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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D) (4) OF THE
SECURITIES EXCHANGE ACT OF 1934
BAILEY CORPORATION
(NAME OF SUBJECT COMPANY)
BAILEY CORPORATION
(NAME OF PERSONS(S) FILING STATEMENT)
COMMON STOCK, $0.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
056-771306
(CUSIP NUMBER)
ROGER R. PHILLIPS
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BAILEY CORPORATION
700 LAFAYETTE ROAD
P.O. BOX 307
SEABROOK, NEW HAMPSHIRE 03874
(603) 474-3011
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS)
Copies to:
David A. Broadwin, Esq.
Arlene L. Bender, Esq.
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 832-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Bailey Corporation, a Delaware
corporation (the "Company"), and the address of the Company is 700 Lafayette
Road, P.O. Box 307, Seabrook, New Hampshire 03874. The title of the class of
equity securities to which this statement relates is the common stock, par value
$0.10 per share (the "Common Stock), and the associated Common Stock purchase
rights (the "Rights" and, together with the Common Stock, the "Shares") issued
pursuant to the Rights Agreement, dated as of September 28, 1995, as amended,
between the Company and State Street Bank and Trust Company as Rights Agent (the
"Rights Agreement").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer from Vemco Acquisition Corp., a
Delaware corporation (the "Purchaser") formed by Venture Holdings Trust (the
"Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated June
11, 1996 (the "Schedule 14D-1") to Purchase all the outstanding Shares, at a
price of $8.75 per Share, net to the seller in cash without interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
June 11, 1996 (the "Offer to Purchase") and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Offer" and are
contained within the Schedule 14D-1).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 5, 1996 (the "Merger Agreement"), between the Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the expiration of the Offer and fulfillment or waiver of all
remaining conditions, the Purchaser will be merged with and into the Company
(the "Merger") and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement has been filed herewith
as Exhibit 1 and is incorporated herein by reference.
Based on information in the Schedule 14D-1, the principal executive offices
of the Purchaser are located at 33226 James J. Pompo, P.O. Box 278, Fraser,
Michigan 48026-0278.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company's executive officers, directors or affiliates or (ii)
Purchaser, its executive officers, directors or affiliates, is described below
or incorporated herein by reference as provided below.
TRANSACTION WITH THE PURCHASER
The following is a summary of the material terms of the Merger Agreement,
the Tender and Option Agreement, the Guaranty, the Indemnity Agreements, the
Noncompetition Agreements and the Amendment to Employment and Noncompetition
Agreements, copies of which are filed as exhibits to this Schedule 14D-9. Such
summary is not a complete description of these agreements and is qualified in
its entirety by reference to the complete text of the Merger Agreement, the
Tender and Option Agreement, the Guaranty, the Indemnity Agreements, the
Noncompetition Agreements and the Amendment to Employment and Noncompetition
Agreements.
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer and that upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, including, without limitation, the
Minimum Condition and Financing Condition (as defined below), the Purchaser will
accept for payment and pay for Shares tendered as soon as practicable after it
is legally permitted to do so under applicable law. The Merger Agreement further
provides that, without the written consent of the Company, the
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Purchaser shall not decrease the Offer Price, decrease the number of Shares
sought, change the form of consideration to be paid in the Offer, increase the
Minimum Condition or amend any other condition of the Offer in any manner
adverse to the holders of the Shares (other than with respect to insignificant
changes or amendments) without the written consent of the Company, except that
the Purchaser may, without the consent of the Company (subject to any rights the
Company may have under the Merger Agreement, including, without limitation, the
right to terminate the Merger Agreement if the Financing Condition has not been
waived by the Purchaser by the thirtieth (30th) business day following
commencement of the Offer), extend the Offer (i) if at the then scheduled
expiration date of the Offer any of the conditions to the Purchaser's obligation
to accept for payment and pay for shares of Company Common Stock shall not be
satisfied or waived, until such time as such conditions are satisfied or waived;
(ii) for an aggregate period of not more than ten (10) business days beyond the
initial expiration date of the Offer if all conditions have been satisfied but
less than ninety percent (90%) of the outstanding shares of Company Common Stock
have been validly tendered and not withdrawn (not including shares covered by
notices of guaranteed delivery); and (iii) for any period required by any rule,
regulation, interpretation or position of the SEC or the staff applicable to the
Offer.
For purposes of the Merger Agreement, "Minimum Condition" means that there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of shares which, together with any shares beneficially
owned by the Purchaser, represents at least a majority of the Shares
outstanding, on a fully-diluted basis on the date of purchase, and "on a
fully-diluted basis" means the number of Shares outstanding plus all Shares
which the Company is required to issue pursuant to obligations outstanding at
that time under employee stock option or other benefit plans, outstanding
warrants, outstanding options of any kind, convertible securities, or otherwise
(to the extent such options, warrants, convertible securities or other rights
are vested or exercisable) other than Shares issuable upon conversion of the
Company's outstanding 9% Convertible Subordinates Notes and 8% Convertible
Debentures. "Financing Condition" means that the Parent shall have received the
financing contemplated by the commitment from NBD Bank to provide all of the
financing (the "Financing") necessary to purchase all outstanding Shares on a
fully-diluted basis pursuant to the Offer and the Merger and to refinance all
outstanding indebtedness of the Company reflected on the Company SEC Reports, as
defined in the Merger Agreement.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) the Purchaser's rights to extend and amend the Offer at
any time in its sole discretion (subject to the provisions of the Merger
Agreement), the Purchaser will not be required to accept for payment or, subject
to any applicable rules and regulations of the Securities and Exchange
Commission ("SEC"), including Rule 14e-1(c) under the Exchange Act (relating to
the Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate the Offer as to any Shares not then
paid for, if (i) the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act") has not expired or terminated,
(ii) the Minimum Condition has not been satisfied or waived, (iii) the Financing
Condition has not been satisfied, (iv) the Company shall not have given notice
of redemption for all Convertible Debentures which are redeemable at the
Company's option in accordance with their terms or (v) at any time on or after
June 5, 1996, and before the time for payment for Shares, any of the following
events shall exist:
(a) any domestic or foreign Federal, state or local governmental,
regulatory or administrative agency or authority or legislative body or
commission shall have instituted any action, proceeding, application, claim
or suit, or shall have promulgated, entered, enforced, enacted, proposed,
issued or made applicable to the Offer or the Merger any statute, rule,
regulation, judgment, order or injunction which directly or indirectly (1)
challenges, seeks to make illegal, prohibits or makes illegal, or imposes
any material limitations on, the Purchaser's ownership or operation (or
that of any of its respective subsidiaries or affiliates) of all or a
material portion of the businesses or assets of it or of the Company or its
subsidiaries, or compels the Purchaser or its affiliates to dispose of or
hold separate any material portion of the business or assets of the Company
or its subsidiaries, taken as a whole, (2) challenges, seeks to make
illegal, prohibits or makes illegal the acceptance for payment, payment for
or purchase of
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Shares or the consummation of the Offer or the Merger, (3) restricts the
ability of the Purchaser, or renders the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares, (4) imposes
material limitations on the ability of the Purchaser to exercise full
rights of ownership of the Shares, including, without limitation, the right
to vote the Shares purchased by it on all matters presented to the
Company's stockholders, (5) seeks to obtain or obtains material damages as
a result of the transactions contemplated by the Offer or the Merger, or
(6) seeks to require divestiture by the Purchaser or any of its
subsidiaries or affiliates of any Shares, and in the case of (5) or (6)
above, is likely to have a Company Material Adverse Effect (as hereinafter
defined), provided that the Purchaser shall have used reasonable efforts to
cause any such judgment, order or injunction to be vacated or lifted;
(b) there shall have occurred (1) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
Inc. or any other securities market for a period in excess of three hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (2)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (3) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (4) any
limitation (whether or not mandatory) by any foreign or United States
governmental authority on the extension of credit by banks or other
financial institutions, (5) any decline in either the Dow Jones Industrial
Average or the Standard & Poor's Index of 500 Industrial Companies by an
amount in excess of 20% measured from the close of business on June 5,
1996, or (6) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening
thereof;
(c) the Company shall have breached or failed to perform or comply
with any of its covenants and agreements contained in the Merger Agreement
other than those contained in Sections 5.1 through 5.9, inclusive, of the
Merger Agreement (regarding the conduct of business of the Company
preceding the time the directors of the Purchaser have been elected to the
Board of Directors of the Company) in any material respect, or the Company
shall have breached or failed to perform or comply with any of its
covenants and agreements contained in Sections 5.1 through 5.9, inclusive,
of the Merger Agreement, which breach or failure shall have a Company
Material Adverse Effect, or the Company shall have breached its
representations and warranties in any respect, which breach shall have a
Company Material Adverse Effect;
(d) since June 5, 1996, there shall have occurred any change in the
financial condition, business, or results of operations of the Company and
its subsidiaries that, or any event, condition, occurrence or development
of a state of circumstances or facts that, individually or in the
aggregate, would constitute a Company Material Adverse Effect;
(e) the Merger Agreement shall have been terminated in accordance with
its terms;
(f) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that any person, entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act of 1934, as amended (the "Exchange
Act"), other than the Purchaser or its affiliates or any group of which any
of them is a member, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than
14.9% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or (ii) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to an
Acquisition Proposal or other business combination with the Company;
(g) the Company's Board of Directors shall have withdrawn, or modified
or changed (including by amendment of the Schedule 14D-9) in a manner
adverse to the Purchaser its approval or recommendation of the Offer, the
Merger Agreement or the Merger or shall have recommended an Acquisition
Proposal, which in the judgment of the Purchaser, in any such case, and
regardless of the circumstances
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(including any action or inaction by the Purchaser giving rise to such
condition) makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payments.
The foregoing conditions are for the sole benefit of the Purchaser and may
be waived by the Purchaser, in whole or in part at any time and from time to
time in the discretion of the Purchaser. The failure by the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
THE MERGER. The Merger Agreement provides that subject to the terms and
conditions thereof, at the effective time of the Merger (the "Effective Time")
the Purchaser shall be merged with and into the Company and the separate
corporate existence of the Purchaser shall thereupon cease. The Company shall be
the successor or surviving corporation in the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware. The separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger.
The respective obligations of the parties to effect the Merger are subject
to the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions: (a) all authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
Federal, state, local or foreign governmental or regulatory authority necessary
for the consummation of the Merger and the transactions contemplated by the
Merger Agreement shall have been filed, occurred or been obtained and shall be
in effect at the Effective Time; (b) no temporary restraining order, preliminary
injunction or permanent injunction or other order precluding, restraining,
enjoining, preventing or prohibiting the consummation of the Merger shall have
been issued by any Federal, state or foreign court or other governmental or
regulatory authority and remain in effect; (c) no Federal, state, local or
foreign statute, rule or regulation shall have been enacted which prohibits the
consummation of the Merger or would make the consummation of the Merger illegal;
(d) the Merger Agreement shall have been approved and adopted by the affirmative
vote required of the stockholders of the Company, if required pursuant to the
Company's certificate of incorporation and applicable Delaware law, in order to
consummate the Merger; and (e) the Purchaser shall have purchased Shares
sufficient to meet the Minimum Condition pursuant to the Offer.
In addition, the obligations of the Purchaser to effect the Merger are also
subject to the satisfaction or waiver by the Purchaser on or prior to Closing
Date of the following conditions: (a) the Company shall have taken action to
terminate all incentive plans or programs pursuant to which options have been or
may be issued, by using its best efforts to (i) receive, prior to the Effective
Time, a cancellation agreement from each holder of an outstanding option or
warrant, in form and substance satisfactory to the Purchaser, acknowledging the
cancellation and termination of such options or warrants, as the case may be or
(ii) to arrange for the exercise of such outstanding options or warrants. Such
cancellation agreements, if any, shall provide that in consideration for the
cancellation of such options and/or warrants, the Surviving Corporation shall
pay to each holder, promptly after the Effective Time, an amount (less any
applicable withholding and employment taxes) equal to the amount by which the
Offer price per Share exceeds the exercise price per Share underlying each
outstanding option, or the strike price per Share underlying each outstanding
warrant, multiplied by the number of Shares covered by such option or warrant,
as the case may be; and (b) each of John G. Owens and Allan B. Freedman shall
have amended or terminated their respective Noncompetition Agreements with the
Company, and each of Louis T. Enos, Phillip Kusky and E Gordon Young shall have
amended or terminated their respective Employment Agreements with the Company,
in each case to provide that no payments to be made thereunder shall be
accelerated by virtue of the Offer or the Merger. These directors have
terminated their Noncompetition Agreements and entered into new Noncompetition
Agreements with the Company, which are described below.
The Merger Agreement provides that at the Effective Time, each issued and
outstanding Share (other than Shares that are owned by the Company as treasury
stock and any Shares owned by the Purchaser or any affiliate of the Purchaser)
shall be converted into the right to receive the Offer price per Share. Pursuant
to the Merger Agreement, each issued and outstanding share of the Purchaser
common stock, par value $1.00 per
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share, shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that
promptly upon the purchase of and payment for any Shares (including, without
limitation, all Shares subject to the Tender and Option Agreement) by the
Purchaser or any affiliate of the Purchaser pursuant to the Offer or the Tender
and Option Agreement which represents the Minimum Condition, the Purchaser shall
be entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors then serving on such Board (after giving effect to
the directors designated by the Purchaser) multiplied by the ratio of the
aggregate number of Shares beneficially owned by the Purchaser and any of its
affiliates to the total number of Shares then outstanding. The Company shall,
upon request of the Purchaser, take all action necessary to cause the
Purchaser's designees to be elected or appointed to the Company's Board,
including, without limitation, increasing the size of its Board or, at the
Company's election, securing the resignations of such number of its incumbent
directors as is necessary to enable the Purchaser's designees to be so elected
or appointed to the Company's Board, and shall cause the Purchaser's designees
to be so elected or appointed. At such time, the Company shall also cause
persons designated by the Purchaser to constitute the same percentage (rounded
up to the next whole number) as is on the Company's Board of (i) each committee
of the Company's Board of Directors, (ii) each board of directors (or similar
body) of each subsidiary of the Company and (iii) each Committee (or similar
body) of each such board. In the event that the Purchaser's designees are
elected to the Board of Directors of the Company, until the Effective Time, the
Board of Directors shall have at least two directors who are directors of the
Company on June 5, 1996 (the "Company Directors"). In the event that the
Purchaser's designees are elected to the Board, after the acceptance for payment
of shares of Common Stock pursuant to the Offer and prior to the Effective Time,
the affirmative vote of the Company Directors shall be required to (a) amend or
terminate the Merger Agreement by the Company, (b) exercise or waive any of the
Company's rights, benefits or remedies under the Merger Agreement, (c) extend
the time for performance of the Purchaser's obligations under the Merger
Agreement or (d) take any other action by the Board in connection with the
Merger Agreement. The Merger Agreement further provides that the Company shall
promptly take all actions required pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder, including mailing to stockholders as part
of the Schedule 14D-9 the information required by such Section 14(f) and Rule
14f-1, as is necessary to enable the Purchaser's designees to be elected to the
Company's Board.
STOCKHOLDERS MEETING. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, as soon as
practicable following the acceptance for payment and purchase of Shares
sufficient to meet the Minimum Condition by the Purchaser pursuant to the Offer,
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting"), for the purpose of considering and taking
action upon the Merger Agreement; (ii) prepare and file with the SEC a
preliminary proxy or information statement relating to the Merger and the Merger
Agreement and use its reasonable efforts (x) to obtain and furnish the
information required to be included by the SEC in the Company Proxy Statement
(as defined below) and, after consultation with the Purchaser, to respond
promptly to any comments made by the SEC with respect to the preliminary proxy
or information statement and cause a definitive proxy or information statement
(the "Company Proxy Statement") to be mailed to its stockholders and (y) to
obtain the necessary approvals of the Merger and the Merger Agreement by its
stockholders; and (iii) include in the Company Proxy 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.
The Purchaser agrees that it shall, and shall cause any permitted assignee to,
vote all Shares then owned by it which are entitled to vote in favor of the
approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement provides that in the event that the Purchaser or any
permitted assignee of the Purchaser acquires at least 90% of the outstanding
Shares, the parties will, subject to the conditions of the Merger Agreement,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after such acquisition, without approval of the
Company's stockholders, in accordance with Section 253 of the Delaware General
Corporation Law (the "DGCL").
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INTERIM OPERATIONS. In the Merger Agreement, the Company agrees that,
except as expressly contemplated therein, or as agreed in writing by the
Purchaser, after June 5, 1996, and prior to the time the directors of the
Purchaser have been elected to the Board of Directors of the Company:
(i) the Company and each of its subsidiaries will carry on their
respective businesses in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted, and will use their
reasonable efforts consistent with past practice and policies to preserve
intact their present business organizations, keep available the services of
their present officers and employees and preserve their existing
relationships with customers, suppliers, lessors, lessees, creditors and
others having business dealings with them and the Company will continue to
maintain a standard system of accounting established and administered in
accordance with United States generally accepted accounting principles
("GAAP");
(ii) the Company will not, and will not cause or permit any of its
subsidiaries to, (a) declare, set aside or pay any dividends on or make
other distributions in respect of any shares of its capital stock, (b)
split, combine or reclassify any shares of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any shares of its capital stock or (c) propose to do
any of the foregoing;
(iii) the Company will not, and will not cause or permit any of its
subsidiaries to, issue, pledge, deliver, sell or transfer or authorize or
propose the issuance, pledge, delivery, sale or transfer of, or repurchase,
redeem or otherwise acquire directly or indirectly, or propose the
repurchase, redemption or other acquisition of, any shares of capital stock
of any class of the Company or its subsidiaries, or any options, warrants
or other rights exercisable for or securities convertible into or
exchangeable for, any such shares (or enter into any agreements,
arrangements, plans or understandings with respect to any of the
foregoing), other than pursuant to the exercise of outstanding options,
warrants or convertible debentures pursuant to the terms thereof as of June
5, 1996;
(iv) the Company will not, and will not cause or permit any of its
subsidiaries to, propose or adopt any amendment to its or their certificate
of incorporation or bylaws (or similar charter documents) or take any
action to alter the size or composition of its Board, except as
specifically contemplated by the Merger Agreement;
(v) the Company will not, and will not cause or permit any of its
subsidiaries to, transfer, sell, lease, license, mortgage or otherwise
dispose of or encumber any material assets, or enter into any commitment to
do any of the foregoing, other than in the ordinary and usual course of
business, consistent with past practice;
(vi) the Company will not, and will not cause or permit any of its
subsidiaries to, incur, become subject to, or agree to incur any debt for
borrowed money except for borrowings under existing terms of credit in the
ordinary course of business or incur or become subject to any other
material obligation or liability (absolute or contingent), except current
liabilities incurred, and obligations under contracts entered into, in the
ordinary course of business consistent with prior practice, and the Company
shall not pay or be liable for prepayment or other penalties in connection
with the early retirement of any Company indebtedness for borrowed money
other than as a result of the transactions contemplated by the Merger
Agreement;
(vii) the Company will not, and will not cause or permit any of its
subsidiaries to, make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or
consultants, enter into any new collective bargaining agreement, enter into
or amend any employment, severance, termination or other agreement or make
any loans to any of its officers, directors, employees, agents or
consultants or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such persons, whether contingent on
consummation of the Offer, the Merger or otherwise;
(viii) the Company will not, and will not cause or permit any of its
subsidiaries to (a) pay, agree to pay or make any accrual or arrangement
for payment of any pension, retirement allowance or other
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employee benefit pursuant to any existing plan, agreement or arrangement to
any officer, director or employee except in the ordinary course of business
and consistent with past practice or as permitted by the Merger Agreement;
(b) pay or agree to pay or make any accrual or arrangement for payment to
any employees of the Company or any of its subsidiaries of any amount
relating to unused vacation days other than pursuant to Company policies
and plans in effect on January 31, 1996, and in a manner consistent with
past practice; (c) commit itself or themselves to adopt or pay, grant,
issue, accelerate or accrue salary or other payments or benefits pursuant
to any pension, profit sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or any employment or consulting agreement
with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present other than pursuant to Company policies
and plans in effect on January 31, 1996, and in a manner consistent with
past practice; or (d) amend in any material respect any such existing plan,
agreement or arrangement, except as contemplated by the Merger Agreement;
(ix) the Company and each of its subsidiaries will (i) properly
prepare and file all material reports or tax returns required by the
Company or any subsidiary to be filed with any governmental or regulatory
authorities with respect to its business, operations, or affairs, and (ii)
pay in full and when due all taxes indicated on such tax returns or
otherwise levied or assessed upon the Company, its subsidiaries or any of
their assets and properties unless such taxes are being contested in good
faith by appropriate proceedings and reasonable reserves therefor have been
established in accordance with GAAP;
(x) the Company and each of its subsidiaries will (i) report on a
regular basis, at reasonable times, to a representative designated by the
Purchaser regarding material operational matters and financial matters
(including monthly unaudited financial information); (ii) promptly and
regularly notify the Purchaser of any change in the normal course or
operation of its business or its properties and of any material development
in the business or operations of the Company and its subsidiaries
(including, without limitation, any Company Material Adverse Effect) or any
governmental or third party claims, complaints, investigations or hearings,
or communications indicating that the same may be forthcoming or
contemplated); (iii) cooperate with the Purchaser and its affiliates and
representatives in arranging for an orderly transition in connection with
the transfer of control of the Company, including without limitation
arranging meetings among the Company, its vendors, suppliers and customers
and representatives of the Purchaser and its affiliates; and (iv) deliver
to the Purchaser concurrently with filing with the SEC true and correct
copies of any report, statement or schedule filed by the Company with the
SEC subsequent to the date of the Merger Agreement;
(xi) the Company will not, and will not cause or permit any of its
subsidiaries to: (a) enter into, amend or terminate any agreements,
commitments or contracts which, individually or in the aggregate, have a
Company Material Adverse Effect or waive, release, assign or relinquish any
material rights or claims thereunder, except in the ordinary course of
business, consistent with past practice; or authorize any new capital
expenditure or expenditures which, individually is in excess of $450,000
or, in the aggregate, are in excess of $2,000,000; (b) discharge or satisfy
any lien or encumbrance or payment of any obligation or liability (absolute
or contingent) other than current liabilities in the ordinary course of
business; (c) cancel or agree to cancel any material debts or claims,
except in each case in the ordinary course of business; (d) waive any
rights of substantial value; (e) pay, discharge, satisfy or settle any
litigation or other claims, liabilities or obligations (absolute, accrued,
asserted, unasserted, contingent or otherwise) involving the payment by the
Company or any of its subsidiaries of more than $100,000; (f) make any
equity investments in third parties; (g) adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries (other than the Merger) or otherwise make any material change
in the conduct of the business or operations of the Company and its
subsidiaries taken as a whole; or (h) agree in writing or otherwise to take
any of the foregoing actions or any other action which would constitute a
Company Material Adverse Effect in any of the items and matters covered by
the representations and warranties of the Company set forth in the Merger
Agreement.
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For purposes of the Merger Agreement, a "Company Material Adverse Effect"
means any event, circumstance, condition, development or occurrence causing,
resulting in or having, or which could reasonably be expected to cause, result
in or have, a material adverse effect on the financial condition, business or
results of operations of the Company and its subsidiaries taken as a whole.
NO SOLICITATION. In the Merger Agreement, the Company has agreed that the
Company and its subsidiaries and affiliates will not, and will use their
reasonable efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other representatives
and agents do not, directly or indirectly, initiate, solicit, encourage or
participate in, or provide any information to any Person (as defined below)
concerning, or take any action to facilitate the making of, any offer or
proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below) of the Company or any subsidiary or affiliate or an
inquiry with respect thereto. The Company has agreed, and shall cause its
subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all existing activities,
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any such matters. Nonetheless, the Company may, directly or
indirectly, provide access and furnish information concerning its business,
properties or assets to any corporation, partnership, person or other entity or
group pursuant to an appropriate confidentiality agreement, and may negotiate
and participate in discussions and negotiations with such entity or group
concerning an Acquisition Proposal (x) if such entity or group has submitted a
bona fide written proposal to the Board relating to any such transaction and (y)
if, in the opinion of the Board, after consultation with independent legal
counsel to the Company, the failure to provide such information or access or to
engage in such discussions or negotiations would be inconsistent with their
fiduciary duties under applicable law.
The Company is required to promptly notify the Purchaser of any such
offers, proposals or Acquisition Proposals (including, without limitation, the
terms and conditions thereof and the identity of the person making it). The
Company is further required to give the Purchaser written notice of any
Acquisition Proposal that the Company intends to accept at least two business
days prior to accepting such offer or otherwise entering into any agreement or
understanding with respect thereto. For purposes of the Merger Agreement, any
modification of an Acquisition Proposal constitutes a new Acquisition Proposal.
As used in the Merger Agreement, "Acquisition Proposal" when used in
connection with any Person means any tender or exchange offer involving such
Person, any proposal for a merger, consolidation or other business combination
involving such Person or any subsidiary of such Person, any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial portion
of the business or assets of, such Person or any subsidiary of such Person, any
proposal or offer with respect to any recapitalization or restructuring with
respect to such Person or any subsidiary of such Person or any proposal or offer
with respect to any other transaction similar to any of the foregoing with
respect to such Person, or any subsidiary of such Person or any public
announcement of a proposal, plan or intent to do any of the foregoing; provided,
however, that the term "Acquisition Proposal" shall not apply to any transaction
of the type described in the preceding clause involving the Purchaser or its
affiliates. As used in the Merger Agreement, "Person" means any corporation,
partnership, person or other entity or group (including the Company and its
affiliates and representatives, but excluding the Purchaser or any of its
affiliates or representatives).
DIRECTORS' AND OFFICERS' INDEMNIFICATION. For six years after the earlier
of (i) the date on which the designees of the Purchaser have been elected to the
Board pursuant to the Merger Agreement and constitute a majority of the members
thereof and (ii) the Effective Time, the Surviving Corporation will keep in
effect provisions in its Certificate of Incorporation and Bylaws providing for
exculpation of director and officer liability and indemnification of the
indemnified parties (the "Indemnified Parties") to the fullest extent permitted
under the DGCL, provided, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under the DGCL, the Surviving Corporation's Certificate of
Incorporation or Bylaws, will be made by independent counsel mutually acceptable
to the Purchaser and the Indemnified Party.
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The Surviving Corporation will maintain the Company's existing officers'
and directors' liability insurance policy for a period of three years after the
Effective Time; provided, that the Surviving Corporation may substitute therefor
policies of substantially similar coverage and amounts containing terms no less
advantageous to such former directors or officers; provided, further, that if
the Company's existing directors' liability insurance expires, is terminated or
canceled during such period, the Surviving Corporation will use its reasonable
efforts to obtain substantially similar insurance; provided, however, that in no
event shall the Surviving Corporation be required to pay aggregate annual
premiums for insurance under this clause in excess of 150% of the aggregate
annual premiums paid by the Company in 1995 (the "1995 Premiums"). In the event
that, but for the last proviso of the immediately preceding sentence, the
Surviving Corporation would be required to expend more than 150% of the 1995
Premiums, the Surviving Corporation would nonetheless be required to purchase
the maximum amount of such insurance obtainable by payment of annual premiums
equal to 150% of the 1995 Premiums.
As of the date of the Merger Agreement and as required by the Merger
Agreement, the Purchaser entered into an Indemnity Agreement with each of the
directors and the chief financial officer of the Company. See "Indemnity
Agreements."
BENEFIT PLANS AND CERTAIN CONTRACTS. From and after the Effective Time,
subject to applicable law, the Purchaser will honor in accordance with their
terms, all Company benefit plans; provided, however, that nothing in the Merger
Agreement shall preclude any change effected on a prospective basis in any
Company Benefit Plan. Those employees of the Company and its subsidiaries whose
employment is continued by the Surviving Corporation after the Merger will be
employed on terms consistent with the Company's current employment practices and
at comparable levels of compensation and positions. Subject to the obligations
of the Surviving Corporation under existing employment agreements, such
employment shall be at will and the Surviving Corporation shall be under no
obligation to continue to employ any individuals. For purposes of eligibility to
participate in and vesting in various benefits (but not for determination of
benefits) provided to employees, employees of the Company and its subsidiaries
will be credited with their years of service with the Company and its
subsidiaries. As contemplated by the Merger Agreement, on June 5, 1996, the
Company entered into an Amendment to Employment and Noncompetition Agreement
with Roger R. Phillips, the Company's Chief Executive Officer, to extend to
December 31, 1997, the terms of his Employment Agreement with the Company, dated
February 18, 1994.
RIGHTS AGREEMENT. The Company has adopted resolutions amending the Rights
Agreement, in order to prevent the Merger Agreement, the Tender and Option
Agreement or the consummation of any of the transactions contemplated thereby
from resulting in the distribution of separate right certificates or the
occurrence of a Distribution Date under the Rights Agreement and to provide that
the Purchaser shall not be an "Acquiring Person" (as defined in the Rights
Agreement) by reason of the transactions contemplated by the Merger Agreement or
the Tender and Option Agreement. Except for such amendments, the Merger
Agreement provides that the Company will not amend the Rights Agreement in any
manner unless and until the Merger Agreement is terminated under the provisions
of subsection (c)(ii) or (iii) as set forth below under "Termination; Fees." In
addition the Company covenants and agrees that it will not redeem the Rights
unless such redemption is consented to in writing by the Purchaser prior to such
redemption.
TERMINATION; FEES. Anything in the Merger Agreement or elsewhere to the
contrary notwithstanding, the Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after stockholder approval thereof:
(a) by mutual consent of the Board of Directors of the Purchaser and
the Board of Directors of the Company;
(b) by either the Board of Directors of the Purchaser or the Board of
Directors of the Company: (i) if Shares shall not have been purchased
pursuant to the Offer on or prior to August 31, 1996; provided, however,
that the right to terminate the Merger Agreement under this clause will not
be available to any party whose failure to fulfill any material obligation
under the Merger Agreement has been the cause of, or resulted in, the
failure of the Purchaser to purchase Shares pursuant to the Offer on or
prior to such date; or (ii) if a court of competent jurisdiction or other
governmental or regulatory
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<PAGE> 11
authority shall have issued an order, decree or ruling or taken any other
action (which order, decree, ruling or other action the party seeking
termination will use its reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and non-appealable, provided
that the party seeking termination did not contribute to the cause of
action.
(c) By the Board of Directors of the Company: (i) if, prior to the
purchase of Shares sufficient to meet the Minimum Condition by the
Purchaser pursuant to the Offer, the Company shall have (x) withdrawn,
modified or changed in a manner adverse to the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger in order to
execute a definitive agreement relating to an Acquisition Proposal by a
Person other than Parent, the Purchaser or any affiliate of either of them,
after consulting with independent legal counsel and determining that the
failure to take such action would be inconsistent with its fiduciary duties
to the Company's stockholders and (y) paid or caused to be paid to the
Purchaser $2.1 million; or (ii) if, prior to the purchase of Shares
sufficient to meet the Minimum Condition pursuant to the Offer, the
Purchaser breaches or fails in any material respect to perform or comply
with any of its material covenants and agreements contained in the Merger
Agreement or breaches its representations and warranties in any material
respect; or (iii) if (x) the Purchaser or any of its affiliates shall have
failed to commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer (the "Offer
Deadline") other than due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth above in paragraphs (a)-(g) under "The Offer" or (y)
the Purchaser shall have failed to waive the Financing Condition by the
thirtieth (30th) business day following commencement of the Offer;
provided, that the Company may not terminate the Merger Agreement pursuant
to this clause if the Company is in material breach of the Merger
Agreement.
(d) By the Board of Directors of the Purchaser: (i) if, due to an
occurrence that if occurring after the commencement of the Offer would
result in a failure to satisfy any of the conditions set forth above in
paragraphs (a)-(g) under "The Offer", the Purchaser shall have failed to
commence the Offer on or prior to the Offer Deadline; provided that the
Purchaser may not terminate the Merger Agreement pursuant to this clause if
the Purchaser (x) is in material breach of the Merger Agreement or (y) has
not exercised such right by the close of business on or before the fifth
business day following the Offer Deadline; or (ii) if the Purchaser is not
in material breach of the Merger Agreement and either (A) prior to the
purchase of Shares pursuant to the Offer, the Board of Directors of the
Company will have withdrawn, or modified or changed (including by amendment
of the Company's Schedule 14D-9) in a manner adverse to the Purchaser its
approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended, or the Company shall have executed an agreement
in principle (or similar agreement) or a definitive agreement relating to,
an Acquisition Proposal; or (B) prior to the purchase of Shares pursuant to
the Offer, it shall have been publicly disclosed, or the Purchaser shall
have learned, that any person, entity or "group" (as that term is defined
in Section 13(d)(3) of the Exchange Act), other than the Purchaser or its
affiliates or any group of which any of them is a member, shall have
acquired beneficial ownership of more than 14.9% of any class or series of
capital stock of the Company (including the Shares) through the acquisition
of stock, the formation of a group or otherwise, or will have been granted
an option, right, or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 14.9% of any class or series of capital
stock of the Company (including the Shares), or (iii) if the Purchaser
shall have terminated the Offer, or the Offer shall have expired without
the Purchaser purchasing any Shares thereunder, provided that the Purchaser
may not terminate the Merger Agreement pursuant to this clause if (x) the
Purchaser has failed to purchase Shares in the Offer in violation of the
material terms thereof or (y) the Purchaser has not exercised such right by
the close of business on or before the fifth business day following the
termination or expiration of the Offer in accordance with its terms; or
(iv) if, prior to the purchase of Shares pursuant to the Offer, the Company
(x) breaches or fails to perform or comply with any of its covenants and
agreements contained in the Merger Agreement other than those contained in
Sections 5.1 through 5.9, inclusive, of the Merger Agreement (generally
regarding interim operations), in any material respect, or (y) breaches or
fails to perform or comply with any of its covenants and agreement
contained in Section 5.1 through 5.9,
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<PAGE> 12
inclusive, of the Merger Agreement, or breaches its representations and
warranties in any respect, which breach or failure shall have a Company
Material Adverse Effect.
If (i) the Board of Directors of the Company terminates the Merger
Agreement under the circumstances set forth in clause (c)(i) above or if (ii)
the Board of Directors of the Purchaser terminates the Merger Agreement under
the circumstances set forth in clause (d)(ii)(A) above, then the Company will
pay or cause to be paid to the Purchaser an amount equal to $2.1 million
concurrently with the termination of the Merger Agreement. Further, if the Board
of Directors of the Purchaser terminates the Merger Agreement under the
circumstances set forth in clause d(ii)(B) or d(iv) above and within nine months
of any such termination a Person shall acquire or beneficially own a majority of
the then outstanding Shares or shall have obtained representation on the
Company's Board of Directors or shall enter into a definitive agreement with the
Company with respect to an Acquisition Proposal or similar business combination,
then the Company shall pay or cause to be paid to the Purchaser $2.1 million
upon the consummation of such Acquisition Proposal or similar business
combination.
