 million.
Calendering, the heart of O'Sullivan's business, is the process for creating
thin-gauge films. O'Sullivan uses the calendering process in conjunction with
painting and laminating to provide premium-quality sheeting that covers
dashboards and door panels on many of today's best-selling passenger cars, light
trucks, sport utility vehicles and minivans. O'Sullivan ranks as North America's
leading supplier to the automotive industry of single-ply vinyl sheeting for
vacuum-formed instrument panels. Customers include Ford, Chrysler, General
Motors, Honda, Toyota, Mazda and Saturn.
In the industrial and consumer segments, O'Sullivan serves a wide range of
markets including stationery/office products, home furnishings, geomembrane,
medical bags and pouches, pool liners, vinyl flooring and many others.
The Geon Company is a leading North American-based polymer services and
technology company with operations in vinyl compounds, specialty vinyl resins
and formulations and other value-added products and services. Headquartered in
Avon Lake, Ohio, The Geon Company and its subsidiaries employ nearly 2,000
people and have 19 manufacturing plants in the United States, Canada, England
and Australia, and joint ventures in the United States, Canada, England,
Australia and Singapore. Information on the Company's products and services, as
well as news releases, EDGAR filings, Form 10-K, 10-Q, etc. is available on
the Internet at http://www.geon.com.
--------------------
Private Securities Litigation Reform Act of 1995
This press release contains statements concerning certain trends and other
forward-looking information affecting or relating to Geon and O'Sullivan and
their industry that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. There are many important factors that could cause actual results to
differ materially from those in the forward-looking statements. Many of these
important factors are outside the control of Geon and O'Sullivan. Changes in
market conditions, including competitive factors,and changes in government
regulations, could cause actual results to differ materially from the
expectations of Geon and O'Sullivan. No assurance can be provided as to any
future financial results. Among the potentially negative factors that could
cause actual results to differ materially from those in the forward-looking
statements are (a) unanticipated costs or difficulties and delays related to
completion of the proposed transaction, and (b) inability to complete the
proposed transaction.
<PAGE>
Exhibit (f)
[LETTERHEAD OF BOWLES HOLLOWELL CONNER APPEARS HERE]
June 2, 1999
Board of Directors
O'Sullivan Corporation
1944 Valley Avenue
Winchester, Virginia 22601
Dear Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of O'Sullivan Corporation ("O'Sullivan"), of the
consideration to be received by such stockholders pursuant to the terms of the
Agreement and Plan of Merger, dated as of June 2, 1999 (the "Agreement"), among
O'Sullivan, The Geon Company ("Geon"), and TGC Acquisition Company, a
wholly-owned subsidiary of Geon. Pursuant to the Agreement, the stockholders of
O'Sullivan will receive $12.25 net in cash for each share of O'Sullivan Common
Stock, par value $1.00 per share. For purposes of this opinion, the
"Transaction" means the proposed acquisition of 100% of the outstanding shares
of O'Sullivan by Geon, the terms of which are more fully set forth in the
Agreement.
In arriving at our opinion, we have, among other things:
. Reviewed the Agreement, including the financial terms of the
Transaction;
. Reviewed certain historical business, financial, and other information
regarding O'Sullivan that was publicly available or furnished to us by
members of O'Sullivan management;
. Reviewed certain financial forecasts and other data provided to us by
members of O'Sullivan management relating to its business;
. Conducted discussions with members of O'Sullivan management with
respect to its business, financial, and other information, including
its business prospects and financial forecasts, and the effects of the
Transaction;
. Reviewed the current and historical market prices of O'Sullivan Common
Stock;
. Compared the financial position and operating results of O'Sullivan
with those of publicly traded companies we deemed relevant;
. Compared the financial terms of the Transaction with certain of the
financial terms of other similar transactions we deemed relevant; and
. Conducted such other financial studies, analyses, and investigations
as we deemed appropriate.
<PAGE>
Board of Directors
O'Sullivan Corporation
June 2, 1999
Page 2
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing financial and other information, and we have not
assumed any responsibility for any independent verification of such
information. With respect to O'Sullivan's financial projections, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgements of O'Sulllivan's management as to the
expected future financial performance of O'Sullivan. We have discussed
O'Sullivan's financial projections with management of O'Sullivan, but we assume
no responsibility for and express no view as to O'Sullivan's financial
projections or the assumptions upon which they are based. In arriving at our
opinion, we have not conducted any physical inspection of the properties or
facilities of O'Sullivan and have not made or been provided with any evaluations
or appraisals of the assets or liabilities of O'Sullivan.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement that we reviewed, without
any waiver of any material terms or conditions. Our opinion is necessarily based
on economic, market, financial, and other conditions and the information made
available to us as of the date hereof. Although subsequent developments may
affect this opinion, we do not have any obligation to update, revise, or
reaffirm this opinion. Our opinion does not address the relative merits of the
Transaction and the other business strategies considered by O'Sullivan's Board
of Directors, nor does it address the Board of Directors' decision to proceed
with the Transaction.
Bowles Hollowell Conner is a division of First Union Capital Markets Corp.,
an investment banking firm and an affiliate of First Union Corporation. We have
been engaged to render financial advisory services to O'Sullivan in connection
with the Transaction and will receive a fee for such services which include the
delivery of this opinion. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of O'Sullivan for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We or our affiliates have in
the past provided investment banking and financial advisory services to
O'Sullivan unrelated to the proposed Transaction, for which services we have
received compensation.
It is understood that this letter is solely for the benefit of Board of
Directors of O'Sullivan and is not intended to confer rights or remedies upon
shareholders of O'Sullivan or any other person. This opinion may not be
summarized, excerpted from or otherwise publicly referred to without prior
written consent, except that this opinion may be reproduced in full or
summarized in any proxy or information statement mailed or provided to the
stockholders of O'Sullivan or in any other filing made under the federal
securities laws.
<PAGE>
Board of Directors
O'Sullivan Corporation
June 2, 1999
Page 3
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the consideration to be received
by the stockholders of O'Sullivan in the Transaction is fair, from a financial
point of view.
Sincerely,
BOWLES HOLLOWELL CONNER
/s/ Brian P. McDonagh
Brian P. McDonagh
Managing Director