REPRESENTATIONS AND WARRANTIES. The Company has made customary
representations and warranties to the Purchaser with respect to, among other
things, its organization and qualification, subsidiaries, capitalization,
authority, consents and approvals, violations, the Company's SEC reports,
financial statements, undisclosed liabilities, certain changes, taxes,
litigation, employee benefit plans, environmental liability, compliance with
applicable laws, material contracts, patents, trade marks, trade names,
copyrights and registrations, labor matters, real property, information
supplied, and the Company's Proxy Statement.
THE TENDER AND OPTION AGREEMENT
TENDER OF SHARES. Concurrently with the execution of the Merger Agreement,
the Purchaser and Roger R. Phillips, William A. Taylor, Louis T. Enos, E Gordon
Young, John G. Owens and Allan B. Freedman (the "Stockholders") entered into the
Tender and Option Agreement. Upon the terms and subject to the conditions of
such agreement, the Stockholders have severally agreed (i) to validly tender or
cause the record owner of any Shares to tender all Shares beneficially owned by
such Stockholder pursuant to the Offer, not later than the fifth business day
after commencement of the Offer or, with respect to any Shares acquired directly
or indirectly, or otherwise beneficially owned, by any of the Stockholders in
any capacity after June 5, 1996, and prior to the termination of the Tender and
Option Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
a purchase, dividend, distribution, gift, bequest, inheritance or as a
successor-in-interest in any capacity (including a fiduciary capacity) or
otherwise ("After-Acquired Shares") within one business day following the
acquisition thereof, (ii) not to withdraw any Shares so tendered without the
prior written consent of the Purchaser except upon receipt of notice from the
Purchaser that it is exercising the Option to acquire the Shares and (iii) to
withdraw all Shares tendered in the Offer immediately upon receipt of notice
from the Purchaser that it is exercising the Option in order that the Purchaser
may acquire such Shares. The Stockholders have agreed that the Purchaser's
obligation to accept for payment and pay for the Shares in the Offer is subject
to the terms and conditions of the Offer.
STOCK OPTION. In order to induce the Purchaser to enter into the Merger
Agreement, the Stockholders have granted to the Purchaser an irrevocable option
exercisable in whole but not in part (the "Option") to purchase the Shares
beneficially owned by such Stockholders (the "Option Shares") at a purchase
price per Share equal to $8.75. Pursuant to the Tender and Option Agreement, the
Purchaser's Option will terminate in the event the Merger Agreement is
terminated under any circumstances other than (a) by the Company, if, prior to
the purchase of Shares sufficient to meet the Minimum Condition by the Purchaser
pursuant to the Offer, the Company shall have (x) withdrawn, modified or changed
in a manner adverse to the Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger in order to execute a definitive
agreement relating to an Acquisition Proposal (as defined in the Merger
Agreement) by a person other than Parent, the Purchaser or any affiliate of
either of them, after consulting with independent legal counsel and determining
that the failure to take such action would be inconsistent with the fiduciary
duty of the Board of Directors of the Company to the Company's stockholders and
(y) paid or caused to be paid to the Purchaser $2.1 million, (b) by the
Purchaser if, due to an occurrence that if occurring after the
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<PAGE> 13
commencement of the Offer would result in a failure to satisfy any of the
conditions to the Offer, the Purchaser shall have failed to commence the Offer
on or prior to the Offer Deadline (as defined in the Merger Agreement); (c) by
the Purchaser if the Purchaser is not in material breach of the Agreement and
either (x) prior to the purchase of Shares, the Board of Directors of the
Company shall have withdrawn, or modified or changed (including by amendment of
the Company's Schedule 14D-9) in a manner adverse to the Purchaser its approval
or recommendation of the Offer, the Merger Agreement or the Merger or shall have
recommended, or the Company shall have executed an agreement in principle (or
similar agreement) or a definitive agreement relating to, an Acquisition
Proposal; or (y) prior to the purchase of shares of Company Common Stock
pursuant to the Offer, it shall have been publicly disclosed, or the Purchaser
shall have learned, that any person, entity or "group" (as that term is defined
in Section 13(d)(3) of the Exchange Act), other than the Purchaser or its
affiliates or any group of which any of them is a member, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of more than 14.9% of any class or series of capital stock of the
Company (including the Shares), through the acquisition of stock, the formation
of a group or otherwise, or shall have been granted an option, right, or
warrant, conditional or otherwise, to acquire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or (d) if, prior to the purchase of Shares pursuant to the Offer, the
Company (x) breaches or fails to perform or comply in any material respect with
any of its covenants and agreements contained in the Merger Agreement other than
those regarding the conduct of business of the Company pending the time the
directors of the Purchaser have been elected to the Board of Directors of the
Company (contained in Sections 5.1 through 5.9 inclusive), or (y) breaches or
fails to perform or comply with any of its covenants and agreements contained in
Sections 5.1 through 5.9 inclusive, or breaches its representations and
warranties in any respect, which breach or failure shall have a Company Material
Adverse Effect (as defined in the Merger Agreement). In the event of termination
of the Option, or termination of the Merger Agreement under any circumstances
other than those described in the preceding sentence, the Purchaser's Option
shall continue for a period of 90 days thereafter so long as (x) all applicable
waiting periods under the HSR Act required for the purchase of the Option Shares
upon such exercise shall have expired or been waived and (y) there shall not be
in effect any preliminary or final injunction or other order issued by any court
or governmental, administrative or regulatory agency or authority or legislative
body or commission prohibiting the exercise of the Option.
If, within twelve (12) months following the exercise of the Option by the
Purchaser, the Purchaser, directly or indirectly, sells, transfers or otherwise
disposes of any or all of the Shares acquired upon exercise of the Option or the
Offer to a third party (or realizes cash proceeds in respect of such Shares as a
result of a distribution to stockholders of the Company following the sale of
substantially all of the Company's assets) in connection with a transaction
whereby the third party is acquiring the entire equity interest in the Company
pursuant to a merger, tender offer, exchange offer, sale of assets, sale of
shares or a similar business transaction (a "Subsequent Sale") at a per Share
price in excess of $8.75 (the "Subsequent Sale Price"), then the Purchaser will
pay to each Stockholder, within five (5) days of receipt of payment by the
Purchaser, an amount equal to such Stockholder's pro rata share of fifty percent
(50%) of the excess of the Subsequent Sale Price over $8.75 multiplied by the
number of Shares sold in the Subsequent Sale.
ASSIGNMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The Stockholders have
assigned to the Purchaser any and all dividends and other distributions that may
be declared, set aside or paid by the Company with respect to the Shares during
the term of the Tender and Option Agreement.
VOTING. Each Stockholder has agreed that (for so long as the Merger
Agreement is in effect), at any meeting of the holders of Company Common Stock,
however called, or in connection with any written consent of the holders of
Company Common Stock, he will vote (or cause to be voted) his Shares (a) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and the Tender and Option Agreement and any
actions required in furtherance thereof and hereof; (b) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or the Tender and Option Agreement; and (c) except as
otherwise agreed to in writing in advance by the Purchaser, against any of the
following actions
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or agreements (other than the Merger Agreement or the transactions contemplated
thereby): (i) any action or agreement that is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone or attempt to discourage or
adversely affect the Merger, the Offer and the transactions contemplated by the
Tender and Option Agreement and the Merger Agreement; (ii) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company and its subsidiaries; (iii) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (iv) any change in the management of the Board, except as
specifically contemplated by the Merger Agreement; (v) any change in the present
capitalization or dividend policy of the Company; (vi) any amendment of the
Company's certificate of incorporation or bylaws; or (vii) any other material
change in the Company's corporate structure or business. Notwithstanding
anything to the contrary contained in the Tender and Option Agreement, each
Stockholder will be free to act in his capacity as a member of the Board and to
discharge his fiduciary duty as such. Each Stockholder agrees, at the request of
the Purchaser, to execute and deliver to the Purchaser an irrevocable proxy.
OTHER COVENANTS, REPRESENTATIONS, WARRANTIES. In connection with the Tender
and Option Agreement, each Stockholder has made certain representations,
warranties and covenants, including without limitation with respect to ownership
of Shares, the Stockholder's power and authority to enter into and perform his
obligations under the Tender and Option Agreement, the receipt of requisite
governmental consents and approvals, absence of conflicts, absence of liens and
encumbrances on and in respect of the Stockholder's Shares, restrictions on the
transfer of the Stockholder's Shares, reliance by the Purchaser, finder's fees,
confidentiality, notice of additional shares and the solicitation of acquisition
proposals.
THE GUARANTY
Vemco, Inc., Venture Industries Corporation, Vemco Leasing, Inc., Venture
Leasing Company, Venture Mold & Engineering Corporation, Venture Service
Company, each a Michigan corporation, and Venture Industries Canada, LTD., an
Ontario corporation (each a "Guarantor" and collectively, the "Guarantors")
executed a Guaranty, dated June 5, 1996, for the benefit of the Company and each
of Roger R. Phillips, William A. Taylor, Louis T. Enos, E Gordon Young, John G.
Owens, Allen B. Freedman and Leonard Heilman (each a "Beneficiary" and
collectively, the "Beneficiaries") with respect to the obligations of the
Purchaser (the Guaranty"). Pursuant to the Guaranty, the Guarantors jointly and
severally guaranteed to the Company and the Beneficiaries the performance of all
liabilities, agreements and other obligations of the Purchaser under the Merger
Agreement, the Indemnity Agreements (as hereinafter described), the
Noncompetition Agreements between the Company and the Beneficiaries, the
Amendment to the Employment and Noncompetition Agreement between the Company and
Roger R. Phillips, and the Amendment to the Employment and Noncompetition
Agreement between the Purchaser, the Company and William A. Taylor, together
with all costs of collection, compromise or enforcement, including, without
limitation, reasonable attorneys' fees incurred with respect to the Guaranty, or
with respect to a proceeding under the federal bankruptcy laws or any
insolvency, receivership, arrangement or reorganization law or an assignment for
the benefit of creditors concerning the Purchaser or any Guarantor, together
with interest on all such costs of collection, compromise or enforcement from
the date arising (all the foregoing, collectively, the "Obligations"). The
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Company or any Beneficiary first attempt to collect any of the Obligations from
the Purchaser or resort to any security or other means of obtaining their
payment.
THE INDEMNITY AGREEMENTS
The Purchaser entered into Indemnity Agreements, effective June 5, 1996,
with each of the directors of the Company and the chief financial officer (each
such officer and director, individually, an "Indemnitee"), which provide that,
subject to certain provisions of the Indemnity Agreements, in the event an
Indemnitee is, or becomes a party to, or witness or other participant in, or is
threatened to be made a party to, or witness or other participant in, any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, investigative or other (a "Proceeding") by reason of
(or arising in part out of) an
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Indemnifiable Event, the Purchaser will indemnify such Indemnitee from and
against any and all Expenses (as hereinafter defined) actually and reasonably
incurred or suffered by the Indemnitee to the fullest extent permitted by law,
as the same exists or may thereafter be amended or interpreted (but in the case
of any such amendment or interpretation, only to the extent that such amendment
or interpretation permits the Purchaser to provide broader indemnification
rights than were permitted prior thereto). The rights to receive indemnification
and the advancement of Expenses under the Indemnity Agreements are not exclusive
of any other rights to which any Indemnitee may be entitled or subsequently
entitled under any statute, the certificate of incorporation or bylaws of the
Company or the Purchaser, by vote of the stockholders of the Company or the
Purchaser or the Board, or otherwise. To the extent that a change in applicable
law (whether by statute or judicial decision) or the bylaws of the Company or
the Purchaser permits greater indemnification than is currently provided for an
Indemnifiable Event, the Indemnity Agreements provide that each Indemnitee will
be entitled to such greater indemnification under the Indemnity Agreements.
For purposes of the Indemnity Agreements, "Expenses" means any expense,
liability, or loss, including reasonable attorneys' fees, judgments, fines,
ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any
interest, assessments, or other charges imposed thereon, and any federal, state,
local, or foreign taxes imposed as a result of the actual or deemed receipt of
any payments under the Indemnity Agreements, paid or incurred in connection with
investigating, defending, being a witness in, or participating in (including on
appeal), or preparing for any of the foregoing in, any Proceeding relating to
any Indemnifiable Event. "Indemnifiable Event," as used in the Indemnity
Agreements, means any event or occurrence that takes place either prior to or
after the execution of the Indemnity Agreements that is (a) related to the fact
that an Indemnitee is, or has agreed to serve as, a director or officer of the
Company or while a director or officer of the Company serves at the request of
the Company as a director, officer, employee, trustee, agent, or fiduciary of
another foreign or domestic corporation, partnership, joint venture, employee
benefit plan, trust, or other enterprise, and (b) related to anything done or
not done by an Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
The Indemnity Agreements provide that expenses incurred by an Indemnitee in
any Proceeding for which indemnification may be sought under the Indemnity
Agreement shall be advanced by the Purchaser to such Indemnitee within twenty
(20) days after receipt by the Purchaser of a statement or statements from such
Indemnitee requesting such advance and reasonably evidencing the Expenses
reasonably incurred by such Indemnitee (an "Expense Advance"). If it is
ultimately determined by a final judicial decision (from which there is no right
of appeal) that an Indemnitee is not entitled to be indemnified by the
Purchaser, the Indemnitee shall immediately repay any amounts advanced by the
Purchaser. Each Indemnitee further agrees to execute any further agreements
regarding the repayment of Expenses as the Purchaser may reasonably request
prior to receiving any such advance, including, without limitation, an
affirmation of the Indemnitee's good faith belief that any applicable standards
of conduct have been met by such Indemnitee.
The Indemnity Agreements provide that no Indemnification or Expense Advance
pursuant to the Indemnity Agreements will be paid by the Purchaser: (i) in
connection with any Proceeding initiated by an Indemnitee against the Purchaser,
the Company or any director or officer of the Purchaser or the Company unless
the Purchaser or the Company has joined in, or the Board of Directors of the
Purchaser or the Company, has consented to, the initiation of such Proceeding,
or the Proceeding is one to enforce indemnification rights as provided in the
Indemnity Agreements; (ii) to the extent an Indemnitee settles or otherwise
disposes of a Proceeding or causes the settlement or disposal of a Proceeding
without the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless the Indemnitee receives court approval
for such settlement or other disposition where the Purchaser had the opportunity
to oppose the Indemnitee's request for such court approval; (iii) with regard to
any judicial award if the Purchaser was not given a reasonable and timely
opportunity, at its expense, to participate in the defense of such action unless
the Purchaser's participation in such Proceeding was barred by the Indemnity
Agreements or the court in such Proceeding; (iv) for any acts, omissions,
transactions or circumstances for which indemnification under the Indemnity
Agreements is prohibited by applicable state or federal law or until any
preconditions imposed upon, or agreed to by, the Purchaser by or with any court
or governmental
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<PAGE> 16
agency are satisfied; (v) for remuneration paid to a director if it shall be
determined by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law; (vi) for any accounting of profits made
from the purchase or sale by an Indemnitee of securities of the Company in
violation of Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereof; (vii) for acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal profit to
which he was not entitled in the event that a final decision of a court of
competent jurisdiction establishes that the Indemnitee was not entitled to such
personal profit; or (viii) for proceedings based upon the same facts as underlie
a breach of a representation and warranty in the Merger Agreement.
Each Indemnitee and the Purchaser acknowledge in the Indemnity Agreements
that, in certain circumstances, federal law or public policy may override
applicable state law and prohibit the Purchaser from indemnifying Indemnitee
under the Indemnity Agreements or otherwise. The Purchaser and each Indemnitee
acknowledge that the SEC has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, each Indemnitee understands and agrees that the Purchaser may be
required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
The indemnification provided under the Indemnity Agreements will continue
as to each Indemnitee for any action taken or not taken while serving in an
indemnified capacity pertaining to an Indemnifiable Event even though such
Indemnitee shall have ceased to serve in such capacity at the time of any
Proceeding. The Indemnity Agreements will continue until and terminate upon the
later of (i) six years after the date that such Indemnitee has ceased to serve
as a director or officer of the Company of (ii) the final termination of all
pending proceedings in respect of which Indemnitee is granted rights of
indemnification or expense advance under the Indemnity Agreements.
THE NONCOMPETITION AGREEMENTS
Louis T. Enos, Allan B. Freedman, John G. Owens and E Gordon Young (the
"Individuals") have each entered into Noncompetition Agreements, dated as of
June 5, 1996, with the Company. Pursuant to the Noncompetition Agreements, each
Individual agrees that he will not during, and for a period of five years
following the Effective Time, directly or indirectly, (other than as the holder
of not more than one percent (1%) of the total outstanding stock of any publicly
held company) own, sponsor, operate, join, control or participate in, or be
connected as a partner, officer, director, employee, consultant, adviser,
sponsor or otherwise, or permit his name to be used in connection with, any
business in which the Company or the Purchaser is presently engaged.
Each Noncompetition Agreement also provides that after the Effective Time,
the Company shall (i) pay to the Individual (or his estate or heirs, in the
event the Individual shall be deceased) $5,000 per month for 60 months
commencing on the first day of the first calendar month following the Effective
Time, (ii) cause the Individual and his spouse to remain on the Company's long
term health insurance policy until age 65 if and so long as it is permitted by
all applicable laws and by the Company's long-term health care provider, and
(iii) from age 65 until their death the Company shall pay to the Individual and
his spouse (or to an appropriate insurer on their behalf) a monthly amount equal
to the lesser of the monthly cost of Medicare Plan (b) and the AARP Group Health
Insurance Program Medical Supplemental Insurance Plan (f) or the monthly cost of
other substantially equivalent health insurance; provided that if the Individual
and his spouse shall cease to be covered in accordance with the preceding
clauses (ii) and (iii), the Company shall purchase equivalent insurance for the
Individual and his spouse.
THE AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENTS
On June 5, 1996 the Company entered into an Amendment to Employment and
Noncompetition Agreement with Roger R. Phillips, the Company's Chief Executive
Officer, to extend to December 31, 1997 the term of his Employment Agreement
with the Company, dated February 18, 1994, and to amend
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<PAGE> 17
Mr. Phillips's Noncompetition Agreement with the Company, dated February 18,
1994, to provide that the first day of the first calendar month following his
Termination of Service thereunder shall be January 1, 1998.
On June 5, 1996 the Company entered into an Amendment to Employment and
Noncompetition Agreement with William A. Taylor, the Company's Executive Vice
President, to terminate the term of his Employment Agreement with the Company,
dated February 18, 1994, on the last day of the month in which the Effective
Time occurs, and to amend Mr. Taylor's Noncompetition Agreement with the
Company, dated February 18, 1994, to provide that the first day of the first
calendar month following his Termination of Service thereunder shall be the
first day of the month immediately following the month in which the Effective
Time occurs.
Copies of the Employment Agreements dated February 18, 1994 between the
Company and Mr. Phillips and the Company and Mr. Taylor have been filed with the
SEC as exhibits to the Company's Form 10-Q, on March 14, 1994.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Recommendation of the Board of Directors
The Board of Directors of the Company, by the unanimous vote of the members
of the Board of Directors present and voting at the meeting of the Board held
June 5, 1996, called for such purpose, has determined that the Merger and the
Offer are fair from a financial point of view and in the best interests of the
stockholders other than the Purchaser and its affiliates, has approved the
Merger Agreement in substantially the form presented to and reviewed by the
Board of Directors of the Company, and the transactions contemplated thereby and
recommends that all holders of Shares and associated rights tender such Shares
pursuant to the Offer.
(b) Background -- Reasons for the Recommendation
THE OFFER. During the summer of 1995, the Company became concerned that,
due to the depressed price of the Company's stock, the Company could become the
target of an acquisition attempt at a price that might significantly undervalue
the Company. In September 1995, Roger R. Phillips, the Chief Executive Officer
of the Company ("Phillips"), and William A. Taylor, the Senior Vice President
and Vice Chairman of the Company ("Taylor"), held discussions with Smith Barney
Inc. ("Smith Barney") concerning its availability to act as the Company's
financial advisor in evaluating the adoption of a shareholder rights plan and
any transaction in which the Company might engage. After several meetings that
took place in September 1995, the Board of Directors selected Smith Barney as
the Company's financial advisor.
In November 1995, the Parent and the Company entered into an agreement
providing for the joint development of, and the joint provision of engineering
services for, a select group of products. On January 23, 1996, representatives
of Parent met with representatives of the Company to discuss the feasibility of
Parent's acquiring the Company. On January 29, 1996, Phillips and Philip Kusky
met with Michael Torakis, President of the Parent ("Torakis"), and Al Young,
Ford Sales Manager of Parent. At this meeting it was agreed that the Company and
the Parent would enter into a confidentiality agreement and the Company would
provide limited confidential information to the Parent. On February 9, 1996, the
Company and the Parent entered into a preliminary confidentiality agreement and
the Company provided the Parent with certain limited confidential information
concerning the Company and representatives of Parent toured various
manufacturing facilities of the Company in Michigan, Indiana, Ohio and New
Hampshire. Based upon its review of such limited information, Parent and the
Company determined to continue discussions. On April 4, 1996, the Company and
one of Parent's wholly-owned subsidiaries entered into a Confidentiality
Agreement, and the Company began to provide the Parent with additional
confidential information. During the following weeks, the Parent conducted its
due diligence review of the Company.
On April 10, 1996, representatives of the Company and Parent met at the
Company's offices in Dearborn, Michigan, to obtain the data previously
requested. At that time, the Company's management made presentations to Parent
and its legal and financial advisors regarding the history of the Company, its
structure, product lines, plant capacities, information systems, labor
relations, overall business operations, competitive
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<PAGE> 18
market conditions and financial reporting, both historical and prospective. The
Company also provided revenue and costing information, both actual and
projected.
On April 26, 1996, Lawrence Winget, Chairman of the Parent ("Winget"), and
Butler met with Phillips, Taylor and Philip Kusky. At that meeting, Winget
indicated that, subject to the completion of the Parent's due diligence and
negotiation of definitive merger documents, the Parent was interested in
acquiring the Company. Phillips and Taylor informed Winget indicated that a cash
offer would be preferable. At that meeting, Parent stated that although it
contemplated a cash offer, it was premature to discuss the terms of an offer, or
whether one would in fact be made, as significant issues were unresolved.
On May 15, 1996, Phillips and Taylor together with the Company's legal and
financial advisors, met in Detroit, at the offices of Parent, together with
Torakis and Purchaser's legal and financial advisors, to discuss the status of
Parent's diligence review of the Company, its level of interest in proceeding
with a transaction and the structure, terms and timing of a possible
transaction. At this meeting, Torakis indicated that Parent was interested
(subject to completing its diligence, obtaining an appropriate financing
commitment from its lender, negotiating definitive agreements and obtaining
options from the Company's principal stockholders) in acquiring the Company for
approximately $8.75 per share. Torakis also indicated that Parent was not
willing to participate in a process that involved significant delays. Phillips
indicated that he believed that the Company and Parent should proceed upon that
basis.
Between May 15, 1996 and June 3, 1996, various representatives of Parent,
reviewed the Company's records and continued their due diligence review of the
Company. During this period, the legal advisors of the Parent and the Company
prepared the Merger Agreement, the Guarantee, the Tender and Option Agreement
and the Indemnity Agreement.
On May 22, 1996 and again on May 24, 1996, the Board of Directors of the
Company held telephonic meetings at which Phillips and Taylor reported on the
discussions with Parent and the level of interest expressed by Parent. At these
meetings, the Board of Directors considered, among other things, the fact that a
prolonged process could be disruptive to the Company's operations, that Parent
had completed its due diligence and that the Company had had recent discussions
with other parties that had not led to formal offers.
On May 24, 1996, Phillips and Taylor called Winget and discussed, among
other things, the structure of the proposed transaction, the nature and timing
of Parent's financing and the proposed financing contingency. On May 24, 1996,
Mr. Winget reaffirmed to Mr. Phillips that Parent, through a newly-formed
subsidiary, would be prepared to make an all cash offer to acquire the Company
at $8.75 per Share, pending the resolution of certain open issues. During the
week of May 27, 1996, Phillips and Taylor held various telephone conversations
with Torakis and discussed, among other things, the break-up fee and the request
for an option with respect to Shares owned by the Directors. On May 28, 1996,
the Board of Directors held a telephonic meeting at which Phillips reported on
his discussions with Winget and Torakis concerning the financing contingency and
the requested break-up fee and option agreements. The Board of Directors
authorized Phillips to negotiate further.
On June 3, 1996, the Board of Directors met to review and discuss the terms
and conditions of the proposed transaction, including drafts of the Merger
Agreement, the Guaranty, the Tender and Option Agreement and the Indemnity
Agreements that reflected the results of extensive negotiations of various terms
including the termination rights and the break-up fee. The Board specifically
noted that a purchase price of $8.75 per Share, was above current market prices
and was significantly above recent historical market prices and should receive
further consideration.
On June 4, 1996, the Parent formally offered to acquire the Company for
$8.75 per Share. Later that day, the Board of Directors of the Company met to
consider the offer, together with the Company's legal and financial advisors. At
that meeting, legal counsel reviewed with the Board the terms and conditions of
the proposed Merger Agreement and the Board's fiduciary obligations in
connection with the proposed transaction. Smith Barney then made a financial
presentation to the Board with respect to the $8.75 per Share cash consideration
to be received by the holders of Shares in the Offer and the Merger. The Board
then analyzed and discussed the possible Offer and the proposed Merger
Agreement. Following extensive discussion and
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<PAGE> 19
consideration, the Board, by unanimous vote of all directors present, determined
(i) that the consideration contemplated to be received by the holders of the
Shares pursuant to the proposed Merger Agreement is fair from a financial point
of view to the holders of Shares, and that the Offer and the Merger contemplated
by the proposed Merger Agreement are fair and in the best interests of the
Company and its stockholders and that the Offer and the Merger will directly
benefit the Company and its stockholders, (ii) to approve and consent to the
proposed Offer and Merger contemplated by the proposed Merger Agreement, (iii)
to authorize the execution and delivery of the proposed Merger Agreement, and
(iv) to recommend that the Company's stockholders accept the proposed Offer, if
and when initiated, and approve and adopt the proposed Merger contemplated by
the Merger Agreement.
On June 5, 1996, Purchaser and the Company resolved all remaining issues
and definitive documents for the proposed Merger were prepared. The Company
entered into the Merger Agreement in the evening of June 5, 1996, and thereafter
the Company issued a press release announcing the execution of the Merger
Agreement. Smith Barney also delivered a written opinion to the Board of
Directors of the Company, dated June 5, 1996, to the effect that, as of such
date and based upon and subject to certain matters stated in such opinion, the
$8.75 per Share cash consideration to be received by holders of Shares (other
than Parent and its affiliates) in the Offer and the Merger was fair, from a
financial point of view, to such holders. The full text of Smith Barney's
written opinion, dated June 5, 1996, which sets forth the assumptions made,
matters considered and limitations on the review undertaken by Smith Barney, is
attached hereto as Exhibit 17 and is incorporated herein by reference. Smith
Barney's opinion is directed only to the fairness, from a financial point of
view, of the $8.75 per Share cash consideration to be received by holders of
Shares (other than Parent and its affiliates) pursuant to the Offer and the
Merger and is not intended to constitute, and does not constitute, a
recommendation as to whether any stockholder should tender Shares pursuant to
the Offer. Holders of Shares are urged to read such opinion carefully in its
entirety. The Purchaser commenced the Offer on June 11, 1996.
In approving the proposed Merger Agreement and the transactions
contemplated thereby and recommending that all holders of Shares tender such
Shares pursuant to the Offer, the Board of Directors considered a number of
factors, including:
a. the consideration per Share to be paid pursuant to the Offer and
the historical and current market prices for the Shares;
b. the Company's business, financial condition, results of operations,
business strategy, prospects, employees, suppliers and customers;
c. the nature of the conditions to the obligations of Purchaser to
consummate the Offer including the fact that the Offer and the Merger are
subject to financing;
d. the guaranty of the obligations of the Purchaser by the
subsidiaries of Parent;
e. the fact that the Purchaser had indicated that it would withdraw
the Offer if not accepted, that it wanted to make a preemptive bid and
would not participate in a prolonged process and that no other formal
offers had been received;
f. the fact that, as more specifically described below under
"-- Discussions with other Parties," during the past two years, the Company
has received expressions of interest from certain other parties, none of
which resulted in formal proposals;
g. the written opinion of Smith Barney, dated June 5, 1996, as to the
fairness, from a financial point of view, to the holders of the Shares
(other than Parent and its affiliates) of the $8.75 per Share consideration
to be received by such holders in the Offer and the Merger;
h. the fact that the holders of approximately 28.9% of the outstanding
Shares and Options were willing to execute the Tender and Option Agreement
and the effect the Tender and Option Agreement might have on subsequent
offers; and
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<PAGE> 20
i. the fact that while the Merger Agreement does not permit the
Company to solicit or initiate discussions with other prospective
purchasers, it does permit the Company to furnish information to and engage
in discussions with third parties if required to meet the fiduciary duties
of the Directors.
The Board of Directors did not assign relative weights to the foregoing
factors or determine that any factor was of more importance than other factors.
Rather, the Board of Directors viewed its position and recommendations as being
based on the totality of the information presented to and considered by it.
DISCUSSIONS WITH OTHER PARTIES. Periodically during the last two years the
Company has had discussions with a party interested in pursuing a transaction
with the Company. In July, 1994 the Company and the interested party entered
into a confidentiality agreement pursuant to which information was exchanged and
discussions were held during the balance of 1994. The frequency of such
discussions increased during the latter half of 1995. The interested party and
the Company and their respective representatives conducted due diligence and
discussions during the period of September through November, 1995. In December,
1995 such discussions were suspended by the interested party due to the
Company's operating condition. Such discussions resumed in February, 1995 and in
the ensuing months the interested party conducted further due diligence. In May,
1996, representatives of the Company and its financial advisors met with the
interested party, after which the Company determined that such party would
require several months to complete its diligence review and obtain financing
adequate to consummate a transaction.
In December 1995, the Company was approached by another party that
expressed interest in a possible transaction with the Company. Between December,
1995 and March, 1996, representatives of the Company had several discussions
with this party. On March 11, 1996, the Company entered into a Confidentiality
Agreement with this party and began to provide such party with information for
its due diligence investigation. During the following weeks, this party
conducted a due diligence review of the Company. In May, 1996, Phillips and
Taylor also met with representatives of this potential acquiror. They discussed
the status of such party's diligence review and its continuing level of interest
in a possible transaction with the Company. This party indicated that it wanted
to perform additional diligence review. Representatives of this potential
acquiror held telephonic discussions with representatives of the Company for
this purpose, but such party indicated that it would still require additional
information from the Company.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained Smith Barney as its financial advisor with respect
to the Offer and the Merger. Pursuant to the terms of Smith Barney's engagement,
the Company has agreed to pay Smith Barney for its services an aggregate
financial advisory fee equal to 1.18% of the total consideration (including
liabilities assumed) payable in connection with the Offer and the Merger. The
Company also has agreed to reimburse Smith Barney for travel and other
out-of-pocket expenses, including legal fees and expenses, and to indemnify
Smith Barney and certain related parties against certain liabilities, including
liabilities under the federal securities laws, arising out of Smith Barney's
engagement. In the ordinary course of business, Smith Barney and its affiliates
may actively trade or hold the securities of Bailey for their own account or for
the account of customers and, accordingly, may at any time hold a long or short
position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) The Holders have granted an option to the Purchaser to acquire their
Shares, warrants and options. Pursuant to the Tender and Option Agreement, the
Holders have agreed to tender all of their Shares into the Offer. The Holders
include all six members of the Board of Directors, the President and Chief
Executive Officer and the Senior Vice President of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, affiliate and subsidiary of the Company currently intends to tender
all Shares to Purchaser that are held of record or beneficially by such person
or over which he, she or it has sole dispositive power. Pursuant to the Tender
and Option Agreement, all of the Holders have agreed to tender their Shares into
the Offer.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, no negotiation is being
undertaken or is underway by the Company in response to the Offer that 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) Not applicable.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) DGCL 203
Section 203 of DGCL purports to regulate certain business combinations of a
corporation organized under Delaware law, such as the Company, with a
stockholder beneficially owning 15% or more of the voting stock of such
corporation after the time the relevant person or entity first becomes a 15%
stockholder. Section 203 provides that the corporation shall not engage for a
period of three years in any business combination with such a stockholder unless
(i) there was prior approval by the Board of Directors of the Corporation,
either of the business combination or the transaction that results in a
stockholder's becoming a 15% stockholder, (ii) upon consummation of the
transaction that resulted in the stockholder's become a 15% stockholder, such
stockholder owned at least 85% of the outstanding voting shares of the
corporation, exclusive of shares owned by persons who are directors and also
officers, or (iii) at or subsequent to the time such stockholder becomes a 15%
stockholder, such business combination is approved by the board of directors and
the holders of two-thirds of the outstanding shares (other than the shares owned
by the 15% stockholder). The Company's Board of Directors has approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, and therefore, the Offer and the Merger are not prohibited by
Section 203 of the DGCL.
(b) Rights Agreement
The Company and State Street Bank and Trust Company, as Rights Agent,
entered into a Rights Agreement, dated as of September 28, 1995 (the "Rights
Agreement"), which provided for the association of one right to purchase for $28
one share of the Company's Common Stock (a "Right") for each share of Common
Stock outstanding on such date and each share issued prior to the earliest of
the Distribution Date (as defined below), the Redemption Date (as defined below)
or the Expiration Date (as defined below). "Distribution Date" is defined as the
earlier of (i) the date on which the Company learns that a person has become an
"Acquiring Person," i.e., with certain exceptions, someone who is the owner of
more than 15% of the Company's outstanding shares (or, if greater, the
percentage owned by such person on September 28, 1995 plus 1% of the Company's
outstanding shares on such date) or (ii) the date designated by the Company's
Board of Directors following the commencement of a tender or exchange offer by
any third party other than a subsidiary, employee benefit plan of the Company or
person holding shares pursuant to the terms of any such employee benefit plan,
if upon consummation of such offer, such person would own more than 15% of the
Company's outstanding shares (or, if greater, the percentage owned by such
person on September 28, 1995 plus 1% of the Company's outstanding shares on such
date). "Redemption Date" is defined as the date on which all Rights shall have
been redeemed. "Expiration Date" is defined as the tenth anniversary of the date
of the Rights Agreement. Each Right entitles the holder to exercise it at any
time after the Distribution Date and prior to the earlier of the Redemption Date
or the Expiration Date.
The Company's Board of Directors has approved the Offer and the Merger and
has amended the Rights Agreement to exclude the consummation of the Offer and
the Merger from the events that could trigger a Distribution Date and to exempt
specifically the Purchaser from being an Acquiring Person.
A copy of the Rights Agreement has been filed with the SEC as an exhibit to
the Company's Report on Form 8-K, on October 2, 1995.
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<PAGE> 22
(c) Information Statement
Following this Schedule 14D-9 is the Information Statement required by
Section 14(f) and Rule 14(f)-l of the Exchange Act in connection with the
designation by Purchaser, pursuant to the Merger Agreement, of certain persons
to be appointed to the Board of Directors of the Company other than at a meeting
of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
Exhibit 1. Agreement and Plan of Merger dated June 5, 1996 between the Company and Vemco
Acquisition Corp.*
Exhibit 2. Guaranty dated June 5, 1996 from Vemco, Inc., Venture Industries Corporation,
Vemco Leasing, Inc., Venture Service Company, Venture Industries Canada, Ltd.,
Venture Mold & Engineering Corp. and Venture Leasing Company.*
Exhibit 3. Tender and Option Agreement dated June 5, 1996, by and between the Purchaser and
certain holders of Shares, Options and Warrants.*
Exhibit 4. Indemnity Agreement between the Purchaser and Roger R. Phillips dated as of June
5, 1996.*
Exhibit 5. Indemnity Agreement between the Purchaser and William A. Taylor dated as of June
5, 1996.*
Exhibit 6. Indemnity Agreement between the Purchaser and Louis T. Enos dated as of June 5,
1996.*
Exhibit 7. Indemnity Agreement between the Purchaser and E Gordon Young dated as of June 5,
1996.*
Exhibit 8. Indemnity Agreement between the Purchaser and John G. Owens dated as of June 5,
1996.*
Exhibit 9. Indemnity Agreement between the Purchaser and Allan B. Freedman dated as of June
5, 1996.*
Exhibit 10. Indemnity Agreement between the Purchaser and Leonard Heilman dated as of June
5, 1996.*
Exhibit 11. Noncompetition Agreement dated June 5, 1996 between the Company and Allan B.
Freedman.*
Exhibit 12. Noncompetition Agreement dated June 5, 1996 between the Company and Louis T.
Enos.*
Exhibit 13. Noncompetition Agreement dated June 5, 1996 between the Company and E Gordon
Young.*
Exhibit 14. Noncompetition Agreement dated June 5, 1996 between the Company and John G.
Owens.*
Exhibit 15. Amendment to Employment and Noncompetition Agreement between the Company and
William A. Taylor dated June 5, 1996.*
Exhibit 16. Amendment to Employment and Noncompetition Agreement between the Company and
Roger R. Phillips dated as of June 5, 1996.*
Exhibit 17. Opinion of Smith Barney Inc. dated June 5, 1996.
Exhibit 18. Press Release of the Company issued on June 5, 1996.*
Exhibit 19. Letter dated June 11, 1996 from Roger R. Phillips, Chairman and Chief Executive
Officer of Bailey Corporation to the Stockholders of Bailey Corporation
concerning the Offer.
</TABLE>
- ---------------
* Not included in copies mailed to stockholders.
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<PAGE> 23
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.
BAILEY CORPORATION
By: /s/ ROGER R. PHILLIPS
Name: Roger R. Phillips
Title: Chief Executive Officer
Date: June 11, 1996
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<PAGE> 24
ADDITIONAL INFORMATION PROVIDED PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed to the stockholders of the
Company on or about June 12, 1996 as part of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9").
You are receiving this Information Statement in connection with the possible
election of persons designated by Purchaser to be elected to the Board of
Directors of the Company (the "Board"), other than at a meeting of the Company's
stockholders. The Merger Agreement provides that promptly upon Purchaser's
purchase of and payment for at least a majority of the outstanding shares of
Common Stock pursuant to the Offer, Purchaser will be entitled to designate at
its option up to that number of directors, rounded to the nearest whole number
as will make the percentage of the Company's directors designated by the
Purchaser equal to the aggregate voting power of the Shares held by Purchaser.
Upon request of Purchaser, the Company is required promptly at its election to
either increase the size of the Board or secure the resignation of such number
of its directors as is necessary to enable Purchaser's designees (the "Purchaser
Designees") to be elected or appointed to the Board. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934, as amended,
and Rule 14f-1 promulgated thereunder. You are urged to read this Information
Statement carefully. You are not, however, required to take any action.
Capitalized terms used and not otherwise defined herein shall have the meaning
set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, on June 11, 1996, Purchaser commenced the
Offer, which is scheduled to expire at 12:00 midnight, New York City time, on
Friday, July 12, 1996, at which time, if all conditions of the Offer have been
satisfied or waived, Purchaser has informed the Company that it intends to
purchase all Shares validly tendered pursuant to the Offer and not withdrawn,
subject to the Purchaser's right to extend the offer for not more than 10
business days if less than 90% of the Shares have been validly tendered and not
withdrawn. All directors, other than Roger R. Phillips and William A. Taylor,
have agreed to resign effective as of the consummation of the Offer and
Purchaser has indicated it intends to designate four new directors of the
Company.
None of the Purchaser Designees currently is a director of, or holds any
position with, the Company. The Company has been advised by Purchaser that, to
the best of its knowledge, none of the Purchaser Designees or any of their
associates beneficially owns any equity securities of the Company, or rights to
acquire any equity securities of the Company or has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates, other than the transactions disclosed in the Schedule 14D-9, which
are required to be disclosed pursuant to the rules and regulations of the
Securities and Exchange Commission.
The information contained in this Information Statement concerning
Purchaser and the Purchaser Designees has been furnished to the Company by
Purchaser and the Purchaser Designees, and the Company assumes no responsibility
for the accuracy or completeness of such information.
23
<PAGE> 25
BOARD OF DIRECTORS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Cumulative voting is not permitted in the election of directors of
the Company. On all matters (including election of directors) submitted to a
vote of stockholders, each holder of Common Stock will be entitled to one vote
for each share of Common Stock owned of record by such stockholder. As of June
10, 1996, there were 5,353,558 shares of Common Stock outstanding.
Pursuant to the Company's By-laws, the Board of Directors has, by
resolution, fixed the number of directors at six. Each director holds office
until the next annual meeting of stockholders of the Company or until his or her
successor is elected or qualified or until his or her earlier resignation or
removal. The Board currently consists of six members.
THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, Purchaser may designate the persons
identified below to be elected to the Board. Purchaser has informed the Company
that each of the Purchaser Designees has consented to act as a director, if so
designated.
The names of the Purchaser Designees, their ages on June 10, 1996 and
certain other information about them are set forth below. There are no family
relationships between any of the Purchaser Designees and the directors or
executive officers of the Company. The business address of Purchaser is 33662
James J. Pompo Drive, Fraser, Michigan 48026.
LARRY J. WINGET. Mr. Winget, age 53, is Chairman of the Board and Chief
Executive Officer of Venture Industries Corporation, Vemco, Inc., Venture Mold &
Engineering Corporation, Venture Industries Canada, Ltd., Venture Leasing
Company, Vemco Leasing, Inc., Venture Holdings Corporation and Venture Service
Company, the subsidiaries of Venture Holdings Trust (the "Venture Group"). In
1981 he acquired 60% ownership of Venture Industries Corporation. He acquired
the remaining 40% in 1987 and he is currently the sole beneficiary of Venture
Holdings Trust. He is Chairman of the Board of Purchaser.
MICHAEL G. TORAKIS. Mr. Torakis, age 39, has been President and Chief
Financial Officer of each member of the Venture Group since April, 1995, and
preceding that served as Executive Vice President and Chief Financial Officer
from 1985 to 1995. He is President and a director of Purchaser.
A. JAMES SCHUTZ. Mr. Schutz, age 50, has been Executive Vice President of
each member of the Venture Group for over five years. He is Executive Vice
President and a director of Purchaser.
JAMES E. BUTLER, JR. Mr. Butler, age 42, has been Vice President -- Finance
of each member of the Venture Group since 1995. He joined the Venture Group in
1994. He worked as a Certified Public Accountant at Coopers & Lybrand LLP, from
1981 to 1994. He is Vice President -- Finance and a director of Purchaser.
CURRENT DIRECTORS OF THE COMPANY
Each of the persons listed below is currently a director of the Company and
has served continuously since first becoming a director. The Board of Directors
held twelve meetings during the year ended July 30, 1995, and each director
attended at least 75% of the aggregate of (a) the total number of meetings of
the Board of Directors held during the period for which he served as a director
and (b) the total number of meetings held by all committees of the Board on
which he served. A brief description of each current director of the Company is
provided below.
ROGER R. PHILLIPS. Mr. Phillips, age 66, has served in various management
capacities with the Company and Bailey Manufacturing Corporation since 1982. He
has been a director and President, Chief Executive Officer, and Secretary of the
Company since 1986 and has served as Chairman of the Board of Directors since
February 1991. Mr. Phillips holds the same positions with Bailey Manufacturing
Corporation ("BMC"), a wholly-owned subsidiary of the Company. Since June 1992
Mr. Phillips has been a director,
24
<PAGE> 26
Chairman of the Board of Directors, and Chief Executive Officer of Bailey
Transportation Products, Inc. ("BTP"), a wholly-owned subsidiary of the Company.
E GORDON YOUNG. Mr. Young, age 61, has held various management positions
with the Company and Bailey Manufacturing Corporation since 1982. He has been a
director of the Company since 1986 and was Executive Vice President from 1989 to
1994. He holds the same positions with BMC. Mr. Young previously was Executive
Vice President -- Research and Development of the Company from 1986 to 1989. Mr.
Young is also a director of BTP.
ALLAN B. FREEDMAN. Mr. Freedman, age 66, has been associated with the
Company and BMC since 1983. He has been a director of the Company since 1986 and
currently serves as a director of BMC. Mr. Freedman served as Chairman and
Treasurer of Edward P. Dolbey & Co., Inc., a distributor of optical and
laboratory supplies, until 1992. Since 1992 Mr. Freedman has been a consultant
and private investor.
JOHN G. OWENS. Mr. Owens, age 62, has served in various management
capacities with the Company since 1986. He has been a director of the Company
since 1986 and currently serves as a director of BMC. He was Executive Vice
President, Chief Operating Officer and Assistant Secretary of the Company from
1986 to 1987. Mr. Owens also was a director, the Chairman of the Board,
President, and Chief Executive Officer of Universal Components Corp. and its
predecessor, Douglas Components Corporation, an industrial equipment
manufacturer from 1987 until 1994.
WILLIAM A. TAYLOR. Mr. Taylor, age 70, became Vice Chairman and Senior Vice
President -- Corporate Development in fiscal year 1994. He has been associated
with the Company and BMC since 1983, has served as a director of the Company
since 1986 and currently also serves as a director of BTP. His primary
responsibility has involved the identification and analysis of potential
acquisition opportunities including the acquisition of the assets and business
of TransPlastics, Inc., in June 1992 (the "Conneaut Acquisition"), the assets
and business of Contour Technologies, a division of The Boler Company, in July
1993 (the "Contour Acquisition"), and the assets and business of Premix/E.M.S.
Inc. in August 1994 (the "Premix/EMS Acquisition").
LOUIS T. ENOS. Mr. Enos, age 59, has been associated with the Company and
BMC since 1982 as a shareholder and consultant. He has been a director of the
Company since 1991 and currently serves as a director of BMC. From January 1990
through January 1993, he served as Executive Vice President of Universal
Components Corp., an industrial equipment manufacturer. Mr. Enos was a
management consultant and Vice President of Exeter Consulting Group from 1989 to
1995.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has an Audit Committee consisting of Messrs. Freedman, Owens and
Enos. The Audit Committee, which met two times in fiscal 1995, is responsible
for reviewing the independent audit of the Company by its independent public
accountants.
The Board has a Compensation Committee consisting of Messrs. Freedman,
Owens and Enos. The Compensation Committee, which met three times in fiscal
1995, is charged with reviewing the compensation paid to senior management of
the Company, including the bonuses, stock options and other incentive payments,
if any, to be made under the Company's benefit plans.
The Board does not have a nominating committee; nominations of officers are
made by the Board. The Board will consider any such nominee suggested by
stockholders of the Company.
CURRENT EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company are Messrs. Phillips and
Taylor, whose positions and backgrounds are set forth under the heading
"Directors of the Company", and Leonard J. Heilman. Mr. Heilman, age 68, has
served as Executive Vice President, Finance and Administration, Chief Financial
Officer, Treasurer and Assistant Secretary of the Company for over five years.
25
<PAGE> 27
OTHER INFORMATION
PRINCIPAL SHARE OWNERSHIP
The following table sets forth certain information as of June 11, 1996,
with respect to the Common Stock beneficially owned by (1) each person known by
the Board of Directors to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (2) each director of the Company and nominee
for such position, (3) the Company's Chief Executive Officer and each of the
four other most highly compensated officers of the Company (the "Named Executive
Officers"), and (4) all directors and Executive Officers of the Company as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
OF COMMON STOCK OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) COMMON STOCK(2)
- --------------------------------------------------------- --------------------- ---------------
<S> <C> <C>
Roger R. Phillips........................................ 521,050(3)(4) 9.38%
700 Lafayette Road
Seabrook, New Hampshire 03874
William A. Taylor........................................ 490,148(5) 8.93%
232 Bridal Path Lane
New Canaan, Connecticut 06840
Louis T. Enos............................................ 208,682(3)(6) 3.83%
700 Lafayette Road
Seabrook, New Hampshire 03874
E Gordon Young........................................... 197,053(3)(6) 3.61%
700 Lafayette Road
Seabrook, New Hampshire 03874
John G. Owens............................................ 180,682(3)(6) 3.31%
700 Lafayette Road
Seabrook, New Hampshire 03874
Allan B. Freedman........................................ 152,500(6)(7) 2.79%
Sutton Terrace Apartments, #410
50 Belmont Avenue
Bala Cynwyd, Pennsylvania 19004
Leonard J. Heilman....................................... 75,000(8) 1.38%
700 Lafayette Road
Seabrook, New Hampshire 03874
Phillip J. Kusky......................................... 85,000(9) 1.56%
17500 Federal Drive, Suite 700
Allen Park, Michigan 48101
Dennis G. Walters........................................ 48,500(10) .90%
700 Lafayette Road
Seabrook, New Hampshire 03874
All directors and executive officers as a group (7
persons)............................................... 1,825,115(11) 29.54%
</TABLE>
- ---------------
(1) Includes shares of Common Stock owned by the wives and minor children of
the named individuals and shares of Common Stock held by custodians for the
benefit of such minors, as to which beneficial ownership may be disclaimed.
(2) Includes options and warrants to purchase Common Stock exercisable within
60 days as specified in applicable rules under the Securities Exchange Act
of 1934, as amended. The percentages have been rounded to the nearest
one-hundredth of a percent.
(3) Includes Common Stock held in self-directed pension and other accounts for
the benefit of the named individual over which such individual holds voting
or investment control.
(4) Includes options to purchase 200,000 shares of Common Stock exercisable at
$6.50 per share.
(5) Includes (i) options to purchase 100,000 shares of Common Stock exercisable
at $6.50 per share and (ii) options to purchase 37,500 shares of Common
Stock exercisable at $6.125 per share. In addition,
26
<PAGE> 28
said individual holds options to purchase 12,500 shares of Common Stock
which are not currently exercisable but which would become exercisable upon
a change of control of the Company. Such 12,500 shares have not been
included for purposes of calculating said individual's Beneficial
Ownership.
(6) Includes options to purchase 100,000 shares of Common Stock exercisable at
$6.50 per share.
(7) Includes currently exercisable warrants to purchase 12,500 shares of Common
Stock at $6.00 per share.
(8) Includes options to purchase (i) 3,000 shares of Common Stock exercisable
at $3.00 per share, (ii) 17,000 shares of Common Stock exercisable at $1.00
per share, (iii) 7,500 shares of Common Stock exercisable at $5.875 per
share, (iv) 22,500 shares of Common Stock exercisable at $7.18 per share,
and (v) 25,000 shares of Common Stock exercisable at $4.75 per share. In
addition, said individual holds options to purchase 22,500 shares of Common
Stock exercisable at $7.18 per share and 25,000 shares of Common Stock
exercisable at $4.75 per share, which options are not currently exercisable
but which would become exercisable upon a change of control of the Company.
Such 47,500 shares have not been included for purposes of calculating said
individual's Beneficial Ownership.
(9) Includes options to purchase (i) 15,000 shares of Common Stock exercisable
at $7.18 per share and (ii) 70,000 shares of Common Stock exercisable at
$4.75 per share. In addition, said individual holds options exercisable at
$7.18 per share to purchase 15,000 shares of Common Stock which are not
currently exercisable but which would become exercisable upon a change of
control of the Company. Such 15,000 shares have not been included for
purposes of calculating said individual's Beneficial Ownership.
(10) Includes options to purchase (i) 2,500 shares of Common Stock exercisable
at $3.00 per share, (ii) 18,500 shares of Common Stock exercisable at $1.00
per share, (iii) 5,000 shares of Common Stock exercisable at $5.875 per
share, (v) 20,000 shares of Common Stock exercisable at $7.18 per share and
(v) 2,500 shares of Common Stock at $4.75 per share. In addition, said
individual (i) holds options exercisable at $7.18 per share to purchase
20,000 shares of Common Stock which are not currently exercisable but which
would become exercisable upon a change of control of the Company, and (ii)
has the right to receive a fully vested option to purchase 30,000 shares of
Common Stock at the lowest market price during the six months proceeding a
change of control of the Company or Mr. Phillips's ceasing to be Chief
Executive Officer of the Company. Such 50,000 shares have not been included
for purposes of calculating said individual's Beneficial Ownership.
(11) See footnotes 4, 5, 6, 7, 8, 9, and 10 with respect to shares of Common
Stock issuable upon the exercise of currently exercisable options and
warrants.
27
<PAGE> 29
COMPENSATION OF NAMED EXECUTIVE OFFICERS
Cash Compensation
The following table sets forth the cash compensation paid directly and
indirectly by the Company for services in all capacities rendered in fiscal
years 1993, 1994 and 1995 to the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM
--------------------------------- COMPENSATION
FISCAL AWARDS/STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(2) YEAR SALARY BONUS OPTIONS(SHARES) COMPENSATION(3)
- ------------------------------ ------ ----------- ---------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Roger R. Phillips............. 1995 $240,000.00 -- -- Use of leased auto
Chief Executive Officer, 1994 $244,000.00 -- 100,000 Use of leased auto
Chairman of the Board, 1993 $144,000.00 -- share option(4) Use of leased auto
President and Secretary
Leonard J. Heilman............ 1995 $150,000.00 $20,000.00 45,000 Auto allowance
Executive Vice President -- 150,000.00 67,000.00 share option(5)
Finance and Administration, 1994 $$104,000.00 $ -- -- Auto allowance
Chief Financial officer, 1993 7,500 None
Treasurer, and Assistant share option(6)
Secretary
Dennis G. Walters............. 1995 $150,000.00 $20,000.00 40,000 Use of leased auto
Executive Vice President -- 150,000.00 9,750.00 share option(7)
Bailey Manufacturing 1994 $$114,000.00 $$35,000.00 -- Use of leased auto
Division 1993 5,000 Use of leased auto
share option(6)
Phillip J. Kusky.............. 1995 $150,000.00 -- 30,000 Use of leased auto
Executive Vice President and 150,000.00 share option(8)
Chief Operating Officer 1994 $ N/A -- -- Use of leased auto
1993 N/A N/A N/A
William A. Taylor............. 1995 $144,000.00 -- -- Auto allowance
Vice Chairman and Senior 1994 $144,000.00 -- 50,000 Auto allowance
Vice President -- Corporate share option(9)
Development 1993 N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Compensation deferred at election of executive is included in the category
and fiscal year in which earned.
(2) Includes Chief Executive Officer and the four most highly compensated
officers whose salary and bonus exceed $100,000.
(3) Includes: (a) perquisites; (b) payments of above-market or preferential
earnings on deferred compensation; (c) payments of earnings with respect to
long-term incentive plans prior to settlement or maturation; (d) tax payment
reimbursements; and (e) preferential discounts on stock.
(4) Grant on August 25, 1993 of options to purchase 100,000 shares of Common
Stock at an exercise price of $11.00 per share, exercisable for 25,000
shares on or after the date the exercise price is set, and for an additional
25,000 shares on each of October 1, 1994, October 1, 1995 and October 1,
1996. These options were subsequently cancelled.
(5) Includes: (a) Grant on November 2, 1994, pursuant to the Company's Amended
and Restated 1986 Incentive Stock Option Plan, of options to purchase 10,000
shares of Common Stock at an exercise price of $7.18 per share, exercisable
for 2,500 shares on or after November 2, 1994, and for an additional 2,500
shares on each of November 2, 1995, November 2, 1996 and November 2, 1997;
and (b) Grant on November 2, 1994 of options to purchase 35,000 shares of
Common Stock at an exercise price of $7.18
28
<PAGE> 30
per share, exercisable for 8,750 shares on or after November 2, 1994, and
for an additional 8,750 shares on each of November 2, 1995, November 2, 1996
and November 2, 1997.
(6) Grant pursuant to the Company's Amended and Restated 1986 Incentive Stock
Option Plan, exercisable immediately for 25% of the number of shares listed,
and for an additional 25% of that number each of the following three years,
at an exercise price of $5.875 per share.
(7) Grant on November 2, 1994 of options to purchase 40,000 shares of Common
Stock at an exercise price of $7.18 per share, exercisable for 10,000 shares
on or after November 2, 1994, and for an additional 10,000 shares on each of
November 2, 1995, November 2, 1996 and November 2, 1997.
(8) Grant on November 2, 1994 of options to purchase 30,000 shares of Common
Stock at an exercise price of $7.18 per share, exercisable for 7,500 shares
on or after November 2, 1994, and for an additional 7,500 shares on each of
November 2, 1995, November 2, 1996 and November 2, 1997.
(9) Grant on March 1, 1994, of options to purchase 50,000 shares of Common Stock
at an exercise price of $6.125 per share, exercisable for 12,500 shares on
or after the date the exercise price is set, and for an additional 12,500
shares on each of March 1, 1995, March 1, 1996, and March 1, 1997.
Employment Agreements
PHILLIPS EMPLOYMENT AGREEMENT. On February 18, 1994, the Company entered
into an Employment Agreement (the "Phillips Employment Agreement") with Roger R.
Phillips. Under the terms of the Phillips Employment Agreement, Mr. Phillips
agreed to serve as President and Chief Executive Officer of the Company for a
three-year period at a base salary of $240,000 annually, together with certain
other benefits, subject to termination by the Company for cause. The Phillips
Employment Agreement, and a non-competition agreement between Mr. Phillips and
the Company also executed February 18, 1984, provide that the Company is to pay
Mr. Phillips $5,000 per month for 60 months following his termination and to
provide him with long term health insurance until his death in exchange for Mr.
Phillips's covenant not to compete with the Company. On June 5, 1996, the
Company entered into the Amendment to Employment and Noncompetition Agreement to
extend the term of the Phillips Employment Agreement through December 31, 1997
and to provide that the first day of the first calendar month following
termination of service for purposes of the noncompetition agreement shall be
January 1, 1998.
TAYLOR EMPLOYMENT AND OPTION AGREEMENT. On February 18, 1994, the Company
entered into an Employment Agreement (the "Taylor Employment Agreement") with
William A. Taylor. Under the terms of the Taylor Employment Agreement, Mr.
Taylor agreed to serve as Senior Vice President of the Company for a three-year
period at a base salary of $144,000 annually, together with certain other
benefits, subject to termination by the Company for cause. In addition, pursuant
to an Option Agreement dated as of November 1, 1993, between the Company and Mr.
Taylor (the "Taylor Option Agreement"), the Company agreed, provided that Mr.
Taylor was in the Company's employ on March 1, 1994, to grant Mr. Taylor options
to purchase 50,000 shares of Common Stock, exercisable as follows: 12,500 shares
on or after the date the exercise price is set, and an additional 12,500 shares
on or after each of March 1, 1995, March 1, 1996, and March 1, 1997 (each, a
"Vesting Date"). The options are exercisable at $6.125 per share. The options
expire on the fifth anniversary of their applicable Vesting Date. As of November
17, 1995, Mr. Taylor had exercised none of the options granted under the Taylor
Option Agreement. The market price of the Company's Common Stock was $13.375 on
March 1, 1994, the date on which the options were granted to Mr. Taylor. In
conjunction with the options, Mr. Taylor was given certain short-form demand and
piggyback registration rights. The Taylor Employment Agreement, and a
non-competition agreement between Mr. Taylor and the Company also executed
February 18, 1984, provide that the Company is to pay Mr. Taylor $5,000 per
month for 60 months following his termination and to provide him with long term
health insurance until his death in exchange for Mr. Taylor's covenant not to
compete with the Company. On June 5, 1996, the Company entered into the
Amendment to Employment and Noncompetition Agreement to provide that the term of
the Taylor Employment Agreement shall end on the last day of the month in which
the Effective Time occurs and that the first day of the first calendar month
following termination of service for purposes of the non-competition agreement
shall be the first day of the month immediately following the month in which the
Effective Time occurs.
29
<PAGE> 31
KUSKY EMPLOYMENT AGREEMENT. On May 10, 1996, the Company entered into an
Employment Agreement (the "Kusky Employment Agreement") with Phillip J. Kusky.
Under the terms of the Kusky Employment Agreement, Mr. Kusky agreed to serve as
Chief Operating Officer of the Company for a two-year period at a base salary of
$174,996 annually, together with certain other benefits, subject to termination
by the Company for cause. If control of the Company is acquired by any party,
the Kusky Employment Agreement provides that Mr. Kusky may resign and receive
the sum he would have received had the non-vested portions of his stock options
granted November 17, 1994 and October 6, 1995 been fully vested as of the date
of such acquisition, as well as the continued payment of his salary and benefits
for a period of 24 months following the date of his resignation. As a condition
to the Merger, the Purchaser has required that Mr. Kusky terminate the Kusky
Employment Agreement, and the Company anticipates he will do so.
WALTERS EMPLOYMENT AGREEMENT. On August 19, 1995, the Company entered into
an Employment Agreement (the "Walters Employment Agreement") with Dennis G.
Walters, subject to termination by the Company for cause. Under the Walters
Employment Agreement, the Company agreed to grant Mr. Walters an option for
10,000 shares of Common Stock, vesting over a five-year period, at an exercise
price equal to the market price on the date of grant. The Walters Employment
Agreement further provides that in the event that there is a change of control
of the Company or Roger Phillips ceases to be Chief Executive Officer of the
Company, (1) the aforesaid option shall fully vest, (2) Mr. Walters shall be
deemed to have a rolling two-year employment agreement in effect at such time at
his then-current compensation and responsibility level, (3) Mr. Walters will be
granted a fully-vested 5-year option to purchase 30,000 shares of Common Stock
at the lowest market price in effect during the six-month period preceding such
event, and (4) any separation agreement will provide him with ownership of his
company car and give him continued medical benefits at a cost equal to that paid
by the Company's other retired salaried employees. As a condition to the Merger,
the Purchaser has required that Mr. Walters terminate the Walters Employment
Agreement, and the Company anticipates he will do so.
Compensation Pursuant to Plans
INCENTIVE STOCK OPTION PLAN. The Company has established the Amended and
Restated 1986 Incentive Stock Option Plan (the "Stock Option Plan"). Pursuant to
the Stock Option Plan, executive officers and other key employees of the Company
are eligible to receive options to purchase shares of Common Stock. There are
200,000 shares of Common Stock reserved for issuance under the Stock Option
Plan. The options are intended to be "incentive stock options" within the
meaning of the Internal Revenue Code of 1986, as amended. The exercise price per
share may not be less than the fair market value of the Common Stock at the time
the option is granted; provided, however, that if an optionee owns more than 10%
of the outstanding shares of Common Stock at the time the option is granted, the
option price may not be less than 110% of the fair market value of the Common
Stock at the time of the grant. The Executive Compensation and Stock Option
Committee decides upon the employees to whom options are to be granted, the
number of shares, and the other terms of the options to be granted based upon
the employee's position, his duties and responsibilities, and other factors.
30
<PAGE> 32
During fiscal year 1995, the Company granted options for 10,000 shares of
Common Stock under the Stock Option Plan and nonqualified options for 216,000
shares of Common Stock. As of July 30, 1995, 70,525 such options were exercised.
The following table shows the number of shares of Common Stock subject to
unexercised options granted to Named Executive Officers of the Company during
the Company's fiscal year ended July 30, 1995 and the potential realizable value
of such options at assumed annual rates of stock price appreciation for the
terms of such options:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE
NUMBER OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OF OPTIONS OF
COMMON STOCK GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED YEAR 1995 PER SHARE DATE 5%($) 10%($)
- -------------------------- ------------ ----------- ----------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leonard J. Heilman........ 35,000 15.5% $7.18 11/2/2002 $389,515 $592,550
10,000 4.4% $7.18 11/2/2004 $122,780 $204,630
Dennis G. Walters......... 40,000 17.7% $7.18 11/2/2002 $445,160 $677,200
</TABLE>
PENSION PLANS. The Company, through its wholly-owned subsidiary, BMC, has
established qualified, non-contributory, defined benefit plans (the "Pension
Plans") covering substantially all of its full-time employees (the "Salaried
Pension Plan") and hourly employees (the "Hourly Pension Plan"). The benefits
under the Hourly Pension Plan are subject to collective bargaining. The Pension
Plans generally provide for the Company to make monthly payments to covered
employees upon their retirement at age 65; however, they also provide for the
payment of benefits upon early retirement. The payments are based on the
employee's years of credited service with the Company and average annual
compensation for the highest five consecutive years of the final ten years prior
to retirement. For the purposes of the Pension Plans, the Company's employees
who previously were employed by USM Corporation ("USM") generally are credited
with their years of service with USM; however, the benefits payable to these
employees under the Pension Plans are reduced by any amounts that they receive
from USM under its pension plans with respect to their prior service. The
maximum benefits payable under the Pension Plans are limited to $90,000 under
the Internal Revenue Code of 1986, as amended. The Company makes annual
contributions to the Pension Plans determined on an actuarial basis. The Company
also bears the expenses of administering the Pension Plans.
The following table sets forth the estimated annual retirement benefits
payable by the Company under the Salaried Pension Plan to an employee who
retires at age 65 based on the greater of (a) 1.5% of the five-year average
compensation less 1.43% Social Security Benefits, or (b) 1% of the five-year
average compensation, in each case multiplied by the employee's years of
credited service with the Company, not to exceed 35 years.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------
ANNUAL COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
----------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 50,000................................. $ 5,230 $ 7,845 $ 10,460 $ 13,075 $ 15,690
75,000................................. 8,355 12,533 16,710 20,888 25,065
100,000................................. 11,480 17,220 22,960 28,700 34,440
125,000................................. 14,605 21,908 29,210 36,513 43,815
150,000................................. 17,730 26,595 35,460 44,325 53,190
</TABLE>
On December 31, 1992, the Salaried Pension Plan was frozen and no further
service liability will accrue thereunder.
For vesting and benefit accrual purposes under the Salaried Pension Plan,
the years of credited service with the Company of the covered persons named in
the table under "Cash Compensation" herein as of December 31, 1992, were as
follows: Roger R. Phillips -- four years; and Dennis G. Walters -- 26 years.
Leonard J. Heilman, Phillip J. Kusky and William A. Taylor do not participate in
the Salaried Pension Plan.
31
<PAGE> 33
Effective January 1, 1993, a contributory 401(k) plan for salaried
employees was established whereby eligible employees may contribute up to 10% of
their salary, with a dollar-for-dollar match by the Company of up to 2% of an
employee's salary.
PENSION PLAN OBLIGATIONS ASSUMED AS A RESULT OF THE PREMIX/EMS
ACQUISITION. As a result of the Premix/EMS Acquisition, the Company adopted
certain tax qualified retirement plans covering the former employees of
Premix/E.M.S. Inc. The three defined benefit plans adopted by the Company
include the Salaried Plan covering non-hourly, non-bargaining employees (the
"Premix/EMS Salaried Pension Plan"); the Hourly Employees' Retirement Plan
covering collective bargaining unit employees at the Lancaster, Ohio facility
(the "Lancaster Hourly Pension Plan"); and the Hartford City Hourly Employees'
Retirement Plan covering hourly employees at the Hartford City, Indiana facility
(the "Hartford City Hourly Pension Plan"). The Premix/EMS Salaried Pension Plan,
the Lancaster Hourly Pension Plan, and the Hartford City Hourly Pension Plan
(collectively, the "Premix/EMS Plans") call for the Company to make
contributions not less than the minimum amounts required under the provisions of
the Employee Retirement Income Security Act of 1974, as amended. The Premix/EMS
Plans also provide for payment of benefits upon early retirement, disability, or
death. Employees become fully vested in the respective Premix/EMS Plans after
five years of service.
The Premix/EMS Salaried Pension Plan provides a benefit at age 65 of 50% of
the five-year average compensation, less 50% of Social Security, reduced
proportionately for employees with less than 30 years of service. The following
table sets forth the estimated annual retirement benefits payable under the
Premix/EMS Salaried Pension Plan to an employee who retires at age 65.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------------
ANNUAL COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
--------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$50,000.......................... $ 6,159 $ 9,239 $ 12,318 $ 15,398 $ 18,478
75,000.......................... 10,205 15,307 20,409 25,511 30,614
100,000.......................... 14,371 21,557 28,742 35,928 43,114
125,000.......................... 18,538 27,807 37,076 46,345 55,614
150,000.......................... 22,705 34,057 45,409 56,761 68,114
</TABLE>
The Lancaster Hourly Pension Plan provides a monthly benefit at age 65 of
$13.50 for each year of service to a maximum of 35 years of service.
The Hartford City Hourly Pension Plan provides a monthly benefit at age 65
of $10.00 for each year of service to a maximum of 30 years of service.
In addition to the defined benefit plans, the Company adopted the
Employees' Deferred Savings and Supplemental Retirement Plan, a 401(k) Plan
covering the former employees of Premix/E.M.S. Inc. (the "Premix/EMS 401(k)
Plan"). Under the Premix/EMS 401(k) Plan, employees may contribute up to 15% of
compensation and receive a Company matching contribution of $.10 for each $1.00
contributed by the employee. Employees are 100% vested in Company matching
contributions under the Premix/EMS 401(k) Plan.
Insider Participation in Compensation Decisions
John G. Owens, a member of the Compensation Committee of the Board of
Directors, was Executive Vice President, Chief Operating Officer, and Assistant
Secretary of the Company from 1986 to 1987.
Louis T. Enos, a member of the Compensation Committee, has been associated
with the Company since 1982 as a shareholder and consultant.
REPORT OF THE COMPENSATION COMMITTEE
The Executive Compensation and Stock Option Committee of the Board of
Directors (the "Compensation Committee") is composed of three independent,
disinterested directors who are not employees of the Company. Messrs. Freedman,
Owens and Enos. The Compensation Committee regularly reviews and
32
<PAGE> 34
approves all compensation and fringe benefit programs of the Company and also
reviews and makes recommendations to the Board of Directors concerning the
actual compensation of the Named Executive Officers as well as stock option
grants to employees. All actions taken by the Compensation Committee are
reported to and approved by the Board of Directors, as a whole. The Compensation
Committee reviews and administers the Company's Stock Option Plan.
The Compensation Committee uses base salary and, in certain instances,
bonuses, for Named Executive Officers to enhance short term profitability and
stockholder value and uses stock options to enhance long term growth and
profitability, return on equity and stockholder value. The Compensation
Committee periodically reviews the Company's performance and the performance of
the individual Named Executive Officers. In this process, the members of the
Compensation Committee individually meet and discuss the performance of the
Company and the Named Executive Officers with the Chief Executive Officer of the
Company. The Compensation Committee then meets in executive session to review
and discuss the performance of all the Named Executive Officers including the
Chief Executive Officer. The Compensation Committee then makes its
recommendations to the Board of Directors.
In evaluating the performance of the Chief Executive Officer the
Compensation Committee takes note of the Company's sales and net income, as well
as accomplishments with regard to the Company's strategic objectives, including,
among other things, the historical growth of the Company and the increase in its
value over the past several years.
REPORTS OF BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Officers, directors, and beneficial owners of more
than 10% of the equity of the Company are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Phillip J. Kusky became Chief Operating Officer of the Company on June 25,
1995. He neglected to file Form 3 at that time. However, this failure has been
corrected in the intervening period. Mr. Kusky has had no transactions in the
stock of the Company.
To the Company's knowledge, based solely on the review of copies of such
reports furnished to the Company and written representations that no other
reports were required during the two fiscal years ended July 30, 1995, the
officers, directors, and beneficial owners of more than 10% of the equity of the
Company complied with all applicable Section 16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SUBORDINATED DEBENTURE OFFERING. As a part of the financing for the
Conneaut Acquisition, the Company issued an aggregate of $400,000 in principal
amount of debentures (the "Series A Debentures") bearing 11% annual interest and
due on June 26, 1996, and warrants to purchase 62,500 shares of Common Stock
(the "Warrants") pursuant to a Subordinated Debenture and Warrant Purchase
Agreement (the "Debenture and Warrant Agreement") to the following investors in
the following principal amounts: Allan B. Freedman, $50,000; Anthony A. Martino,
$200,000; Orion Group Money Purchase Pension Plan FBO Roger R. Phillips,
$100,000; and William A. Taylor, $50,000. Under the Debenture and Warrant
Agreement, Allan B. Freedman and Anthony A. Martino also acquired
non-transferable Warrants to purchase 12,500 and 50,000 shares of Common Stock,
respectively. The Series A Debentures were retired in the first quarter of
fiscal year 1994 in accordance with their terms; the Warrants remain
outstanding.
The Warrants are exercisable at any time prior to June 25, 1997, at an
option price of $6.00 per share. Each holder of Warrants has the right to demand
registration of the shares underlying the Warrants once at any time after June
26, 1993.
Mr. Phillips is Chairman of the Board, President, Chief Executive Officer
and Secretary, and a director of the Company; Mr. Taylor is Vice Chairman,
Senior Vice President -- Corporation Development, and a
33
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ------------ ------------
<S> <C> <C>
Exhibit 1. Agreement and Plan of Merger dated June 5, 1996 between the Company
and Vemco Acquisition Corp............................................
Exhibit 2. Guaranty dated June 5, 1996 from Vemco, Inc., Venture Industries
Corporation, Vemco Leasing, Inc., Venture Service Company, Venture
Industries Canada, Ltd., Venture Mold & Engineering Corp. and Venture
Leasing Company.......................................................
Exhibit 3. Tender and Option Agreement dated June 5, 1996, by and between the
Purchaser and certain holders of Shares, Options and Warrants.........
Exhibit 4. Indemnity Agreement between the Purchaser and Roger R. Phillips dated
as of June 5, 1996....................................................
Exhibit 5. Indemnity Agreement between the Purchaser and William A. Taylor dated
as of June 5, 1996....................................................
Exhibit 6. Indemnity Agreement between the Purchaser and Louis T. Enos dated as
of June 5, 1996.......................................................
Exhibit 7. Indemnity Agreement between the Purchaser and E Gordon Young dated as
of June 5, 1996.......................................................
Exhibit 8. Indemnity Agreement between the Purchaser and John G. Owens dated as
of June 5, 1996.......................................................
Exhibit 9. Indemnity Agreement between the Purchaser and Allan B. Freedman dated
as of June 5, 1996....................................................
Exhibit 10. Indemnity Agreement between the Purchaser and Leonard Heilman dated as
of June 5, 1996.......................................................
Exhibit 11. Noncompetition Agreement dated June 5, 1996 between the Company and
Allan B. Freedman.....................................................
Exhibit 12. Noncompetition Agreement dated June 5, 1996 between the Company and
Louis T. Enos.........................................................
Exhibit 13. Noncompetition Agreement dated June 5, 1996 between the Company and E
Gordon Young..........................................................
Exhibit 14. Noncompetition Agreement dated June 5, 1996 between the Company and
John G. Owens.........................................................
Exhibit 15. Amendment to Employment and Noncompetition Agreement between the
Company and William A. Taylor dated June 5, 1996......................
Exhibit 16. Amendment to Employment and Noncompetition Agreement between the
Company and Roger R. Phillips dated as of June 5, 1996................
Exhibit 17. Opinion of Smith Barney Inc. dated June 5, 1996. .....................
Exhibit 18. Press Release of the Company issued on June 5, 1996...................
Exhibit 19. Letter dated June 11, 1996 from Roger R. Phillips, Chairman and Chief
Executive Officer of Bailey Corporation to the Stockholders of Bailey
Corporation concerning the Offer. ....................................
</TABLE>
<PAGE> 1
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
by and between
VEMCO ACQUISITION CORP.,
a Delaware corporation
and
BAILEY CORPORATION,
a Delaware corporation
June 5, 1996
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER
Page
Section 1.1 The Offer................................................... 2
Section 1.2 Company Actions............................................. 4
Section 1.3 Directors................................................... 5
Section 1.4 The Merger.................................................. 6
Section 1.5 Effective Time.............................................. 7
Section 1.6 Closing..................................................... 7
Section 1.7 Directors and Officers of the Surviving Corporation......... 7
Section 1.8 Stockholders' Meeting....................................... 7
Section 1.9 Merger Without Approval of Company Stockholders............. 8
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock................................. 8
Section 2.2 Exchange of Certificates.................................... 9
Section 2.3 Stock Options; Warrants..................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization and Qualification: Subsidiaries............... 11
Section 3.2 Capitalization............................................. 12
Section 3.3 Authority.................................................. 13
Section 3.4 Consents and Approvals; No Violation....................... 14
Section 3.5 Company SEC Reports........................................ 15
Section 3.6 Financial Statements....................................... 15
Section 3.7 Absence of Undisclosed Liabilities......................... 16
Section 3.8 Absence of Certain Changes................................. 16
Section 3.9 Taxes...................................................... 17
Section 3.10 Litigation................................................. 18
Section 3.11 Employee Benefit Plans, ERISA.............................. 18
Section 3.12 Environmental Liability.................................... 20
Section 3.13 Compliance with Applicable Laws............................ 21
Section 3.14 Material Contracts......................................... 21
Section 3.15 Patents, Marks, Trade Names, Copyrights and Registrations.. 22
Section 3.16 Labor Matters.............................................. 22
Section 3.17 Real Property.............................................. 23
i
<PAGE> 3
Section 3.18 Disclosure Documents.......................................... 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Organization................................................... 24
Section 4.2 Authority Relative to this Agreement........................... 24
Section 4.3 Consent and Approvals; No Violation............................ 25
Section 4.4 Information Supplied........................................... 25
Section 4.5 Financing...................................................... 25
Section 4.6 Purchaser's Operations......................................... 26
Section 4.7 No Shares Owned by Purchaser or Affiliates..................... 26
Section 4.8 Disclosure Documents........................................... 26
ARTICLE V
CONDUCT OF BUSINESS BY THE COMPANY
Section 5.1 Ordinary Course ........................................ 26
Section 5.2 Dividends, Changes in Stock.................................... 26
Section 5.3 Issuance or Repurchase of Securities........................... 27
Section 5.4 Governing Documents; Board of Directors........................ 27
Section 5.5 No Dispositions................................................ 27
Section 5.6 Indebtedness................................................... 27
Section 5.7 Employees...................................................... 27
Section 5.8 Benefit Plans.................................................. 28
Section 5.9 Taxes.......................................................... 28
Section 5.10 Consultation and Cooperation................................... 28
Section 5.11 Additional Matters............................................. 29
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 No Solicitation................................................ 29
Section 6.2 Access to Information.......................................... 30
Section 6.3 HSR Act........................................................ 31
Section 6.4 Consents and Approvals......................................... 31
Section 6.5 Notification of Certain Events................................. 31
Section 6.6 Brokers or Finders............................................. 32
Section 6.7 Additional Actions............................................. 32
Section 6.8 Benefit Plans and Certain Contracts............................ 33
Section 6.9 Directors' and Officers' Indemnification....................... 33
Section 6.10 Publicity...................................................... 34
Section 6.11 Stockholders' Meeting; Proxy Materials......................... 34
ii
<PAGE> 4
Section 6.12 Rights Agreement............................................. 34
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger... 35
Section 7.2 Conditions to Purchaser's Obligation to Effect the Merger..... 35
ARTICLE VIII
TERMINATION
Section 8.1 Termination................................................... 36
Section 8.2 Effect of Termination......................................... 38
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Fees and Expenses ..................................... 38
Section 9.2 Amendment and Modification.................................... 39
Section 9.3 Nonsurvival of Representations and Warranties................. 39
Section 9.4 Notices....................................................... 39
Section 9.5 Definitions; Interpretation................................... 40
Section 9.6 Counterparts.................................................. 40
Section 9.7 Entire Agreement; No Third Party Beneficiaries................ 40
Section 9.8 Severability.................................................. 40
Section 9.9 Governing Law................................................. 41
Section 9.10 Assignment.................................................... 41
Section 9.11 Knowledge..................................................... 41
Signatures................................................................. 41
ANNEX A -- Guaranty
ANNEX B -- Conditions to the Tender Offer
ANNEX C -- Indemnity Agreement
INDEX OF DEFINED TERMS:
Acceptable Offer.................................................. 6.1(d)
Acquisition Proposal.............................................. 6.1(c)
Agreement........................................................Preamble
Audit............................................................. 3.9(f)
Certificate of Merger................................................ 1.5
Certificates...................................................... 2.2(b)
Closing.............................................................. 1.6
Closing Date......................................................... 1.6
Code............................................................. 3.11(b)
Company......................................................... Preamble
iii
<PAGE> 5
Company Common Stock....................................... Preamble
Company Directors............................................ 1.3(a)
Company Disclosure Documents................................ 3.18(a)
Company Material Adverse Effect.............................. 3.1(c)
Company Proxy Statement.................................. 1.8(a)(ii)
Company Stockholders Meeting................................... 6.11
Contracts...................................................... 3.14
Convertible Debentures....................................... 3.2(a)
DGCL...................................................... Preamble
Dissenting Stockholder.................................... Preamble
Effective Time.................................................. 1.5
Environmental Law........................................... 3.12(a)
ERISA....................................................... 3.11(a)
ERISA Affiliate............................................. 3.11(a)
ERISA Plans................................................. 3.11(a)
Exchange Act................................................. 1.1(a)
Financial Statements............................................ 3.6
Financing Commitment Letter.................................. 1.1(a)
Financing Condition.......................................... 1.1(a)
GAAP............................................................ 3.6
Governmental Entity.......................................... 3.4(b)
Hazardous Substances........................................ 3.12(a)
HSR Act...................................................... 3.4(b)
Indemnified Parties.......................................... 6.9(a)
Intellectual Property....................................... 3.15(b)
Intent Notice................................................ 6.1(b)
Liens.......................................................... 3.17
Material Contracts............................................. 3.14
Merger..................................................... Preamble
Merger Consideration......................................... 2.1(c)
Minimum Condition............................................ 1.1(a)
Offer...................................................... Preamble
Offer Deadline.......................................... 8.1(c)(iii)
Offer Documents.............................................. 1.1(b)
Offer Price.................................................. 1.1(a)
Offer to Purchase............................................ 1.1(a)
Option.......................................................... 2.3
Option Plans.................................................... 2.3
Options......................................................... 2.3
Other Transactions........................................... 1.2(a)
Parent....................................................... 1.1(a)
Paying Agent................................................. 2.2(a)
Permitted Liens................................................ 3.17
iv
<PAGE> 6
Person...................................................... 6.1(c)
Plans...................................................... 3.11(a)
Purchaser................................................. Preamble
Purchaser Common Stock......................................... 2.1
Purchaser Disclosure Documents................................. 4.8
Rights...................................................... 1.1(a)
Rights Agreement.......................................... Preamble
Rights Amendment............................................ 1.2(a)
Schedule 14D-1.............................................. 1.1(b)
Schedule 14D-9.............................................. 1.2(b)
SEC......................................................... 1.1(b)
Securities Act................................................ 3.5
Selling Stockholders...................................... Preamble
Shares.................................................... Preamble
Smith Barney................................................ 3.3(d)
SPD........................................................ 3.11(b)
Special Meeting.......................................... 1.8(a)(i)
Subsidiary.............................................. 3.1(c)(ii)
Surviving Corporation....................................... 1.4(a)
Tax Authority.................................................. 3.9
Taxes.......................................................... 3.9
Tax Returns.................................................... 3.9
Tender and Option Agreement............................... Preamble
Voting Debt................................................. 3.2(a)
Warrants....................................................... 2.3
1995 Premiums............................................... 6.9(b)
SCHEDULES:
Schedule 3.2 -- Outstanding Options and Warrants
Schedule 3.4 -- Conflicts
Schedule 3.8 -- Changes since January 31, 1996
Schedule 3.10 -- Litigation
Schedule 3.11 -- Employee Benefit and ERISA Matters
Schedule 3.12 -- Environmental Matters
Schedule 3.14 -- Certain Material Contracts
Schedule 3.16 -- Labor Matters
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into on
June 5, 1996 by and between VEMCO ACQUISITION CORP., a Delaware corporation
("Purchaser"), and BAILEY CORPORATION, a Delaware corporation (the "Company").
RECITALS:
WHEREAS, the Board of Directors of Purchaser has determined that it is
advisable and in the best interests of Purchaser to engage in a transaction
whereby Purchaser will acquire the Company on the terms and subject to the
conditions set forth herein; and
WHEREAS, the Board of Directors of the Company has determined that it is
advisable and in the best interests of the Company and its stockholders to
engage in a transaction whereby Purchaser will acquire the Company on the terms
and subject to the conditions set forth in this Agreement; and
WHEREAS, as an inducement to Purchaser to acquire the Company, and as a
condition to Purchaser's willingness to enter into this Agreement, concurrently
with the execution and delivery of this Agreement, Purchaser and certain
stockholders are entering into a tender and option agreement (the "Tender and
Option Agreement") pursuant to which such stockholders (the "Selling
Stockholders") have agreed to (i) grant Purchaser an irrevocable option to buy
their Shares (as defined below), and (ii) tender and, in the event such
irrevocable option is not theretofore exercised, sell their Shares in the Offer
(as defined below) and (iii) vote their Shares in favor of the Merger (as
defined below) in each case upon the terms and subject to the conditions set
forth therein; and
WHEREAS, in order to induce the Purchaser to enter into this Agreement,
the Board of Directors of the Company has approved the execution and delivery
of the Tender and Option Agreement so that (i) the restrictions on "business
combinations" set forth in Section 203 of the Delaware General Corporation Law
("DGCL") do not and will not apply to Purchaser or affiliates or associates of
Purchaser as a result of the execution and delivery of the Tender and Option
Agreement or the consummation of the transactions contemplated thereby or by
this Agreement, and (ii) the Rights Agreement between the Company and State
Street Bank and Trust Company, as Rights Agent, dated as of September 28, 1995
(the "Rights Agreement") shall be amended to prevent this Agreement or the
Tender and Option Agreement from resulting in the distribution of right
certificates or the Purchaser or its affiliates from being an Acquiring Person
(as defined in the Rights Agreement); and
WHEREAS, as an inducement to the Company to enter into this Agreement,
affiliates of Purchaser have executed and delivered of a guaranty agreement
(the "Guaranty") in the form of Annex A hereto; and
WHEREAS, in furtherance of its acquisition of the Company, Purchaser
proposes to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all of the issued and
outstanding shares of common stock, $.10 par value per
<PAGE> 8
share, of the Company (hereinafter referred to as either the "Shares" or the
"Company Common Stock") at a price per share of Company Common Stock of $8.75,
net to the seller in cash, upon the terms and subject to the conditions set
forth in this Agreement, and the Board of Directors of the Company has adopted
resolutions approving, among other things, the Offer and the Merger and
recommending that the Company's stockholders accept the Offer; and
WHEREAS, the respective Boards of Directors of Purchaser and the Company
have approved the merger (the "Merger") of Purchaser into the Company, upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Company Common Stock not owned directly or
indirectly by Purchaser or the Company, except shares of Company Common Stock
held by persons who object to the Merger and comply with all the provisions of
the DGCL concerning the right of holders of Company Common Stock to dissent
from the Merger and require appraisal of their shares of Company Common Stock
("Dissenting Stockholders"), will be converted into the right to receive the
per share consideration paid pursuant to the Offer; and
WHEREAS, the Company and Purchaser wish to make certain representations,
warranties, covenants and agreements in connection with the Offer and the
Merger and also to prescribe various conditions to the Offer and the Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as
follows:
ARTICLE I
THE OFFER AND MERGER
1.1 The Offer.
(a) As promptly as practicable, but in no event later than five business
days after the public announcement of the execution hereof, Purchaser shall
commence (within the meaning of Rule l4d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) the Offer to purchase for cash all of
the issued and outstanding shares of Company Common Stock, and the associated
Rights (the "Rights") issued pursuant to the Rights Agreement, at a price of
$8.75 per Share, net to the seller in cash, without interest (such price, or
such higher price per Share as may be paid in the Offer, being referred to
herein as the "Offer Price"), subject (i) to there being validly tendered and
not withdrawn prior to the expiration of the Offer that number of Shares which,
together with any Shares beneficially owned by Purchaser, represents at least a
majority of the Shares outstanding on a fully-diluted basis on the date of
purchase ("on a fully-diluted basis" meaning, as of any date, the number of
Shares outstanding plus all Shares the Company is then required to issue
pursuant to obligations outstanding at that date under employee stock option or
other benefit plans, outstanding warrants, outstanding options of any kind,
convertible securities, or otherwise (to the extent such options, warrants,
convertible securities or other rights are vested or exercisable), other than
Shares issuable upon conversion of the Company's 9% Convertible Subordinated
Notes due April 13, 2000,
2
<PAGE> 9
or its 8% Convertible Debentures due July 31, 1999 (collectively, the
"Convertible Debentures") (the "Minimum Condition"), (ii) the condition that
Venture Holdings Trust, the parent of Purchaser ("Parent") shall have received
the Financing (as defined below) contemplated by the commitment letter dated
June 3, 1996, from NBD Bank (the "Financing Commitment Letter") pursuant to
which, subject to the terms and conditions thereof, NBD Bank has committed to
provide all of the financing ("Financing") necessary to purchase all outstanding
Shares on a fully-diluted basis pursuant to the Offer and the Merger and to
refinance all outstanding indebtedness of the Company reflected on the Company
SEC Reports (the "Financing Condition") and (iii) the other conditions set forth
in Annex B hereto. Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, including without
limitation the Minimum Condition and the Financing Condition accept for payment
and pay for Shares tendered as soon as practicable after it is legally permitted
to do so under applicable law. The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") containing the terms set forth in this
Agreement, the Minimum Condition, the Financing Condition and the other
conditions set forth in Annex B hereto. Without the written consent of the
Company, Purchaser shall not decrease the Offer Price, decrease the number of
Shares sought, change the form of consideration to be paid in the Offer,
increase the Minimum Condition or amend any other condition of the Offer in any
manner adverse to the holders of the Shares (other than with respect to
insignificant changes or amendments). Notwithstanding the foregoing, but subject
to any rights the Company may have under this Agreement (including, without
limitation, pursuant to Section 8.1(c)(iii)(y)), Purchaser may, without the
consent of the Company, extend the Offer (i) if at the then scheduled expiration
date of the Offer any of the conditions to Purchaser's obligation to accept for
payment and pay for shares of Company Common Stock shall not be satisfied or
waived, until such time as such conditions are satisfied or waived; (ii) for an
aggregate period of not more than ten (10) business days beyond the initial
expiration date of the Offer if all conditions have been satisfied but less than
ninety percent (90%) of the outstanding shares of Company Common Stock have been
validly tendered and not withdrawn (not including shares covered by notices of
guaranteed delivery); and (iii) for any period required by any rule, regulation,
interpretation or position of the SEC or the staff of the SEC applicable to the
Offer. Purchaser shall terminate the Offer upon termination of this Agreement
pursuant to its terms.
(b) As soon as practicable on the date the Offer is commenced, Purchaser
shall file with the United States Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will include, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the "Offer Documents") with respect to the Offer. The Offer Documents
will comply in all material respects with the provisions of applicable Federal
securities laws and, on the date filed with the SEC and on the date first
published, 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 Purchaser with respect to information
supplied by the Company in writing specifically for inclusion in the Offer
Documents. Purchaser further
3
<PAGE> 10
agrees to take all steps necessary to cause the Offer Documents to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable Federal securities laws. Each of Purchaser, on
the one hand, and the Company, on the other hand, agrees promptly to correct any
information provided by such party for use in the Offer Documents if and to the
extent that it shall have become false and misleading in any material respect
and Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
Federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-1 before it
is filed with the SEC. In addition, Purchaser agrees to provide the Company and
its counsel in writing with any comments Purchaser or its counsel may receive
from time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held on
the date or dates on which the parties entered into this Agreement and the
Tender and Option Agreement, has unanimously (i) determined that each of the
Offer and the Merger are fair to and in the best interests of the Company's
stockholders (other than Purchaser and its affiliates); (ii) approved this
Agreement and the transactions contemplated hereby (including without
limitation (x) the acquisition of the Company by Purchaser or any of its
affiliates, and any purchase of Shares in connection therewith, by means of
this Agreement, the Offer, the Merger and the Tender and Option Agreement, and
any other transactions conducted to effectuate the acquisition of the Company
by Purchaser or its affiliates in accordance with this Agreement ("Other
Transactions")) and (y) any other transactions contemplated hereby and by the
foregoing clause (x)); (iii) resolved to recommend that the stockholders of the
Company accept the Offer, tender their Shares thereunder to Purchaser and
approve and adopt this Agreement and the Merger; (iv) adopted resolutions
approving all of the actions and transactions referenced herein, with the
consequences that the requirements for "business combinations" set forth in
Section 203 of the DGCL will not be applicable to the Merger; and (v) adopted
resolutions approving an amendment to the Rights Agreement, as necessary (the
"Rights Amendment"), (A) to prevent this Agreement, the Tender and Option
Agreement or the consummation of any of the transactions contemplated hereby or
thereby, including without limitation, the publication or other announcement of
the Offer and the consummation of the Offer and the Merger, from resulting in
the distribution of separate right certificates or the occurrence of a
Distribution Date (as defined therein) and (B) to provide that the Purchaser
shall not be deemed to be an Acquiring Person (as defined therein) by reason of
the transactions expressly provided for in this Agreement and the Tender and
Option Agreement. The Company shall not amend, revoke, withdraw or modify the
approval of the Purchaser's acquisition of the Company Common Stock by reason
of the Offer, the Merger or the Tender and Option Agreement so as to render the
restrictions of Section 203 of the DGCL applicable thereto; provided, however,
that the Company may take any such action if this Agreement has been terminated
pursuant to Section 8.1(c)(i) hereof and Purchaser has been paid the fees
contemplated by Section 9.1 hereof.
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(b) Concurrently with the commencement of the Offer, the Company shall
file with the SEC a Solicitation/ Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto, and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the statements to
the same effect as those referred to in Section 1.2(a) hereof. 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 SEC 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 Purchaser in writing specifically for inclusion in
the Schedule 14D-9. The Company further agrees to take all steps necessary to
cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
Federal securities laws. Each of the Company, on the one hand, and Purchaser,
on the other hand, 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 and 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 SEC and to be disseminated to holders of the Shares, in each
case as and to the extent required by applicable Federal securities laws.
Purchaser and its counsel shall be given a reasonable opportunity to review
and comment upon the Schedule 14D-9 before it is filed with the SEC. In
addition, the Company agrees to provide Purchaser and its counsel in writing
any comments the Company or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments. The Company and its counsel will advise Purchaser and its
counsel of the substance of all communications received by the Company from the
SEC and its staff relating to the Schedule 14D-9, the Merger, this Agreement or
the transactions contemplated hereby.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Purchaser mailing labels, security position listings
and any available listing or computer file containing the names and addresses
of the record holders of the Shares as of a recent date and those of persons
becoming record holders after such date, together with copies of all other
information in the Company's control regarding the beneficial owners of shares
of Company Common Stock that Purchaser may reasonably request, and shall
furnish Purchaser with such other information and assistance as Purchaser or
its agents may reasonably request in communicating the Offer to the
Stockholders of the Company.
1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares (including
without limitation all Shares subject to the Tender and Option Agreement) by
Purchaser or any affiliate of Purchaser pursuant to the Offer or the Tender and
Option Agreement which represents the Minimum Condition, Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of directors then serving on such Board (after giving effect
to the directors designated by
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Purchaser pursuant to this Section) multiplied by the ratio of the aggregate
number of Shares beneficially owned by Purchaser and any of its affiliates to
the total number of Shares then outstanding. The Company shall, upon request of
Purchaser, take all action necessary to cause Purchaser's designees to be
elected or appointed to the Company's Board of Directors, including, without
limitation, increasing the size of its Board of Directors or, at the Company's
election, securing the resignations of such number of its incumbent directors as
is necessary to enable Purchaser's designees to be so elected or appointed to
the Company's Board, and shall cause Purchaser's designees to be so elected or
appointed. At such time, the Company shall also cause persons designated by
Purchaser to constitute the same percentage (rounded up to the next whole
number) as is on the Company's Board of Directors of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar body) of
each Subsidiary (as defined below) of the Company and (iii) each committee (or
similar body) of each such board. In the event that Purchaser's designees are
elected to the Board of Directors of the Company, until the Effective Time, the
Board of Directors shall have at least two directors who are directors on the
date hereof (the "Company Directors"). In such event, if either of the Company
Directors is unable to serve for any reason whatsoever, the other directors
shall designate a person to fill such vacancy who shall not be a designee,
stockholder or affiliate of Purchaser to be a Company Director for purposes of
this Agreement. Notwithstanding anything in this Agreement to the contrary, in
the event that Purchaser's designees are elected to the Board of Directors of
the Company, after the acceptance for payment of shares of Common Stock pursuant
to the Offer and prior to the Effective Time, the affirmative vote of the
Company Directors shall be required to (a) amend or terminate this Agreement by
the Company, (b) exercise or waive any of the Company's rights, benefits or
remedies hereunder,(c) extend the time for performance of Purchaser's respective
obligations hereunder or (d) take any other action by the Board of Directors of
the Company in connection with this Agreement.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 1.3(a), including mailing to
stockholders as part of the Schedule 14D-9 the information required by such
Section 14(f) and Rule 14f-1, as is necessary to enable Purchaser's designees
to be elected to the Company's Board of Directors. Purchaser shall supply the
Company with any information with respect to either of them and their nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1. The provisions of Section 1.3(a) are in addition to and shall not limit
any rights which Purchaser or any of its affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
1.4 The Merger.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time the Company and Purchaser shall consummate the Merger pursuant
to which (i) Purchaser shall be merged with and into the Company and the
separate corporate existence of Purchaser shall thereupon cease, (ii) the
Company shall be the successor or surviving corporation in the Merger (the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware, and (iii) the
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separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger.
(b) Pursuant to the Merger, (i) the certificate of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by applicable law and such certificate of incorporation,
and (ii) the Bylaws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the certificate of incorporation and
such bylaws. The Merger shall have the effects set forth in the DGCL.
1.5 Effective Time. On the date of Closing (as defined in Section 1.6)
as soon as practicable following the satisfaction or waiver of the conditions
set forth in Article VII (or on such a other date as Purchaser and the Company
may agree) the parties shall cause a certificate of merger or other appropriate
document (in any such case, the "Certificate of Merger") to be executed and
filed with the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective at the time and on the date on which
the Certificate of Merger has been duly filed with the Secretary of State of
the State of Delaware or such later time as is agreed upon by the parties and
specified in the Certificate of Merger, and such time is hereinafter referred
to as the "Effective Time."
1.6 Closing. The Closing of the Merger (the "Closing") will take place
at 10:00 a.m., Detroit time, on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VII hereof (the "Closing Date"), at
the offices of Dykema Gossett PLLC, 400 Renaissance Center, Detroit, Michigan
48243, unless another date or place is agreed to in writing by the parties
hereto.
1.7 Directors and Officers of the Surviving Corporation. The directors
and officers of Purchaser at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's certificate of incorporation and bylaws.
1.8 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, as soon as practicable following the acceptance for payment and
purchase of Shares sufficient to meet the Minimum Condition by Purchaser
pursuant to the Offer:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting"), for the purpose of considering
and taking action upon this Agreement;
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(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and use its reasonable
efforts (x) to obtain and furnish the information required to be included
by the SEC in the Company Proxy Statement (as defined below) and, after
consultation with Purchaser, to respond promptly to any comments made by
the SEC with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement (the "Company Proxy
Statement") to be mailed to its stockholders and (y) to obtain the
necessary approvals of the Merger and this Agreement by its stockholders;
and
(iii) include in the Company Proxy 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 this Agreement.
(b) Purchaser agrees that it shall, and shall cause any permitted
assignee to, vote all Shares then owned by it which are entitled to vote in
favor of the approval of the Merger and the adoption of this Agreement.
1.9 Merger Without Approval of Company Stockholders. Notwithstanding
Section 1.8 hereof, in the event that Purchaser or any permitted assignee of
Purchaser shall acquire at least 90% of the outstanding Shares, pursuant to the
Offer, the Tender and Option Agreement or otherwise, the parties hereto agree,
subject to Article VII hereof, to take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without approval of the Company's Stockholders, in accordance with
Section 253 of the DGCL. If the Board of Directors of the Company so approves a
merger pursuant to Section 253, Purchaser shall, and shall cause any permitted
assignee to, continue to hold not less than 90% of the issued and outstanding
shares of Company Common Stock until the consummation or abandonment of such
merger.
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders of any shares of
Company Common Stock or common stock, par value $1.00 per share, of Purchaser
(the "Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share of
Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All shares
of Company Common Stock that are owned by the Company as treasury stock and any
shares of Company Common Stock owned by Purchaser or any affiliate of Purchaser
shall be canceled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor.
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(c) Conversion of Shares. Each issued and outstanding share of Company
Common Stock (other than shares to be cancelled in accordance with Section
2.1(b)) shall be converted into the right to receive the Offer Price, payable to
the holder thereof, without interest (the "Merger Consideration"), upon
surrender of the certificate formerly representing such share of Company Common
Stock in the manner provided in Section 2.2. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration therefor
upon the surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares of Company Common
Stock held by a Dissenting Stockholder shall not be converted as described in
Section 2.1(c) but shall become the right to receive such consideration as may
be determined to be due to such Dissenting Stockholder pursuant to Section 262
of the DGCL; provided, however, that the shares of Company Common Stock
outstanding immediately prior to the Effective Time and held by a Dissenting
Stockholder who shall, after the Effective Time, withdraw his or her demand for
appraisal or lose his or her right of appraisal, in either case pursuant to the
DGCL, shall be deemed to be converted as of the Effective Time into the right to
receive the Merger Consideration. The Company shall give Purchaser (i) prompt
notice of any written demands for appraisal of shares of Company Common Stock
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without
the prior written consent of Purchaser, voluntarily make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such demands.
2.2 Exchange of Certificates.
(a) Paying Agent. Purchaser shall designate a bank or trust company to
act as agent for the holders of shares of Company Common Stock in connection
with the Merger (the "Paying Agent") to receive the monies to which holders of
shares of Company Common Stock shall become entitled pursuant to Section 2.1(c).
Such monies shall be invested by the Paying Agent as directed by Purchaser or
the Surviving Corporation. All costs and fees of the Paying Agent shall be paid
by the Parent or the Purchaser.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose Shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Purchaser and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate
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<PAGE> 16
for cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Purchaser, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in Company Common Stock.
At the Effective Time, the stock transfer books of the Company shall be closed
and thereafter there shall be no further registration of transfers of shares of
Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(d) Termination of Fund, No Liability. At any time following six (6)
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any monies (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.3 Stock Options; Warrants. Immediately prior to the Effective Time,
all options (individually, an "Option" and collectively, the "Options") then
outstanding under the Company's 1986 Incentive Stock Option Plan or any other
incentive compensation or stock option plan, agreement or arrangement of the
Company or otherwise (the "Option Plans") and all warrants to purchase shares of
Common Stock (the "Warrants"), shall be canceled and each holder of a vested
Option or Warrant will be entitled to receive from the Company, for each share
of Common Stock subject to a vested Option or Warrant, an amount in cash equal
to the excess, if any, of the Merger Consideration over the per share exercise
price of such Option or Warrant. The Company will use
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its best efforts to obtain any necessary consents from holders of Options or
Warrants to the cancellation and payment provided for in this Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
3.1 Organization and Qualification, Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the Company's properties or the nature of its business
makes such qualification necessary, except in jurisdictions, if any, where the
failure to be so qualified would not result in a Company Material Adverse Effect
(as defined below). The Company has all requisite corporate or other power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted and as it is now proposed to be conducted. The Company
has made available to Purchaser a complete and correct copy of its certificate
of incorporation and bylaws. each as amended to date, and the Company's
certificate of incorporation and bylaws, as so delivered are in full force and
effect. The Company is not in default in any respect in the performance,
observation or fulfillment of any provision of its certificate of incorporation
or bylaws.
(b) Exhibit 22 to the Company's Report on Form 10-K for the fiscal year
ended July 31, 1995, sets forth a complete list of the Company's active
Subsidiaries. Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business as a foreign corporation and is
in good standing in the jurisdictions in which the character of Subsidiary's
properties or the nature of its business makes such qualification necessary,
except in jurisdictions, if any, where the failure to be so qualified would not
result in a Company Material Adverse Effect. Each of the Company's Subsidiaries
has the requisite corporate or other power and authority to own, use or lease
its properties and to carry on its business as it is now being conducted and as
it is now proposed to be conducted. Except as disclosed in the Company SEC
Reports, each of such Subsidiaries is operating in accordance with all
applicable laws and regulations of its jurisdiction of incorporation, except
where the failure so to operate would not result in a Company Material Adverse
Effect. The Company has made available to Purchaser a complete and correct copy
of the certificate of incorporation and bylaws (or similar charter documents) of
each of the Company's Subsidiaries, each as amended to date, and the certificate
of incorporation and bylaws (or similar charter documents) as so delivered are
in full force and effect. No Subsidiary of the Company is in default in any
respect in the performance, observation or fulfillment of any provision of its
certificate of incorporation or bylaws (or similar charter documents).
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(c) For purposes of this Agreement, (i) a "Company Material Adverse
Effect" shall mean any event, circumstance, condition, development or
occurrence causing, resulting in or having, or which could reasonably be
expected to cause, result in or have, a material adverse effect on the financial
condition, business or results of operations of the Company and its Subsidiaries
taken as a whole; and (ii) "Subsidiary" shall mean, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which (x) at least a majority of the securities or other interests having by
their terms voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries, or (y) such party or any other subsidiary of such party is a
general partner (excluding such partnerships where such party or any Subsidiary
of such party do not have a majority of the voting interest in such
partnership).
3.2 Capitalization.
(a) The authorized capital stock of the Company consists solely of
40,000,000 shares of the Company Common Stock. As of the date hereof, (i)
5,353,558 shares of Company Common Stock are issued and outstanding; and (ii)
40,000 shares of Company Common Stock are issued and held in the treasury of the
Company. Schedule 3.2 sets forth a complete list of outstanding Options and
Warrants in each case indicating which are currently exercisable, and a list of
all shares of Common Stock issuable upon conversion of the Convertible
Debentures. No agreement or other document grants or imposes on any shares of
the Company Common Stock any right, preference, privilege or restriction with
respect to the transaction contemplated hereby (including, without limitation,
any rights of first refusal), other than the right to dissent from the Merger as
provided in Section 2.1(d) above. All of the issued and outstanding shares of
the Company Common Stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Options and Warrants will be, when issued in accordance
with the terms thereof, duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except for the Convertible
Debentures, there are no bonds, debentures, notes or other indebtedness having
general voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement, as of the date hereof, (i) there are no shares
of capital stock of the Company authorized, issued or outstanding and (ii) there
are no existing options, warrants, calls, preemptive rights, subscriptions or
other rights, agreements, arrangements or commitments of any character
(including without limitation "earn-out" arrangements) relating to the issued or
unissued capital stock of the Company or any of its Subsidiaries, obligating the
Company or any of its Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. There are no outstanding contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Shares or the capital stock of the Company or any Subsidiary or
affiliate of the Company or to provide funds to
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make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity.
(b) There are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries. None of
the Company or its Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
(c) Except for the Subsidiaries, neither the Company nor any Subsidiary
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or entity.
3.3 Authority.
(a) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company's Board of Directors and no other
corporate proceedings on the part of the Company are necessary, as a matter of
law to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
the Company and is a valid and binding agreement of the Company, enforceable
against it in accordance with its terms, except (a) as such enforcement may be
subject to bankruptcy, insolvency or similar laws now or hereafter in effect
relating to creditors rights, and (b) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) The Board of Directors of the Company has duly and validly approved
and taken all corporate action required to be taken by the Board of Directors
for the consummation by the Company of the transactions contemplated by this
Agreement, including the Offer, the Merger and the acquisition of Shares
pursuant to the Offer, the Merger, the Tender and Option Agreement, and any
Other Transactions, including without limitation all matters contemplated by
Section 1.2(a)(ii) hereof. In reliance upon the representation and warranty of
Purchaser in Section 4.7 hereof, and assuming that the Minimum Condition is
satisfied, or that no Shares are purchased under the Offer or otherwise (other
than pursuant to the Tender and Option Agreement), the Company represents to
Purchaser that the actions set forth in Section 1.2(a) are all the actions
required, and are sufficient, to render the relevant antitakeover provisions of
Section 203 of the DGCL inapplicable to the Offer, the Merger, the Tender and
Option Agreement and any Other Transactions so long as this Agreement has not
been terminated in accordance with its terms.
(c) The Rights Amendment will be sufficient to render the Rights
inoperative with respect to any acquisition of Shares by the Purchaser or any of
its affiliates pursuant to this Agreement
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and/or the Tender and Option Agreement. As a result of the Rights Amendment,
the Rights shall not be exercisable as a result of the acceptance for payment
of Shares pursuant to the Offer and/or the purchase of Shares by Purchaser
pursuant to the Tender and Option Agreement.
(d) Smith Barney Inc. ("Smith Barney"), the financial advisor to the
Company, has delivered to the Board of Directors of the Company its opinion to
the effect that as of the date of this Agreement, the $8.75 per Share
consideration to be received by the holders of Company Common Stock (other than
Purchaser and its affiliates) pursuant to the Offer and the Merger is
fair to such holders from a financial point of view, and the Company has
delivered a copy of such opinion to the Purchaser.
(e) The Company hereby consents to the inclusion in the Offer Documents
of the recommendation of the Board of Directors of the Company described in this
Section 1.2(a) and Smith Barney has consented to inclusion of its opinion in
the Schedule 14D-9 so long as such inclusion is in form and substance
satisfactory to Smith Barney.
3.4 Consents and Approvals, No Violation. The execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby and the
performance by the Company of its obligations hereunder will not:
(a) subject to the obtaining of any requisite approvals of the Company's
stockholders as contemplated by Sections 1.8 and 1.9 hereof, conflict with
any provision of the Company's certificate of incorporation or bylaws or
the certificate of incorporation or bylaws (or other similar charter
documents) of any of its Subsidiaries;
(b) require any consent, approval, order, authorization or permit of, or
registration, filing with or notification to, any governmental or
regulatory authority or agency (a "Governmental Entity"), except for (i)
the filing of a premerger notification and report form by the Company under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) the filing with the SEC of (x) the Schedule 14D-9, (y) the
Company Proxy Statement relating to the approval by the Company's
Stockholders of this Agreement, if such approval is required by law, and
(z) such reports under Section 13(a) of the Exchange Act as may be required
in connection with this Agreement, the Tender and Option Agreement and the
transactions contemplated hereby and thereby, and (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware;
(c) except as disclosed on Schedule 3.4, result in any violation of or
the breach of or constitute a default (with notice or lapse of time or
both) under, or give rise to any right of termination, cancellation or
acceleration or guaranteed payments under or to a loss of a material
benefit under, any of the terms, conditions or provisions of any note,
lease, mortgage, license, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective properties or
assets may be bound, except for such violations, breaches,
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defaults, or rights of termination, cancellation or acceleration, or losses
as to which requisite waivers or consents have been obtained or will be
obtained prior to the Effective Time or which, individually or in the
aggregate, would not (i) result in a Company Material Adverse Effect, (ii)
materially impair the ability of the Company to perform its obligations
under this Agreement or (iii) prevent the consummation of any of the
transactions contemplated by this Agreement;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to the Company or any
Subsidiary, in such a manner as to (i) result in a Company Material Adverse
Effect, (ii) materially impair the ability of the Company to perform its
obligations under this Agreement or (iii) prevent the consummation of any
of the transactions contemplated by this Agreement; or
(e) except as disclosed in Schedule 3.4, result in the creation of any
lien, charge or encumbrance upon any shares of capital stock, properties or
assets of the Company or its Subsidiaries under any agreement or instrument
to which the Company or its Subsidiaries is a party or by which the Company
or its Subsidiaries is bound.
3.5 Company SEC Reports. The Company has filed with the SEC, and has
heretofore delivered to Purchaser true and complete copies of each form,
registration statement, report, schedule, proxy or information statement and
other document (including exhibits and amendments thereto), including without
limitation its Annual Reports to Stockholders incorporated by reference in
certain of such reports, required to be filed with the SEC since July 26, 1992,
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act (the "Company SEC Reports"). As of the respective dates such
Company SEC Reports were filed or, if any such Company SEC Reports were amended,
as of the date such amendment was filed, each of the Company SEC Reports,
including without limitation any financial statements or schedules included
therein, (a) complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and (b) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Subsidiaries is required to file any forms, reports or
other documents with the SEC pursuant to Section 12 or 15 of the Exchange Act.
3.6 Financial Statements. Each of the audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company (including any related notes and schedules) included (or incorporated by
reference) in the Company SEC Reports and the Company's unaudited consolidated
balance sheet as of April 26, 1996 (collectively, the "Financial Statements"),
have been prepared from, and are in accordance with, the books and records of
the Company and its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis (except as may be indicated in the notes thereto and subject,
in the case of quarterly
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financial statements, to normal and recurring year-end adjustments which would
not be material in amount or effect) and fairly present, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its Subsidiaries as of
the date thereof and the consolidated results of operations and cash flows (and
changes in financial position, if any) of the Company and its Subsidiaries for
the periods presented therein (subject to normal year-end adjustments which
would not be material in amount or effect and the absence of financial footnotes
in the case of any unaudited interim financial statements).
3.7 Absence of Undisclosed Liabilities. Except (a) as specifically
disclosed in the Company SEC Reports and (b) for liabilities and obligations
incurred in the ordinary course of business since January 31, 1996, and
consistent with past practice, neither the Company nor any of its Subsidiaries
has incurred any material liabilities or obligations of any nature (contingent
or otherwise). As of the date hereof, the total amounts of principal and unpaid
interest outstanding under the Company's credit agreement with BayBank do not
exceed $31 million in the aggregate, and the long-term principal portions
thereof (including such amounts as are required to be classified as current debt
under GAAP) do not exceed $10 million.
3.8 Absence of Certain Changes. Except as disclosed in the Company SEC
Reports, since January 31, 1996, the Company and its Subsidiaries have conducted
their respective businesses only in, have not engaged in any transaction other
than according to, the ordinary and usual course, and there has not been (a) any
event, circumstance, condition, development or occurrence which has or is
reasonably likely to have a Company Material Adverse Effect; (b) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of the
Company or any of its Subsidiaries; (c) any change by the Company in accounting
principles, practices or methods; (d) any labor dispute or difficulty which is
reasonably likely to result in any Company Material Adverse Effect, and to the
Company's knowledge no such dispute or difficulty is now threatened; (e) any
material asset sold, disposed of (except inventory sold in the ordinary course
of business) mortgaged, pledged or subjected to any lien, charge or other
encumbrance; (f) except as set forth on Schedule 3.8, any increase in the
compensation payable or which could become payable by the Company or any of its
Subsidiaries to their directors, officers, employees, distributors, dealers or
sales representatives; (g) any amendment of any employee benefit plan, except as
disclosed in Schedule 3.8; (h) any issuance, transfer, sale or pledge by the
Company or its Subsidiaries of any shares of stock or other securities or of any
commitments, options, rights or privileges under which the Company or its
Subsidiaries is or may become obligated to issue any shares of stock or other
securities, other than pursuant to Options and Warrants outstanding on the date
hereof; (i) except as set forth on Schedule 3.8, any indebtedness incurred by
the Company or its Subsidiaries, except such as may have been incurred in the
ordinary course of business and consistent with past practice; (j) any loan made
or agreed to be made by the Company or its Subsidiaries, nor has the Company or
its Subsidiaries become liable or agreed to become liable as a guarantor with
respect to any loan; (k) any waiver by the Company or its Subsidiaries of any
right or rights of material value or any payment, direct or indirect, of any
material debt, liability or other obligation; (l) any change in or amendment to
the certificate of incorporation or bylaws (or similar charter documents) of the
Company or its Subsidiaries; (m) any change in the Company's or any of
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<PAGE> 23
its Subsidiaries' relations with, or any loss or threat of loss of, any of the
Company's important suppliers or customers, which would result in a Company
Material Adverse Effect; (n) any termination, cancellation or waiver of any
contract or other right which would result in a Company Material Adverse Effect;
(o) any material damage, destruction or loss, whether or not covered by
insurance, adversely affecting the properties or business of the Company and its
Subsidiaries taken as a whole, or any deterioration in the operating condition
of the assets of the Company and its Subsidiaries which would have a Company
Material Adverse Effect; or (p) any payment made to affiliates of the Company
other than in accordance with the terms of existing employment agreements or
documents evidencing indebtedness owing to such affiliates.
3.9 Taxes.
(a) The Company and each of its Subsidiaries have timely filed (or have
had timely filed on their behalf) or will file or cause to be timely filed, all
material Tax Returns (as defined below) required by applicable law to be filed
by any of them prior to or as of the Closing Date. All such Tax Returns and
amendments thereto are or will be true, complete and correct in all material
respects.
(b) The Company and each of its Subsidiaries have paid (or have had paid
on their behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established on or before the Closing Date, an adequate
accrual for the payment of all material Taxes (as defined below) due with
respect to any period ending prior to or as of the Closing Date.
(c) No Audit (as defined below) by a Tax Authority (as defined below) is
pending or threatened with respect to any Tax Returns filed by, or Taxes due
from, the Company or any Subsidiary. No issue has been raised by any Tax
Authority in any Audit of the Company or any of its Subsidiaries that if raised
with respect to any other period not so audited could be expected to result in a
material proposed deficiency for any period not so audited. No material
deficiency or adjustment for any Taxes has been threatened, proposed, asserted
or assessed against the Company or any of its Subsidiaries. There are no liens
for Taxes upon the assets of the Company or any of its Subsidiaries, except
liens for current Taxes not yet due.
(d) Neither the Company nor any of its Subsidiaries has given or been
requested to give any waiver of statutes of limitations relating to the payment
of Taxes or have executed powers of attorney with respect to Tax matters, which
will be outstanding as of the Closing Date.
(e) Neither the Company nor its Subsidiaries are a party to, is bound by,
or has any obligation or liability for Taxes pursuant to any Tax sharing, Tax
indemnity, or similar agreements.
As used in this Agreement, (i) "Audit" shall mean any audit, assessment of
Taxes, other examination by any Tax Authority, proceeding or appeal of such
proceeding relating to Taxes; (ii) "Taxes" shall
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mean all Federal, state, local and foreign taxes, and other assessments of a
similar nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto; (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign governmental authority responsible for the administration of any Taxes;
and (iv) "Tax Returns" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
3.10 Litigation. Except as disclosed in the Company SEC Reports or on
Schedule 3.10 hereto, and except for claims of the type described on Schedule
3.16 hereto, there is no suit, claim, action, proceeding or investigation
pending or, to the Company's knowledge, threatened against or affecting the
Company, any Subsidiaries of the Company or any of the directors or officers of
the Company or any of its Subsidiaries in their capacity as such that,
individually or in the aggregate, allege damages of $100,000 or more. Neither
the Company nor any of its Subsidiaries, nor any officer, director or employee
of the Company or any of its Subsidiaries, has been permanently or temporarily
enjoined by any order, judgment or decree of any court or any other governmental
or regulatory authority from engaging in or continuing any conduct or practice
in connection with the business, assets or properties of the Company or such
Subsidiary nor, to the knowledge of the Company, is the Company, any Subsidiary
or any officer, director or employee of the Company or its Subsidiaries under
investigation by any Governmental Entity related to the conduct of the Company's
business. There is not in existence any order, judgment or decree of any court
or other tribunal or other agency enjoining or requiring the Company or any of
its Subsidiaries to take any action of any kind with respect to its business,
assets or properties.
3.11 Employee Benefit Plans, ERISA.
(a) Schedule 3.11 contains a true and complete list of each employment,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder ("ERISA"), for the
benefit of any employee or former employee of the Company or any ERISA Affiliate
whether formal or informal and whether legally binding or not (the "Plans").
Schedule 3.11 identifies each of the Plans that is an "employee welfare benefit
plan" or "employee pension benefit plan" as such terms are defined in Sections
3(l) and 3(2) of ERISA (such plans being hereinafter referred to collectively as
the "ERISA Plans"). Neither the Company nor any ERISA Affiliate has any formal
plan or commitment, whether legally binding or not, to create any additional
Plan or modify or change any existing Plan that would affect any employee or
terminated employee of the Company or any ERISA Affiliate.
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(b) With respect to each of the Plans, the Company has heretofore
delivered to Purchaser true and complete copies of each of the following
documents: (i) a copy of each Plan (including all amendments thereto); (ii) a
copy of the annual report, if required under ERISA, with respect to each Plan
for the last three years; (iii) a copy of the actuarial report, if required
under ERISA, with respect to each Plan for the last three years; (iv) a copy of
the most recent Summary Plan Description ("SPD"), together with all Summaries of
Material Modification issued with respect to such SPD, if required under ERISA
with respect to each Plan, and all other material employee communications
relating to each Plan; (v) if the Plan is funded through a trust or any other
funding vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof; (vi) all
contracts relating to the Plans with respect to which the Company or any ERISA
Affiliate may have any liability, including without limitation insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vii) the most recent
determination letter received from the Internal Revenue Service with respect to
each Plan that is intended to be qualified under Section 401 of the Internal
Revenue Code of 1986, as from time to time amended (the "Code").
(c) No liability under Title IV of ERISA has been incurred by the Company
or any ERISA Affiliate since the effective date of ERISA that has not been
satisfied in full.
(d) Neither the Company, any ERISA Affiliate, any of the ERISA Plans, any
trust created thereunder nor any trustee or administrator thereof has engaged in
a transaction or has taken or failed to take any action in connection with which
the Company, any ERISA Affiliate, any of the ERISA Plans, any such trust, any
trustee or administrator thereof, or any party dealing with the ERISA Plans or
any such trust could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976
or 4980B of the Code.
(e) Each of the Plans has been operated and administered in all material
respects in accordance with applicable laws, including but not limited to ERISA
and the Code.
(f) Each of the ERISA Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified.
(g) Neither the Company nor any ERISA Affiliate currently maintains or
previously has maintained an ERISA Plan subject to Section 501(c)(9) of the
Code.
(h) Except as set forth on Schedule 3.11, no amounts payable under the
Plans or any other agreement or arrangement to which the Company or any ERISA
Affiliate is a party will fail to be deductible for Federal income tax purposes
by virtue of Section 280G of the Code.
(i) No "leased employee," as that term is defined in Section 414(n) of
the Code, performs services for the Company or any ERISA Affiliate.
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(j) Except for those Plans and other arrangements listed on Schedule
3.11, no Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
after retirement or other termination of service (other than coverage mandated
by applicable law, death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, deferred
compensation benefits accrued as liabilities on the books of the Company or the
ERISA Affiliates, or benefits, the full cost of which is borne by the current
or former employee (or his beneficiary)).
(k) With respect to each Plan that is funded wholly or partially through
an insurance policy, there will be no liability of the Company or an ERISA
Affiliate, as of the Closing Date, under any such insurance policy or ancillary
agreement with respect to such insurance policy in the nature of a retroactive
rate adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring prior to the
Closing Date.
3.12 Environmental Liability.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) all substances, wastes,
pollutants, contaminants and materials regulated, or defined or designated as
hazardous, extremely hazardous, or toxic under the following federal statutes
and their state counterparts, as well as these statutes' implementing
regulations: the Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Atomic Energy Act, the Resource Conservation and Recovery Act, the Clean Air Act
and the Hazardous Materials Transportation Act; (B) any asbestos or
asbestos-containing material, petroleum and petroleum products, including crude
oil and any fractions thereof, natural gas, natural gas liquids, synthetic gas
or polychlorinated biphenyls; or (C) any substance with respect to which a
federal, state or local agency requires environmental investigation, monitoring,
reporting or remediation; and (ii) "Environmental Law" means any applicable
statute, code, enactment, ordinance, rule, regulation, permit, consent,
authorization, judgment, order, or other requirement having the force and effect
of law whether local, state or national, to the extent enacted and in effect on
or prior to the Closing Date, relating to: (A) emissions, discharges, spills,
releases or threatened releases of Hazardous Substances or materials containing
Hazardous Substances into ambient air, surface water, ground water, water
courses, publicly or privately owned treatment works, drains, sewer systems,
wetlands, septic systems or onto land; (B) the manufacture, handling, transport,
use, treatment, storage or disposal of Hazardous Substances or materials
containing Hazardous Substances: (C) the regulation of storage tanks; or (D)
otherwise relating to pollution or protection of the environment or the
protection of human health from environmental hazards.
(b) Except as disclosed in the Company SEC Reports or in Schedule 3.12
hereto, (i) neither the Company nor any Subsidiary is in violation of any
Environmental Law except for any violation that would not individually or in the
aggregate result in liability to the Company in excess of $100,000; (ii) the
Company and each Subsidiary have all permits, licenses and other authorizations
required under any Environmental Law; (iii) no Hazardous Substances have been
used, stored,
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manufactured or processed by the Company or any Subsidiary, except as
reasonably necessary to conduct the business of the Company and the
Subsidiaries, and in compliance with all laws, ordinances and regulations
applicable to the use, storage or manufacture thereof, nor to the knowledge of
the Company has any third party used, stored, manufactured or processed any
Hazardous Substances on the property owned or leased by the Company except in
compliance with Environmental Law; (iv) there has been no disposal, release or
threatened release of Hazardous Substances by the Company or any Subsidiary, nor
to the knowledge of the Company has there been any disposal, release or
threatened release of Hazardous Substances from or to the property owned or
leased by the Company; (v) to the knowledge of the Company, none of the
properties owned or leased by the Company or any Subsidiary (including, without
limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance nor has the Company contaminated (including, without
limitation, soils and surface and groundwaters) with Hazardous Substances, the
properties owned or leased by it or any Subsidiary; (vi) to the knowledge of
the Company, neither the Company nor any Subsidiary is or is threatened to be
named as a potentially responsible party with respect to any off-site
contamination; and (vii) neither the Company nor any Subsidiary has received any
written notice of violation of or liability under any Environmental Law and the
Company is not aware of any circumstances that could reasonably be expected to
give rise to such notice.
(c) Without in any way limiting the generality of the foregoing, except
as disclosed in the Company SEC Reports or in Schedule 3.12 hereto, (i) the
Company does not store, dispose of or arrange for the disposal of Hazardous
Substances at on-site or off-site locations except in compliance with
Environmental Law, (ii) the Company does not own any underground storage tanks,
(iii) there is no asbestos contained in or forming part of any building,
building component. structure or office space owned or leased by the Company,
and (iv) there are no polychlorinated biphenyls (PCBs) or PCB-containing items
are used or stored at any property owned or leased by the Company, except in the
case of subsections (iii) and (iv) for such conditions as would not involve or
require the expenditure of more than $100,000 in the aggregate to remediate.
3.13 Compliance with Applicable Laws. Except as disclosed in the Company
SEC Reports or in a Schedule to this Agreement or as would not result in a
Company Material Adverse Effect, neither the Company nor any Subsidiary is in
conflict with, or in default or violation of, (a) any law, rule, regulation,
order, judgment or decree applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound or affected.
3.14 Material Contracts. Schedule 3.14 hereto sets forth a true and
correct list of any and all agreements, contracts, purchase or installment
agreements, indentures, leases, mortgages, licenses, plans, arrangements,
commitments (whether written or oral) and instruments (collectively,
"contracts") that are material to the Company and its Subsidiaries (the
"Material Contracts"); provided, however, that Schedule 3.14 need not list such
Material Contracts that are specifically
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filed as exhibits to the Company SEC Reports. True and complete copies of each
written Material Contract, or form thereof and true and complete written
summaries of each oral Material Contract have been made available to Purchaser
by the Company prior to the date hereof. Except as disclosed in the Company SEC
Reports, any Schedule to this Agreement or as set forth on Schedule 3.14, (i)
Each Material Contract is a valid, binding and enforceable agreement of the
Company or its Subsidiaries and, to the knowledge of the Company, the other
parties thereto and will, subject to the satisfaction of the conditions in
Article VII, continue to be valid, binding and enforceable immediately after the
Closing, except as such enforcement may be subject to bankruptcy, insolvency or
similar laws now or hereafter in effect relating to creditors' rights, and as
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought; (ii) as of the date hereof,
the Company has no reason to believe that the Company or the relevant Subsidiary
will not be able to fulfill in all material respects all of its obligations
under the Material Contracts which remain to be performed after the date hereof
and (iii) to the knowledge of the Company, there has not occurred any material
default (or event which upon provision of notice or lapse of time or both would
become such a default) under any of the Material Contracts on the part of the
Company or the relevant Subsidiary party thereto.
3.15 Patents, Marks, Trade Names, Copyrights and Registrations.
(a) The Company has all right, title and interest in all Intellectual
Property (as defined below) used in or necessary for the business of the Company
and its Subsidiaries as now conducted and the consummation of the transactions
contemplated hereby will not alter or impair in an adverse manner such
Intellectual Property rights.
(b) "Intellectual Property" includes United States and foreign
inventions, invention disclosures, patents, inventors' certificates, utility
models, trademarks, service marks, trade names, copyrights, mask work
registrations, trade secrets (including processes and software programs),
registrations and applications therefor, and past, present and future causes of
action and remedies therefor.
(c) To the knowledge of the Company, the Company and its Subsidiaries are
not in default under any material agreement pursuant to which it is licensing
Intellectual Property of a third party or granting licenses to its own
Intellectual Property. The Company has not notified any other party of an
alleged default of any such agreement. The Company has not received any
communications alleging that the Company has violated in any material respect
any other person's Intellectual Property rights or has engaged in unfair
competition against such person.
(d) To the knowledge of the Company, the Company and its Subsidiaries do
not now infringe or misappropriate any third party's Intellectual Property
rights and do not have any material liability for any past infringement or
misappropriation. No material dispute or disagreement involving the Company or
any of its Subsidiaries exists or is, to the knowledge of the Company,
threatened with regard to any third party Intellectual Property right, including
any allegation of
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Intellectual Property infringement or misappropriation or of any breach or
default of an Intellectual Property license or similar agreement.
3.16 Labor Matters. Schedule 3.16 sets forth each collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound. There are no controversies pending or,
to the best knowledge of the Company, threatened between the Company or any
Subsidiary and any of their respective employees. To the best knowledge of the
Company, there are no activities or proceedings of any labor union to organize
any non-unionized employees. Neither the Company nor any Subsidiary has breached
or otherwise failed to comply with any provision of any such agreement or
contract and, except as listed on Schedule 3.16, there are no grievances
outstanding against the Company or any Subsidiary under any such agreement or
contract nor any unfair labor practice complaints pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary before the
National Labor Relations Board or any current union representation questions
involving any alleged claims in excess of $25,000. There is no strike,
slowdown, work stoppage or lockout, or, to the best knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any
Subsidiary.
3.17 Real Property. The Company and the Subsidiaries have good and
marketable title to the real property they own and valid leasehold interests in
the real properties leased. Except as disclosed in the Company SEC Reports,
each parcel of real property owned or leased by the Company or any Subsidiary is
owned or leased free and clear of all mortgages, liens, security interests, or
other claims of third parties of any kind (collectively, "Liens"), other than
(A) Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company or such Subsidiary consistent with past practice, and
as to none of which is the Company delinquent with respect to the underlying
obligation and (D) all matters of record, Liens and other imperfections of title
and encumbrances which, individually or in the aggregate, would not have a
Company Material Adverse Effect (collectively, "Permitted Liens").
3.18 Disclosure Documents.
(a) Each document filed or required to be filed by the Company with the
SEC in connection with the Offer, the Merger or the transactions contemplated
hereby (the "Company Disclosure Documents"), including, without limitation, the
Schedule 14D-9, the Company Proxy Statement and any amendments or supplements to
any thereof will comply as to form in all material respects with the applicable
requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to any stockholder of the Company, at the
time such stockholders vote on adoption of this Agreement and at the Effective
Time, the Company Proxy Statement as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
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material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. At the
time of the filing with the SEC or any other governmental authority of any
Company Disclosure Documents (other than the Company Proxy Statement), at the
time of any distribution thereof and throughout the remaining pendency of the
Offer, each such Company Disclosure Document will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. The representations and warranties
contained in this subsection (b) will not apply to statements or omissions in
the Company Disclosure Documents based upon information furnished in writing to
the Company by Purchaser specifically for use therein.
(c) The information with respect to the Company or any Company Subsidiary
furnished by the Company or its affiliates to Purchaser in writing specifically
for use in the Offer and the Offer Documents shall not contain, as of the date
the Offer Documents are filed, any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made not misleading. If any
such information provided by the Company or its affiliates shall, after the
filing of the Offer Documents, become false or misleading in any material
respect, the Company shall promptly notify Purchaser and update such information
in writing.
(d) Any information disclosed on a particular Schedule hereto shall be
deemed to have been disclosed in connection with all other Schedules hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
4.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate or other power to carry on its business as it is now
being conducted and as it is now proposed to be conducted. Purchaser is not in
default in any respect in the performance, observation or fulfillment of any
provision of its certificate of incorporation or bylaws. Purchaser has made
available to the Company a complete and correct copy of its certificate of
incorporation and bylaws and, as so delivered, such documents are in full force
and effect.
4.2 Authority Relative to this Agreement. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby on
the part of Purchaser have been duly and validly authorized by the Board of
Directors of Purchaser and by Parent as the sole stockholder of Purchaser and no
other corporate proceedings on the part of Parent and Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly
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executed and delivered by Purchaser and is a valid and binding agreement of
Purchaser, enforceable against it in accordance with its terms, except (a) as
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and (b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
4.3 Consent and Approvals, No Violation. Neither the execution and
delivery of this Agreement by Purchaser, nor the consummation of the
transactions contemplated hereby, will:
(a) conflict with any provision of the certificate of incorporation or
bylaws of Purchaser;
(b) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
the filing of a premerger notification and report form under the HSR Act, (ii)
the filing with the SEC of the Schedule 14D-1, the Company Proxy Statement
relating to the approval by the Company's stockholders of the Agreement as
contemplated by Section 1.8 of the Agreement, if such approval is required by
law, and such reports under Section 13(a) of the Exchange Act as may be
required in connection with this Agreement, the Tender and Option Agreement and
the transactions contemplated hereby and thereby, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, and
(iv) where the failure to obtain such consents, approvals, authorizations or
permits or the failure to make such filings or notifications would not have a
material adverse effect on the financial condition, business or results of
operations of Purchaser;
(c) except as disclosed to the Company in writing by Purchaser, conflict
with, result in the breach of or constitute a default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any material note, lease, mortgage, license, agreement or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which, in the aggregate, would not have a
material adverse effect on the financial condition, business, properties or
results of operations of Purchaser; or
(d) conflict with or violate the provisions of any order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to
Purchaser in such a manner as to result in a material adverse effect on the
financial condition, business, properties or results of operations of Purchaser.
4.4 Information Supplied. None of the information supplied or to be
supplied by Purchaser expressly for inclusion in the Company Proxy Statement or
the Schedule 14D-9 will, at the date mailed to the Company's stockholders and at
the time of the Special Meeting, contain any untrue statement of a material fact
or will 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
in which they are made, not misleading.
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4.5 Financing. Parent has entered into, and furnished to the Company a
copy of, the Financing Commitment Letter with NBD Bank. Subject to the terms
and conditions specified therein, the Financing Commitment Letter will provide
Purchaser funds sufficient in amount to consummate the Offer and Merger pursuant
to this Agreement. The Financing Commitment Letter is in full force and effect
as of the date of the Agreement.
4.6 Purchaser's Operations. The Purchaser 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.
4.7 No Shares Owned by Purchaser or Affiliates. As of the date hereof,
neither Purchaser nor any of its affiliates owns any Shares.
4.8 Disclosure Documents. Each document filed or required to be filed
with the SEC in connection with the Offer, the Merger and the transactions
contemplated hereby (the "Purchaser Disclosure Documents"), and any amendments
or supplements to any thereof, will comply as to form in all material respects
with the applicable requirements of the Exchange Act. At the time of filing
with the SEC or any other governmental authority of any Purchaser Disclosure
Documents, at the time of distribution thereof and throughout the remaining
pendency of the Offer, each such Purchaser Disclosure Document will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 4.8 will not apply to statements or
omissions in the Purchaser Disclosure Documents based upon information furnished
in writing to the Purchaser by the Company specifically for use therein.
ARTICLE V
CONDUCT OF BUSINESS BY THE COMPANY
The Company agrees that, after the date hereof, and prior to the time the
directors of the Purchaser have been elected to the Board of Directors of the
Company pursuant to Section 1.3, except as expressly contemplated by this
Agreement, or as agreed in writing by Purchaser:
5.1 Ordinary Course. The Company and each of its Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course,
in substantially the same manner as heretofore conducted, and use their
reasonable efforts consistent with past practice and policies to preserve intact
their present business organizations, keep available the services of their
present officers and employees and preserve their existing relationships with
customers, suppliers, lessors, lessees, creditors and others having business
dealings with them. The Company will continue to maintain a standard system of
accounting established and administered in accordance with GAAP.
5.2 Dividends, Changes in Stock. The Company shall not, and shall not
cause or permit any of its Subsidiaries to, (a) declare, set aside or pay any
dividends on or make other distributions in respect of any shares of its capital
stock, (b) split, combine or reclassify any shares of its capital
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stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any shares of its capital stock or (c) propose
to do any of the foregoing.
5.3 Issuance or Repurchase of Securities. The Company shall not, and
shall not cause or permit any of its Subsidiaries to, issue, pledge, deliver,
sell or transfer or authorize or propose the issuance, pledge, delivery, sale or
transfer of, or repurchase, redeem or otherwise acquire directly or indirectly,
or propose the repurchase, redemption or other acquisition of, any shares of
capital stock of any class of the Company or its Subsidiaries, or any options,
warrants or other rights exercisable for or securities convertible into or
exchangeable for, any such shares (or enter into any agreements, arrangements,
plans or understandings with respect to any of the foregoing), other than
pursuant to the exercise of outstanding Options, Warrants or Convertible
Debentures pursuant to the terms thereof as of the date hereof.
5.4 Governing Documents, Board of Directors. The Company shall not, and
shall not cause or permit any of its Subsidiaries to, propose or adopt any
amendment to its or their certificate of incorporation or bylaws (or similar
charter documents) or take any action to alter the size or composition of its
Board of Directors, except as specifically contemplated by Section 1.3(a)
hereof.
5.5 No Dispositions. The Company shall not, and shall not cause or
permit any of its Subsidiaries to, transfer, sell, lease, license, mortgage or
otherwise dispose of or encumber any material assets, or enter into any
commitment to do any of the foregoing, other than in the ordinary and usual
course of business, consistent with past practice.
5.6 Indebtedness.
(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, incur, become subject to, or agree to incur any debt for
borrowed money except for borrowings under existing terms of credit in the
ordinary course of business or incur or become subject to any other material
obligation or liability (absolute or contingent), except current liabilities
incurred, and obligations under contracts entered into, in the ordinary course
of business consistent with prior practice.
(b) The Company shall not pay or be liable for prepayment or other
penalties in connection with the early retirement of any Company indebtedness
for borrowed money, other than as a result of the transactions contemplated
hereby.
5.7 Employees. The Company shall not, and shall not cause or permit any
of its Subsidiaries to, make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants,
enter into any new collective bargaining agreement, enter into or amend any
employment, severance, termination or other agreement or make any loans to any
of its officers, directors, employees, agents or consultants or make any change
in its existing borrowing or lending arrangements for or on behalf of any of
such persons, whether contingent on consummation of the Offer, the Merger or
otherwise.
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5.8 Benefit Plans. The Company shall not, and shall not cause or permit
any of its Subsidiaries to (a) pay, agree to pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any officer,
director or employee except in the ordinary course of business and consistent
with past practice or as permitted by this Agreement; (b) pay or agree to pay or
make any accrual or arrangement for payment to any employees of the Company or
any of its Subsidiaries of any amount relating to unused vacation days other
than pursuant to Company policies and plans in effect on January 31, 1996, and
in a manner consistent with past practice; (c) commit itself or themselves to
adopt or pay, grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to any pension, profit sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present other than pursuant to Company policies and
plans in effect on January 31, 1996, and in a manner consistent with past
practice; or (d) amend in any material respect any such existing plan, agreement
or arrangement, except as contemplated by Section 7.2.
5.9 Taxes. The Company and each of its Subsidiaries shall (i) properly
prepare and file all material reports or Tax Returns required by the Company or
any Subsidiary to be filed with any governmental or regulatory authorities with
respect to its business, operations, or affairs, and (ii) pay in full and when
due all Taxes indicated on such Tax Returns or otherwise levied or assessed upon
the Company, its Subsidiaries or any of their assets and properties unless such
Taxes are being contested in good faith by appropriate proceedings and
reasonable reserves therefor have been established in accordance with GAAP.
5.10 Consultation and Cooperation. The Company and each of its
Subsidiaries shall (i) report on a regular basis, at reasonable times, to a
representative designated by Purchaser regarding material operational matters
and financial matters (including monthly unaudited financial information); (ii)
promptly and regularly notify Purchaser of any change in the normal course or
operation of its business or its properties and of any material development in
the business or operations of the Company and its Subsidiaries (including
without limitation any Company Material Adverse Effect or any governmental or
third party claims, complaints, investigations or hearings, or communications
indicating that the same may be forthcoming or contemplated); (iii) cooperate
with Purchaser and its affiliates and representatives in arranging for an
orderly transition in connection with the transfer of control of the Company,
including without limitation arranging meetings among the Company, its vendors,
suppliers and customers and representatives of Purchaser and its affiliates; and
(iv) deliver to Purchaser concurrently with filing with the SEC true and correct
copies of any report, statement or schedule filed by the Company with the SEC
subsequent to the date of this Agreement.
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5.11 Additional Matters. The Company shall not, and shall not cause or
permit any of its Subsidiaries to:
(a) enter into, amend or terminate any agreements, commitments or
contracts which, individually or in the aggregate, have a Company Material
Adverse Effect, or waive, release, assign or relinquish any material rights or
claims thereunder, except in the ordinary course of business, consistent with
past practice; or authorize any new capital expenditure or expenditures which,
individually is in excess of $450,000 or, in the aggregate, are in excess of
$2,000,000;
(b) discharge or satisfy any lien or encumbrance or payment of any
obligation or liability (absolute or contingent) other than current liabilities
in the ordinary course of business;
(c) cancel or agree to cancel any material debts or claims, except in
each case in the ordinary course of business;
(d) waive any rights of substantial value;
(e) pay, discharge, satisfy or settle any litigation or other claims,
liabilities or obligations (absolute, accrued, asserted, unasserted, contingent
or otherwise) involving the payment by the Company or any of its Subsidiaries of
more than $100,000;
(f) make any equity investments in third parties;
(g) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries (other than the Merger) or otherwise make any
material change in the conduct of the business or operations of the Company and
its Subsidiaries taken as a whole; or
(h) agree in writing or otherwise to take any of the foregoing actions or
any other action which would constitute a Company Material Adverse Effect in any
of the items and matters covered by the representations and warranties of the
Company set forth in Article III.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 No Solicitation.
(a) The Company and its Subsidiaries and affiliates will not, and the
Company and its Subsidiaries and affiliates will use their reasonable efforts to
ensure that their respective officers, directors, employees, investment bankers,
attorneys, accountants and other representatives and agents do not, directly or
indirectly, initiate, solicit, encourage or participate in, or provide any
information to any Person (as defined below) concerning, or take any action to
facilitate the making
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of, any offer or proposal which constitutes or is reasonably likely to lead to
any Acquisition Proposal (as defined below) of the Company or any Subsidiary or
affiliate or an inquiry with respect thereto. The Company shall, and shall
cause its Subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all existing activities,
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any of the foregoing. Notwithstanding the foregoing, the Company may,
directly or indirectly, provide access and furnish information concerning its
business, properties or assets to any corporation, partnership, person or other
entity or group pursuant to an appropriate confidentiality agreement, and may
negotiate and participate in discussions and negotiations with such entity or
group concerning an Acquisition Proposal (x) if such entity or group has
submitted a bona fide written proposal to the Board of Directors of the Company
relating to any such transaction and (y) if, in the opinion of the Board of
Directors of the Company, after consultation with independent legal counsel to
the Company, the failure to provide such information or access or to engage in
such discussions or negotiations would be inconsistent with their fiduciary
duties under applicable law.
(b) The Company shall promptly notify Purchaser of any such offers,
proposals or Acquisition Proposals (including without limitation the terms and
conditions thereof and the identity of the Person making it). The Company shall
give Purchaser written notice (an "Intent Notice") of any Acquisition Proposal
that the Company intends to accept at least two business days prior to accepting
such offer or otherwise entering into any agreement or understanding with
respect thereto. For purposes hereof, any modification of an Acquisition
Proposal shall constitute a new Acquisition Proposal.
(c) As used in this Agreement, "Acquisition Proposal" when used in
connection with any Person shall mean any tender or exchange offer involving
such Person, any proposal for a merger, consolidation or other business
combination involving such Person or any subsidiary of such Person, any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the business or assets of, such Person or any subsidiary
of such Person, any proposal or offer with respect to any recapitalization or
restructuring with respect to such Person or any subsidiary of such Person or
any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to such Person, or any subsidiary of such Person or
any public announcement of a proposal, plan or intent to do any of the
foregoing; provided, however, that, as used in this Agreement, the term
"Acquisition Proposal" shall not apply to any transaction of the type described
in this subsection (c) involving Purchaser or its affiliates. As used in this
Agreement, "Person" shall mean any corporation, partnership, person or other
entity or group (including the Company and its affiliates and representatives,
but excluding Purchaser or any of its affiliates or representatives).
6.2 Access to Information. Between the date of this Agreement and the
Effective Time, upon reasonable notice and at reasonable times, the Company
shall (and shall cause each of its Subsidiaries to) (i) provide Purchaser and
its officers, employees, accountants, counsel, financing sources and other
agents and representatives reasonable access to all plants, offices, warehouses
and other facilities and to all contracts, internal reports, data processing
files and records, Federal, state,
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local and foreign tax returns and records, commitments, books, records and
affairs of the Company and its Subsidiaries, whether located on the premises of
the Company or one of its Subsidiaries or at another location; (ii) furnish
promptly to Purchaser a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of Federal securities laws or regulations; (iii) permit Purchaser
to make such inspections as it may require; (iv) cause its officers and the
officers of its Subsidiaries to furnish Purchaser such financial, operating,
technical and product data and other information with respect to the business
and properties of the Company and its Subsidiaries as Purchaser from time to
time may request, including without limitation financial statements and
schedules; (v) allow Purchaser the opportunity to interview such employees,
vendors, customers, sales representatives, distributors and other personnel of
the Company with the Company's prior written consent, which consent shall not be
unreasonably withheld; and (vi) assist and cooperate with Purchaser in the
development of integration plans for implementation by the Surviving Corporation
following the Effective Time; provided, however, that no investigation pursuant
to this Section 6.2 shall affect or be deemed to modify any representation or
warranty made by the Company herein. Until the Effective Time, materials
furnished to Purchaser pursuant to this Section 6.2 may be used by Purchaser for
strategic and integration planning purposes relating to accomplishing the
transactions contemplated hereby.
6.3 HSR Act. The Company and Purchaser shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state attorney
general or other Governmental Entity in connection with antitrust matters.
6.4 Consents and Approvals. Each of the Company and Purchaser will take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to this Agreement, and the transactions
contemplated hereby (which actions shall include, without limitation, furnishing
all information required under the HSR Act and in connection with approvals of
or filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their respective subsidiaries in connection
with this Agreement, and the transactions contemplated hereby. Each of the
Company and Purchaser will, and will cause their respective subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Purchaser, the Company or any of their
respective subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
6.5 Notification of Certain Events. The Company shall promptly notify
Purchaser of:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the transactions
contemplated by this Agreement;
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(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
(c) any action, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or involving or
otherwise affecting the Company or any Subsidiary on the date of this Agreement
which could interfere with the consummation of the transactions contemplated by
this Agreement or could result in a Company Material Adverse Effect; and
(d) the occurrence, or non-occurrence, of any event which, to the
knowledge of the Company, would cause either (i) any representation or warranty
of the Company contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time, (ii)
any condition set forth in Annex B to be unsatisfied at any time from the date
hereof to the date Purchaser purchases Shares pursuant to the Offer, (iii) any
condition set forth in Article VII hereof to be unsatisfied at any time from the
date hereof to the Effective Time or (iv) any material failure by the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
hereunder; provided that the delivery of any notice pursuant to this Section 6.5
shall not limit or otherwise affect the remedies available hereunder to
Purchaser.
6.6 Brokers or Finders. Each of Purchaser and the Company represents, as
to itself, its subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement except
Smith Barney, whose fees and expenses will be paid by the Company, in accordance
with the agreements with such firm (copies of which have been delivered by the
Company), and each of Purchaser and Company agrees to indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to any other fees, commissions or expenses asserted by any person
on the basis of any act or statement alleged to have been made by such party or
its affiliates.
6.7 Additional Actions. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Merger, and the other transactions contemplated by this Agreement,
subject, however, to the appropriate vote of stockholders of the Company
required so to vote as described in Section 6.11 hereof. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either of Purchaser or the Company, the proper officers and
directors of each corporation which is a party to this Agreement shall take all
such necessary action.
6.8 Benefit Plans and Certain Contracts.
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(a) From and after the Effective Time, subject to applicable law,
Purchaser will honor in accordance with their terms, all Company Benefit Plans;
provided, however, that nothing herein shall preclude any change effected on a
prospective basis in any Company Benefit Plan.
(b) Those employees of the Company and its Subsidiaries whose employment
is continued by the Surviving Corporation after the Closing Date shall be
employed on terms consistent with the Company's current employment practices and
at comparable levels of compensation and positions. Subject to the obligations
of the Surviving Corporation under existing employment agreements, all such
employment shall be at will and the Surviving Corporation shall be under no
obligation to continue to employ any individuals. For purposes of eligibility
to participate in and vesting in various benefits (but not for determination of
benefits) provided to employees, employees of the Company and its Subsidiaries
will be credited with their years of service with the Company and its
Subsidiaries.
(c) Prior to the Effective Time of the Merger, the Company shall enter
into an employment contract with Roger R. Phillips providing for the employment
of Mr. Phillips until December 31, 1997, at a compensation not less than he is
receiving at the date of this Agreement.
6.9 Directors' and Officers' Indemnification.
(a) For six years after the earlier of (i) the date on which the
designees of Purchaser have been elected to the Board of Directors of the
Company pursuant to Section 1.3 hereof and constitute a majority of the members
thereof and (ii) the Effective Time, the Surviving Corporation shall keep in
effect provisions in its Certificate of Incorporation and Bylaws providing for
exculpation of director and officer liability and indemnification of the
indemnified parties (the "Indemnified Parties") to the fullest extent permitted
under the DGCL, provided, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under the DGCL, the Surviving Corporation's Certificate of
Incorporation or Bylaws, shall be made by independent counsel mutually
acceptable to Purchaser and the Indemnified Party.
(b) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance policy for a period of three years
after the Effective Time; provided, that the Surviving Corporation may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or officers;
provided, further, that if the existing director's liability insurance expires,
is terminated or cancelled during such period, the Surviving Corporation will
use its best efforts to obtain substantially similar insurance; provided,
however, that in no event shall the Company be required to pay aggregate annual
premiums for insurance under this Section 6.9 in excess of 150% of the aggregate
annual premiums paid by the Company in 1995 (the "1995 Premiums"). In the event
that, but for the last proviso of the immediately preceding sentence, the
Surviving Corporation would be required to expend more than 150% of the 1995
Premiums, the Surviving Corporation shall nonetheless purchase the maximum
amount of such insurance obtainable by payment of annual premiums equal to 150%
of the 1995 Premiums.
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(c) Purchaser shall have entered into an Indemnity Agreement with the
directors and certain officers of the Company as of the date of this Agreement
in the form of Annex C hereto.
6.10 Publicity. The initial announcements of the execution of this
Agreement, the Offer, the Merger and the transactions contemplated hereby shall
be subject to the prior review and approval of both Purchaser and the Company.
Thereafter, so long as this Agreement is in effect and subject to Section 6.1
hereof, neither the Company, Purchaser nor any of their respective affiliates
shall issue or cause the publication of any press release or other announcement
with respect to the Merger, this Agreement or the other transactions
contemplated hereby without the prior consultation of the other party, except as
may be required by law or by any listing agreement with a national securities
exchange.
6.11 Stockholders' Meeting; Proxy Material. Unless Purchaser acquires at
least 90% of the outstanding Shares, in which case Purchaser shall cause the
merger to take place without a vote of the Company's stockholders as permitted
under the DGCL, if required by applicable law, the Company shall cause a special
meeting of its stockholders (the "Company Stockholders Meeting") to be duly
called and held as soon as reasonably practicable after the purchase of Shares
pursuant to the Offer for the purpose of acting upon proposals to approve this
Agreement and all actions contemplated hereby that require the approval of the
Company's stockholders. The Board shall recommend approval and adoption of this
Agreement by the Company's stockholders, unless otherwise required by the
fiduciary duties of the Board under applicable law as advised by independent
legal counsel (who may be the Company's regularly engaged legal counsel). In
connection with the Company Stockholders Meeting, the Company shall in
accordance with applicable law and after consultation with the Buyer, prepare
and file with the SEC a preliminary Company Proxy Statement relating to the
matters to be considered at the Company Stockholders Meeting, respond promptly
to any comments made by the SEC with respect to the preliminary Company Proxy
Statement and cause a definitive Company Proxy Statement to be mailed to its
stockholders.
6.12 Rights Agreement. Except for the amendments contemplated by Section
1.2(a) hereof or amendments approved in writing by the Purchaser, the Company
will not, following the date hereof, amend the Rights Agreement in any manner
unless and until this Agreement has been terminated pursuant to Section
8.1(c)(ii) or (iii). In addition the Company covenants and agrees that it will
not redeem the Rights unless such redemption is consented to in writing by
Purchaser prior to such redemption.
ARTICLE VII
CONDITIONS
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<PAGE> 41
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:
(a) Governmental Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any Federal, state, local or foreign governmental or regulatory
authority necessary for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained
and shall be in effect at the Effective Time.
(b) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or other order precluding, restraining, enjoining,
preventing or prohibiting the consummation of the Merger shall have been issued
by any Federal, state or foreign court or other governmental or regulatory
authority and remain in effect.
(c) Statutes. No Federal, state, local or foreign statute, rule or
regulation shall have been enacted which prohibits the consummation of the
Merger or would make the consummation of the Merger illegal.
(d) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote required of the stockholders of the Company, if
required pursuant to the Company's certificate of incorporation and applicable
Delaware law, in order to consummate the Merger.
(e) Purchase of Shares in Offer. Purchaser shall have purchased Shares
of Company Common Stock sufficient to meet the Minimum Condition pursuant to the
Offer.
7.2 Conditions to Purchaser's Obligation to Effect the Merger. The
obligations of the Purchaser to effect the Merger shall also be subject to the
satisfaction or waiver by Purchaser on or prior to Closing Date of the following
conditions:
(a) Options and Warrants. The Company shall have taken action to
terminate all incentive plans or programs pursuant to which Options have been or
may be issued. The Company shall use its best efforts to (i) receive, prior to
the Effective Time, a cancellation agreement from each holder of an outstanding
Option or Warrant, in form and substance satisfactory to Purchaser,
acknowledging the cancellation and termination of such Options or Warrants, as
the case may be or (ii) arrange for the exercise of such outstanding Options or
Warrants. Such cancellation agreements, if any, shall provide that in
consideration for the cancellations of the Options and/or Warrants, the
Surviving Corporation shall pay to each holder thereof, promptly after the
Effective Time, an amount (less any applicable withholding and employment taxes)
equal to the amount by which the Merger Consideration exceeds the exercise price
per share of Company Common Stock underlying each outstanding Option, or the
strike price per share of Company Common Stock underlying each outstanding
Warrant, multiplied by the number of shares of Company Common Stock covered by
such vested Options or Warrants, as the case may be.
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<PAGE> 42
(c) Non-Competition Payments. Each of John G. Owens and Allan B.
Freedman shall have amended or terminated their existing respective
Noncompetition Agreements with the Company, and each of Louis T. Enos, Phillip
Kusky and E. Gordon Young shall have amended or terminated their respective
Employment Agreements with the Company, in each case to provide that no
payments to be made thereunder shall be accelerated by virtue of the Offer or
the Merger.
ARTICLE VIII
TERMINATION
8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:
(a) By Mutual Consent. By mutual consent of the Board of Directors of
Purchaser and the Board of Directors of the Company.
(b) By Purchaser or the Company. By either the Board of Directors of
Purchaser or the Board of Directors of the Company:
(i) if shares of Company Common Stock shall not have been purchased
pursuant to the Offer on or prior to August 31, 1996; provided, however,
that the right to terminate this Agreement under this Section 8.1(b)(i)
shall not be available to any party whose failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Purchaser to purchase shares of Company Common Stock
pursuant to the Offer on or prior to such date; or
(ii) if a court of competent jurisdiction or other governmental or
regulatory authority shall have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the party
seeking termination shall use its reasonable efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and non-appealable, provided that
the party seeking termination did not contribute to the cause of action.
(c) By the Company. By the Board of Directors of the Company:
(i) if, prior to the purchase of Shares sufficient to meet the
Minimum Condition by Purchaser pursuant to the Offer, the Company shall
have (x) withdrawn, modified or changed in a manner adverse to Purchaser
its approval or recommendation of the Offer, this Agreement or the Merger
in order to execute a definitive agreement relating to an Acquisition
Proposal by a Person other than Parent, Purchaser or any affiliate of
either of them, after consulting with independent legal counsel and
determining that the failure to take
36
<PAGE> 43
such action would be inconsistent with its fiduciary duties to the
Company's stockholders and (y) paid or caused to be paid the fees provided
for in Section 9.1 (b) hereof; or
(ii) if, prior to the purchase of Shares sufficient to meet the
Minimum Condition pursuant to the Offer, Purchaser breaches or fails in any
material respect to perform or comply with any of its material covenants
and agreements contained herein or breaches its representations and
warranties in any material respect; or
(iii) if (x) Purchaser or any of its affiliates shall have failed to
commence the Offer on or prior to five business days following the date of
the initial public announcement of the Offer (the "Offer Deadline") other
than due to an occurrence that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions set forth
in Annex B hereto, or (y) Purchaser shall have failed to waive the
Financing Condition by the thirtieth (30th) business day following the
commencement of the Offer; provided, that the Company may not terminate
this Agreement pursuant to this Section 8.1(c)(iii) if the Company is in
material breach of this Agreement.
(d) By Purchaser. By the Board of Directors of Purchaser:
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex B hereto, Purchaser shall have failed to
commence the Offer on or prior to the Offer Deadline; provided that
Purchaser may not terminate this Agreement pursuant to this Section
8.1(d)(i) if Purchaser (x) is in material breach of this Agreement or (y)
has not exercised such right by the close of business on or before the
fifth business day following the Offer Deadline; or
(ii) if Purchaser is not in material breach of the Agreement and
either (A) prior to the purchase of shares of Company Common Stock pursuant
to the Offer, the Board of Directors of the Company shall have withdrawn,
or modified or changed (including by amendment of the Company's Schedule
14D-9) in a manner adverse to Purchaser its approval or recommendation of
the Offer, this Agreement or the Merger or shall have recommended, or the
Company shall have executed an agreement in principle (or similar
agreement) or a definitive agreement relating to, an Acquisition Proposal
as provided in Section 8.1(c); or (B) prior to the purchase of shares of
Company Common Stock pursuant to the Offer, it shall have been publicly
disclosed, or Purchaser shall have learned, that any person, entity or
"group" (as that term is defined in Section 13(d)(3) of the Exchange Act),
other than Purchaser or its affiliates or any group of which any of them is
a member, shall have acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of more than 14.9% of any
class or series of capital stock of the Company (including the Shares),
through the acquisition of stock, the formation of a group or otherwise, or
shall have been granted an option, right, or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 14.9% of any class
or series of capital stock of the Company (including the Shares); or
37
<PAGE> 44
(iii) if Purchaser shall have terminated the Offer, or the Offer
shall have expired without Purchaser purchasing any shares of Company
Common Stock thereunder, provided that Purchaser may not terminate this
Agreement pursuant to this Section 8.1(d)(iii) if (x) Purchaser has failed
to purchase shares of Company Common Stock in the Offer in violation of the
material terms thereof or (y) Purchaser has not exercised such right by the
close of business on or before the fifth business day following the
termination or expiration of the Offer in accordance with its terms; or
(iv) if, prior to the purchase of Company Common Stock pursuant to
the Offer, the Company (x) breaches or fails to perform or comply with any
of its covenants and agreements contained herein other than those contained
in Sections 5.1 through 5.9, inclusive, in any material respect, or (y)
breaches or fails to perform or comply with any of its covenants and
agreements contained in Sections 5.1 through 5.9, inclusive, or breaches
its representations and warranties in any respect, which breach or failure
shall have a Company Material Adverse Effect.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1 above, 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 forthwith become null
and void and there shall be no liability or obligation on the part of Purchaser
or the Company, or their respective officers, directors or employees, except (a)
for fraud or for material breach of this Agreement, (b) as set forth in this
Section 8.2, or Sections 6.10 and 9.1 hereof, (c) to the extent that, and for so
long as, Purchaser's designees to the Company's Board of Directors pursuant to
Section 1.3 hereof constitute at least a majority of the members of such Board
of Directors, Section 6.9(a) hereof and (d) to the extent that, and for so long
as, Purchaser may exercise the Option under the Tender and Option Agreement, the
Company shall not take action so as to make the Rights Agreement or the
restrictions of Section 203 of the DGCL applicable thereto.
ARTICLE IX
GENERAL PROVISIONS
9.1 Fees and Expenses.
(a) Except as contemplated by this Agreement, including Section 9.1(b)
hereof, 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 expenses.
(b) If (i) the Board of Directors of the Company shall terminate this
Agreement pursuant to Section 8.1(c)(i) hereof, or if (ii) the Board of
Directors of Purchaser shall terminate this Agreement pursuant to Section
8.1(d)(ii)(A) hereof, or if (iii) the Board of Directors of Purchaser shall
terminate this Agreement pursuant to Section 8.1(d)(ii)(B) or Section 8.1(d)(iv)
and within nine months of any such termination a Person shall acquire or
beneficially own a majority of the then outstanding shares of Company Common
Stock or shall have obtained representation on the Company's Board of
38
<PAGE> 45
Directors or shall enter into a definitive agreement with the Company with
respect to an Acquisition Proposal or similar business combination, then, in any
such case as described in clause (i), (ii) or (iii), the Company shall pay or
cause to be paid to Purchaser (concurrently with the termination of this
Agreement in the case of a termination referred to in Section 9.1(b)(i) or
Section 9.1(b)(ii) hereof, upon the consummation of the Acquisition Proposal or
similar business combination in the case of a termination referred to in Section
9.1(b)(iii) hereof), an amount equal to $2.1 million.
9.2 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the Stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors (which in the case of the Company shall include
approvals as contemplated in Section 1.3(c) hereof), at any time prior to the
Closing Date with respect to any of the terms contained herein; provided,
however, that after the approval of this Agreement by the Stockholders of the
Company, no such amendment, modification or supplement shall reduce or change
the Merger Consideration.
9.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time.
9.4 Notices. All notices and other communications hereunder and shall be
in writing and shall be deemed given upon personal delivery, facsimile
transmission (which delivery by an overnight express courier service (delivery,
postage or freight charges prepaid), or on the fourth day following deposit in
the United States mail (if sent by registered or certified mail, return receipt
requested, delivery, postage or freight charges prepaid), addressed to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Purchaser, to:
Vemco Acquisition Corp.
33662 James J. Pompo Drive, P.O. Box 278
Fraser, Michigan 48026-0278
Telecopy: (810) 294-1960
Attention: Michael G. Torakis, President
with a copy to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243
Telecopy No. (313) 568-6915
Attention: Paul R. Rentenbach
(b) if to the Company, to:
Bailey Corporation
700 Lafayette Road, P.O. Box 307
39
<PAGE> 46
Seabrook, NH 03874
Telecopy: (603) 474-5831
Attention: Roger R. Phillips, President
with a copy to:
Foley Hoag & Eliot
1 Post Office Square
Boston, MA 02109-2170
Telecopy: (617) 832-7000
Attention: David A. Broadwin
9.5 Definitions, Interpretation. As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act. When a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule
to this Agreement unless otherwise indicated. The words "include," "includes"
and "including" when used herein shall be deemed in each case to be followed by
the words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.7 Entire Agreement, No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein and therein) and
the Confidentiality Agreement dated April 4, 1996 (the "Confidentiality
Agreement"), between Venture Industries, Inc., and the Company (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 6.9 hereof is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
9.8 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated and this Agreement shall be reformed to provide the parties with
substantially equivalent benefits to those conferred by the deleted provisions
hereof.
9.9 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to the
principles of conflicts of law thereof).
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<PAGE> 47
9.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Purchaser may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to Parent or to any direct or
indirect wholly owned subsidiary of Parent. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by, the parties and their respective successors and assigns.
9.11 Knowledge. Wherever the word "knowledge" (or variations thereof,
including, without limitation, "know" and "knows") appears in Article III of
this Agreement, the parties intend that such word be construed to mean the
actual knowledge of the Executive Officers of the Company (as such term is
defined in the Company Proxy Statement).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VEMCO ACQUISITION CORP.
By:
-----------------------------
Michael G. Torakis, President
BAILEY CORPORATION
By:
-----------------------------
Roger R. Phillips, President
41
<PAGE> 48
ANNEX A
GUARANTY
This Guaranty is made as of the June 5, 1996, by VEMCO, INC., VENTURE
INDUSTRIES CORPORATION, VEMCO LEASING, INC., VENTURE LEASING COMPANY, VENTURE
MOLD & ENGINEERING CORPORATION, VENTURE SERVICE COMPANY, each a Michigan
corporation, and VENTURE INDUSTRIES CANADA, LTD., an Ontario corporation (each
a "Guarantor" and collectively, the "Guarantors") to Bailey Corporation, a
Delaware corporation (the "Company") and to Roger R. Phillips, William A.
Taylor, Louis T. Enos, E. Gordon Young, John G. Owens, Allen B. Freedman and
Leonard Heilman (each a "Beneficiary" and collectively, the "Beneficiaries")
with respect to the obligations of VEMCO ACQUISITION CORP., a Delaware
corporation (the "Purchaser").
RECITALS
A. The Company is willing, on or about the date of this Guaranty, to enter
into an Agreement and Plan of Merger with the Purchaser (the "Merger
Agreement"), provided that the Guarantors guarantee the obligations of the
Purchaser thereunder and with respect to certain related matters; and
B. Guarantors desire to induce the Company to enter into the Merger
Agreement.
In consideration of the foregoing matters and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Guarantors covenant and agree as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantors hereby jointly
and severally guarantee to the Company and the Beneficiaries the performance of
all liabilities, agreements and other obligations of the Purchaser under the
Merger Agreement, the Indemnity Agreements between the Purchaser and the
Beneficiaries contemplated by Section 6.9(c) of the Merger Agreement, and the
Company's obligations under the Noncompetition Agreements between the Company
and the Beneficiaries in the forms attached hereto, the Amendment to the
Employment and Noncompetition Agreement between the Company and Roger R.
Phillips, and the Amendment to the Employment and Noncompetition Agreement
between the Company and William A. Taylor, together with all costs of
collection, compromise or enforcement, including, without limitation,
reasonable attorneys' fees incurred with respect to this Guaranty, or with
respect to a proceeding under the federal bankruptcy laws or any insolvency,
receivership, arrangement or reorganization law or an assignment for the
benefit of creditors concerning Purchaser or any Guarantor, together with
interest on all such costs of collection, compromise or enforcement from the
date arising (all the foregoing, collectively, the "Obligations"). This
Guaranty is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Company or any Beneficiary first attempt to collect any of the Obligations from
the Purchaser or resort to any security or other means of obtaining their
payment.
<PAGE> 49
2. UNLIMITED GUARANTY. The liability of the Guarantors hereunder shall
be unlimited.
3. WAIVERS BY GUARANTORS; PURCHASER'S FREEDOM TO ACT. The Guarantors
waive presentment, demand, protest, notice of acceptance, notice of obligations
incurred and all other notices of any kind, all defenses that may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Purchaser, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantors agree to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agree that the obligations of the Guarantors hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by: (i)
the failure of the Company or any Beneficiary to assert any claim or demand or
to enforce any right or remedy against the Purchaser; (ii) any extensions or
renewals of, or alterations of the terms of, any Obligations or any portion
thereof (iii) any rescissions, waivers, amendments or modifications of any of
the terms or provisions of any agreement evidencing, securing or otherwise
executed in connection with any Obligation; (iv) the substitution or release of
any entity primarily or secondarily liable for any Obligation; (v) the adequacy
of any rights the Company or any Beneficiary may have against any other means
of obtaining repayment of the Obligations; (vi) failure to obtain or maintain a
right of contribution for the benefit of the Guarantors; or (vii) any other act
or omission that might in any manner or to any extent vary the risk of the
Guarantors or otherwise operate as a release or discharge of the Guarantors,
all of which may be done without notice to the Guarantors.
4. SUBROGATION. Until the payment and performance in full of all
Obligations and any and all obligations of the Purchaser to the Company and the
Beneficiaries, the Guarantors shall not exercise any rights against the
Purchaser arising as a result of payment by the Guarantors hereunder, by way of
subrogation or otherwise, and will not prove any claim in competition with the
Company or any Beneficiary in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature; the Guarantors will not claim any set-off
or counterclaim against the Purchaser in respect of any liability of the
Guarantors to the Purchaser; and the Guarantors waive any benefit of and any
right to participate in any collateral that may be held by the Company or any
Beneficiary.
5. TERMINATION. This Guaranty is irrevocable and shall continue without
limit of time.
6. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantors, their successors and assigns, and shall inure to the benefit of and
be enforceable by the Company, the Beneficiaries and their successors,
transferees and assigns.
7. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Guaranty nor any consent to any departure by the Guarantors therefrom
shall be effective unless the same shall be in writing and signed by the
Company and the Beneficiaries. No failure on the part of the Company or any
Beneficiary to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof of the exercise
of any other right.
A-2
<PAGE> 50
8. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or
mailed first class mail postage prepaid or, in the case of telegraphic or
telexed notice, when transmitted, answerback received, addressed as set forth
below following the signatures hereto, or to such other address as either
party may designate in writing.
9. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantors
agree that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or the State of Michigan or any
Federal Court sitting therein, and consent to the non-exclusive jurisdiction of
such court and to service of process in any such suit being made upon the
Guarantors by mail at the address set forth at the head of this Guaranty. The
Guarantors hereby waive any objection that they may now or hereafter have to
the venue of such suit or any such court or that such suit was brought in an
inconvenient court.
10. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantors with respect to the matters set forth herein. This writing is
intended by the parties as a final, complete and exclusive expression of their
guaranty agreement. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms. There are no conditions to the full effectiveness of this
Guaranty. The rights and remedies herein provided are cumulative and not
exclusive of any remedies provided by law or any other agreement, and this
Guaranty shall be in addition to any other guaranty of the Obligations. The
invalidity or unenforceability of any one or more sections of the Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this
Guaranty shall be equally applicable to the singular and plural forms of the
terms defined.
IN WITNESS WHEREOF, the Guarantors have cause this Guaranty to be executed
and delivered as a sealed instrument as of the date appearing on page one.
VEMCO, INC.
By:
----------------------------------
Michael G. Torakis, President
VENTURE INDUSTRIES CORPORATION
By:
----------------------------------
Michael G. Torakis, President
A-3
<PAGE> 51
VEMCO LEASING, INC.
By:
----------------------------------
Michael G. Torakis, President
VENTURE SERVICE COMPANY
By:
----------------------------------
Michael G. Torakis, President
VENTURE LEASING COMPANY
By:
----------------------------------
Michael G. Torakis, President
VENTURE MOLD & ENGINEERING CORPORATION
By:
----------------------------------
Michael G. Torakis, President
VENTURE INDUSTRIES CANADA, LTD.
By:
----------------------------------
Michael G. Torakis, President
Address for Guarantors:
33662 James J. Pompo
P.O. Box 278
Fraser, MI 48026-0278
Address for Beneficiaries:
700 Lafayette Road
P.O. Box 307
Seabrook, NH 03874
A-4
<PAGE> 52
ANNEX B
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and in addition to (and not
in limitation of) Purchaser's rights to extend and amend the Offer at any time
in its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, and may
delay the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares, and may terminate the Offer as to
any Shares not then paid for, if (i) the applicable waiting period under the
HSR Act has not expired or terminated, (ii) the Minimum Condition has not been
satisfied or waived, (iii) the Financing Condition has not been satisfied or
(iv) the Company shall not have given notice of redemption for all Convertible
Debentures which are redeemable at the Company's option in accordance with
their terms or (v) at any time on or after June 5, 1996, and before the time
for payment for Shares, any of the following events shall exist :
(a) any domestic or foreign Federal, state or local governmental,
regulatory or administrative agency or authority or legislative body or
commission shall have instituted any action, proceeding, application, claim
or suit, or shall have promulgated, entered, enforced, enacted, proposed,
issued or made applicable to the Offer or the Merger any statute, rule,
regulation, judgment, order or injunction which directly or indirectly (1)
challenges, seeks to make illegal, prohibits or makes illegal, or imposes any
material limitations on, Purchaser's ownership or operation (or that of any of
their respective subsidiaries or affiliates) of all or a material portion of the
businesses or assets of it or of the Company or its Subsidiaries, or compels
Purchaser or its affiliates to dispose of or hold separate any material portion
of the business or assets of the Company or its subsidiaries, taken as a whole,
(2) challenges, seeks to make illegal, prohibits or makes illegal the acceptance
for payment, payment for or purchase of Shares or the consummation of the Offer
or the Merger, (3) restricts the ability of Purchaser, or renders Purchaser
unable, to accept for payment, pay for or purchase some or all of the Shares,
(4) imposes material limitations on the ability of Purchaser to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters presented to the Company's
Stockholders, (5) seeks to obtain or obtains material damages as a result of
the transactions contemplated by the Offer or the Merger, or (6) seeks to
require divestiture by Purchaser or any of its subsidiaries or affiliates of any
Shares, and in the case of (5) or (6) above, is likely to have a Company
Material Adverse Effect, provided that Purchaser shall have used reasonable
efforts to cause any such judgment, order or injunction to be vacated or lifted;
(b) there shall have occurred (1) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, Inc. or
any other securities market for a period in excess of three hours (excluding
suspensions or limitations resulting solely from physical
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damage or interference with such exchanges not related to market conditions),
(2) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (3) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (4) any limitation
(whether or not mandatory) by any foreign or United States governmental
authority on the extension of credit by banks or other financial institutions,
(5) any decline in either the Dow Jones Industrial Average or the Standard &
Poor's Index of 500 Industrial Companies by an amount in excess of 20% measured
from the close of business on June 5, 1996, or (6) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(c) the Company shall have breached or failed to perform or comply with
any of its covenants and agreements contained in the Merger Agreement other than
those contained in Sections 5.1 through 5.9, inclusive, in any material respect,
or the Company shall have breached or failed to perform or comply with any of
its covenants and agreements contained in Sections 5.1 through 5.9, inclusive,
which breach or failure shall have a Company Material Adverse Effect, or the
Company shall have breached its representations and warranties in any respect,
which breach shall have a Company Material Adverse Effect;
(d) since the date of the Merger Agreement, there shall have occurred any
change in the financial condition, business, or results of operations of the
Company and its Subsidiaries that, or any event, condition, occurrence or
development of a state of circumstances or facts which individually or in the
aggregate, constitutes a Company Material Adverse Effect;
(e) the Merger Agreement shall have been terminated in accordance with
its terms;
(f) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Purchaser or its affiliates or any
group of which any of them is a member, shall have acquired beneficial ownership
(determined pursuant to Rule l3d-3 promulgated under the Exchange Act) of more
than 14.9% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right or warrant, conditional
or otherwise, to acquire beneficial ownership of more than 14.9% of any class or
series of capital stock of the Company (including the Shares); or (ii) any
person or group shall have entered into a definitive agreement or agreement in
principle with the Company with respect to an Acquisition Proposal or other
business combination with the Company;
(g) the Company's Board of Directors shall have withdrawn, or modified or
changed (including by amendment of the Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, the Merger Agreement or
the Merger or shall have recommended an Acquisition Proposal,
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which in the judgment of Purchaser, in any such case, and regardless of the
circumstances (including any action or inaction by Purchaser giving rise to
such condition) makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Purchaser and may be
waived by Purchaser, in whole or in part at any time and from time to time in
the discretion of Purchaser. The failure by Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
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ANNEX C
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
________________ ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged
<PAGE> 56
action in an official capacity while serving in any capacity described
above.
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
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(iii) With regard to any judicial award if the Purchaser was not
given a reasonable and timely opportunity, at its expense, to participate
in the defense of such action unless the Purchaser's participation in
such Proceeding was barred by this Agreement or the court in such
Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation,
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of which Purchaser acknowledges it has been notified. The failure of
Indemnitee to give notice, as provided in this Section 4(a) shall not relieve
the Purchaser of its obligations to provide indemnification under this
Agreement; however, the amounts to which Indemnitee may be indemnified shall be
reduced to the extent that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by
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commencing litigation in any court having subject matter jurisdiction thereof
and in which venue is proper. Likewise, the Purchaser may seek judicial
determination of its obligations under this Agreement. The Purchaser and
Indemnitee each hereby consent to service of process and to appear in any such
proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that
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Purchaser may be required in the future to undertake with the SEC to submit the
question of indemnification to a court in certain circumstances for a
determination of the Purchaser's right under public policy to indemnify
Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
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(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By:
--------------------------------
Michael G. Torakis, President
INDEMNITEE:
------------------------------------
Signature
Name:
----------------------------
Address:
-------------------------
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EXHIBIT (c)(11)
GUARANTY
This Guaranty is made as of the June 5, 1996, by VEMCO, INC., VENTURE
INDUSTRIES CORPORATION, VEMCO LEASING, INC., VENTURE LEASING COMPANY, VENTURE
MOLD & ENGINEERING CORPORATION, VENTURE SERVICE COMPANY, each a Michigan
corporation, and VENTURE INDUSTRIES CANADA, LTD., an Ontario corporation (each
a "Guarantor" and collectively, the "Guarantors") to Bailey Corporation, a
Delaware corporation (the "Company") and to Roger R. Phillips, William A.
Taylor, Louis T. Enos, E. Gordon Young, John G. Owens, Allen B. Freedman and
Leonard Heilman (each a "Beneficiary" and collectively, the "Beneficiaries")
with respect to the obligations of VEMCO ACQUISITION CORP., a Delaware
corporation (the "Purchaser").
RECITALS
A. The Company is willing, on or about the date of this Guaranty, to enter
into an Agreement and Plan of Merger with the Purchaser (the "Merger
Agreement"), provided that the Guarantors guarantee the obligations of the
Purchaser thereunder and with respect to certain related matters; and
B. Guarantors desire to induce the Company to enter into the Merger
Agreement.
In consideration of the foregoing matters and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Guarantors covenant and agree as follows:
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantors hereby jointly and
severally guarantee to the Company and the Beneficiaries the performance of all
liabilities, agreements and other obligations of the Purchaser under the Merger
Agreement, the Indemnity Agreements between the Purchaser and the Beneficiaries
contemplated by Section 6.9(c) of the Merger Agreement, and the Company's
obligations under the Noncompetition Agreements between the Company and the
Beneficiaries in the forms attached hereto, the Amendment to the Employment and
Noncompetition Agreement between the Company and Roger R. Phillips, and the
Amendment to the Employment and Noncompetition Agreement between the Company and
William A. Taylor, together with all costs of collection, compromise or
enforcement, including, without limitation, reasonable attorneys' fees incurred
with respect to this Guaranty, or with respect to a proceeding under the federal
bankruptcy laws or any insolvency, receivership, arrangement or reorganization
law or an assignment for the benefit of creditors concerning Purchaser or any
Guarantor, together with interest on all such costs of collection, compromise or
enforcement from the date arising (all the foregoing, collectively, the
"Obligations"). This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of the Obligations and
not of their collectibility only and is in no way conditioned upon any
requirement that the Company or any Beneficiary first attempt to collect any of
the Obligations from the Purchaser or resort to any security or other means of
obtaining their payment.
2. UNLIMITED GUARANTY. The liability of the Guarantors hereunder shall
be unlimited.
<PAGE> 2
3. WAIVERS BY GUARANTORS; PURCHASER'S FREEDOM TO ACT. The Guarantors
waive presentment, demand, protest, notice of acceptance, notice of obligations
incurred and all other notices of any kind, all defenses that may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Purchaser, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantors agree to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agree that the obligations of the Guarantors hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by: (i)
the failure of the Company or any Beneficiary to assert any claim or demand or
to enforce any right or remedy against the Purchaser; (ii) any extensions or
renewals of, or alterations of the terms of, any Obligations or any portion
thereof (iii) any rescissions, waivers, amendments or modifications of any of
the terms or provisions of any agreement evidencing, securing or otherwise
executed in connection with any Obligation; (iv) the substitution or release of
any entity primarily or secondarily liable for any Obligation; (v) the adequacy
of any rights the Company or any Beneficiary may have against any other means
of obtaining repayment of the Obligations; (vi) failure to obtain or maintain a
right of contribution for the benefit of the Guarantors; or (vii) any other act
or omission that might in any manner or to any extent vary the risk of the
Guarantors or otherwise operate as a release or discharge of the Guarantors,
all of which may be done without notice to the Guarantors.
4. SUBROGATION. Until the payment and performance in full of all
Obligations and any and all obligations of the Purchaser to the Company and the
Beneficiaries, the Guarantors shall not exercise any rights against the
Purchaser arising as a result of payment by the Guarantors hereunder, by way of
subrogation or otherwise, and will not prove any claim in competition with the
Company or any Beneficiary in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature; the Guarantors will not claim any set-off
or counterclaim against the Purchaser in respect of any liability of the
Guarantors to the Purchaser; and the Guarantors waive any benefit of and any
right to participate in any collateral that may be held by the Company or any
Beneficiary.
5. TERMINATION. This Guaranty is irrevocable and shall continue without
limit of time.
6. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantors, their successors and assigns, and shall inure to the benefit of and
be enforceable by the Company, the Beneficiaries and their successors,
transferees and assigns.
7. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Guaranty nor any consent to any departure by the Guarantors therefrom
shall be effective unless the same shall be in writing and signed by the
Company and the Beneficiaries. No failure on the part of the Company or
any Beneficiary to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof of the
exercise of any other right.
8. NOTICES. All notices and other communications called for hereunder
shall be made in
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<PAGE> 3
writing and, unless otherwise specifically provided herein, shall be deemed
to have been duly made or given when delivered by hand or mailed first class
mail postage prepaid or, in the case of telegraphic or telexed notice, when
transmitted, answerback received, addressed as set forth below following the
signatures hereto, or to such other address as either party may designate in
writing.
9. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantors
agree that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or the State of Michigan or any
Federal Court sitting therein, and consent to the non-exclusive jurisdiction of
such court and to service of process in any such suit being made upon the
Guarantors by mail at the address set forth at the head of this Guaranty. The
Guarantors hereby waive any objection that they may now or hereafter have to
the venue of such suit or any such court or that such suit was brought in an
inconvenient court.
10. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantors with respect to the matters set forth herein. This writing is
intended by the parties as a final, complete and exclusive expression of their
guaranty agreement. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms. There are no conditions to the full effectiveness of this
Guaranty. The rights and remedies herein provided are cumulative and not
exclusive of any remedies provided by law or any other agreement, and this
Guaranty shall be in addition to any other guaranty of the Obligations. The
invalidity or unenforceability of any one or more sections of the Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this
Guaranty shall be equally applicable to the singular and plural forms of the
terms defined.
IN WITNESS WHEREOF, the Guarantors have cause this Guaranty to be executed
and delivered as a sealed instrument as of the date appearing on page one.
VEMCO, INC.
By: __________________________________
Michael G. Torakis, President
VENTURE INDUSTRIES CORPORATION
By: __________________________________
Michael G. Torakis, President
3
<PAGE> 4
VEMCO LEASING, INC.
By: __________________________________
Michael G. Torakis, President
VENTURE SERVICE COMPANY
By: __________________________________
Michael G. Torakis, President
VENTURE LEASING COMPANY
By: __________________________________
Michael G. Torakis, President
VENTURE MOLD & ENGINEERING CORPORATION
By: __________________________________
Michael G. Torakis, President
VENTURE INDUSTRIES CANADA, LTD.
By: __________________________________
Michael G. Torakis, President
Address for Guarantors:
33662 James J. Pompo
P.O. Box 278
Fraser, MI 48026-0278
Address for Beneficiaries:
700 Lafayette Road
P.O. Box 307
Seabrook, NH 03874
4
<PAGE> 1
EXHIBIT (C)(2)
TENDER AND OPTION AGREEMENT
This TENDER AND OPTION AGREEMENT (the "Agreement") is entered into on June
5, 1996 by and between Vemco Acquisition Corp., a Delaware corporation
("Purchaser"), and each of the individuals a signatory to this Agreement (the
"Stockholders").
RECITALS
WHEREAS, concurrently herewith, Purchaser is entering into an Agreement
and Plan of Merger (the "Merger Agreement") with Bailey Corporation, a Delaware
corporation (the "Company"), pursuant to which Purchaser will acquire the
Company, on the terms and subject to the conditions set forth in the Merger
Agreement, by means of a tender offer by Purchaser (the "Offer") for all
outstanding shares of common stock, par value $.10 per share, of the Company
(the "Company Common Stock"), at $8.75 per share, net to the seller in cash,
followed by a merger (the "Merger") of Purchaser into the Company (capitalized
terms used herein and not otherwise defined are used as defined in the Merger
Agreement); and
WHEREAS, as of the date hereof, the Stockholders together beneficially own
directly or indirectly 996,136 shares of Company Common Stock, together with
the associated Rights issued under that certain Rights Agreement dated
September 28, 1995, between the Company and State Street Bank and Trust
Company, as Rights Agent (which stock and associated rights are referred to as
the "Existing Shares" and, together with any After-Acquired Shares (as defined
below), (the "Shares"), which Existing Shares constitute approximately 18.6% of
the issued and outstanding shares of Company Common Stock; and
WHEREAS, as an inducement to Purchaser to acquire the Company, and as a
condition to Purchaser's willingness to enter into the Merger Agreement and
consummate the transactions contemplated thereby, Purchaser has required that
the Stockholders agree, and the Stockholders have agreed (i) to grant Purchaser
an irrevocable option to buy the Shares at $8.75 per share (the "Option"); and
(ii) to tender and, in the event such option is not theretofore exercised, sell
the Shares in the Offer and vote their Shares in favor of the Merger, in each
case upon the terms and subject to the conditions set forth herein; and
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, and such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Agreement to Tender; Option.
1.1 Tender of Shares. Each Stockholder hereby agrees (a) to validly
tender (or cause the record owner of any Shares to tender) all Shares
beneficially owned by such Stockholder pursuant to the Offer, not later than
the fifth business day after commencement of the Offer or, with respect to
After-Acquired Shares, within one business day following the acquisition
thereof, (b) not to withdraw any Shares so tendered without the prior written
consent of Purchaser except as otherwise provided in Section 1.1(c) and (c) to
withdraw all Shares tendered in the Offer immediately upon
<PAGE> 2
receipt of notice from Purchaser that it is exercising the Option in order
that it may acquire such Shares in accordance with Section 1.2(a) hereof.
Each Stockholder hereby acknowledges and agrees that Purchaser's obligation to
accept for payment and pay for the Shares in the Offer is subject to the terms
and conditions of the Offer.
1.2 Option.
(a) In order to induce Purchaser to enter into the Merger Agreement, and
subject to the terms and conditions of this Agreement, each of the Stockholders
hereby irrevocably grants to Purchaser the Option, exercisable in whole but not
in part from and after the date hereof, to purchase Shares at a purchase price
of $8.75 per Share. If (i) the Offer if terminated, abandoned or withdrawn by
Purchaser (whether due to the failure of any of the conditions thereto or
otherwise) or (ii) the Merger Agreement is terminated pursuant to Section
8.1(c)(i), 8.1(d)(i), 8.1(d)(ii) or 8.1(d)(iv), the Option shall continue to be
exercisable, in whole but not in part for a period of 90 days after the date of
the occurrence of such event, so long as (x) all applicable waiting periods
under the HSR Act required for the purchase of the Option Shares upon such
exercise shall have expired or been waived and (y) there shall not be in effect
any preliminary or final injunction or other order issued by any court or
governmental, administrative or regulatory agency or authority or legislative
body or commission prohibiting the exercise of the Option pursuant to this
Agreement. In the event the Merger Agreement is terminated other than pursuant
to Section 8.1(c)(i), 8.1(d)(i), 8.1(d)(ii) or 8.1(d)(iv), the Option shall
terminate upon such termination of the Merger Agreement..
(b) In the event Purchaser wishes to exercise the Option, Purchaser shall
deliver written notice thereof to each of the Stockholders, specifying the
date, time and place for the closing of such purchase. A closing of the
purchase of Shares pursuant to the Option (a "Closing") shall take place on the
date, at the time and at the place specified in such notice; provided, that if
at such date any of the conditions specified in Section 1.2(a)(x) or (y) hereof
shall not have been satisfied or waived, Purchaser may postpone such Closing
until a date within two business days after such conditions are satisfied or
waived. At the Closing, each of the Stockholders will deliver to Purchaser (in
accordance with Purchaser's instructions) the certificates representing the
Shares being purchased pursuant to Section 1.2, duly endorsed or accompanied by
stock powers duly executed in blank. At such Closing, Purchaser shall either
(i) wire transfer to the account designated by each Stockholder or (ii) deliver
to each Stockholder a certified or bank cashier's check payable to or upon the
order of such Stockholder, in each case in an amount equal to the number of
Shares being purchased from such Stockholder at such Closing multiplied by
$8.75, in immediately available funds.
1.3 Assignment of Dividends and Other Distributions. Each Stockholder
hereby assigns to Purchaser any and all dividends and other distributions that
may be declared, set aside or paid by the Company with respect to such
Stockholder's Shares during the term of this Agreement.
1.4 Title. Each Stockholder agrees that, in connection with the transfer
of Shares to Purchaser in the Offer or to Purchaser pursuant to the Option, he
shall transfer to and unconditionally vest in the Purchaser good and valid
title to such Shares, free and clear of all claims, liens,
2
<PAGE> 3
restrictions, security interests, pledges, limitations and encumbrances
whatsoever, except those arising hereunder.
1.5 No Purchase. Purchaser may allow the Offer to expire without
accepting for payment or paying for any Shares, as set forth in the Offer to
purchase, and Purchaser may allow the Option to terminate without purchasing
all or any Shares pursuant to the exercise thereof. If any Shares are not
accepted for payment in accordance with the terms of the Offer or purchased
pursuant to the Option, they shall be returned to the respective Stockholder,
whereupon they shall continue to be held by such Stockholder subject to the
terms and conditions of this Agreement.
1.6 Certain Price Protection. If, within 12 months following the
exercise of the Option by Purchaser, Purchaser, directly or indirectly, sells,
transfers or otherwise disposes of any or all of the Shares acquired upon
exercise of the Option or the Offer to a third party (or realizes cash proceeds
in respect of such Shares as a result of a distribution to stockholders of the
Company following the sale of substantially all of the Company's assets) in
connection with a transaction whereby the third party is acquiring the entire
equity interest in the Company pursuant to a merger, tender offer, exchange
offer, sale of assets, sale of shares or a similar business transaction (a
"Subsequent Sale") at a per Share price in excess of $8.75 (the "Subsequent
Sale Price"), then Purchaser will pay to each Stockholder, within five (5)
days of receipt of payment by Purchaser, an amount equal to such Stockholder's
pro rata share of 50% of the excess of the Subsequent Sale Price over $8.75
multiplied by the number of Shares sold in the Subsequent Sale.
2. Voting. Each Stockholder hereby agrees that (for so long as the
Merger Agreement is in effect), at any meeting of the holders of Company Common
Stock, however called, or in connection with any written consent of the holders
of Company Common Stock, it shall vote (or cause to be voted) the Shares (a) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; (b) against any action or agreement
that would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or this Agreement; and (c) except as otherwise agreed to in writing
in advance by Purchaser, against any of the following actions or agreements
(other than the Merger Agreement or the transactions contemplated thereby): (i)
any action or agreement that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or attempt to discourage or adversely
affect the Merger, the Offer and the transactions contemplated by this
Agreement and the Merger Agreement; (ii) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company and its Subsidiaries; (iii) a sale, lease or transfer of
a material amount of assets of the Company or its Subsidiaries or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (iv) any change in the management or Board of Directors of
the Company, except as contemplated by the Merger Agreement; (v) any change in
the present capitalization or dividend policy of the Company; (vi) any
amendment of the Company's certificate of incorporation or bylaws; or (vii) any
other material change in the Company's corporate structure or business.
Notwithstanding anything to the contrary
3
<PAGE> 4
contained in this Agreement, each Stockholder shall be free to act in his
capacity as a member of the Board of Directors of the Company and to discharge
his fiduciary duty as such. At the request of Purchaser, each Stockholder, in
furtherance of the transactions contemplated hereby and by the Merger
Agreement, shall promptly execute and deliver to Purchaser an irrevocable proxy
and irrevocably appoint Purchaser or its designees, its attorney and proxy to
vote all Shares of such Stockholder, for all purposes whatsoever, with full
power of substitution. Each such Stockholder acknowledges that this proxy (a)
shall be coupled with an interest, (b) constitutes, among other things, an
inducement for Purchaser to enter into the Merger Agreement, and (c) shall be
irrevocable and shall not be terminated by operation of law upon the occurrence
of any event. Any such proxy shall terminate upon the termination of the
Option.
3. Representation and Warranties. Each Stockholder hereby severally and
not jointly represents and warrants to Purchaser as follows:
3.1 Ownership of Shares; Purchase Rights. (a) On the date hereof, (i)
such Stockholder is the record owner of the Existing Shares as set forth
opposite such Stockholder's name on the signature page hereto and (ii) such
Existing Shares constitute all of the shares of Company Common Stock owned of
record and beneficially by each such Stockholder. Such Stockholder has sole
voting power, sole power of disposition and sole power to agree to all of the
matters set forth in this Agreement with respect to all of the Existing Shares,
with no limitations, qualifications or restrictions on such rights, and the
Existing Shares are the only shares of Company Common Stock over which such
Stockholder has such powers or otherwise are owned of record or beneficially by
such Stockholder as of the date hereof.
(b) On the date hereof, (i) each Stockholder is the beneficial owner of
the options and warrants as set forth opposite such Stockholder's name on the
signature page hereto and (ii) such Stockholder does not have any option or
other right to acquire Shares ("Purchase Right") except as indicated thereon.
3.2 Power, Binding Agreement. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by such
Stockholder will not violate any other agreement to which he is a party,
including without limitation any voting agreement, stockholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by such Stockholder and constitutes a valid and binding agreement of him,
enforceable against him in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights.
3.3 No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (a) no filing with, and no permit, authorization, consent or approval of,
any Federal, state or foreign public body or authority is necessary for the
execution of this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby and (b) neither the
execution and delivery of this Agreement by such Stockholder nor the
consummation by such
4
<PAGE> 5
Stockholder of the transactions contemplated hereby nor compliance by such
Stockholder with any of the provisions hereof shall (i) conflict with or result
in a violation orbreach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation to which such Stockholder is a party or by which such Stockholder
or any of his properties or assets may be bound or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to such
Stockholder or any of his properties or assets.
3.4 Encumbrances. The Shares and the certificates representing such
Shares are now, and at all times during the term hereof will be, held by such
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever, except for any such encumbrances or proxies arising hereunder.
3.5 Finder's Fees. Except for the fee to be paid to Smith Barney Inc., no
investment banker, broker, financial advisor, finder or other person is
entitled to a commission or fee from Purchaser or the Company in respect of
this Agreement or the transactions contemplated hereby based upon any
arrangement or agreement made by or on behalf of such Stockholder, except as
otherwise specifically provided in the Merger Agreement or arrangements or
agreements made by or on behalf of Purchaser by its authorized representatives.
3.6 Reliance by Purchaser. Such Stockholder understands and acknowledges
that Purchaser is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery of
this Agreement and the representations, warranties and covenants of such
Stockholder set forth herein.
4. Other Covenants of the Stockholders. Each Stockholder hereby severally
and not jointly covenants and agrees as follows:
4.1 No Solicitation. Each Stockholder agrees that he shall comply with
the provisions of Section 6.1 of the Merger Agreement.
4.2 Restriction on Transfer, Proxies and Non-Interference; Stop Transfer
Order.
(a) Each Stockholder hereby agrees, while this Agreement is in effect, and
except as specifically contemplated hereby, not to (i) offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the offer for sale, sale, transfer, tender, pledge, encumbrance, assignment or
other disposition of, any of the Shares or any interest therein, (ii) grant any
proxies or powers of attorney, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any Shares or (iii) take any action
that would make any representation or warranty of any
5
<PAGE> 6
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling any Stockholder from performing its obligations under
this Agreement.
(b) In furtherance of the provisions of Section 4.2(a) hereof,
concurrently herewith the Stockholders shall and hereby do authorize the
Company to notify the Company's transfer agent that there is a stop transfer
order with respect to all of the Existing Shares and any additional Shares of
Common Stock acquired by any Stockholder after the date hereof (and that this
Agreement places limits on the voting and transfer of such shares).
4.3 Confidentiality. Each Stockholder recognizes that successful
consummation of the transactions contemplated by this Agreement may be
dependent upon confidentiality with respect to the matters referred to herein.
In this connection, pending public disclosure thereof, each Stockholder hereby
agrees not to disclose or discuss such matters with anyone not a party to this
Agreement (other than counsel and advisors, if any) without the prior written
consent of Purchaser, except for filings required pursuant to the Exchange Act
and the rules and regulations thereunder or disclosures such Stockholder's
counsel advises are necessary in order to fulfill its obligations imposed by
laws, in which event such Stockholder shall give notice of such disclosure to
Purchaser as promptly as practicable so as to enable Purchaser to seek a
protective order from a court of competent jurisdiction with respect thereto.
4.4 Additional Shares. (a) Each Stockholder agrees, subject to the
following provisions of this Section 4.4(a), at the request of Purchaser, to
exercise, exchange or convert his Purchase Rights into Shares of Company Common
Stock, so as to constitute After-Acquired Shares under this Agreement. In
order to facilitate the exercise at the request of Purchaser of any such
Purchase Right, Purchaser shall loan to any requesting Stockholder funds
sufficient to allow such Stockholder to exercise the Purchase Right. Such loan
shall not be interest bearing and, at Purchaser's option, shall be secured by a
pledge of the shares of Company Common Stock acquired upon exercise of such
Purchase Right.
(b) Each Stockholder hereby agrees to promptly notify Purchaser in writing
of the number of After-Acquired Shares that may be acquired by such
Stockholder, if any, after the date hereof.
4.5 Public Disclosure. Each Stockholder hereby agrees that Purchaser may
publish and disclose in the Offer Documents and, if approval of the Company's
Stockholders is required under applicable law, the Company Proxy Statement
(including all documents and schedules filed with the SEC) his identity and
ownership of Company Common Stock and the nature of his commitments,
arrangements and understandings under this Agreement.
4.6 No Inconsistent Agreements. No Stockholder shall enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions of this Agreement.
6
<PAGE> 7
4.7 Further Assurances. From time to time, at the other party's request
and without further consideration, each of the Purchaser on the one hand and a
Stockholder on the other shall execute and deliver such additional documents
and take all such further action as may be necessary or desirable to consummate
and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
5. Miscellaneous.
5.1 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 expenses.
5.2 Survival of Representations and Warranties. Except for the
representations and warranties in Section 3.2 of this Agreement, the
representations and warranties contained in this Agreement shall not survive
the delivery of and payment for the Shares or termination of the Option in
accordance with this Agreement.
5.3 Effect of Representations, Warranties and Covenants of Holders. The
representations, warranties and covenants of the Stockholders shall be several
and not joint. The liability of each individual Stockholder shall extend only
to the representations, warranties and covenants of such Stockholder and not to
any representation, warranty or covenant of any other Stockholder. No
Stockholder shall have any liability for incidental or consequential damages or
any amount in excess of the aggregate purchase price for his Shares.
5.4 Amendment and Modification. This Agreement may be amended, modified
and supplemented in any and all respects by written agreement of all parties
hereto.
5.5 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that any or all of its respective rights, interests
and obligations hereunder to any other direct or indirect wholly owned
subsidiary of Venture Holdings Trust. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective heirs, executors, legal representative or
successors and assigns or other transferees and any other successor in
interest.
5.6 Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
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<PAGE> 8
5.7 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile
transmission (which is confirmed), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or on the
fourth day following deposit in the United States mail (if sent by registered
or certified mail, return receipt requested, delivery, postage or freight
charges prepaid), addressed to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to a Stockholder: c/o Bailey Corporation
700 Lafayette Rd.
P. O. Box 307
Seabrook, NH 03874
Telecopy: (603) 474-5831
Attention: Roger R. Phillips
with a copy to: Foley Hoag & Eliot
One Post Office Square
Boston, MA 02109-2170
Telecopy: (617) 832-7000
Attention: David A. Broadwin, Esq.
If to Purchaser, to: Vemco Acquisition Corp.
33662 James J. Pompo Dr.
Fraser, MI 48026-0278
Telecopy: (810) 294-1960
Attention: Michael G. Torakis
with a copy to: Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Telecopy: (313) 568-6915
Attention: Paul R. Rentenbach, Esq.
5.8 Definitions; Interpretation.
(a) As used in this Agreement, (i) the term "After-Acquired Shares" shall
mean any shares of Company Common Stock acquired directly or indirectly, or
otherwise beneficially owned, by any of the Stockholders in any capacity after
the date hereof and prior to the termination hereof, whether upon the exercise
of options, warrants or rights, the conversion or exchange of convertible or
exchangeable securities, or by means of a purchase, dividend, distribution,
gift, bequest, inheritance or as a successor in interest in any capacity
(including a fiduciary capacity) or otherwise; (ii) the term "affiliate(s)"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act and (ii) the
phrases "beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under
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<PAGE> 9
the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing (without duplicative counting of the
same securities by the same holder, securities beneficially owned by a person
shall include securities beneficially owned by all other persons with whom such
Person would constitute a "group" within the meaning of Rule 13d-5 of the
Exchange Act).
(b) When a reference is made in this Agreement to a Section, such
reference shall be to a Section in this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation." The
descriptive headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
5.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
5.10 Entire Agreement, No Third Party Beneficiaries, Rights of Ownership.
This Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
5.11 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
5.12 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
5.13 Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
IN WITNESS WHEREOF, Purchaser and each of the Stockholders have caused
this Agreement to be duly executed as of the day and year first above written.
VEMCO ACQUISITION CORP.
By: _______________________________
Michael G. Torakis, President
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STOCKHOLDERS:
Purchase Rights
-----------------
Shares Options Warrants
- ------ ------- --------
322,041 200,000 0
-----------------
Roger R. Phillips
352,648 150,000 0
-----------------
William A. Taylor
108,682 100,000 0
-----------------
Louis T. Enos
92,083 100,000 0
-----------------
E. Gordon Young
80,682 100,000 0
-----------------
John G. Owens
40,000 100,000 12,500
- ------- ------- ------ -----------------
996,136 750,000 12,500 Allan B. Freedman
======= ======= ======
10
<PAGE> 1
EXHIBIT (c)(4)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
ROGER R. PHILLIPS ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
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and timely opportunity, at its expense, to participate in the defense of
such action unless the Purchaser's participation in such Proceeding was
barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to give
notice, as
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provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
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is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
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<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ___________________________
Address: _________________________
7
<PAGE> 1
EXHIBIT(c)(5)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
WILLIAM A. TAYLOR ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
2
<PAGE> 3
and timely opportunity, at its expense, to participate in the defense
of such action unless the Purchaser's participation in such Proceeding was
barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be
determined by a final decision of a court of competent jurisdiction that
such remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to give
notice, as
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<PAGE> 4
provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
4
<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
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<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ____________________________
Address: _________________________
7
<PAGE> 1
EXHIBIT (c)(6)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
LOUIS T. ENOS ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
2
<PAGE> 3
and timely opportunity, at its expense, to participate in the defense
of such action unless the Purchaser's participation in such Proceeding
was barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to
give notice, as
3
<PAGE> 4
provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
4
<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of
its obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
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<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
6
<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ___________________________
Address: _________________________
7
<PAGE> 1
INDEMNITY AGREEMENT EXIHIBT (c)(7)
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
E. GORDON YOUNG ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
2
<PAGE> 3
and timely opportunity, at its expense, to participate in the defense of
such action unless the Purchaser's participation in such Proceeding was
barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to give
notice, as
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<PAGE> 4
provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
4
<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
6
<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By
-----------------------------------
Michael G. Torakis, President
INDEMNITEE:
-------------------------------------
Signature
Name:
--------------------------------
Address:
-----------------------------
7
<PAGE> 1
EXHIBIT (c)(8)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
JOHN G. OWENS ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
2
<PAGE> 3
and timely opportunity, at its expense, to participate in the defense of
such action unless the Purchaser's participation in such Proceeding was
barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of
Indemnitee to give notice, as
3
<PAGE> 4
provided in this Section 4(a) shall not relieve the Purchaser of its obligations
to provide indemnification under this Agreement; however, the amounts to which
Indemnitee may be indemnified shall be reduced to the extent that the Purchaser
has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
4
<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
6
<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ___________________________
Address: _________________________
<PAGE> 1
EXHIBIT (c)(9)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
ALLAN B. FREEDMAN ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
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and timely opportunity, at its expense, to participate in the defense
of such action unless the Purchaser's participation in such Proceeding was
barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to give
notice, as
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provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
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<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
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<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ____________________________
Address: _________________________
7
<PAGE> 1
EXHIBIT (c)(10)
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement"), effective as of June 5, 1996,
between VEMCO ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
LEONARD HEILMAN ("Indemnitee"),
WITNESSETH THAT:
WHEREAS, Purchaser is acquiring or has acquired control of Bailey
Corporation (the "Company"); and
WHEREAS, the Company and certain of its officers and directors, including
Indemnitee, may be subject to certain legal liabilities, including but not
limited to liabilities arising from the matter styled as Vicki Match Suna and
Lori Rosen v. Bailey Corporation (the "Suna Litigation"); and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability, the Purchaser desires to provide for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent permitted by law and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the capitalized terms
listed below shall have the meanings ascribed to them as follows:
"Board" means the Board of Directors of the Purchaser.
"Expenses" means any expense, liability, or loss, including reasonable
attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or
other charges imposed thereon, and any federal, state, local, or foreign
taxes imposed as a result of the actual or deemed receipt of any payments
under this Agreement, paid or incurred in connection with investigating,
defending, being a witness in, or participating in (including on appeal),
or preparing for any of the foregoing in, any Proceeding relating to any
Indemnifiable Event.
"Indemnifiable Event" means any event or occurrence that takes place
either prior to or after the execution of this Agreement that is (a)
related to the fact that Indemnitee is, or has agreed to serve as, a
director or officer of the Company or while a director or officer of the
Company serves at the request of the Company as a director, officer,
employee, trustee, agent, or fiduciary of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan, trust, or
other enterprise, and (b) related to anything done or not done by
Indemnitee in any such capacity, whether or not the basis of the
Proceeding is alleged action in an official capacity while serving in any
capacity described above.
<PAGE> 2
"Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, investigative or
other.
2. Agreement to Indemnify.
(a) Subject to the provisions of Section 2(c), in the event Indemnitee
is, or becomes a party to, or witness or other participant in, or is threatened
to be made a party to, or witness or other participant in, a Proceeding by
reason of (or arising in part out of) an Indemnifiable Event, including, but
not limited to, the Suna Litigation, the Purchaser shall indemnify Indemnitee
from and against any and all Expenses actually and reasonably incurred or
suffered by the Indemnitee to the fullest extent permitted by law, as the same
exists or may hereafter be amended or interpreted (but in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Purchaser to provide broader indemnification rights
than were permitted prior thereto). The rights to receive indemnification and
the advancement of Expenses under this Agreement are not exclusive of any other
rights which Indemnitee may be entitled or subsequently entitled under any
statute, the Certificate of Incorporation or Bylaws of the Company or the
Purchaser, by vote of the stockholders of the Company or the Purchaser or the
Board, or otherwise. To the extent that a change in applicable law (whether by
statute or judicial decision) or the Bylaws of the Company or the Purchaser
permits greater indemnification than is currently provided for an Indemnifiable
Event, Indemnitee shall be entitled to such greater indemnification under this
Agreement.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Purchaser for a portion of Expenses, but not, however,
for the total amount thereof, the Purchaser shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
(c) No Indemnification nor Expense Advance (as defined in Section 3
below) pursuant to this Agreement shall be paid by the Purchaser:
(i) In connection with any Proceeding initiated by Indemnitee
against the Purchaser, the Company or any director or officer of the
Purchaser or the Company unless the Purchaser or the Company has joined
in, or the Board of Directors of the Purchaser or the Company, has
consented to, the initiation of such Proceeding, or the Proceeding is one
to enforce indemnification rights under Section 5 below;
(ii) To the extent Indemnitee settles or otherwise disposes of a
Proceeding or causes the settlement or disposal of a Proceeding without
the Purchaser's express prior written consent (which shall not be
unreasonably withheld or delayed) unless Indemnitee receives court
approval for such settlement or other disposition where the Purchaser had
the opportunity to oppose Indemnitee's request for such court approval;
(iii) With regard to any judicial award if the Purchaser was not
given a reasonable
2
<PAGE> 3
and timely opportunity, at its expense, to participate in the defense of
such action unless the Purchaser's participation in such Proceeding
was barred by this Agreement or the court in such Proceeding;
(iv) For any acts, omissions, transactions or circumstances for
which indemnification under this Agreement is prohibited by applicable
state or federal law or until any preconditions imposed upon, or agreed
to by, the Purchaser by or with any court or governmental agency are
satisfied;
(v) For remuneration paid to the director if it shall be determined
by a final decision of a court of competent jurisdiction that such
remuneration was in violation of law;
(vi) For any accounting of profits made from the purchase or sale
by the Indemnitee of securities of the Company in violation of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereof;
(vii) For acts actually performed by the Indemnitee or of which the
Indemnitee had actual knowledge if the Indemnitee gained any personal
profit to which he was not entitled in the event that a final decision of
a court of competent jurisdiction establishes that the Indemnitee was not
entitled to such personal profit; or
(viii) For proceedings based upon the same facts as underlie a
breach of a representation and warranty in the Agreement and Plan of
Merger, of even date herewith, between Purchaser and the Company.
3. Expenses Advances. Expenses incurred by Indemnitee in any Proceeding for
which indemnification may be sought under this Agreement shall be advanced by
the Purchaser to Indemnitee within 20 days after receipt by the Purchaser of a
statement or statements from Indemnitee requesting such advance and reasonably
evidencing the Expenses reasonably incurred by Indemnitee (an "Expense
Advance"). If it is ultimately determined by a final judicial decision (from
which there is no right of appeal) that Indemnitee is not entitled to be
indemnified by the Purchaser, Indemnitee hereby agrees to immediately repay any
amounts advanced by the Purchaser under this Section 3. Indemnitee agrees to
execute any further agreements regarding the repayment of Expenses as the
Purchaser may reasonably request prior to receiving any such advance,
including, without limitation, an affirmation of Indemnitee's good faith belief
that any applicable standards of conduct have been met by Indemnitee.
4. Notification and Defense of Proceeding.
(a) Indemnitee shall give written notice (including a description of the
claim and an estimate of Expenses) to the Purchaser promptly after Indemnitee
has actual knowledge of any Proceeding as to which indemnification may be
sought under this Agreement in addition to the Suna Litigation, of which
Purchaser acknowledges it has been notified. The failure of Indemnitee to
give notice, as
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<PAGE> 4
provided in this Section 4(a) shall not relieve the Purchaser of its
obligations to provide indemnification under this Agreement; however, the
amounts to which Indemnitee may be indemnified shall be reduced to the extent
that the Purchaser has been prejudiced by such failure.
(b) With respect to any Proceeding, the Purchaser will be entitled to
participate in the Proceeding at its own expense and, except as otherwise
provided below, to the extent the Purchaser so desires, the Purchaser may
assume the defense thereof directly or through the Company with counsel
reasonably satisfactory to Indemnitee. However, the Purchaser shall not be
entitled to assume the defense of any Proceeding brought by the Purchaser or
the Company.
(c) If the Purchaser assumes the defense, Indemnitee shall furnish such
information regarding Indemnitee or the Proceeding in question, as the
Purchaser may reasonably request and as may be required in connection with the
defense or settlement of such Proceeding and shall fully cooperate with the
Purchaser in every other respect. Except as provided in Section 4(f) below, if
the Purchaser assumes the defense of the Proceeding, the Purchaser shall take
all necessary steps in good faith to defend, settle or otherwise dispose of the
Proceeding.
(d) After notice from the Purchaser to Indemnitee of its election to
assume the defense of any Proceeding, the Purchaser will not be liable to
Indemnitee under this Agreement or otherwise for any Expenses subsequently
incurred by Indemnitee in connection with the defense of such Proceeding other
than reasonable costs of investigation or as otherwise provided in clauses (i)
through (iii) below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such Proceeding, but all Expenses related thereto incurred after
notice from the Purchaser of its assumption of the defense shall be at
Indemnitee's expense, unless (i) the employment of counsel by Indemnitee has
been authorized by the Purchaser; (ii) Purchaser or a court of competent
jurisdiction has reasonably determined that there may be a conflict of interest
between Indemnitee and the Purchaser in the defense of the Proceeding; or (iii)
the Purchaser does not, in fact, assume and conduct the defense of such
Proceeding.
(e) Any Expenses incurred by the Purchaser in defense of the Proceeding
under this Section 4 (except in a situation described in clause (i), (ii) or
(iii) of Section 4(d)) shall be considered Expenses advanced by the Purchaser
to Indemnitee under Section 3 above.
(f) The Purchaser may consent to a settlement or other disposition of all
or any part of any Proceeding which the Purchaser is defending under Section
4(b) above without first obtaining the written consent of Indemnitee; provided
that such settlement or other disposition would not cause Indemnitee to lose
any right to indemnification under this Agreement.
5. Enforcement; Consent to Serve.
(a) The Purchaser acknowledges that Indemnitee is relying upon this
Agreement. Indemnitee shall have the right to enforce his indemnification
rights under this Agreement by commencing litigation in any court having
subject matter jurisdiction thereof and in which venue
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<PAGE> 5
is proper. Likewise, the Purchaser may seek judicial determination of its
obligations under this Agreement. The Purchaser and Indemnitee each hereby
consent to service of process and to appear in any such proceeding.
(b) It shall be a defense to any action brought by Indemnitee or the
Purchaser concerning enforceability of this Agreement that it is not
permissible under applicable law or prohibited by Section 2(c) of this
Agreement for the Purchaser to indemnify Indemnitee for the amount claimed. In
connection with any such action or any determination as to whether Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Purchaser.
(c) Neither the failure of the Purchaser (including its Board or
stockholders) to have made a determination prior to the commencement of such
action that indemnification is proper under the circumstances because
Indemnitee has met the standard of conduct set forth in applicable law, nor an
actual determination by the Purchaser (including its Board or stockholders)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief of that a court has determined that indemnification is not
permitted by applicable law.
(d) The Purchaser agrees that the Purchaser's failure to make
indemnification payments or Expense Advances to Indemnitee shall cause
irreparable damage to Indemnitee, the exact amount of which is impossible to
ascertain, and for this reason agrees that Indemnitee shall be entitled to seek
such injunctive or other equitable relief as shall be necessary to adequately
provide for payment or reasonably anticipated payments.
(e) The Purchaser shall indemnify Indemnitee against any and all Expenses
actually and reasonably incurred by Indemnitee in connection with any claim or
action asserted against or brought by Indemnitee for indemnification of
Expenses or payment of Expense Advances by the Purchaser under this Agreement
or any other agreement or under applicable law or the Purchaser's Certificate
of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, if Indemnitee is successful in such
action. Any Expenses so paid shall be considered Expense Advances under
Section 3 above.
(f) Indemnitee and Purchaser acknowledge that, in certain circumstances,
federal law or public policy may override applicable state law and prohibit
Purchaser from indemnifying Indemnitee under this Agreement or otherwise.
Purchaser and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws and
federal legislation prohibits indemnification for certain ERISA violations.
Furthermore, Indemnitee understands and agrees that Purchaser may be required
in the future to undertake with the SEC to submit the question of
5
<PAGE> 6
indemnification to a court in certain circumstances for a determination of the
Purchaser's right under public policy to indemnify Indemnitee.
6. Insurance; Subrogation. The Purchaser shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise indemnifiable
hereunder. In the event of payment under this Agreement, the Purchaser shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything, that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Purchaser effectively to bring suit to
enforce such rights.
7. General Provisions
(a) No supplement, modification, or amendment of this Agreement shall be
binding unless executed in writing by both parties hereto. No waiver of any of
the provisions of this Agreement shall operate as a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver. Except as specifically provided herein, no failure to
exercise or any delay in exercising any right or remedy hereunder shall
constitute a waiver thereof.
(b) This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
spouses, heirs, and personal and legal representatives. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity pertaining to an
Indemnifiable Event even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof.
(d) The rights and remedies provided in this Agreement and by law shall
be cumulative and the exercise of any particular right or remedy shall not
preclude the exercise of any other right or remedy in addition to, or as an
alternative to, such right or remedy.
(e) Any notice required or permitted by this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery or, if
mailed, upon deposit with the United States Post Office by certified mail,
return receipt requested, postage prepaid, to the address for the recipient set
forth on the signature page thereto or to such other address as the recipient
shall hereafter have noticed the sending party in the manner set forth above.
(f) Descriptive headings contained herein are for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
6
<PAGE> 7
(g) Any reference in this Agreement to the indemnity provisions of the
Purchaser's or the Company's Certificate of Incorporation or Bylaws or to any
applicable law shall refer to such provisions as they shall be amended from
time to time or to any successor provision, except that any change in the
Purchaser's or the Company's Certificate of Incorporation or Bylaws shall only
apply to the extent that such amendment permits the Purchaser or the Company to
provide broader indemnification rights to Indemnitee than currently provided.
(h) Purchaser's inability, pursuant to Court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. Any provision of this Agreement, which is unenforceable in any
jurisdiction, shall be ineffective in such jurisdiction to the extent of such
unenforceability without invalidating the remaining provisions of this
Agreement, and any unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) The rights and obligations under this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware applicable
to contracts between Delaware residents made and to be performed entirely
within such State.
(k) This Agreement shall continue until and terminate upon the later of
(i) six years after the date that Indemnitee shall have ceased to serve as a
director or officer of the Company or (ii) the final termination of all pending
proceedings in respect of which Indemnitee is granted rights of indemnification
or expense advance hereunder.
IN WITNESS WHEREOF, this Agreement has been entered into effective as of
the date first written above.
VEMCO ACQUISITION CORP.
By: _________________________________
Michael G. Torakis, President
INDEMNITEE:
____________________________________
Signature
Name: ___________________________
Address: _________________________
7
<PAGE> 1
EXHIBIT 11
----------
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT, dated as of the 5th day of June, 1996 (this
"AGREEMENT"), by and between Bailey Corporation, a Delaware corporation
(the "COMPANY"), and Allan B. Freedman (the "FORMER DIRECTOR");
WITNESSETH THAT:
WHEREAS, the Former Director has served as a director of the Company;
WHEREAS, the Company and Vemco Acquisition Corp. ("Vemco") have entered
into an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant to
which, among other things, Vemco shall be merged with and into the Company (the
"MERGER") and the Stockholders of the Company will receive cash in exchange for
their shares in the Merger;
WHEREAS, Vemco desires to protect its interests by obtaining the agreement
of the Former Director not to invest in, or serve as a director, officer,
employee or consultant to any competitor of the Company; and
WHEREAS, the Former Director is willing to agree to the terms and
conditions hereof;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, the Former Director and the Company agree as follows:
1. The Former Director covenants that the Former Director shall not during,
and for a period of five years following the Effective Time (as defined in the
Merger Agreement), directly or indirectly, (other than as the holder of not more
than one percent (1%) of the total outstanding stock of any publicly held
company) own, sponsor, operate, join, control or participate in, or be connected
as a partner, officer, director, employee, consultant, adviser, sponsor or
otherwise, or permit his name to be used in connection with, any business in
which the Company is presently engaged.
2. In consideration of the foregoing, after the Effective Time of the
Merger, the Company shall (a) pay to the Former Director (or his estate or
heirs, in the event the Former Director shall be deceased) $5,000 per month for
60 months commencing on the first day of the first calendar month following
Effective Time of the Merger, (b) cause the Former Director and his spouse to
remain on the Company's long-term health insurance policy until age 65 if and so
long as it is permitted by all applicable laws and by the Company's long-term
health care provider, and (c) from age 65 until their death the Company shall
pay to the Former Director and his spouse (or to an appropriate insurer on their
behalf) a monthly amount equal to the lesser
<PAGE> 2
of the monthly cost of Medicare Plan (b) and the AARP Group Health Insurance
Program Medical Supplemental Insurance Plan (f) or the monthly cost of other
substantially equivalent health insurance; provided that if the Former Director
and his spouse shall cease to be covered in accordance with the preceding
CLAUSES (b) or (c), the Company shall purchase equivalent insurance for the
Former Director and his spouse.
3. If at any time any of the foregoing agreements is deemed invalid or
unenforceable under the laws of the jurisdiction in which it is being enforced
by reason of being vague or unreasonable as to geographic scope, scope of
activities limited or duration such agreements will be deemed to be divisible as
to any portions which are unenforceable and this agreement will be amended by
the court or other body having jurisdiction so that it will be enforceable to
the maximum extent permitted by applicable law.
4. The Former Director recognizes and agrees that his compliance with the
covenants and agreements contained in SECTION 1 hereof are reasonable and
necessary for the protection of the Company's interests and that any violation
thereof may cause irreparable and continuing damage or injury to the Company,
the exact amount of which would be difficult to ascertain and for which there
may be no adequate remedy at law, and that, for such reasons, among others, the
Company shall be entitled to seek an injunction from any court of competent
jurisdiction restraining any further such violation. Such right to request an
injunction shall be in addition to any other damages, rights and remedies to
which the Company may be entitled at law or in equity.
5. This Agreement is to be made under and shall be construed in accordance
with the laws of the State of New Hampshire and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and merges any and all prior agreements, understandings and
representations.
6. This Agreement may not be superseded, amended or modified except by
written agreement between the parties hereto.
7. This Agreement constitutes the sole and only agreement of the parties
hereto and supersedes any prior understanding or written or oral agreements
between the parties, with regard to the matters set forth herein, except as
provided in SECTION 5 hereof.
8. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
BAILEY CORPORATION
By: /s/ Roger R. Phillips
---------------------------------
Name:
--------------------------------
Title:
-------------------------------
FORMER DIRECTOR
/s/ Allan B. Freedman
----------------------------
-3-
<PAGE> 1
EXHIBIT 12
----------
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT, dated as of the 5th day of June, 1996 (this
"AGREEMENT"), by and between Bailey Corporation, a Delaware corporation (the
"COMPANY"), and Louis T. Enos (the "FORMER DIRECTOR");
WITNESSETH THAT:
WHEREAS, the Former Director has served as a director of the Company;
WHEREAS, the Company and Vemco Acquisition Corp. ("Vemco") have entered
into an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant to which,
among other things, Vemco shall be merged with and into the Company (the
"MERGER") and the Stockholders of the Company will receive cash in exchange for
their shares in the Merger;
WHEREAS, Vemco desires to protect its interests by obtaining the agreement
of the Former Director not to invest in, or serve as a director, officer,
employee or consultant to any competitor of the Company; and
WHEREAS, the Former Director is willing to agree to the terms and
conditions hereof;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, the Former Director and the Company agree as follows:
1. The Former Director covenants that the Former Director shall not during,
and for a period of five years following the Effective Time (as defined in the
Merger Agreement), directly or indirectly, (other than as the holder of not more
than one percent (1%) of the total outstanding stock of any publicly held
company) own, sponsor, operate, join, control or participate in, or be connected
as a partner, officer, director, employee, consultant, adviser, sponsor or
otherwise, or permit his name to be used in connection with, any business in
which the Company is presently engaged.
2. In consideration of the foregoing, after the Effective Time of the
Merger, the Company shall (a) pay to the Former Director (or his estate or
heirs, in the event the Former Director shall be deceased) $5,000 per month for
60 months commencing on the first day of the first calendar month following
Effective Time of the Merger, (b) cause the Former Director and his spouse to
remain on the Company's long-term health insurance policy until age 65 if and so
long as it is permitted by all applicable laws and by the Company's long-term
health care provider, and (c) from age 65 until their death the Company shall
pay to the Former Director and his spouse (or to an appropriate insurer on their
behalf) a monthly amount equal to the lesser
<PAGE> 2
of the monthly cost of Medicare Plan (b) and the AARP Group Health Insurance
Program Medical Supplemental Insurance Plan (f) or the monthly cost of other
substantially equivalent health insurance; provided that if the Former Director
and his spouse shall cease to be covered in accordance with the preceding
CLAUSES (b) or (c), the Company shall purchase equivalent insurance for the
Former Director and his spouse.
3. If at any time any of the foregoing agreements is deemed invalid or
unenforceable under the laws of the jurisdiction in which it is being enforced
by reason of being vague or unreasonable as to geographic scope, scope of
activities limited or duration such agreements will be deemed to be divisible as
to any portions which are unenforceable and this agreement will be amended by
the court or other body having jurisdiction so that it will be enforceable to
the maximum extent permitted by applicable law.
4. The Former Director recognizes and agrees that his compliance with the
covenants and agreements contained in SECTION 1 hereof are reasonable and
necessary for the protection of the Company's interests and that any violation
thereof may cause irreparable and continuing damage or injury to the Company,
the exact amount of which would be difficult to ascertain and for which there
may be no adequate remedy at law, and that, for such reasons, among others, the
Company shall be entitled to seek an injunction from any court of competent
jurisdiction restraining any further such violation. Such right to request an
injunction shall be in addition to any other damages, rights and remedies to
which the Company may be entitled at law or in equity.
5. This Agreement is to be made under and shall be construed in accordance
with the laws of the State of New Hampshire and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and merges any and all prior agreements, understandings and
representations.
6. This Agreement may not be superseded, amended or modified except by
written agreement between the parties hereto.
7. This Agreement constitutes the sole and only agreement of the parties
hereto and supersedes any prior understanding or written or oral agreements
between the parties, with regard to the matters set forth herein, except as
provided in SECTION 5 hereof.
8. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
BAILEY CORPORATION
By: /s/ Roger R. Phillips
-------------------------------
Name:
------------------------------
Title:
----------------------------
FORMER DIRECTOR
/s/ Louis T. Enos
-----------------------------------
-3-
<PAGE> 1
EXHIBIT 13
----------
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT, dated as of the 5th day of June, 1996 (this
"AGREEMENT"), by and between Bailey Corporation, a Delaware corporation (the
"COMPANY"), and E Gordon Young (the "FORMER DIRECTOR");
WITNESSETH THAT:
WHEREAS, the Former Director has served as a director of the Company;
WHEREAS, the Company and Vemco Acquisition Corp. ("Vemco") have entered
into an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant to which,
among other things, Vemco shall be merged with and into the Company (the
"MERGER") and the Stockholders of the Company will receive cash in exchange for
their shares in the Merger;
WHEREAS, Vemco desires to protect its interests by obtaining the agreement
of the Former Director not to invest in, or serve as a director, officer,
employee or consultant to any competitor of the Company; and
WHEREAS, the Former Director is willing to agree to the terms and
conditions hereof;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, the Former Director and the Company agree as follows:
1. The Former Director covenants that the Former Director shall not during,
and for a period of five years following the Effective Time (as defined in the
Merger Agreement), directly or indirectly, (other than as the holder of not more
than one percent (1%) of the total outstanding stock of any publicly held
company) own, sponsor, operate, join, control or participate in, or be connected
as a partner, officer, director, employee, consultant, adviser, sponsor or
otherwise, or permit his name to be used in connection with, any business in
which the Company is presently engaged.
2. In consideration of the foregoing, after the Effective Time of the
Merger, the Company shall (a) pay to the Former Director (or his estate or
heirs, in the event the Former Director shall be deceased) $5,000 per month for
60 months commencing on the first day of the first calendar month following
Effective Time of the Merger, (b) cause the Former Director and his spouse to
remain on the Company's long-term health insurance policy until age 65 if and so
long as it is permitted by all applicable laws and by the Company's long-term
health care provider, and (c) from age 65 until their death the Company shall
pay to the Former Director and his spouse (or to an appropriate insurer on their
behalf) a monthly amount equal to the lesser
<PAGE> 2
of the monthly cost of Medicare Plan (b) and the AARP Group Health Insurance
Program Medical Supplemental Insurance Plan (f) or the monthly cost of other
substantially equivalent health insurance; provided that if the Former Director
and his spouse shall cease to be covered in accordance with the preceding
CLAUSES (b) or (c), the Company shall purchase equivalent insurance for the
Former Director and his spouse.
3. If at any time any of the foregoing agreements is deemed invalid or
unenforceable under the laws of the jurisdiction in which it is being enforced
by reason of being vague or unreasonable as to geographic scope, scope of
activities limited or duration such agreements will be deemed to be divisible as
to any portions which are unenforceable and this agreement will be amended by
the court or other body having jurisdiction so that it will be enforceable to
the maximum extent permitted by applicable law.
4. The Former Director recognizes and agrees that his compliance with the
covenants and agreements contained in SECTION 1 hereof are reasonable and
necessary for the protection of the Company's interests and that any violation
thereof may cause irreparable and continuing damage or injury to the Company,
the exact amount of which would be difficult to ascertain and for which there
may be no adequate remedy at law, and that, for such reasons, among others, the
Company shall be entitled to seek an injunction from any court of competent
jurisdiction restraining any further such violation. Such right to request an
injunction shall be in addition to any other damages, rights and remedies to
which the Company may be entitled at law or in equity.
5. This Agreement is to be made under and shall be construed in accordance
with the laws of the State of New Hampshire and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and merges any and all prior agreements, understandings and
representations.
6. This Agreement may not be superseded, amended or modified except by
written agreement between the parties hereto.
7. This Agreement constitutes the sole and only agreement of the parties
hereto and supersedes any prior understanding or written or oral agreements
between the parties, with regard to the matters set forth herein, except as
provided in SECTION 5 hereof.
8. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
BAILEY CORPORATION
By: /s/ Roger R. Phillips
--------------------------
Name:
-------------------------
Title:
------------------------
FORMER DIRECTOR
/s/ E. Gordon Young
-------------------------------
-3-
<PAGE> 1
EXHIBIT 14
----------
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT, dated as of the 5th day of June, 1996 (this
"AGREEMENT"), by and between Bailey Corporation, a Delaware corporation (the
"COMPANY"), and John G. Owens (the "FORMER DIRECTOR");
WITNESSETH THAT:
WHEREAS, the Former Director has served as a director of the Company;
WHEREAS, the Company and Vemco Acquisition Corp. ("Vemco") have entered
into an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant to which,
among other things, Vemco shall be merged with and into the Company (the
"MERGER") and the Stockholders of the Company will receive cash in exchange
for their shares in the Merger;
WHEREAS, Vemco desires to protect its interests by obtaining the agreement
of the Former Director not to invest in, or serve as a director, officer,
employee or consultant to any competitor of the Company; and
WHEREAS, the Former Director is willing to agree to the terms and
conditions hereof;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, the Former Director and the Company agree as follows:
1. The Former Director covenants that the Former Director shall not during,
and for a period of five years following the Effective Time (as defined in the
Merger Agreement), directly or indirectly, (other than as the holder of not more
than one percent (1%) of the total outstanding stock of any publicly held
company) own, sponsor, operate, join, control or participate in, or be connected
as a partner, officer, director, employee, consultant, adviser, sponsor or
otherwise, or permit his name to be used in connection with, any business in
which the Company is presently engaged.
2. In consideration of the foregoing, after the Effective Time of the
Merger, the Company shall (a) pay to the Former Director (or his estate or
heirs, in the event the Former Director shall be deceased) $5,000 per month for
60 months commencing on the first day of the first calendar month following
Effective Time of the Merger, (b) cause the Former Director and his spouse to
remain on the Company's long-term health insurance policy until age 65 if and so
long as it is permitted by all applicable laws and by the Company's long-term
<PAGE> 2
health care provider, and (c) from age 65 until their death the Company shall
pay to the Former Director and his spouse (or to an appropriate insurer on their
behalf) a monthly amount equal to the lesser of the monthly cost of Medicare
Plan (b) and the AARP Group Health Insurance Program Medical Supplemental
Insurance Plan (f) or the monthly cost of other substantially equivalent health
insurance; provided that if the Former Director and his spouse shall cease to be
covered in accordance with the preceding CLAUSES (b) or (c), the Company shall
purchase equivalent insurance for the Former Director and his spouse.
3. If at any time any of the foregoing agreements is deemed invalid or
unenforceable under the laws of the jurisdiction in which it is being enforced
by reason of being vague or unreasonable as to geographic scope, scope of
activities limited or duration such agreements will be deemed to be divisible as
to any portions which are unenforceable and this agreement will be amended by
the court or other body having jurisdiction so that it will be enforceable to
the maximum extent permitted by applicable law.
4. The Former Director recognizes and agrees that his compliance with the
covenants and agreements contained in SECTION 1 hereof are reasonable and
necessary for the protection of the Company's interests and that any violation
thereof may cause irreparable and continuing damage or injury to the Company,
the exact amount of which would be difficult to ascertain and for which there
may be no adequate remedy at law, and that, for such reasons, among others, the
Company shall be entitled to seek an injunction from any court of competent
jurisdiction restraining any further such violation. Such right to request an
injunction shall be in addition to any other damages, rights and remedies to
which the Company may be entitled at law or in equity.
5. This Agreement is to be made under and shall be construed in accordance
with the laws of the State of New Hampshire and constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and merges any and all prior agreements, understandings and
representations.
6. This Agreement may not be superseded, amended or modified except by
written agreement between the parties hereto.
7. This Agreement constitutes the sole and only agreement of the parties
hereto and supersedes any prior understanding or written or oral agreements
between the parties, with regard to the matters set forth herein, except as
provided in SECTION 5 hereof.
8. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
-2-
<PAGE> 3
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the date first above written.
BAILEY CORPORATION
By: /s/ Roger R. Phillips
------------------------------
Name:
---------------------------
Title:
---------------------------
FORMER DIRECTOR
/s/ John G. Owens
----------------------------------
-3-
<PAGE> 1
EXHIBIT 15
----------
AMENDMENT TO
------------
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
THIS AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT, dated as of the
fifth day of June, 1996, by and between Bailey Corporation ("BAILEY") and
William A. Taylor ("TAYLOR");
W I T N E S S E T H T H A T :
WHEREAS, Bailey and Taylor entered into an Employment Agreement dated
February 18, 1994, copy of which is annexed hereto and made a part hereof, and a
Noncompetition Agreement dated February 18, 1994, copy of which is annexed
hereto and made a part hereof (the "1994 AGREEMENTS");
WHEREAS, Bailey and Vemco Acquisition Corp. ("Vemco") have entered into an
Agreement and Plan for Merger (the "Merger Agreement"), effective this date; and
WHEREAS, Bailey, Vemco and Taylor desire to amend the 1994 Agreements in
certain respects and to confirm the full force and effect of the 1994
Agreements as amended;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, Bailey and Taylor agree as follows:
1. Section 2 of the Employment Agreement dated February 18, 1994 is
amended to end its term on the last day of the month in which the
Effective Time (as defined in the Merger Agreement) occurs. Except for
said amendment, the Employment Agreement dated February 18, 1994
remains in full force and effect.
2. For purposes of implementing the provisions of Section 2 of the
Noncompetition Agreement dated February 18, 1994, the first day of the
first calendar month following Termination of Service shall be deemed
to be the first day of the month immediately following the month in
which the Effective Time occurs.
3. This Amendment shall be binding upon the Parties, their successors and
assigns, and shall inure to the benefit of and be enforceable by the
Taylor and his successors, transferees and assigns.
<PAGE> 2
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf as of the date first above written
BAILEY CORPORATION
By: /s/ Roger R. Phillips
------------------------------
Name:
-----------------------------
Title:
----------------------------
/s/ William A. Taylor
------------------------------
William A. Taylor
-2-
<PAGE> 1
EXHIBIT 16
----------
AMENDMENT TO
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AND NONCOMPETITION AGREEMENT, dated as of the
5th day of June, 1996, by and between Bailey Corporation ("BAILEY") and Roger
R. Phillips ("PHILLIPS");
W I T N E S S E T H T H A T :
WHEREAS, Bailey and Phillips entered into an Employment Agreement dated
February 18, 1994, copy of which is annexed hereto and made a part hereof, and a
Noncompetition Agreement dated February 18, 1994, copy of which is annexed
hereto and made a part hereof (the "1994 AGREEMENTS");
WHEREAS, Bailey and Vemco Acquisition Corp. ("Vemco") have entered
into an Agreement and Plan for Merger, effective this date; and
WHEREAS, Bailey, Vemco and Phillips desire to amend the 1994 Agreements in
certain respects and to confirm the full force and effect of the 1994
Agreements as amended;
NOW, THEREFORE, in consideration hereof and intending to be legally bound
hereby, Bailey and Phillips agree as follows:
1. Section 2 of the Employment Agreement dated February 18, 1994 is
amended to extend its term to December 31, 1997, subject to earlier
termination as provided in Section 8. Except for said amendment, the
Employment Agreement dated February 18, 1994 remains in full force and
effect.
2. For purposes of implementing the provisions of Section 2 of the
Noncompetition Agreement dated February 18, 1994, the first day of the
first calendar month following Termination of Service shall be deemed
to be January 1, 1998.
3. This Amendment shall be binding upon the parties, their successors and
assigns, and shall inure to the benefit of and be enforceable by
Phillips and his successors, transferees and assigns.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf as of the date first above written.
BAILEY CORPORATION
<PAGE> 2
By: /s/ Roger R. Phillips
-----------------------------
Name:
---------------------------
Title:
--------------------------
/s/ Roger R. Phillips
-------------------------------
Roger R. Phillips
-2-
<PAGE> 1
[SMITH BARNEY LETTERHEAD]
June 5, 1996
The Board of Directors
Bailey Corporation
700 Lafayette Road
Seabrook, New Hampshire 03874
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Bailey Corporation, other than
Venture Holdings Trust ("Venture") and its affiliates, of the consideration to
be received by such holders pursuant to the terms and subject to the conditions
set forth in the Agreement and Plan of Merger, dated as of June 5, 1996 (the
"Merger Agreement"), by and between Vemco Acquisition Corp., a wholly owned
subsidiary of Venture ("Acquisition Sub"), and Bailey. As more fully described
in the Merger Agreement, (i) Acquisition Sub will make a tender offer to
purchase all outstanding shares of the common stock, par value $0.10 per share,
of Bailey (the "Bailey Common Stock") at a purchase price of $8.75 per share,
net to the seller in cash (the "Tender Offer") and (ii) subsequent to the Tender
Offer, Acquisition Sub will be merged with and into Bailey (the "Merger" and,
together with the Tender Offer, the "Transaction") and each outstanding share of
Bailey Common Stock not previously tendered will be converted into the right to
receive $8.75 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Bailey and certain senior officers and other representatives and
advisors of Venture concerning the business, operations and prospects of Bailey.
We examined certain publicly available business and financial information
relating to Bailey as well as certain financial forecasts and other information
and data for Bailey which were provided to or otherwise discussed with us by the
management of Bailey. We reviewed the financial terms of the Transaction as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of the Bailey Common Stock; the
historical and projected earnings and operating data of Bailey; and the
capitalization and financial condition of Bailey. We also considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Transaction and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of Bailey. In connection
with our engagement, we were requested to approach on a limited basis, and held
discussions with, certain third parties to solicit indications of interest in a
possible acquisition of Bailey. In addition to the foregoing, we conducted such
other analyses and examinations and considered such other financial, economic
and market criteria as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Bailey that such forecasts and other information
and data have been reasonably prepared reflecting the best currently available
estimates and judgments of the management of Bailey as to the future financial
performance of Bailey. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Bailey nor have we made any physical inspection of the properties or assets
of Bailey. Our opinion is necessarily based upon information available to us,
and financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
<PAGE> 2
Smith Barney has been engaged to render financial advisory services to Bailey in
connection with the Transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. We also will receive a fee upon the delivery of this opinion. In
the ordinary course of our business, we and our affiliates may actively trade or
hold the securities of Bailey 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 have in the past provided certain financial advisory
services to Bailey unrelated to the proposed Transaction, for which services we
have received compensation. In addition, we and our affiliates (including
Travelers Group Inc. and its affiliates) may maintain relationships with Bailey,
Venture and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Bailey in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of Bailey Common Stock in the Tender Offer or
how such stockholder should vote on the proposed Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Smith Barney be made, without our prior written consent.
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 cash consideration to be received by
holders of Bailey Common Stock (other than Venture and its affiliates) in the
Transaction is fair, from a financial point of view, to such holders.
Very truly yours,
SMITH BARNEY INC.
<PAGE> 1
EXHIBIT 18
[BAILEY LETTERHEAD]
FOR IMMEDIATE RELEASE
June 5, 1996
SEABROOK, NH -- Bailey Corporation, a manufacturer of molded plastic components
for the automobile industry, announced today it has entered into a merger
agreement with Vemco Acquisition Corp., a subsidiary of Venture Holdings Trust
of Fraser, Michigan. The agreement calls for Vemco to commence a cash tender
offer for all outstanding shares of Bailey's common stock for $8.75 per share.
Venture Holdings Trust, through its wholly owned subsidiaries and certain
affiliates, is engaged in the design, development and manufacture of molded
plastic components as well as a wide range of systems integration and other
services for the automobile industry in the United States, Canada and the Far
East.
Consummation of the acquisition is contingent upon, among other things, the
tender of at least a majority of Bailey Corporation's total outstanding shares
of common stock.
Under the agreement and plan of merger, upon completion of the tender
offer, Vemco Acquisition Corp. will be merged with and into Bailey Corporation
and thereupon Bailey Corporation will become a subsidiary of Venture Holdings
Trust.
Bailey Corporation, by unanimous vote of its Board of Directors, has
determined that the tender offer and plan of merger are fair and in the best
interests of the Company's stockholders, have approved the contemplated
transaction, and have agreed to recommend to the Company's stockholders that the
tender offer be accepted.
Roger Phillips, Chairman and CEO of Bailey Corporation, stated, "The
combination of Bailey with Venture presents an excellent opportunity for the
Company to continue to improve its current operations and makes long term
strategic sense as the consolidation of the automotive supplier industry
continues. We believe the transaction provides the best opportunity for our
stockholders to receive a fair return for their investment in Bailey.
"Bailey Corporation's common stock is quoted in the National Association of
Securities -- Dealers Quotation System -- National Market System ("NASDAQ-NMS")
under the Symbol "BAIB".
* * * *
For further information contact: Bailey Corporation
Corporate Offices
Ph: (603) 474-3011
Fax: (603) 474-5831
<PAGE> 1
June 11, 1996
To the Stockholders of Bailey Corporation
Dear Stockholder:
On behalf of the Board of Directors of Bailey Corporation (the "Company"),
I am pleased to inform you that on June 5, 1996, the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Vemco Acquisition
Corp. (the "Purchaser"), a wholly-owned subsidiary of Venture Holdings Trust
("Parent"), pursuant to which the Purchaser has commenced today a tender offer
(the "Offer") to purchase all outstanding shares of Common Stock of the Company
and the associated common stock purchase rights issued pursuant to the Rights
Agreement (together, the "Shares") for $8.75 per Share in cash. The Offer is
scheduled to expire at 12:00 midnight, New York City time, on Friday, July 12,
1996. Following the completion of the Offer, upon the terms and subject to the
conditions of the Merger Agreement, the Purchaser will be merged into the
Company (the "Merger"), and each share of the Company's Common Stock not owned
by the Company, the Purchaser or its affiliates or dissenting stockholders will
be converted into the right to receive $8.75 per Share in cash.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT, HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES
PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board gave careful consideration to
a number of factors summarized in the attached Schedule 14D-9 that is being
filed today with the Securities and Exchange Commission. Among other matters,
the Board considered the opinion dated June 5, 1996 of Smith Barney Inc., the
Company's financial advisor, to the effect that, as of such date and based upon
and subject to certain matters stated in such opinion, the $8.75 per Share cash
consideration to be received by holders of Shares (other than Parent and its
affiliates) pursuant to the Offer and the Merger was fair, from a financial
point of view, to such holders. A copy of such opinion is enclosed for your
review.
Accompanying this letter, in addition to the attached Schedule 14D-9
relating to this Offer, is the Purchaser's Offer to Purchase, dated June 11,
1996, together with related materials including a Letter of Transmittal to be
used for tendering your Shares. These documents set forth the terms and
conditions of the Offer and the Merger and provide instructions as to how to
tender your Shares. WE URGE YOU TO READ THE ENCLOSED MATERIALS CAREFULLY BEFORE
TENDERING YOUR SHARES.
Very truly yours,
LOGO
Roger R. Phillips
Chairman of the Board
